The
SP500 ended downbeat mainly because data pointed that growth is softening. So the market is in the process of deciding whether or not the current positive economic setup is sustainable or not. Also keep in mind that 1Q results in the US are almost over and that politics play a strong role both in the US and Europe (expect lots of noise from Greece, and maybe less so from France). So, while the market jitters from economic noise, and decides whether or not a change in growth trend is turning up, it is likely that it manages to regain the top. As usually it will do so only for the pleasure of misleading us to later kick our ass with no mercy (in our opinion a 'growth accident' will likely take place at around 3Q12).
Long ExtremeStop @ 1347.2: comes down but suggesting less 'appetite' (tolerance) to endure downward
moves in prices in case we decide to go long. Past week long
ExtremeStop was triggered the very last day leaving us out of our position.
Short ExtremeStop @ 1400.5: moves up pointing more 'appetite' for being short.
DPTA We completely misunderstood (by misreading) DTPA last week and got punished accordingly (stopped out at a loss). Yes, there is more and more blue coming, but this is only a sign for the next few weeks in the future (look into the superimposed red square in the chart ; refer to note 1 below). Also note that past data changed a bit in the chart. This happens because it is a rolling window 100% recomputed every time, in which a small revision of past data generates a risk profile that wasn't available at that time. Doesn't matter, we always look into the red square and make our decision based on that. So let's try to do it better this time. The SP500 was strongly attracted to the 1370 area breaching our long stop. Getting lower to the 1350 area is more likely than we would desire, but if it just manages to remain around those levels, it will confirm the support that has been forming from the beginning of April. Summing up, some ripples are left and they may clear up in one or maybe two weeks. Once past, the SP500 will try to reach the previous top with a sharp move.
DPTA We completely misunderstood (by misreading) DTPA last week and got punished accordingly (stopped out at a loss). Yes, there is more and more blue coming, but this is only a sign for the next few weeks in the future (look into the superimposed red square in the chart ; refer to note 1 below). Also note that past data changed a bit in the chart. This happens because it is a rolling window 100% recomputed every time, in which a small revision of past data generates a risk profile that wasn't available at that time. Doesn't matter, we always look into the red square and make our decision based on that. So let's try to do it better this time. The SP500 was strongly attracted to the 1370 area breaching our long stop. Getting lower to the 1350 area is more likely than we would desire, but if it just manages to remain around those levels, it will confirm the support that has been forming from the beginning of April. Summing up, some ripples are left and they may clear up in one or maybe two weeks. Once past, the SP500 will try to reach the previous top with a sharp move.
Conclusion:
1) volatility on the rise, 2) lower bound formed likely to be tested back, 3) seems the the week will start on a weak note, as usual its a close callWe tried to get in the market and were kicked out without ceremony (deservedly of course). We believe that an opportunity is on the make to get long but will try to be more patient to take advantage of it. We find it amusing that our repeated mistakes and wrong decisions help demostrate that these tools are adequate. In our case we will remain playing the game though slowly but consistenly losing capital :-(
WE ARE CURRENTLY PONDERING WHETHER OR NOT THE WRITE UP OF OUR REPORT IS WORTH THE EFFORT. IF YOU FIND THESE COMMENTS USEFUL, WE WOULD BE GRATEFUL IF YOU DO SOME OR ALL OF THE FOLLOWING:
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IF YOU DONT LIKE IT YOUR ARE ALSO WELCOME TO EXPRESS IT, BUT REMEMBER TO EXPLAIN WHY, PLEASE
Note 1: Reminder on how to interpret DTPA. The chart provides the probability of a strong movement around the trend for the next few weeks. As you can see it always adds up to 100%. The colours represent how much danger we should expect: light and dark blue are good for those who think they should stay long. Orange and red have the opposite meaning. In between, representing low chances of change in the trend in force (whether upwards or downwards) we have green.
Note 2: we will cover more explanations about DTPA (Dynamic Technical Probability Assessment) and ExtremeStops in our Bits for Thought section
Note 3: Always keep in mind our disclaimer issued in our first post (31/03/2012)
