Not a Single Technique Caught the Market Downturn

We will lead today with our Dow Projections yesterday morning in the alert:

>> Market Rally-8450, former resistance, to 8550
(On 5/4 the market hit 8456 three times before 2.30 p.m.)
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>> Market Top-8326-8370-Classic Market Top
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>> Market Hesitancy-8250
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>> First Market Bottom-7950
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>> Projected low-7850
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>> Charts would show exhaustion taking place and the consolidation taking place first, but the market is optimistic, and the reverse could be true.
We saw low volume last week in the upside, and saw an exhaustive gap yesterday morning that many traders think is a sign of shorts covering. Housing data looked bleakly positive and the bull run continued.

Risk traders that took our suggestion for the May 425 were able to buy at less than 15% above prior day close, and sell to 80% returns same day.

Part of this optimism, which we think now a bit overly euphoric, may be from the "babble" that the bank stress tests will not come in bad later this week, and that the top 8450 resistance lines can be broken.

For traders truly wanting to understand just how charting, however, was unable to successfully predict the October meltdown we had last year I read an article quite detailed in its analysis, as it will clarify to you what Floyd always has said, "charting shows historical data and can be read emotionally, making it only a tool in trading"

Effectively this chartist study shows us that NOT one of the technical indicators we all use so well, with such faith, caught the market slide. This includes RSI, MACD, Wilde work, Bollingers, et al. When a true technical analysis was done, not a single "technique caught the market downturn".

In the summer of 2008 we sold 1/3 of our stock and bond holdings in Blue Chip Options (www.bluechipoptions.com)) at 14,100 tops (13,500 recommended sell) and a second 1/3 of our positions at 11,900.

My theory then that none of it made sense. I didn't believe any of the facts being presented, and things looked too good, and I believed it was time to "lock profits and always leave money on the table".

That left Blue Chip Options with only 1/3 of our holdings in stocks and bonds by October of last year, and we began aggressively adding to our existing new positions as the Dow hit 7400, and again on downturn.

I will not project for you more than a week. Our Dow projections are listed for 21 day periods, the maximum I believe any market can be "predicted", as the market is emotionally random, and it is happening in even shorter increments recently, 5 days.

Our May410P may be our first loss in 16 straight trades, but we'll hold it for stop loss, and as our hedge, and it's time is not up. We thought the downturn would take place before the upturn, but continue to see a consolidation day or two to spirit the market and lock profits. Things are too good, and they aren't really:)

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Floydian Therapy: Here's part of an article on our website called The Circle of Chaos:

There is such a thing as Chaos Theory, and I vaguely understand it. I also know that after entropy occurs there is often new growth. Simply put, once we’ve endured bunches of shit we get used to it and can endure more shit.

At Floydian Therapy we believe there are circles to actions, and that multiple people enter these circles.

Circles of Chaos, and all of us with different abilities to handle chaos; that is, we each as individuals have our own levels of endurance of just how much INPUT we can handle. All we get is input, from voice, to email to TV, and with people. You know the drill. The more you work and are closer to “on the grid” the more you have input.

Your ability to filter this input and how you deal with it defines the amount of “stress you feel”.

Stress is an emotion, not a physical condition. It becomes physiological in response, but begins with brain wave movements, all based on how one is handling input.

When we create or enter drama situations, the circle of chaos is immediate and all pervasive. You have been there, or you are there. Interaction within a circle of certain people is not just interaction, but drama. It tolls on you. This is a circle of chaos, and you are in it.

Most of us spend the majority of our time in the past, or the future. The present is not as real to us, even though we may think it is. We fill the present with “things, events, work, action, and input”, and during that time “remember” the past, or spend more time planning the future. We create scenarios around our FEARS, whatever they are, as we imagine the future, and build our present around what we want to not make happen in the future.