Theoretically, anything can happen on any given day.
Realistically, honoring stops is the only way to trade.
Practically, we can't trade on the possible exceptions and have to focus on what is actually happening now.
Having said all that and clearly seeing the bulls are leading the charge, I still see real reasons to question this move. Specifically, I ask you to question your rationalizations for the move. In other words, if the market had fallen this week, we would say that it was the 80-week cycle. It went up so we blame the 9-year cycle. This kind of reasoning subtracts from our credibility IMO. It sounds like we are just making stuff up to fit whatever the market delivers. Given the size of the last 80-week and 40-week cycles down, it seems at least a little suspicious to now point to the 9-year cycle as the lifting force. Why would the 9-year suddenly kick in now when it didn't in 2004 or in the spring of 2005?
I also question the jump-on-the-bandwagon mentality. I at least want to engage in some serious discussion of the other possibilities. For example, last year we expected a 20-week low in December, and it was difficult to see except in retrospect. Then a significant move down occurred at the next 5-week cycle low in January 2005. In this case, I think it is reasonable to say that the energy of the 20-week cycle down was delayed into January. What if we are now experiencing a similar delay? Is there evidence? At least some:
* Retail--a significant portion of America's GDP--is falling.
* The $VIX--which does follow the Hurst cycles to a T--is
exceptionally low and has not yet delivered an 80-week high.
* The $CPC is in the same range as it was prior to the last
40-week and 80-week cycle lows.
* The $BKX has been less than exhuberant.
* The $TRAN has not joined the party.
* The market behavior we observed this week is
consistent with recent tops (see March 2005).
* Many stocks are in need of a good haircut and can only
deliver significant growth if a new mania drives it, and
I'm not sure mutual fund cash levels and U.S. prosperity
can drive it here and now.
* The yield curve continues to flatten and invert, and the
British yield curve has already inverted significantly.
* The article Cash quoted regarding the Chinese policy on
the U.S. dollar and bonds could be significant
immediately. Maybe. If we have to raise interest rates
to feed the need for foreign capital, this economy
could be in a world of hurt fast, and the stock market is
always looking out 6 months. Now this part is funny-mental
speculation, which is a habit I don't want to start. I
do want to stir up more contrarian discussion, however.
I'm not pushing this point of view. I'm just offering it as a counterbalance. I'm just asking questions, and I'm not even sure I've asked the best ones or offered the best evidence in support of the possible bearish case. But I do believe this rally needs to be questioned. In the meantime, I will trade the tape just as it is--bullish.
Bliss--you go, man. You have been right many, many times when I have doubted you. And I dispute the point of view that you just make bullish comments until your proven right. I have seen you make some great calls, and you made this bearish call for January a long time ago. And you're sticking to your guns even though it appears that you are dead wrong.
BB
AI
