Tuesday, November 9, 2010

back to normal long positions

As you can see from the daily bar chart above the cash S&P 500 has reached new highs for the bull market that started in March 2009 from the 666 level.

The aggressive contrarian trader has maintained an above average long position established at the 690 level. According to the rules set out in chapter 11 of my book the aggressive contrarian should have sold his long position when the 50 day moving average of the S&P turned lower by 1/2 % in mid-May of 2010. But by then the S&P itself was in a position where I thought the aggressive contrarian should be a buyer. I said so in this post and again in this one. So the net result was that the aggressive contrarian would have held his above average long position throughout the April-July 2010 drop.

Now that the S&P is back at new bull market highs and has rallied more than 20% from its early July low I think the aggressive contrarian should cut back his above average long position to average levels. I would not reduce exposure more than this because I think that the S&P has quite a bit further to go on the upside over the next six months.

The conservative contrarian established an above average long position around the S&P 1000 level as I pointed out in this post. As I write this the S&P has rallied for 20 months from its March 2009 low and has advanced 82% during that time. According to my tabulations (which were described in my book) this qualifies as a normal bull market both in duration and in extent. So the conservative contrarian should now reduce his stock market exposure to normal levels too.


  1. Here it is why It Is my Bible and You My Saviour!
    Long on every dip from 1063 till now !
    Thank You!

  2. The thanks should go to Mr. Bernanke and the Fed. Without whom almost none of this would be possible.

  3. I remember reading your book in my back yard soon after it's release. I also recall doing the calculations at that time (many months ago) and, based upon your methods, realizing that the markets then current bull move should continue AT LEAST through November 2010. And now, here on cue, is your call for moving back to normal positions. There are many pundits out there that would love to be followed and I've looked at many. However, you Carl are truly someone who has much to offer in teaching someone how to read the market. I'm so glad I've found you. Many thanks!

  4. Well, it is not contrarian whatsoever to be long this market. Popular TV shows and every single publication has told us to be long since March, 2009. Maybe I do not understand the term then, Carl? I have been long-biased WITH the crowd. No one makes money being contrarian as the way to make money is to dip in WITH commercial buyers or sellers.