Staying With The Trend

One of my Twitter friends, @edwardrooster, retweeted an interesting news article yesterday about Paul Tudor Jones. The story noted that Jones had had a two-decade run of returning 26% annually. That's an amazing feat.

I've always admired Jones since reading about him in Market Wizards, and it was through those pages (and Jones himself) that I first became acquainted with Elliott Wave. One thing that jumped out at me in yesterday's article was that about half of Jones’ trading depends on technical analysis using historical price charts to predict market moves. I thought this was a really intriguing idea. Perhaps his long-term track record is due to having a long-term perspective.

Indeed, a long-term problem seems to finally be catching up with Europe.  European indices are melting so far today. I guess the idea of Eurobonds didn't go over so well in Germany, nor should it have.

But whatever the reason given, the fact is that the trend is still down. And that means across virtually all markets, because they're all linked by liquidity. That liquidity is seeping steadily, and from a long-term perspective, the process has probably just begun.  Furthermore, it's largely a psychological process spurred by darkening social mood.  For example, an actual fight broke out yesterday in Chicago's corn option pits.  Expect worse, and do your best not to get sucked in by it.  It could be a very long time until it's over. 

The two things that I noted yesterday, advancers and volume, were resolved through market action. Volume was still muted versus the big down day on Friday, and advancers caved in. Not what you want to see if you're bullish and think everything's fine. In fact, the only time volume increased yesterday was during down drafts.

Continue to keep an eye on the 200-day and 50-week MAs at roughly 1278 and 1282 respectively.  To the upside -- and yes, it still could happen at any time -- both the US dollar and the Euro are showing what could be seen as reversing candlesticks so far on the daily charts.  If these develop further, there is nothing to preclude a snap back rally up into the 1330s.