Thursday, July 1, 2010

Why Do These Things Always Happen When You're Not Around?

What a nasty start to the week and end to the 2nd quarter! I've been away with my wife and two of my sons at Virginia Beach for the National Junior Olympic Power Tumbling and Trampoline Championships since Saturday. My youngest son, Stewart, has been competing in the sport since he was six, and he is quite the competitor. He has advanced to the highest level of competition possible before moving up to Junior Elite. Senior Elite is the highest level of competition. The Junior and Senior Elites compete in world competitions. After competing in events in Quebec in 2007 and Belarus in 2008, Stewart could have moved up to Junior Elite last year, but decided to take another year to polish his skills to build a solid foundation before advancing. Those were good opportunities to meet the top competitors and see what it would take to get to the top.

This year Stewart fully expected to win gold in both the trampoline and double-mini events. While the competition was very good, he clearly had the skills and experience to win both events, but he didn't and was quite disappointed. After prelims, he was 2nd in tramp and 1st in double-mini and in position to win. However, he had some muscle pain in his left shoulder. He let that distract him from his mental preparation, which cost him. He finished 7th in tramp and 2nd in double-mini. He did have a solid finish on his final pass in double-mini which allowed him to take the silver. After a mental mistake that cost him several points on his first pass, he landed his second pass to finish second by 0.3 points on a positive note. Still, it was a great experience and he can now see how much work he has to do mentally and emotionally in order to be able to win at the next level. I would like to say that I am proud of him as is common, but that is a self serving statement. Truly, I am happy for him, as it is his accomplishment.

I came into this year on target with my 10 year plan and fully expecting to win big. I have the skills and experience to do so, but I haven't and I am disappointed for myself. I've made some mental mistakes which have cost me because I got distracted with my views on the potential future market direction. The problem is not so much whether I have been right or wrong with regard to those views, but the manner in which I have executed my plan. I deviated from my plan by being over allocated on the long side, which has led to a greater drawdown during the recent correction than I should have had. Now, I will have to nail "my final pass", the second half of the year to pull out a respectable finish. I know I can do it. This week my son taught me how.

The market has given up all but two possible avenues for a positive outcome for the rest of the summer. All but a couple of the trend following systems are on a sell, which says as much as anything. The charts are beginning to look like late December 2007 just before the plunge in January 2008, but we should be guarded in drawing such an obvious parallel. The action over the next week will tell whether we should commit fully to the downside. The first day of July closes higher 80% of the time after an early morning low. We then have a holiday weekend which also typically leads to a positive Tuesday. The market still has a chance to pull a rabbitt out of the hat.

The MACD signalled a buy for the Qs off of the rising 200dema on 6/2, and although price has violated the low of the swing, the MACD has not fallen below its low and the 200dema has only just turned negative. The Qs turned down from a flat 50dema. For the a true MACD sell signal, we will need to see the MACD violate it June low or the Qs rise to the falling 50dema with the MACD giving a new sell signal.

From an elliott wave perspective, I see that we are in some sort of complex correction, but it just doesn't look anything like what I have seen in the past that would indicate a 3rd wave breakdown. Even with all that has happened, the correction has not even hit the 20% level for the SP500. Yes, this correction could have been avoided, but I am not ready to commit to a full blown return to the bear market just yet. I am getting close though.

No comments: