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Minyan Mailbag: Puzzling Pieces

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Can't we all just get along?

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Editor's Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Kevin,

As a long time reader of Minyanville, I felt compelled to make a couple of comments with regard to your column this morning. I try and respect everyone's opinion, and I realize that hindsight is 20/20, but consider the following:

- it was a 3 year "bear market," not two. Though we had many huge upside corrections in the process.

- I find technical analysis of little benefit, though I imagine for daily trading it is of more use. Just my opinion- but technicians have been incorrect for so long and disguise their verbage as to be non-committal. Just like a Fed official we all know of.

- Minyanville was basically a bear-den in March 2003, as I recall. One of your writers' basically capitulated (though he certainly wasn't alone). I know Minyanville doesn't provide "advice" - but readers certainly were not being given a bullish outlook at the time. Or frankly since then.

- So every indicator you follow is "flashing green?" You certainly have a right to your opinion, but it's kind of like "now you tell us." Since the recent low, the S&P 500 has risen almost 6% and the Nasdaq almost 10%. Again- hindsight is 20/20 but to say everything is flashing green after (a) a strong rally (b) VIX at 12 (c) stronger dollar which will likely negatively affect earnings (d) debt/derivitives/etc (that Toddo often speaks of) frankly I find a bit puzzling.

Respectfully yours,
Minyan Greg

Greg-
Thanks for your comments. That's what Minyanville is all about, exchanging viewpoints and providing a forum for discussion. It would be the last place I would want to be if we all agreed on everything and simply spent all day patting ourselves on the back.

I'll respond to your comments in order.

"It was a 3 year "bear market", not two. Though we had many huge upside corrections in the process."

Biotechnology, Netstocks and Semis began emerging from their bear market in the Summer of 2002, the first positive technical signs of life for those groups since the peak in 2000. To clarify, when I use the term "bear market," I am not referring to cyclical down moves, but to the structural moves where the majority of stocks and sectors are moving down together sparing no one.

Financials, for example, enjoyed a very strong year in 2000. The BKX was up about 17% in 2000, while the S&P 500 Equal Weight Index was up nearly 8%. The Nasdaq 100 was down nearly 40%, however, and since that's where most people were weighted that's what they tend to remember. 2001-2002 was grim, however. Those were the years where everything moved down simultaneously. That is a structural bear market.

"I find technical analysis of little benefit, though I imagine for daily trading it is of more use. Just my opinion- but technicians have been incorrect for so long and disguise their verbage as to be non-committal. Just like a Fed official we all know of."

I have no intention of turning anyone into a technician and certainly I respect your opinion. Our mission in the 'Ville is to educate, share our processes and hopefully exchange ideas, not make market calls or offer advice. There are many things I find of little value in financial markets too. But I do try to approach everything with an open mind and when I find something of interest, such as Scott Reamer's Complexity analysis, I pursue it further.

There is no one best way to approach the markets, which is why those who find success trading and investing come from all walks of life, and employ many, many different methodologies. However, one thing all successful methodologies seem to have in common is discipline.

"Minyanville was basically a bear-den in March 2003, as I recall. One of your writers' basically capitulated (though he certainly wasn't alone). I know Minyanville doesn't provide "advice"- but readers' certainly were not being given a bullish outlook at the time. Or frankly since then."

It's ok to be wrong, but not ok to stay wrong, an old cliche but every cliche has a kernel of truth. I can't explain another contributor's view, but I know all of the Minyanville contributors are happy to respond to Minyan questions and feedback. Meanwhile, we have a lot of big things in the works here, and chief among those things is the recruitment of more contributors with varied areas of expertise and opinions.

"So every indicator you follow is "flashing green?" You certainly have a right to your opinion, but it's kind of like "now you tell us." Since the recent low, the S&P 500 has risen almost 6% and the Nasdaq almost 10%. Again- hindsight is 20/20 but to say everything is flashing green after (a) a strong rally (b) VIX at 12 (c) stronger dollar which will likely negatively affect earnings (d) debt/derivitives/etc (that Toddo often speaks of) frankly I find a bit puzzling."

The indicators Toddo and I were referring to were the contextual bullish percent indicators, which I have tried to make clear are not timing devices in a couple of different pieces this week. They are not timing indicators, but absolute supply and demand indicators that tell me whether to operate in offensive mode or defensive mode. They began turning down last December and year-to-date the Nasdaq is down ~4.5% while the Dow is down ~2.5% and the S&P 500 down ~1%.

My style is such that when my indicators are in defensive mode I look for opportunities to short stocks and ETFs on rallies where some of the timing indicators I use, such as DeMark and Elliott, give me the ok. When they are green I look for opportunities to buy weakness. That is what I mean by context.

As I wrote this morning, my big picture view remains intact. But for now, I have no choice but to be less aggressive from the short side and search for opportunities to stay within the appropriate context. I could definitely be wrong, but even if wrong my disciplined approach will keep me in the game to play another day. Come to think of it, that's precisely the theme for this year's MIM2 at the Ojai Valley Inn & Spa near Santa Barbara, "Controlling Risk and Staying in the Game." Hope to see you there.
-Kevin

Kevin,

Absolutely.

Harrison and I are both Valley boys btw.

Your response is appreciated and was well-thought out. You are correct about 2000- it's just most investors focus on the S&P/Naz. And yes, it is good and refreshing that people are able to share ideas/offer varying opinions and not just break their arms patting themselves/fellow columnists on the back while conveniently forgetting all the disastrous advice that has been given (over and over) at other finanical venues.

P.S. I in no way was trying to criticize any specific technicians. I'm sure many have benefited greatly- it's just that in my experience technicians seem to tell us where things have been, not where they are going. I respect definitive market calls- and as someone much smarter than I recently said- "It's ok to be wrong. It's not ok to keep being wrong." Keep up the fine work- and your humor is definitely appreciated.

-Minyan Greg

Now that's what the spirit of the 'Ville is all about!

No positions in stocks mentioned.

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