The Golden Swan Formation

I haven't day traded in more than fifteen years. But, for five years, I was an aggressive trader. I was on the phone sometimes several times a day with Olde Discount and charting and wielding my Quotrek. The approach I took was technical analysis, the theory that stock prices and volume best predicts future prices as all information that exists is contained within those metrics, and trend analysis, the theory that buy and sell trends persist-- until they don't.

After observing the market, I noticed one re-occuring money-making pattern, which I call the Golden Swan. Here is an example of the last six month's stock prices of J.P. Morgan.






Janaury through March formed the back of the swan-- a gentle curve reflecting negative sentiment. In early April, the neck grew on good volume. Prices then broke above the swan's back into virgin territory (at least in the perspective of the last three months)-- a positive sign of recovery for J.P. Morgan.

Two caveats. As enthusiasm mounts, there will be price gaps. Prices jump above the close of a prior day, sometimes by dollars. These gaps almost always get filled, and these are buying opportunities to load up on a sound stock. Also, if you look at the one, two, and five year trend, there is a lot of upstream resistence-- bearish investors waiting to unload JP Morgan at higher levels. However, the overall trend in my view is strongly positive. And you can take that to the bank.

Stewart Versus Cramer

An entertaining vivisection of someone who is louder than he knows.

But, as John notes, this is more than entertainment. However, it does amaze me that anyone would take trading advice from Jim and CNBC's 17 hours of broadcast.

Cramer's got your back? Ha!

How Low Will It Go?

The market continued to erode today on news of continuing weakening of bank stocks and the possibe collapse of GM. The paradox is that Obama's approval rating continues to be high-- more than 60 percent.

My interpretation is that the market continues to be skeptical of a recovery in key sectors of the economy-- especially thge efficacy of government intervention-- while the public generally recognizes that Obama's is doing the best he can to find a solution to inherited problems.

The stock market is the more accurate indicator than polls, as it recognizes the verdict of all players in the market-- and the verdict right now is a thumbs down. While I think it is a mistake to anthromorphize the market, I do believe that it tries to hurt or fool as many people as it can. Stocks will only recover when the floor is reached. The floor will be reached when if last bit of optimisim has been squeezed out of the market and a conensus has been reached that all is gloom and doom. We're not at the place yet.