A Market In Motion Tends To Stay In Motion...

By: Chris Ciovacco | Fri, Mar 11, 2011
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Newton's First Law of Motion states that a body at rest will remain at rest unless an outside force acts on it, and a body in motion at a constant velocity will remain in motion in a straight line unless acted upon by an outside force. Financial markets are not immune to Newton's First Law. The short-term "motion" in stocks is to the downside.

As of 12:45 p.m. ET, today's stock market gains are a positive, but not all that meaningful yet. Volume is running significantly behind yesterday's sell-off, indicative of a higher desire to sell yesterday than the desire to buy today, something that could improve before the session closes.

The advance/decline stats on the NASDAQ are running about even, and they are slightly bullish on the NYSE. The advancing and declining volume stats look much better, showing the larger market players do have some interest today. In terms of investing new cash, or redeploying cash in existing accounts, we will continue to be patient. We first presented the table below using data from March 7, 2010.

Patience is a Virtue

The basic concepts in the table above can be summed up as follows:

In the short-run, until the market can prove otherwise, we will continue to give the bears the benefit of the doubt since they have control of the very short-term trends. Big-picture-wise and longer-term, we will give the bulls and the bull market the benefit of the doubt, until proven otherwise, since they control the long-and-intermediate-term trends.

We mentioned early on Friday the technical concerns we have are starting to spill over into weekly charts, which increases the need to be skeptical and patient until the market is acted on by positive outside forces. The action in defensive investments, mentioned on March 10, has not changed significantly yet.

For now, the bull market remains firmly intact (see oil/bear post), but we have to respect how far corrections can run, especially in an environment where Fed policy (printing money) is such an important component of the market's recent strength.

 


 

Chris Ciovacco

Author: Chris Ciovacco

Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE.

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. CCM helps individual investors and businesses, large & small; achieve improved investment results via research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions.

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Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/