May 29, 2005 in Technical Analysis | Permalink
Comments
Tom, would you please give an update to your 2cents indicator? Has it moved much in the last week or two?
Thanks,
Steve
Posted by: Steve Hamrick | June 12, 2005 12:27 PM
Reply:
Steve,
The 2C Sentimeter was 51 as of Friday's close, so there has been no real change in the past few weeks. This is part of the current technical analysis dilemma. The set up for a sell was so perfect as to be "too good", and indeed we haven't sold off. Being so late and so little off the timer line date of May 31/June 1 generally means the market isn't going anywhere or not far in the opposite direction.
Since 2003 not every sell setup has failed but a meaningful number have for SELLS but not for BUYS. So this inaction at present is consistent with a continuation of the bull market from 2002 or 2003. Also the mechanical trade entry method I call the Scottish system has not given a sell signal. IT can do so each day under certain conditions but so far those conditions have been negated or aborted, leaving the last buy signal of May 16 in force.
As a result I have removed my short hedges in cash stock and fund accounts and have just been scalping the stock index futures, awaiting a sell signal at some point.
A fair question has been put to me before about this approach:"Tom, if you don't do anything until you have a mechanical trade entry signal, why do you bother with the TA, sentiment and timing methods?"
The best answer I can give, apart from enjoying TA in itself, is that having a "weather forecast report" from that work I am psychologically ready to act when I do get a signal. The draw down is being psychologically ready for a move that doesn't happen, as may be the case here. If it weren't for the fact of leverage with futures and the occasional need for a next day confirmation with the Scottish, I would be tempted to use the Scottish method exclusively for trading. Having the TA weather report gives me the confidence to act upon the early warning or preliminary Scottish signal.
If we do not get a sell here and rather soon, it's pretty obvious that we are going to new highs on the year in SPX. The SP small cap and mid cap indexes already have done so.
Recent Comments