Sunday, March 18, 2007

Some Softening Ahead

The economy that is - well we've been told that over and over again lately by every talking head who is put in front of a microphone. That's normal - the business cycle is a continuous process of ebb and flow.

Several weeks ago I posted a chart going back to the Eisenhower administration that showed that the market was either going into a slump or coming out of a slump all the time. I also mentioned that what moves the markets is earnings (or the fear of lost earnings) and earnings came from economic activity and when economic activity slows earnings slow and the market slumps. Most of you probably know that the prices you see in the market today are discounting news in the future so if you are seeing the market slumping today that means 6 months or a year from now the Government might report that we are in a recession.

Anyway I keep an eye on this for you because CNBC doesn't - all they do is report what the Government tells them to report and even then it is only with a lot of spin. Does it really matter what the unemployment picture was a month ago? By the time it's reported it is ancient news. Given today's computerized everything it defies common sense that we couldn't have an up to date employment report twice a day - and an accurate one at that.

Consequently you will only hear about recessions as a historical reference. In other words - by the time the Government figures out that we're in one we are probably already passing out of it. And keep in mind - the Government only reports the maximum lows - not all the little lows that got us there. Marlyn's Curve on the other hand is right up to date and reports what's happening now.

Here's the latest chart and as you can see - we are starting to slump a bit.

Normally we get a more graceful decline but this chart is picking up on the several mini-crunches we've been through in the past couple of weeks and that's why the IWM shows that abrupt change in direction. The IWM jumps around quite a bit normally anyway and it is the secular trend that is important. So you can see that the Dow, the SPX and the NASDAQ tech index are all rolling over and turning down.

That doesn't mean that you should panic it only means that you won't make money as easily as you have in the past 6 months or so. Things don't stop they just slow down or heat up a bit and it is this slowing and heating that Marlyn's Curve reports - nothing more nothing less. Prices are declining a bit but prices go up and down of their own accord - what is important is the volatility of the prices either up or down. Volatility is what makes the difference in your trading account. A trending market provides good returns - a range bound market doesn't.


JOSEPH said...

Another day...another idea.

The saying is novices buy openings and pros buy closes.

Let's agree that this is true.

Now if this be true doesn't this fly in the face of the opening b/o group? Instead of looking for the high after 15' or 30' I believe given that the first statement is true to gauge one's opening b/o strategy on the 3:30 range and as long as it closes higher hold into the next days opening.
If you want to discuss this more please e-mail me and I will be glad to have a discussion,


Looks ruff