Monday, August 3, 2009

Conservative Contrarians - get ready to rumble

In my book on pages 129-130 I suggested a simple market strategy for the conservative contrarian trader. After a bearish investment crowd like the one which developed during 2008 becomes prominent the conservative contrarian waits for an upturn of 1% in the 200 day moving average of the S&P 500. Once this happens he increases his stock market commitment to above normal levels.

I think this signal will develop sometime during the next six weeks. I think the 200 day moving average of the S&P hit its bear market low at 870.57 on July 27. Once this moving average rises to 879.28 or higher the conservative contrarian will get confirmation that a new bull market is underway. After taking an above normal long position in stocks the conservative contrarian then waits for the bull market to develop. A normal advance would take the S&P up at least 65% from its 666 low to the 1100 level or higher. A normal advance is also likely to last at least 20 months, i.e. until November of 2010. Once both these expectations are satisfied the conservative contrarian then expects to reduce his stock market exposure to normal levels.


  1. We are not in normal times for past normalcy to be any indicator worth anything

  2. Carl,

    You are definitely the Contrairian with this view. You're either gonna be a hero or an ...... ! because I'm hearing just the opposite from several very successful traders, "that the worst is yet to come".

    But, you've been correct so far.


  3. Carl,

    Congratulations! I think your "Spot-On" here with your forecast. Love these tutorials paralleling your book. Congrats on the book as well! Just finishing up the last chapter. A treasure trough of goodies. I'll be re-reading right away. This time with highlight pen in hand.

    Thanks for sharing!

  4. I like the idea of waiting until the 200 day MA turns up, but I doubt that the market can continue its uptrend through Nov 2010.

    I think a better investment than the broad market over this time will continue to be gold, as it will benefit from all the govt money printing, or from a withdrawal of the stimulus, which would send the economy back into recession and create a very volatile and uncertain environment. For a further discussion on these issues and how they relate to gold, here is an interesting article:
    gold price

  5. I really enjoy your book. Just half way through but it really helped med break out of the bear crowd camp and profiting again...

  6. Carl, in a previous post you mentioned:
    "A word to the aggressive contrarian. You took an above-normal long position at the 685 level near the March low point of 666."
    How is 685 calculated?

  7. Life Observer:

    I was working from memory and made a mistake. The correct number is 677, roughly the level of the open on March 9. The reasons for buying then were explained in this post:

  8. Ok, I just started my media diary online (blog) and on a penndrive and in my search for webpages with daily front pages I found this one:

    Scans of 817 newspapers in 79 countries daily. What a homerun. To bad they don´t have an archive...