The Illusion of Strength

By: Erik Swarts | Mon, Feb 6, 2012
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Here's something I have been keeping an eye on as a possible guide coming out of the next pivot. It is the retracement blowoff that culminated in the markets in May of 2008. Most of these charts are of the underlying assets respective hourly 10 period SMA's. Notable similarities in the equity markets structure, volatility, and the equity to bond ratio (SPX:TLT). Notable divergences in where the SPX peaked relative to higher beta, but this was primarily due to how the financials strongly led the market lower in the first phase of the breakdown. The Russell eventually caught up and exceeded the SPX's losses during the fall swoon, in just another example of where price gave the illusion of strength under the guise of momentum.

Here's a quick look.

SPX 2012
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SPX 2008
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VIX 2012
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VIX 2008
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SPX:TLT 2012
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SPX:TLT 2008
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RUT:SPX 2012
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RUT:SPX 2008
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SPX & RUT:SPX 2012
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SPX & RUT:SPX 2008
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FCT 2012
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FCT 2008
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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.

Copyright © 2011-2014 Erik Swarts

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