Tuesday, April 28, 2009

What Would Wyckoff Do?

Not quite as emotionally charged as what our friend from Nazareth would do but for the market it is kind of important.

Wyckoff believed that cause and result are necessarily intertwined. Lots of volume should push the market by lots of points. Conversely, low volume (effort) should result in little price movement. One look at the S&P with NYSE volume gives us neither. Prices have edged higher as volume edged lower.

Or, put another way, the tank is empty and the market is rising on vapors.

I know that the past two have given me the vapors. It is hard to fight the trend for so long but at the same time the S&P has gained about one point. That means I popped Tums like candy for no good reason, at least no good monetary reason.

Let's switch gears. Warning - rant coming. If all you want are my technical musings you can skip to the final paragraph.

Why is it that something with even a sliver of a chance to be really bad is blown completely to a panic stage? The deaths - and I am certainly not making light of them - are still a very low in number. Someone out there can find some death stat for another medical issue - like cancer - and show that diseases we already have are far worse. But the pandemic of 1918? Let's not get ahead of the facts.

Sure it is possible that this will end up to be really bad. But wasn't AIDS also like this - with the ability to spread like wildfire? I am not disputing that AIDS was and is still horrific but rather that the panic now seems quite similar.

End of rant. Bringing it back to the market, this hair trigger fear of swine flu should be telling us about the sentiment of the public. It is willing to embrace depressions and pandemics rather quickly and that tells us there are plenty of problems left to be worked out in the stock market.


bmbull said...

So, you're wondering if Wyckoff would leave the house without his surgical mask on? :)

Amalan said...

This is not a reflection of the people, but a reflection of the media. It is the media that is reminding us of 1918, over and over again, with black and white photos/film of death and destruction. I don't think the public is as jittery as the media wants us to be. After all, good news doesn't sell as much as bad news.

Meanwhile, we are close to May - "sell in May and go away"?

TomOfTheNorth said...

Regarding the flu outbreak, it seems to me that the 'color' we are receiving a-la "cause for concern, but not for alarm" doesn't square with some of the very few facts emerging: WHO raises pandemic alert status to 4 (on a scale of 6); CA declares state of emergency; hundreds of students sick at NY school yet reported cases in the 10s; Mexican public functions/facilities cancelled/closed; and so on. With respect to media providing historic context, I don't necessarily consider that scare-mongering. One of the more unusual instances of flu outbreak that I learned of from thos scare-mongers was the Ft. Dix outbreak after which it was determined that deaths were caused by vaccine but not by virus.

Unknown said...

In WA state, nobody I interact with seems even remotely aware of "the flu". I canceled my cable TV service precisely because the information it presents is so ridiculous I will no longer pay for it.

The market seems to be bottoming normally. The fundamentals support this. Banks are no longer "locked up" or causing a systemic risk. People have short memories. Already they forgot a few months ago they were scared even their money markets weren't safe.

I will be a buyer on pull backs, but with stops -- it's unlikely to be a return to good times, just not Great Depression II. Over time, more investors will become less bearish as well. They will follow the early leaders up the now rounding bottom.

Michael Kahn said...


When you say "pullbacks" I hope you mean double digit percents. If so, I am with you.