I am writing this blog feeling both despondent and elated.
Let’s just get the negativity out of the way. In the last 5 days I would have made a killing, even though the pace at which this would have happened has certainly shocked me. Shorting the market on Friday’s close, taking profits on Monday morning and then setting an order to open at the Dow’s Primary Value Zone would have been the most perfect series of plays I could ever have dared to dream to make. I would have had great leverage and been in at brilliant points. I would have been squarely on the right side of the line of least resistance.
But I wasn’t…. I guess I just have to continue getting back on my feet and wait for next time.
So here is why I am so happy. The validation of the system is the proof positive I needed for my next move (watch this space!!!).
Just look at the chart below.
Please click for full image
In the early hours of this morning, my order to open would have been fired. I would have woken up to see a great profit. I almost certainly would have moved my stops up to lock some in and then just waited to see how the rest of the day went. By the market’s close I would have closed my position and said thank you very much to a 700 point profit. I know I would have done this as this comes straight out of “Reminiscences”. When the beneficiary of a huge windfall, grab it with open arms!
I would now take a break from the market. In fact I would probably go away for a week to clear my head. Such a windfall would have surely clouded my judgement so would have been the best thing to do.
For what it’s worth today’s announcement by the Fed to keep rates on hold until mid 2013 does not strike me as being that positive a move.
A rushed announcement of QE3 would have been ridiculous and looked panicked. They couldn’t cut rates any further (although the idea they might start printing money and handing it out on street corners has amused me – NOT that I have read this anywhere as it is a ridiculous thought!!!). So in reality this announcement by the Fed tells us two things.
First they have given up on 2012. Second they really are out of options. They have engaged in unprecedented monetary stimulus and this has failed to cure the economy.
This announcement is stealth stimulus. My announcing that rates will be on hold for such a long period of time they have clearly told the market the cost of money will be kept at a record low. This may well give stocks a lift, but I can’t this being anything more than a temporary fix.
This announcement strikes me as being particularly bearish. I would probably plan to go long again at the Dow’s Primary Value Zone, when it is hit, but I would have far less confidence it would be held. Although this is not 2008/09, be under no illusions, the situation is extremely serious.