Monday, May 24, 2010

ACTION & REACTION

The stock market is really nothing more than a gauge of human emotions. And just like bodies in motion, human emotions also follow the laws of action and reaction.

In simple terms the bigger the bull the bigger the bear and vise versa.

We've had a ring side seat to this as we are witnessing one of the most aggressive bull markets in history unfold after the second worst bear market ever.

Lately we are seeing this play out on a smaller scale in the intermediate swings. After the powerful initial thrust out of the `09 bottom and the final spurt into the second leg top we witnessed a rapid correction of 9%. During that correction sentiment again quickly reached excessively bearish levels. The general consensus was a second deflationary spiral was upon us.




It was of course just a brief profit taking event like I said it would be. But that's beside the point. More importantly the severe bearish sentiment generated a powerful runaway move out of the February bottom.

That extreme move in turn swung sentiment to levels of optimism in line with what we saw at the `07 top.

Now the law of action and reaction has again taken the market to the opposite extreme. Those extreme bullish sentiment levels generated during the runaway move have now produced one hell of a hang-over complete with a mini-crash.

So here we are again. Human emotions have now run to bearish extremes similar to, and in some cases even worse than what we saw at the `09 bottom.

If this is only a correction in an ongoing cyclical bull market then we have now built a massive negative sentiment base from which to launch the next explosive move higher in the ongoing war of action and reaction.

19 comments:

  1. Dude, give up your bull might resume(hedging my perceptions) stance.

    What are you wishing/projecting for.

    This goes beyond emotions and sentiment. Give rid of market mumbo jumbo, nomenclature.

    Look outside your freakin window at that bloody mess we are in right now.

    Is the venerable Richard Russell the only one who gets it???

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  2. If the pattern of higher highs and higher lows is broken and a Dow theory sell signal is given then I will be the first one to say the bear is back.

    Until that happens the trend is still up and trying to specualte on whether the bear has returned is ...just speculation.

    Besides what difference does it make? I'm certainly not going to waste time and money selling stocks short as long as the gold bull remains intact.

    What's the point of taking on huge risk for minimal returns trying to fight with a bear market when the really big money is easily made by just sitting tight in the gold bull?

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  3. Have you seen the charts on the gold jnr´s, mids and majors??

    They´re all bloody rolling over like a one legged dog. Looks just like 2008 with the BRL, AUS and CAD leading the way.

    Will they resume the upswing? YES!

    But, why watch them drop 20%,30%,40%,50% or in the meantime?

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  4. Sounds like someone has a crystal ball :)

    Where can I get one?

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  5. Anon,
    Are you the same noob that was touting the breakout in the oil stocks?

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  6. You get one by listening to what the market is telling you instead of going by the voices and pictures going on in your own head.

    What´s these market balls telling you Tman?

    http://quotes.ino.com/chart/index.html?s=FOREX_AUDUSD&t=&a=&w=&v=d12

    http://quotes.ino.com/chart/index.html?s=FOREX_USDCAD&t=&a=&w=&v=d12

    http://quotes.ino.com/chart/index.html?s=NYBOT_DX&t=&a=&w=&v=d12

    http://quotes.ino.com/chart/index.html?s=NYMEX_CL.N10.E&t=&a=&w=&v=d12

    http://quotes.ino.com/chart/index.html?s=FOREX_USDCHF&t=&a=&w=&v=d12

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  7. Eventually you will figure this out if you last long enough.

    There is a lot more to markets than just lines on charts.

    Things looked a lot worse at the March 09 bottom and look what followed.

    In case you haven't figured it out it really isn't possible to predict the future by looking at the past.

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  8. Toby your theory of powerful upside seems likely to me. How low do you think we need to go first?

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  9. Oh gawd. The blind followers are coming out now.

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  10. We will keep sinking fast until the markets are fed multi-trillions more handouts/bailouts(with no guarantees it will work this time).

    This round is over. Get over it.

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  11. The bull is being gored by the bear.

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  12. Tman,

    Eventually you will figure what´s really happening when you look at your statements next month. If you open them that is.

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  13. Geez what part of I'm not invested in the stock market do you not understand?

    I'm only invested in the PM sector. I'm confident that bull still has a long way to go and the more weakness we see in stocks the more printing the governments of the world will do.

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  14. PM Stocks are gonna tank in this rout as well.

    What part of that don´t you understand.

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  15. I have to ask. So what? The secular bull is still intact. They will just come raoring right back once the selling pressure fform the stock market is released just like they did last time.

    You don't seem to understand, I'm not a short term trader. These daily wiggles are meaningless to me. All I care about is where the market will be at the end of the bull and the odds are it will be many multiples higher than it is now.

    Any minor correction now will just be an almost undiscernible wiggle on the long term chart.

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  16. Hey Gumby,
    Miners are holding up pretty darn well and gold is up. I thought they were supposed to get destroyed.

    I've got to say your predictions kinda suck. hahaha

    Like Toby says it's a bull market after all.

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  17. Hey Pokey,

    What´s the difference between the words will and are?

    Could it relate to time?

    BTW, how many PM shares are priced in CAD´S?

    Factored the 8% currency loss in yet?

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  18. Both the S&P and Dow have breached their Feb lows today. Does this mean the trend "may" have become bearish now. So any bounce from hereon is a sell on rise instead of a buy on dips market ?

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  19. If you want to waste your time and capital on trying to trade the stock market then probably yes.

    I have much better things to do with my money like ride the secular gold bull.

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