Thursday, October 22, 2009

Choppy Toppy (just when you thought you'd had enough, you find a way to miss the little thing you were waiting for)...

Over their, beyond the hill
Lies the Picnic still

So much self doubt out there tonight. I really have to chide you.

Self doubt is almost as bad as conviction - even worse in other fields; just not as bad here.

The right amount of self doubt as a trader is essential, typically. It saves lives. Superman is going to get hit by a bus at some point .

But too much self doubt is not any advantage. Far from it. If you have such a condition, vacations are the best thing. However, if you find yourself still passionate (let's say inspired), even though slathered in doubt, you may not need a lengthy break. One should be working when inspired. That's where breakthroughs are born.

If you're exhausted and defeated and have no such spark, absolutely, the only thing keeping you from certified self-destruction would be a mandatory, self-imposed break; certainly in this field. In this place (this special game of the 21st century whereby everyone is playing whether they like it or not, since it dominates our civilization; so you might as well play it, right?). In this place you do not want to impose self-destruction. It's bad for you - it's bad for evolution.

Anyhow, I'm just posting to say something fresh and I'm even a little cheeky (Chichikov!) right now. If we were surfing, resting upright and looking out, I'd be pointing at something right now and personally I'd be moving to where I could take advantage of it, or at least paddle to where walls of water wont be face-planting and pummeling me cartilage-first into the coral.

The Dollar's been holding like a rock. Like a stone under water.

Trish has not done a lot for us with the stock market lately, but she has branded the US Dollar quite sufficiently now and this has possible negative implications for stocks. I say possible, because she cannot go a day anymore without very brightly mentioning the tight inverse-relationship the USD and equities hold, and just how sad and weak is the state of the buck. Therefore, if you fade Trish fully (and she is the genius here) it's possible the Dollar could de-couple that relationship and both Dollar and equities rally (not out of the question).

If Trish is worth her salt, and I'll argue again that she is, then this weak Dollar may or may not punch-down once more, proving everyone right that the Dollar is pawned - before punishing them all at once. Just for being right when everyone and their ancestors were on the same side of the ship.

It's the punishing them all part that I am more or less now convinced of.

Maybe this is the first, next wave down then for stocks (assuming we don't see any de-coupling). If so, the first slice is usually the deepest (for the short term anyway).

Yes, that last part is even meaningful. If I know little in the way a market behaves, I know that strong stocks and strong markets, correct sharpest (short-term) on the first real slice down (subsequent waves create higher-lows for some time after). And important, we haven't yet had a real slice down, presently. So far the market has been bought rather abruptly for several attempted declines in a row.

This last decline though was different. There was real blood in the water late Wednesday and volume that hour was stronger than any force we've seen recently. On top of that is was the half-dozenth or so distribution day for the major indices in recent weeks. And, importantly again, the time-duration of selling was even briefer (encased inside of two hours between late Wednesday and early Thursday).

Momentum, for now, has peaked (and it broke down on Wednesday). Even if prices manage higher-highs in the next couple of days, which would get a lot of the party-goers all on one, smart-side of the ship, momentum is already leading us down.

So I suppose I have a (fluid) script in my hand right now (though I'm not memorizing any text!). I might even be inspired a little myself just not and this is why I am up so late, taking psychological risks in sharing such thoughts; I'm not yet sure.

Or perhaps I am about to get walled - just for saying as much.


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