Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19
The Many Aligning Signals in Gold - 15th Oct 19
Market Action Suggests Downside in Precious Metals - 15th Oct 19
US Major Stock Market Indexes Retest Critical Price Channel Resistance - 15th Oct 19
“Baghad Jerome” Powell Denies the Fed Is Using Financial Crisis Tools - 15th Oct 19
British Pound GBP Trend Analysis - 14th Oct 19
A Guide to Financing Your Next Car - 14th Oct 19
America's Ruling Class - Underestimating Them & Overestimating Us - 14th Oct 19
Stock Market Range Bound - 14th Oct 19
Gold, Silver Bonds - Inflation in the Offing? - 14th Oct 19
East-West Trade War: Never Take a Knife to a Gunfight - 14th Oct 19
Consider Precious Metals for Insurance First, Profit Second... - 14th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - 13th Oct 19
The Most Successful IPOs Have This One Thing in Common - 13th Oct 19
Precious Metals & Stock Market VIX Are Set To Launch Dramatically Higher - 13th Oct 19
Discovery Sport EGR Valve Gasket Problems - Land Rover Dealer Fix - 13th Oct 19
Stock Market US Presidential Cycle - Video - 12th Oct 19
Social Security Is Screwing Millennials - 12th Oct 19
Gold Gifts Traders With Another Rotation Below $1500 - 12th Oct 19
US Dollar Index Trend Analysis - 11th Oct 19
China Golden Week Sales Exceed Expectations - 11th Oct 19
Stock Market Short-term Consolidation Does Not change Secular Bullish Trend - 11th Oct 19
The Allure of Upswings in Silver Mining Stocks - 11th Oct 19
US Housing Market 2018-2019 and 2006-2007: Similarities & Differences - 11th Oct 19
Now Is the Time to Load Up on 5G Stocks - 11th Oct 19
Why the Law Can’t Protect Your Money - 11th Oct 19
Will Miami be the First U.S. Real Estate Bubble to Burst? - 11th Oct 19
How Online Casinos Maximise Profits - 11th Oct 19
3 Tips for Picking Junior Gold Stocks - 10th Oct 19
How Does Inflation Affect Exchange Rates? - 10th Oct 19
This Is the Best Time to Load Up on These 3 Value Stocks - 10th Oct 19
What Makes this Gold Market Rally Different From All Others - 10th Oct 19
Stock Market US Presidential Cycle - 9th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Scared Stupid, What Is Next For Stock Prices

Stock-Markets / Cycles Analysis Sep 22, 2010 - 01:15 PM GMT

By: Bob_Clark

Stock-Markets Best Financial Markets Analysis ArticleFirst I will rant about my pet peeve  and then I will follow up on the current cyclical structure in the stock market.
 
Financial natural selection  
The bears are being cut to pieces  as stop after stop is hit, not only that but each time we surge a little higher, new pressure points prod the ones without stops to end the pain and cover as well.  Fear drives out greed in the bears and greed drives out fear in the bulls.


At the same time the fund managers that sold out on the lows, fearing for their jobs, jump back in on the long side as the market hits new pressure points.

At the same time the media starts finding reasons for optimism.  It is a movie I have seen many times before and the script never changes.  Human nature and the need to follow the crowd gives the Fats Boys the victims they continually need to fill their coffers.  It is almost a perfect system, where the strong take from the weak. It is natural selection in the financial world.

The Fat Boys gobble up the crowd again

Once again a high price is being paid by those that followed the crowd. When will investors and traders learn the one simple rule that never fails.  The majority is usually wrong.  There is a simple reason and it is this.  When most people are selling someone is buying. That somebody has all the money, they have deep pockets. When they have taken every last share that is available for sale they simply start increasing their bid and the rally begins. 

Stay away from crowds 

The loose money era that preceded today's volatile market place created a population of potential victims, ill equipped to venture into the current investment environment.  Know thyself is the best thing any of us can do.  We need to know what we know, and more important, what we don't know.

If after  looking inward you come to the conclusion that you have no skills, then you are metaphorically, financially blind. You are the perfect victim. Avoid crowds at all costs.

Follow the leader 

How are you to know whether the people you are listening to and who's advice you may be acting on have vision either.  If you are blind, the last person you want to be coat-tailing  is another blind man. 

There is a simple way to know.  Let the market price measure their performance and be their judge, there is no other measure.  

It has been my experience that when all the theories, all the rhetoric, all the drum beating has been striped away and we stand naked before the gods of profit, it is market price that is our judge and jury.

What are the cycles telling us now? 

Lets look at the current situation in the stock market. Clearly the bears have their feet in the fire and everyone was a bear a month ago. Can this rally turn into a new leg up? Can the cycles give us a few clues?  Lets take a look.  

In the chart below I have created a cyclical model.  I have drawn in the dominant 4 month trading cycle's envelope in blue. It should contain the price if the sum of all trends larger than 4 months (represented by the orange channel) is still following the path it confirmed when we made the last 4 month low July 1st. You will notice that we have been going up for over 2 1/2 months, we are pasted the neutral point and are heading toward late translation (red L).  That is a bullish sign but it can be negated by a sharp drop starting now.  We are at a key point in the cyclical model and what we do here will give clues as to the sustainability of the rally. There is a smaller 1 month low due at the end of the month, how far we fall into it and how we bounce will show us the way forward.

 

If you read my last  article are stock bears doomed, (here is a google doc link) I warned that a big stock squeeze was coming when we were at 105.00. Now I expect the market to struggle and fall back into the end of October. The 4 month cycle is a strong consistent cycle and if the model is valid then we are near the end of the up run.

Notice the market has rallied strongly for a number of days, this is normal in a short squeeze but it has created an interesting dynamic.  It caused the 1 month cycle to go into a late translation (green arrow).  In other words we only have a few days to go down and make the next 1 month low. It should come in before the end of this month.  Remember late translation is a sign of strength.

If the market can push higher out of the up coming 1 month low then that will suggest that the orange envelope has started to turn back up and that will mean a new leg up has started.

I will be watching the coming sell off with interest.
 
Scared stupid
I hope you will put up with my ranting and raving about the perils of following the crowd. I do it  because I care and I want to keep as many readers as possible out of the Fat Boys clutches.  Investors tend to find their way to my door after they have been beaten and bloodied.  Occasionally I get there first and snatch a victim from their gaping maw and it feels good.
 
I have created a series of videos that give traders and investors the skills they need to follow the Fat Boys and prosper in these markets. There is not one indicator in the whole 8 hours of videos. If you have been trading for a while you know indicators don't work.

Please go to my blog to learn more.

Don't let the crowd's shrieking and wailing scare you stupid.  The Fat Boys will grab you up.  Remember if you are not with them, you are a victim. 

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2010 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules