This Page Last Updated: January 22, 1977 6:00PM
TIME TO GET OUT YOUR "GUM OUT"
Yes traders, it's days like today that that throw a monkey wrench into the mechanics of technical analysis. The idiosyncratic activity in IBM today caused a large disparity in the S&P 500 and OEX relative to the price action of the DOW. Non to worry for me. The Prudent Trader was in a holding pattern, as I have been, for several days now. Going into today, the market condition was BUY. As calculated by me this evening, it REMAINS A BUY CONDITION. (remember to refer to my Trailing Indicator page for an explanation of definitions). We did creep closer to a NEUTRALITY condition so the plot thickens.
Several e-mails were received today by traders who wanted to anticipate the drop. Once again I had to discourage them. When this market decides to pause, the 20 day MA will be target numero uno. We are currently about 28 OEX points from this moving average, so being late to the party will still be profitable. In short relax!
When this market breaks, which I feel is now 1 or 2 days away, there is a distinct possibility that the market condition will shift to FULL SELL quickly. By that I mean we normally spend a couple of days in a Neutrality condition but this time it will be much shorter.As of this post, I do not have todays McClellan Oscillator and Summation Index figures but it would be my guess that they deteriorated further from yesterdays numbers. I now feel confident that the trigger of the FULL SELL condition will occurr simoultaneously with the turning down of the summation index and the dropping of the oscillator into negative territory. Also, this would not be the first time that these events coincided with the change in market condition from BUY to FULL SELL, thereby bypassing a Neutrality condition all together. Some other moving average crossover work I do that has kept me from going short will also trigger this correction, so it does appear that MULTIPLE INDICATORS WILL BE TRIPPING during this first leg down.Price points are not being given tonight because they are not necessary. The Prudent Trader should be stricyly on a TA signal watch.
So in summary, the Prudent Trader methodology can in NO WAY support long positions but the time to go short is rapidly approaching but "it ain't soup yet"! Using my strategy, no money would have been lost today, no money would have been made. If you jumped the gun with a short position all I can say is "naught, naughty"! Even though I had touted the 20 day MA reaching the previous price peak, that is only a "casual observation". It works many a time but I'd never bet the ranch on it. The Trailing Indicator is much more reliable. Until tomorrow, have a happy........
