Home > Uncategorized > 2011/09/06: QuickPost: Hands Down Best Ever Financial Press Column on Real Trend Analysis

2011/09/06: QuickPost: Hands Down Best Ever Financial Press Column on Real Trend Analysis

It’s often tough to succinctly communicate just how the well-rounded price trend analyst approaches their craft. We’ve had a lot of folks over the years inquire what we ‘look at‘ to derive our analysis, and that’s the sort of question which defies easy answers.

While we cannot say they apply equally in all cases (and quite a few forms of analysis are indeed wholly different), it is mostly as we say on the main page of our website: assessing trends first from a pure price movement aspect, and then considering how that fits in with the current and anticipated politico-economic economic factors. All fine and good… yet admittedly rather too dry and meaningless to the layman to provide real insight.

Well, one of the commentators cum analyst at the Financial Times has slashed that little Gordian Knot in a recent column that we found extremely interesting and informative. James Mackintosh writes the Short View each weekday (with occasional stints by his also very adept colleague Jennifer Hughes), covering the most pointed aspects of current market influences. It’s my first read every morning, and last Wednesday he hit it out of park with a column on how the recent rally in stocks had to be viewed as less than credible.

Forget the fact that S&P 500 had dropped almost a hundred bucks from its high trade last Tuesday; that’s beside the point. It is the very plain and simple way he moves from the price pattern through some of the basic additional technical aspects, and then relates how that fit in with historic valuations that is so impressive, and readily understandable.

AND… that’s not even the best part of the column…

It was also a video at www.ft.com.  That’s right, for my reading-challenged friends, you don’t even need to read the column copy, because James discusses all that and more in the video presentation of W is for worry or for win?   Of course, compliments to both him and the Financial Times on this breakthrough in mainstream business daily reportage.

That is in stark contrast to the typical references to technical analysis in the financial press. It is alternatively described as bizarre (somewhat akin to voodoo), or as the pursuit of arcane tea leaf reading that cannot benefit those outside the technical cabal. As macro-technical (price trends assessed in the context of the politico-economic drivers) analysts with many years experience, we feel that sort of derision has deprived both the investment community and public of meaningful real world insights into how markets work in practice.

The lack of that kind of sensible view of the real-time performance has encouraged the sort of denial responsible (at least in part) for some of the past couple of decades’ major problems. While it might not have prevented all of the losses incurred in 2008 and early 2009, how much might it have helped if more investors and portfolio managers had allowed that equity markets had entered a more bearish trend early in 2008?

One can only hope this is the beginning of a new, highly evolved focus for the Financial Times’ always useful insights that benefit both dealers and investors. Kudos are certainly in order for this effort.

EXTENDED TREND IMPLICATIONS

The most critical indications will be for equities and govvies again. The September S&P 500 future has already collapsed from its test of the very important 1,224-1230 congestion and Fibonacci retracement area (the levels it was up to last Tuesday into Wednesday morning.) It also gapped below important interim congestion in the 1,192-85 area in the wake of the stale US Employment number last Friday. And in the wake of the German DAX stock index making a new low yesterday as well, the S&P 500 dropped down somewhat below its important interim 1,155-45 range prior to recovering today.

Consistent with all of the other bizarre ‘politico’-economic influences this week, it will all likely rest with the decision by the German Constitutional Court on Wednesday regarding whether further German payments into the European sovereign debt rescue funds is legal. That is huge. While it’s become a bit of a foregone conclusion the court would not all in one fell swoop destroy the euro currency and Euro-zone, there are no guarantees.

And if they rule against further German participation, all hell is going to break loose. Of course, everyone is presuming they are aware of that, and don’t want to take the blame for destroying the stock markets and economies of the developed world. We shall see.

The most pointed recent influence out of the weak equities has of course been the strength of the developed world government bond markets, very much in spite of what the Cassandra’s had warned would happen if there was a US government debt downgrade. September T-note future pushed above 130-20, yet is hung up so far around its previous all-time high at 131-20. Far more impressive was the continued bid at the end of last week in the September German Bund future above the 135.50-.80 oscillator resistance.

As we had suspected, a weekly Close above that level could readily indicate a further push up of at least another point-and-a-half, and possibly as much as several points higher. And while the T-note and Gilt future have lagged to some degree, the September Bund future traded up into the top end of its extended 138-139 oscillator thresholds yesterday. Impressive, and an indication of just how far and fast bond markets can move when flight capital out of the weaker European economies drives the trend psychology.

Thanks for your interest.

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