Text Book Head and Shoulders Pattern

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Jul 7, 2009 4:29 pm

Anybody been watching the head and shoulders pattern on the S&P 500 & Dow?

 
Looks like it's breaking down like magic. If it acts like a textbook H&S typically would we should see 850, a historical area of support, on the S&P and 7800 on the DOW (ish in both cases) in the next few days.
 
Any thoughts?
Jul 7, 2009 4:42 pm

Just numbness at this point.

Jul 7, 2009 4:50 pm
Borker Boy:

Just numbness at this point.

  LOL

 
Well If it gets there quick there will be a three standard deviation penetration with a 97%+ probability of retracement. I'll be selling puts and going long with some rather tight stops and bag a few swing trades with any luck.
 
I have stops on almost everything at this point. If we have the 1933 like secondary tank and or retest the lows. I'll be in almost all cash.
Jul 7, 2009 5:04 pm

Gaddock, do you run discretionary money?  Seems tough to find the time to do all of that AND call all your clients to execute.  Would be much easier in a UMA/discretionary account for RIA clients?

Jul 7, 2009 5:07 pm

Both my managers think my gig is ripe for a PIM. Until then most of my clients are on board with what we are doing and can give a quick yes or no.

Jul 23, 2009 12:50 pm

Now what ?

Jul 23, 2009 1:00 pm
Ron 14:

Now what ?

 
Looks like you would be better off selling American Funds door to door than listening to all the "technical analysis" out there.  Filter out the noise and buy good companies and watch them grow over time!  Just my .02
Jul 23, 2009 1:10 pm

I totally agree with you. Can the crap and buy at all times. I just couldn't sell enough of them to make a living, doesn't mean I don't believe in their funds.

Jul 23, 2009 2:05 pm
Ron 14:

I totally agree with you. Can the crap and buy at all times. I just couldn't sell enough of them to make a living, doesn't mean I don't believe in their funds.

 
And I don't just mean American funds....I use lots of funds, preferred and otherwise!  I have a friend with UBS that spouts his timing theories using technical analysis...Very few of the brightest financial minds in the world can do it successfully, but HE thinks he can!...
Jul 23, 2009 2:23 pm

buy and hold only works if you have 80 year time horizons or catch a secular bull market.



We always see the graphics based on 1984-2002 market return 9.66

If you missed just the best:          Your return fell to:

10days                                      6.44

20days                                      4.16

30days                                      2.18

40days                                      0.47



But they never show the flip side.

Missed the worst                            your return grew to

10days                                       14.67

20days                                       17.28

30days                                       19.46

40days                                       21.46



And for the crazy arguers

If you missed best and worst                 return

10days                                        11.30

20days                                        11.39

30days                                        11.31

40days                                        11.31



So maybe somewhere in the middle is the answer

Jul 23, 2009 2:39 pm

Also why is the market up? AT&T reports a drop in profits and people are excited? McDonalds reports a lower qtrly profit..Ford refinances and everyone thinks they are great(and they are compared to the rest in their industry GM and chrysler bankrupt).. Jobless claims have peaked?? Really who is hiring? Hershey profits up 72% thanks to price hike and marketing effort(i didn't even know they advertised anymore, so we can scratch the marketing and rely on the price hike(i am sure that will last with consumers))



No mention of commercial real estate, credit cards, no housing market(haven't seen a new home built in a while)

Jul 23, 2009 2:39 pm
Hey Kool-Aid:
Ron 14:

I totally agree with you. Can the crap and buy at all times. I just couldn't sell enough of them to make a living, doesn't mean I don't believe in their funds.



And I don't just mean American funds....I use lots of funds, preferred and otherwise! I have a friend with UBS that spouts his timing theories using technical analysis...Very few of the brightest financial minds in the world can do it successfully, but HE thinks he can!...





Being bright doesn't make you good at investing. They can be smart all they want. Discipline is what wins.



You can be smart and not disciplined. People make money market timing because they have icewater in their veins. They don't have "favorite investments" like Jones teaches people to ask.

Jul 23, 2009 2:55 pm

and the typical investor doesn't have ice water in their veins so if I am trying to help them it sure as hell won't be market timing, it will be from a disciplined long term approach

Jul 23, 2009 3:44 pm

How are you helping them by doing nothing when markets collapse..



For example:

buy caibx july 22 @49.10/share...



today 43.39/



so you clients over that period of time has lost 12%. cummulative.. that doesn't include dividends but it doesn't include inflation either



so how is that better than them buying it themselves through schwab

Jul 23, 2009 3:54 pm
Ron 14:

and the typical investor doesn't have ice water in their veins so if I am trying to help them it sure as hell won't be market timing, it will be from a disciplined long term approach





This is true. But if you could be the disciplined guy, maybe they would be able to make money in any market. Of course typical investors don't have the discipline, they hire YOU for guidance, not a "disciplined, long term approach" which is fundamentally flawed by the way.



Buy and hold will never be dead, because people will be satisfied with mediocre returns and will respond to great "re-selling" and propaganda that firms put out to hold on to assets. If you are not trying to make money in the market, then just sell them an EIA. You make money, their money is protected. You're buying and holding.

Jul 23, 2009 4:11 pm
Squash1:

How are you helping them by doing nothing when markets collapse..

For example:
buy caibx july 22 @49.10/share...

today 43.39/

so you clients over that period of time has lost 12%. cummulative.. that doesn't include dividends but it doesn't include inflation either

so how is that better than them buying it themselves through schwab

 
I will only say this...the average investor bought CAIBX on July 22nd, then sold it in November, and lost like 30%.  Then they gave up and bought CD's at 1.5%.  My point is not that buy-and-hold is the answer to everything....there are times to sell.  But through discipline, we can save the average investor from making stupid decisions on their own, and come out ahead of where they would be on their own.
 
One caveat to trying to time the market is that it requires a legitimate, successful, repeatable strategy that you can interpret and have the persistance to execute.  That's a lot to ask of people, when you would much rather be a little wrong by doing nothing, rather than a whole lot wrong by doing something.
 
Jul 23, 2009 4:19 pm

A little wrong by doing nothing??? Like give up a decade of returns?

Jul 23, 2009 4:24 pm

So Squash when did you get everyone out ? When are you getting them back in ? Where are we going from here ? What is your value proposition ?

Jul 23, 2009 4:30 pm
Moraen:
Ron 14:

and the typical investor doesn't have ice water in their veins so if I am trying to help them it sure as hell won't be market timing, it will be from a disciplined long term approach



This is true. But if you could be the disciplined guy, maybe they would be able to make money in any market. Of course typical investors don't have the discipline, they hire YOU for guidance, not a "disciplined, long term approach" which is fundamentally flawed by the way.

Buy and hold will never be dead, because people will be satisfied with mediocre returns and will respond to great "re-selling" and propaganda that firms put out to hold on to assets. If you are not trying to make money in the market, then just sell them an EIA. You make money, their money is protected. You're buying and holding.

 
Disciplined long term approach is fundamentally flawed ? How ? When ?
Jul 23, 2009 4:52 pm
Squash1:

A little wrong by doing nothing??? Like give up a decade of returns?

 
Squash, I don't disagree with that.  I truly believe in both a fundamental and technical approach.  But here's part of the problem also...most long-tenured veterans were looking through the lense of a 17-year bull market where the rule was "buy equities and everything goes up."  Nobody (nearly) was even TALKING about market timing until after the 90's were over (I'm excluding day-trading crap).  So then the investement world thought the tech bubble was an anomoly and we were "back to normal".  But we really weren't.  By most measures, we are in the middle of an extended secular bear.  But we also had a cyclical bull sandwiched in there from '02-'07.  So it's easy to say "hey just time the market", but the reality is not quite the same.  If it were THAT easy, wouldn't everyone be doing it? 
 
Don't get me wrong, I am not saying a flat decade is OK.  But also keep in mind that not everyone is flat.  Most people are not all in equities, so in a balanced portfolio, you are up maybe 3-6% annually.  Not great, but not flat.