Trader’s Narrative

To take stock of the year that was, I’m looking back at my commentary and analysis for each month. Hopefully I can learn from both my mistakes and successes.

If you’ve missed the previous monthly highlights, here they are: January, February, March, April, May. And that brings us to the next month, June 2009:

• Coppock Guide Signals The Start Of New Bull Market
  After months of waiting we had an official upturn (finally!). This signal arrived from an incredibly negative level suggesting that the ensuing rally would be intense. And, it brought it’s friends. While the signal was for the S&P 500 index, the Nasdaq had given a similar signal a few months ago and so had the Dow.
  As well, other major indexes around the world were sending the same message. The change in tone was a clear. For a qualitative sentiment observation, check out the comments from readers. Without a doubt, this was the most hated rally I’ve seen.
• Comparing Flag Formations: Then & Now
  Once more I compared the rally in the S&P 500 index to the one we saw in 2003. Based on the overwhelmingly negative sentiment, I projected a longer term price movement which proved surprisingly prescient. While in the short term, I was mildly negative based on the ISE options data. That proved correct as well.
• Dow Jones Industrial Changes Composition (Again)
  The components of the Dow were once again being changed and I used it as an opportunity to point out that ‘passive investment’ is a misnomer. After all, every single index is created and managed by mere mortals.
• Defending The Coppock Guide
  There was a surprising amount of disbelief and criticism leveled at the new bullish signal delivered by the Coppock Guide earlier in the month. While this said more about the prevailing sentiment, I offered a defense of sorts based on some quantitative work based on this long standing indicator. Time proved the critiques wrong.
• Claymore Gold IPO: Sign Of Top In Gold?
  Once again I relied on a sentiment gauge to find a significant top in gold. While the pullback was rather shallow, it wasn’t until the beginning of September that a new annual high would be made.
• US Consumer Rediscovers Frugality
  After decades of over-consumption fueled by debt, the US consumer hit the wall. The long term chart of the personal savings rate told the story of the major theme for 2009 (and beyond): frugality.
• Volume Ratio Indicates Speculative Froth
  The ratio of trading activity between the NYSE and the Nasdaq is a rather old technical indicator but it is still reliable. In June it correctly told us that the market was top heavy. For the rest of the month, the S&P 500 traded lower and it was not until mid July that it surpassed the 940 level.
• Lowry Research: This Is No Bull Market
  Paul Desmond of Lowry Research continued to be skeptical of the rally. This was mainly based on their proprietary demand and supply gauges. Soon Lowry would do an about face but for now, their reputation made even more traders question the rally.
• Comparing Market Breadth To 2003’s Bull Market
  The rally from the March lows was incredibly intense, even compared to the last bull market in 2003. We gained as much in 2 months in 2009 as we did in 10 months in 2003. And it was all thanks to a relatively small group of stocks.
• Golden Cross: Bullish Technical Formation
  The month ended as it had begun, with an important bullish development: the golden cross. Just as with the Coppock Guide, there were some who questioned whether the 50 day moving average overtaking the 200 day moving average offered an edge. I offered several different research reports which were bullish but ultimately, time was the judge and jury.

Jan - February - March - April - May - July - Aug - Sept - October - November - December