Man, this nasty Black Crow is a really tough old bird! You know, the one baked up into this humble pie. After our Proprietary Momentum Change Indicators generated a confirming Sell signal on Friday, lighting up the maximum number on our signal scale, I thought the top was in. Not! The Dow and the SPX have both lifted to new highs.
But it still does not appear all is well with Mr Market's health. The RSI and the MACD are both flashing short term Negative Divergences, as well as long term divergences. The Transports, the SPF, the NDX and the RUT are still not at new highs, and it does not appear they can make it today. I will be interested in leaning what the Dow Theory Gurus have to say this evening about non-confirmations. As if anyone has any idea what any of this action has to do with the experience on the ground of the American Middle Class.
The latest headline measures of the business environment are pointing to an improving economy, yet the sub paragraphs in all of these reports keeps reminding us that margins are collapsing, pricing power is lacking, the housing market is again in decline for the past 4 months, and there is little evidence of actual growth that can be attributed to anything other than Government spending. The commodity complex behavior for the past 4 months, and especially the last 1 month, indicates escalating inflation in food stuffs and basic materials, the BDI continues to crash, nearing historic lows, and the Middle East appears to be catching fire. Yet the two most widely recognized measures of the health of the economy, the Dow and the SPX, are making new highs. Go figure.
We are stopped out of all 4 of our recommended trades this afternoon with small losses. Although our Momentum Change signals are still pointing to a lower market, the stop loss orders are designed to protect us from our selves....getting us out of a market that is not moving in our preferred direction, and also offering us an opportunity to re-establish our positions at better prices.
As my old friend and manager, Captain Gatorbait, used to say... "if this was easy, we would have 3rd graders in knee socks doing it."
Best To Your Trading!
Bill
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