My Own Private Idaho

First I’d like to acknowledge my sadness about the death of Walter Cronkite. As a boy, I remember being told he was "the most trusted man in America", and even my earliest stock market memory came from Cronkite’s voice when he announced in 1981 (or so…..) that the Dow had gone up 28 points or something like that. At the time, it was really big news, and I think it was the lead story that night.

Mr. Cronkite represents the calm, thoughtful, reassuring voice I remember growing up. He represents what I think we can agree was a classier and more dignified era of reporting.

The explanation for the title of this morning’s post is that I am flying up to Boise for a get-together today, and I’m currently sitting at the San Francisco airport. I haven’t been to Idaho since church camp when I was 14 years old, so this will be an interesting day trip.

Whenever I am feeling confused by the markets, I return to the very long-term charts, some of them spanning a century, in order to get my bearings. Here is the S&P for the past decade:

Here’s what I’ve got to say about the very big picture:

1. I accept the possibility – I emphasize, possibility – that we could be in a bottoming process, and the big, nasty plunge we’ve been talking about might never materialize. I set aside my preference for bear markets in saying this, because my preference doesn’t mean squat.
2. I also accept the possibility that the countertrend rally continues must farther, as high to my oft-cited target of 1150, before the market falls to pieces again.
3. Finally, I accept the possibility (and, again, my unimportant preference shouldn’t enter into the picture here) that we start descending from here before stabilizing at about 750 or so before resuming the uptrend. That would agree with the parallel I’ve made between the two tinted areas.

The reason this week was so bad for me wasn’t because I ignored my rules – – with the exception of TBT, I followed my rules religiously. It was because I put a lot of trust in the H&S pattern and was heavily loaded on the short side. I have "backed off" quite a bit (largely by being stopped out of dozens of positions!) and am taking a wait-and-see approach to next week.

I remain, at the moment, still entirely short, although not as heavily as a week ago. If things do soften up, I will press the hardest on gold and energy shorts.

This is a tough market to trade, and it has been for much of the year. I find a lot of guidance and "anchoring’ from sharing my experiences here. Thanks for being a part of it.