Keeping it Simple

Last night I did very little technical analysis. Mostly because I was busy setting up and testing my futures desk in simulation mode. (Amazing how easy it is to make money in simulation mode!) Another reason is that the analysis is not required at this point. There is no need to over analyze the situation at hand. We are in a downtrend, in September, with a bunch of technical indicators pointing to a correction. I am short the market and plan to remain short through the correction.

For those who "need" the technical data, I encourage you to look at the daily for both the S&P and the DOW. Start with the S&P.



Search for any period in the last 2 years where we had the 20 day (pink) trading on top of the 50 day (blue) trading on top of the 200 day (white). Did you find it? There you go, October 2008. In fact, that was the very last high set by the market. Now, study the distance between the 20 day and the 200 day in that period. What did we see? About 7% spread at the most. Well, today we sit with almost TWICE the spread near 13%. You can do the same with the chart of the DOW.

Now, take a look at the daily for the last 100 days again - focusing on the period starting June 11 and ending with a local bottom in July.




I posted on HMS board that the last time we printed a daily stick entirely below the 20 day moving average, it was a doji at the bottom of a topping process. The very next day we were up, followed by another small positive session and then the correction continued. Ultimately we corrected 10% from the high. We are doing the same exact thing right now.

Anyway, now is NOT the time to look at the 5 minute, 15 minute, or even the hourly charts. Now is the time to patiently wait the swing down to the 980 level, then the 960 level, and we'll see from there - ALL ON THE DAILY CHART.

Keep it simple and be calm - this is not a market collapse, it is a natural correction that is necessary if the Bull wants to keep charging in 2010.

Good luck!