Tuesday, October 21, 2008

Nothing decisive in the charts

I don't think the market has picked a short-term direction yet. If that's a breakout above the declining tops trend line then it's not a very convincing one.

Sentiment indicators are on the pessimistic side, which forecasts a rally, but that's been the case for the past few weeks. So much then for sentiment forecasts during a bear market!


Tim said...

Jodi what particular "pessimist indicators" are you looking at?

Jody said...

I look at several sentiment indicators, including one or two that I think most people aren't aware of. Any single indicator alone can give a false reading from time to time, but the odds improve significantly when they are combined.

John from Colorado said...

Why wouldn't the sentiment indicators you monitor be giving an accurate reading in a bear market vs bull? Or are they accurate in a bear market and some other variable(s) is(are) "holding them hostage"? Thoughts?
John from snowy Colorado

Jody said...

Two things:

1) Sentiment indicators are only good for short-term forecasts. Sentiment isn't good for forecasting a change from a bear market into a bull or vice versa, but it can forecast a short-term bear market rally or bull market correction.

2) Bear markets play by their own rules sometimes, and will refrain from rallying despite pessimistic sentiment. In this case the market has decided to move horizontally for a while rather than rally. This unpredictability is one reason why I've been fond of cash lately.

Please don't worry about all of this. One of two things is eventually going to happen:

1) A bear market rally will come to an end, and I'll get into GRZZX and make money when the market falls again.


2) The bear market will bottom-out and the next bull market will begin.

Either way, I will report it when I see it.