The daily sentiment oscillator made three more > +15 readings this past week, and the 2CS sentimeter fell under 50 again. The major indices crept upward, but the Russell 2000 (RUT) gave back nearly all its gains of the week fom the Thursday high open to Friday's close.
My short hedging has cost me some opportunity profits, about seven tenths of one percent of assets, which I regard as not excessive. I am keeping them in place.
The timer lines have given nice short term turns but nothing like a swing trade since May. There was another sell signal one for Friday, so we shall see. Two timing gurus I respect and have mentioned in these pages have important turns for October. One of them thinks it will be a top lasting into next year at least, and the other thinks it will be a low leading to highs in 2010. Obviously at least one of them will be wrong!
At times like these the temptation is there to throw all timing and sentiment indicators out the window and "Just Buy" as a friend says jokingly. Added to that is Michael Covel's "Trend Following: How Great Traders Make Millions In Up or Down Markets" which another friend recently sent to our house. Covel's book doesn't tell you how to follow trends, just lots of evidence that many of the greatest traders of the past 25 years have been trend traders who used rule-based systems. Nevertheless, I bought health insurance for the market with my hedges, and I shouldn't be angry because the market chose not to become ill. Yet.
I'm sticking with my own "rule-based" system which says not to buy when sentiment is at the high edge where prices have faltered over the past decade.
Recent Comments