Changes in the Wind

Although I am a investor, I enjoy very much reading some technical articles. Put it this way, I bare no grudge against folks who trade nor do I bare any grudge against the usage of technical analysis.

Anyway, one of my favourite are those written by Tim Wood. He used to have his editorials published on Fridays on FSO. I do not know why but he no longer does. However, I found his editorial on the Safe Haven website.

The following is recent write-up: The Trend is still up, Sentiment is High, but Change is in the Wind

Like to post some quotes he made.

• Let me begin by saying that according to Dow theory, the trend is still positive. But, at the same time the ongoing non-confirmation between the Industrials and the Transports continues to warn of an approaching top.
• We have just completed the 222nd consecutive week with this reading either at or above the 50% level. When this indicator is at the 50% level it means that there are just as many bulls as there are bears. When this indicator is at 75% it is telling us that there are 3 times as many bulls as there are bears. The point here is that optimism among investors ebb and flow with market cycles.
• So, it is a fact that most people are the most bullish at or near a top and that most people are the most bearish at or near a bottom. Please understand that just as with non-confirmations sentiment data does not yield buy and sell signals, but rather serve as an indication of the overall environment.
• The danger here, as I see it, is that we now have far too many people on one side of the boat. When the decline into the 4-year cycle low does begin and this sentiment begins to shift, the heard will run to the other side, it's only human nature. With this level of consistent/persistent bullishness there is an awful lot of weight that will be running to the other side, which could exacerbate the move into the 4-year cycle low.
• Another reason that there is so little fear amongst the public is that the market is now in its 7th consecutive month without a meaningful correction.
• No doubt about it, the price advance out of the summer low remains intact as of this writing and I do respect the current trend. But, at the same time, the "over the horizon" piece of the equation continues to tell me that storm clouds are in fact still gathering and I also must respect that fact as well.
• This sort of reminds me of an e-mail I received in which a subscriber asked me why I didn't give my turn point on oil when it topped. Fact is, I did give the signal right near the top way back in August. Trouble was, she heard what he wanted to hear at the time and that was $100 oil, not $50 oil. There was a refusal to believe the technical indicators. When I showed this documentation to the subscriber she did not remember it. Nor did she remember when I said that the rally out of the lows this past fall would be a counter trend bounce. Point being, people become opinionated and conditioned to think as a heard. Virtually no one is expecting anything but higher stock prices and I can count on less than one hand the people that I know who are in agreement that the 4-year cycle low still lies ahead. Yes, if you know what your looking at, the evidence of risk is fairly clear. Yet, I find it very interesting that so many are so complacent at this juncture. But then again, that's the nature of the markets, so this really does make perfect sense.