Low Tide

By: Erik Swarts | Fri, Jan 6, 2012
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They've chased em' - and they've chased them hard.

I tend to shy away from reading too much into the weekly sentiment numbers because for the most part they are relatively noise. The data series back and fill like the tidal wash on a shoreline.

Of course every once and a while you get a new or full moon - or something a bit more ominous like the tidal pull of an approaching tsunami.

AAII Investor Sentiment Survey
AAII Investor Sentiment Survey

Who's to say which phenomenon is behind the regressive tide - but considering the view across the Atlantic that has been for the most part papered over in the last two weeks, it would be wise to seek higher ground - if just for perspective.

What is noteworthy about the arbitrary threshold of a new year is the goldfish phenomenon that can take place from time to time during market environments under pressure. It comes as no surprise that traders and money managers alike tend to walk into the new year with a sense of anything is possible this year. Of course it would behoove them to think of the phrase in the context framed by our famously observant 26th President:

With self-discipline - most anything is possible. - Theodore Roosevelt

Self discipline, when it comes to risk management in the face of the European crisis appears to be in short supply. Decoupling, I believe is the colloquial used by the kids these days.

With that said, below are two markets that present a relative range of similar price structures and emotional backdrops coming into January after a sudden December reversal. As I mentioned in my previous note, I would guesstimate the bulls most favorable outcome to be a scenario similar to 2003 where the Fall lows were defended. If those lows are broken, I suspect the market will find initial support between 975 and 1050.

 


 

Erik Swarts

Author: Erik Swarts

Erik Swarts
Market Anthropology

Although I am an active trader, I have always taken a broad perspective when approaching the markets. I respect the Big Picture and attempt to place each piece of information within its appropriate context and timeframe. I have found that without this approach, there is very little understanding of ones expectations in the market and an endless potential for risk.

I am not a stock picker - but trade the broader market itself in varying timeframes. I want to know which way the prevailing wind is blowing, where the doldrums can be expected and where the shoals will likely rise. I will not claim to know which vessel is the fastest or most comfortable for passage - but I can read the charts and know the risks.

I am not a salesperson for the market and its many wares. I observe it, contextualize its moving parts - both visible and discrete - and interpret.

I practice Market Anthropology - Welcome to my notes.

Erik Swarts is not a registered investment advisor. Under no circumstances should any content be used or interpreted as a recommendation for any investment, trade or approach to the markets. Trading and investing can be hazardous to your wealth. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This is strictly for educational and informational purposes only. All opinions expressed by Mr. Swarts are subject to change without notice, and the reader should always obtain current information and perform their own due diligence before making any investment or trading decision.

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TRUE MONEY SUPPLY

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