Morning Audibles 3.26.10 - Musical Chairs (to Tetris Music)

Sometimes waiting around for a market break feels like a game of musical chairs. 


I suppose musical chairs can be fun, when you're a kid. (OTOH, what a better way to teach kids at a young age that they don't fit in, they're losers, so go stand in the corner while the other kids fight it out). Now you know where the idea for the reality show 'Survivor' came from...

Don't these people look like they're having fun?

Usually doesn't end this way (with everyone laughing). And why does the guy in the pink shirt look like he wished the guy on the other end had landed in his lap instead. I mean, you'd think he's be fishing for dollar bills out of his pocket instead of staring down the aisle (if you know what I mean). For his own part, the other guy looks like he'd be happy to oblige. Couple more rounds guys. Only a couple more rounds and we can book you two a room!

Now try playing musical chairs against a bunch of computer driven algos written by MIT nerds, who, just to annoy you, decided to loop the TETRIS music as the "game on", "game off" indicator...

Quick! toggle that bar over to the left and flip it 90 degrees you jackass!

Sometimes the best thing to do is to shut off the music and let others play the game. Things are sometimes too confusing in the short term (whether you're a fundamental trader, a technical trader, or both).


- What's the dollar doing?
- Is options pinning involved?
- What's the latest yak from politicians?
- Why is this so over sold/bought?
- Why did Gross/Soros/Bernanke say that?


My K.I.S.S. idea was to take a weekly view of the SPX over the past 10 years to see if it revealed anything. Here's what I came up with...

The chart is "sans" annotations. I'm just going to tell you what I see here:


- The downward trend line is from the March 2000 highs (this makes the entire 2006-2008 period appear to be a bubble - we are back to that trendline, and IMO, in the "noise" phase where to takes the markets a few weeks to figure out if we're really going to go higher, or if this is a serious barrier).
- The wavy line is the 144MA (weekly). While we crossed through this to the upside on yesterdays move, the market came SERIOUSLY reeling back. Depending on Friday's action, we may not 'close' the week above that MA.
- The market went into serious meltdown in 2008 after abandoning that MA
- In 2003, it took the markets a few weeks of tap dancing on it before doing a skyward move. 8 months later, it had retraced the entire move.
- The fibonacci levels you see are the RETRACEMENT from October '02 lows back to the March '00 highs. Note that THAT retracement NEVER really got past 50%. That level corresponds to the price levels we're at now (not FIBO wise - based on the '07 highs/'08 lows), but rather we're around those previous price levels (as if you were to fold the chart and erase 7 years).


Draw your own conclusions... CV's takeaway is that it's about time for the market to decide if we're going to just "bubble-up" again, or, if this was all just an exercise to get back to a more manageable slide down, rather than armageddon... 


Or in other terms, this is where the music stops (or keeps playing)...