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VIDEODJIA and Transports Leave Dow Theory Buy Signal
Every technical benchmark and data point seem but an island in the market's stream of confusion.
Well, I don’t know what it is
But there is definitely something going on upstairs
Dig, Lazarus, Dig (Nick Cave & The Bad Seeds)
“Never confuse motion with action.”
-- Ernest Hemingway
“The dignity of movement of an iceberg is due to only one-ninth of it being above water.”
-- Ernest Hemingway
“We are all apprentices in a craft where no one ever becomes a master.”
-- Ernest Hemingway
On Monday the Dow Industrials and the Dow Transports closed convincingly above their respective June closing highs, leaving a Dow Theory confirmation of a bullish direction for the market.
The question is whether this signal will be any better than the dark cross sell signal scored on July 1 when the 50-day moving average on the S&P crossed below the 200-day moving average.
As I understand it, a Dow Theory confirmation with both the DJIA and the Transports confirming on the same day is supposed to be a "firmer" signal.
Be that as it may, the only certainty in the stock market is in stocks going from overvaluation to undervaluation and back again.
Nothing is infallible in the stock market -- no theory, no measure of the market be it technical, fundamental, or cyclical. The basic tenet of any investment or trading methodology worth its salt should be that it's not infallible.
Those that demand the least from a method will gain the most from it. Those who demand the most from a method will be the ones most frustrated by it.
The only way to gain control is to give up control. The only way to gain control is to give up the idea of trying to have control.
The market is more art than science: The good and bad part of any genuine approach to the market is that it requires interpretation, which is what makes markets and opportunity, but is bad because it's frustrating.
The study of the market is part theoretical and part philosophical. That’s what makes it so intriguing. The market is a mystery. Despite all the artificial intelligence and computer power available, no one has solved the mystery. There's no sure thing in the markets.
When you hear comments like "July was the low for the year," it's an educated guess but nonetheless a guess. Albeit, July 7 saw the S&P stab impressively back up through the prior lows, leaving the potential of a W V bottoming pattern as offered in this space. I failed to recognize the potential power of the rally to get so far so fast, but like the post-flash-crash snapback, bear market rallies are tricky and deceptive. They tend to end suddenly with little warning, having created just enough bullishness to leave the pullback buyers in tears.
As I mentioned last week, the rollover on Wednesday, July 21, followed by the more than one point upside gap on the S&P SPDR (SPY) on Thursday, July 22, inserted the "hook," and once the hook is in, the big fish is pulled all the way up on the deck flailing.
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