sa<>Navigate Fragile Market With Simple, Predetermined Strategy
May 31, 2010 | about: DIA / QQQQ / SPY
by Roger Nusbaum 35115 Followers
It appears as though things are getting a little dicier in the market. Emotion is clearly elevated as indicated by the now, but probably only temporary, ability of the market to have huge swings in a given day or big moves in one just one direction for a day.
My thought along these lines has been that these exaggerated moves are signs of a fragile market. Fragile does not have to mean that it will implode or even go down in a meaningful way from here, maybe a run down to the low we've hit twice recently will do it but of course we don't know at this point.
For now, the 200 DMA still looks important. The huge, I tweeted it was a panic, rally on Thursday stopped about a point under the 200 DMA, one point. Friday was obviously a down day and the S&P 500 is currently about 15 or 16 points below the indicator. From having one eye on CNBC it seems like most of the TV guests view this as a correction in a bull market, while more people in print view the rally from a year ago March as a bear market rally, or what I like to call a feel good rally.
Throughout I have been saying that the worst financial crisis in 80 years won't wrap up in 18 months, and that at some point there would be a another decline that would scare the hell out of people. Whether the low for the current move is in or not, an emotion fueled, fast run back to 1200 will not be the end of it. In my opinion, the best thing would be a slow move off of the low with a year or two of single digit gains. Should it play out that way the US may not be a world beating investment destination (I don't think it will be) but the chance for another run to SPX 700 would then be an incredibly remote possibility instead of what I think now is merely a low probability.
Times like now are much easier to navigate with a predetermined and simple strategy.
Disclosure: No positions
Market Data 
Markets 
AI
