Continuing with the annual review, this is the April look back to the year that was. If you’ve just stumbled on this, here’s a little explanation. I’m winding down the year by revisiting my commentary and analysis for 2009. Each time I review a month and highlight the more interesting posts and what we can learn from them (combined with a healthy pinch of hindsight).
If you’ve missed the previous months, here you go: January, February, March. If you’re new to the blog, this should give you a good idea of what you’ve missed. And if you’re a regular reader, don’t pass up the opportunity to remind me how fallible I am
Which brings us to the highlights for April 2009:
- Comparison Of Bear Markets: Weinstein Stage Analysis
Continuing the main message from March that this was a significant level in the market, I used Weinstein’s framework to look at the end of the bear market in 2002-2003 and used it as a template for the current bear market. Once again, the March low stood out as the bottom. However, it didn’t rule out a revisit of the low.
- Recent Stock Market Rally Hitting The Wall
Relying on the same set of market breadth indicators that had proven so useful in navigating the market so far, made me turn cautious much too early. In hindsight, it is obvious that such powerful thrusts (like March 2003 or 2009) characteristically push market breadth to extremes and keep them there. Of course, option traders penchant for calls and the quick turnabout in sentiment surveys helped to muddy waters also.
- Coppock Curve Approves Of The Chinese Stock Market
While I had recommended Chinese stocks late last year (at the exact bottom!), the Coppock Curve finally signalled the all clear for a new bull market in April 2009. I predicted a move to 3,800-4,000 which was a bit too optimistic. The Shanghai index topped out at 3471 in August 2009 for a trough to peak move of +103%.
- Twin Charts Separated At Birth: Can You Guess Which Is Which?
I’ve compared the March 2003 low to the March 2009 low several times but this was the first mention of it. I removed the year on the time scales and asked for readers to tell the difference.
- Market Wobbles On Extreme Optimism & Breadth
The equity market breadth was unmistakeably extreme. That and the put call ratio in the option trading pits made me very cautious that the fantastic rally we had enjoyed was about to end.
- The Definitive Guide To Trading Mastery & Success
Don’t worry, I’m not trying to sell you a get rich quick scheme. In fact, the very opposite. According to Outliers, to reach effective mastery of a skill you need to devote at least 10,000 hours. I explored what this means to a trader and used Steve Cohen as an example to illustrate the principle.
I was happy to see this featured and referred to by many other blogs, including FT’s alphaville.
- Nasdaq Bullish Percent Index Back To 2007 Level
Yet another breadth indicator which was signaling a top (incorrectly). I wrote: “The only justification for new long positions here, or continuing to hold on to existing long positions, is the expectation that we are going to see yet another powerful non-stop rocket ride as in 2003. Anything is possible but considering everything, I think that scenario is highly improbable.” Oh boy… wrong!
- NYSE Breadth Is Strong: Why It Doesn’t Matter
The myth of cumulative breadth as an indicator dies hard but hopefully I’ve inflicted a mortal wound with some fact based analysis. This is why I use a moving average of daily breadth instead.
- The Anxious Index: Worst Of Recession Over?
The little known “Survey of Professional Forecasters” is a great predictor of the start and end of recessions. Known colloquially as the “Anxious Index” the next quarter prediction for GDP was the highest it had ever been (since the start of this survey). It will be interesting to see how it corresponds to the official end of the recession once the NBER gets around to announcing it.
- Relative Performance Of Large Caps vs. Small Caps
I showed a very long term chart of the ratio of large capitalization stocks to their small cap brethren. The multi-year trading range continues still as the current ratio of the Russell 2000 and the S&P 500 index is 0.55 (smack dab in the middle of the range).
- “When To Sell” by Justin Mamis: A Classic Trading Book
This was a short review and recommendation of a less popular but still brilliant trading book. “When to Sell” is really just a book about tape reading so if you’re interested to learn more about that skill, pick up a copy of this classic.
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