Celebrating My Blogiversary by Sitting on My Hands

Today is my 1 year Blogiversary! Funny I do not see a cake in the kitchen, or party decorations going up. Those are probably coming later. Or maybe not. Over the past year I have made a lot of calls on both short term and long term trade ideas. Many right and many wrong. Actually a lot more of them have been wrong than right. It has a been a pleasure being out here to share ideas and get feedback, and I appreciate all that have read commented and given me ideas along the way.

Those that read me regularly know that my week starts with a top down trend analysis of the broad market and its influencers. Next a sector review to determine the leaders and laggards within the broad market. Then finally specific trade ideas. I have become less active over the last couple of weeks, seeing less and less good setups. This basic old school technical analysis chart can explain the reasoning for that.

Dow theory looks for the Transportation Index to confirm the moves of the Dow Jones Industrial Averages to determine a change in trend. We last saw a new high confirmed in late April but have traded lower since then and are now resting near support the 1 year uptrend line. A change in trend to lower would be confirmed with both indexes moving not below the trend line but below the red line, the previous low. Those that read me regularly know that I am not a strict Dow theorist either, but this illustrates quite well why I am sitting on my hands today.

Thanks to all that keep reading, I hope I can keep living up to your expectations. I leave you with an excerpt from my first blog post. I felt strongly about technical analysis then and I still do.

April 27, 2010 was the key day and was confirmed on April 30th. That was the day the technicals started to roll over on the indices. The weekend of May 1&2 I started posting support levels for the $SPX, $SPY, $QQQ and $IWM. There were still a lot of long set ups within the financials, tech and retail. Pharma and commodity related stocks were getting toppy with a bunch of great shorts. I, along with everyone else, was calling for new highs for $GLD and $GC_F and a run for the dollar. Then came the ‘flash crash’ May 6th. The speed of the fall was as incredible as how fast it stopped and reversed. Following that day there were pundits and ‘professionals’ on the boob tube, as well as educated professional traders and self proclaimed part-time technicians on social networks (like Stocktwits, my preference) stating that in this environment that the charts do not matter anymore. To that I call bullshit!

It is not surprising that this would occur. In any world disaster afflicted people question their religion, in government induced disasters they question the President and Legislature. I do not put the flash crash into these categories but I think it helps make the point. But come on, it makes no sense to give up on the technicals just because the market moved a lot. First, a good technician knows that technical analysis gives you an edge, but is not a guarantee of where a stock price is moving. Second, the basis of technical analysis is that all information is included in the price history. Finally, much of the history and following of technical analysis is based its applicability during a crisis.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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