Ian Woodward's Investing Blog

Those of you who follow my blog faithfully know that I never discuss politics here, or in our newsletter, or in the seminars…this is an investing blog not a political one.  However, you also know that trying to understand the IMPLICATIONS of political actions relative to the stock market next actions is important.  It is with that in mind that I write this blog, but as I have always said “Have three scenarios, and then let the Market tell you which one it is on.”

Dr. Jeffrey Scott is holding an HGSI Webinar tonight and I am sure there will be much discussion on how to use the tools to look for any clues of which way the wind is blowing, so this blog note written in haste will present more questions than it will provide answers!  Once the dust settles, I will continue to provide the three Scenarios, but for now there are no Highland Flings in sight for the bulls!

Yes of course we should expect a Bounce Play from an oversold market, but right now the market is in deep yogurt as my good friend David Galardi reminds me with this picture which he sent me:

To continue the thread of the last few blog notes, here is the updated picture of the “Perfect Symmetry” chart, and at least the first suggestion I made that we were headed for 1250 on the S&P 500 has come and gone.  Now the $64 question is whether we get the Bounce here or continue on down to hit Flash Crash proportions of a 17% correction as the natural next line of support to complete the symmetry:

By the way, please digest the updated lines at the top and bottom and my Assessment which are all on this chart for posterity sake.  The last line finishes with “Uncertainty”.  Uncertainty begets Volatility. The Grinch will be back in full force sooner rather than later.  But always let the market be our guide as to which road it is on.  There is a distinction between short-term Type 1&2 traders and longer time Type 3&4, and that is what must be kept in mind as we digest and search every nook and cranny for clues of which way the wind is blowing. “When it’s at your back, Attack; when it’s in your face, Disgrace.”…but that is exactly what the moment traders are good at.

Would you believe it, the Bounce Play has already begun while I am at this point in writing the note, 10.40 am PST…well that is no surprise.  But let me not digress and show you for the record that the oversold situation in Bucketology Terms has delivered the 3rd Worst Bungee jump we have recorded, with only the Flash Crash and Black Swan era being deeper, as shown on this next chart:

The next slide is the “Custer’s Last Stand’ and “Feels Good Man” Slide which my readers get a kick out of, especially the latter which my good friends Chris Wilson, Dave Baratto and Maynard Burstein always say they enjoy.  A heads up to them too as they all get together for their monthly meeting lead by Maynard in San Antonio, tonight.

True to form, this is out of date as I prepared it last night, but note that it broke the -8% Line in the Sand today dropping to 1235, and as one could expect, the Bounce Play was on. I just updated it in yellow for the Bounce that is now in progress.   Now its simple to measure the quality of the Bounce and where to expect the “Fakey”!  1300 gets us back to the -4% Line and is the fight at the OK Corral, and don’t hold your breath for 1350 to “Feel Good Man”.  Always have THREE SCENARIOS and let the market tell you which one it is on:

Now comes the “Coulda, Shoulda, Woulda” second guessing with ants in your pants for type 3’s and 4’s.  I’ve just shown you where to expect a Fakey, but of course if you want to play like a Type 1, then the longer you wait the more you get left at the post.

However, my mind is not on this short term mumbo jumbo right now.  Rather I want to leave you with two old pictures which are most appropriate at this writing.  They both go back to the gloom and doom era of Black Swan, but I submit that they are worth tucking in the back of your mind for when we get around to Thanksgiving time and the Volatility we can expect from the uncertainty that the recent actions have caused to the Market.

As you well know, I am a Glass Half Full Type but I have always given you fair warning of the other side of the coin, so in the spirit of leaving you with how that scenario can develop over the next six months, here are the two slides with no further commentary other than to mention that David Galardi reminded me of the second one:

Good Luck to you all, and may the Kahuna Force be with you whatever you decide.

Best Regards, Ian.

Last night the Futures were up strong, the Market opened up and then slid for another Bungee Jump.  We are only 30 S&P 500 points from the -8% line in the sand, then it’s left in the lap of the gods.  We need a $5 Trillion Coin to solve the problem:

As the caption says on the next chart: One more Day like these with a big sell off and we will be “Bungee Jumping” to Flash Crash levels:

We are currently sitting with 25% of the S&P 1500 stocks in Bucket <0 (Below the Lower Bollinger Band).  It won’t take much to drop this to Flash Crash levels of 62%, and then Heaven help us if we swoon to Black Swan Days of 75% should this all blow up in our face.  However, with the Market so oversold, we can expect a Bounce Play if this Debt Crisis is resolved by tomorrow, particularly since the Institutions have not opened the floodgates to the downside yet:

So far we have experienced the drip, drip process of a Market in Correction; the one-year trendline is now slightly broken to the downside, but with all the kerfuffle on the Debt Crisis the market is only about 6% down from its recent high.  Fortunately the Earnings Reports have been rather robust with over 72% beating Analyst Estimates.  This is particularly good when the likes of GOOG, IBM and AAPL all come in with strong reports:

The bottom line is that the Bears can turn on the floodgates spiggot if we drop another 30 points, while the Bulls have to wait for 72 points higher before it “Feels Good Man!”

Good Luck to us all…we need a bit of it these days.

Best Regards, Ian.

Although the deadline is August 2 for the Debt Ceiling resolution, I suggest the Market will be anticipating the outcome before then and probably by tomorrow.  I should remind you that a month ago the market was sitting on top of the world, and here we are a month later on the verge of a precipice.  The hour is late, and the House vote has not yet happened, so we are down to just one day:

I felt you would like to know what Euphoria and Precipice means in %B Terms so that you can judge where we sit:

I must remind you that the Market is currently in Correction as shown by the usual yardsticks we use for %B:

It’s finger biting time, and either you roll the dice and take a chance or you make up your mind to protect your portfolio.  Volatility as usual will be key to watch and as you can already see the VIX is pointing towards a new spike.  It’s Your Call.

Best Regards, Ian.

It’s time to laugh at this idiocy as the Nation’s blood boils.  401-K’s will soon become 401-Kegs at this rate.

I know the next slide has a lot to digest, but I wanted to get this whole mumbo jumbo down to one chart, as the market has of its own wish given us a Symmetrical Chart Pattern the likes of which I certainly haven’t seen before.  So staying with the “Send in the Clowns” Theme of my last couple of blogs, here is MY READING of what the MARKET is NOW telling us.  I have been wrong before and I will be wrong again, so enjoy it for what it is worth:

Best Regards…Oh, by the way, great to have Ron back safe and sound after a memorable vacation.

Ian.

The Stock Market has been very tolerant so far of all the Debt Ceiling debate, and although great Earnings Reports last week from the likes of GOOG, IBM and AAPL have helped to keep it pointed upwards, time is running out and we may be in for harder times to come.

The KISS Approach I have taught you with the Thin Blue Pencil Line confirms that we are still on the High Road Scenario:

Once more the VIX quietened down to a reasonably safe territory, having done a jittery dance to 21 the previous week:

…And the Chief Canary, AAPL, has been chirping its way to Hog Heaven and knocking on the door of breaking above 400:

…But, all bets are off for tomorrow as the Futures Market already seems to be signaling a rough ride.  We may end up with Perfect Symmetry:

Keep your Powder Dry and be ready to work in whatever direction the Market takes.  Let’s hope it doesn’t eventually end below 1250…-8%!

Best Regards, Ian.