If Hindsight Is Perfect . . . ~ John Norquay

December 19, 2011

The briefing was written Saturday and can be found in The Briefing Room.

Since the market took the 20% drop in Late July and early August this year, it has pretty much stayed range bound. Every time we get signs it wants to begin a new direction, those signs soon break down and we must adjust. This is exactly what we have been experiencing these last couple weeks. The market moved up hard off a bottom, took a break and acted like it wanted to begin a new longer leg up. Unfortunately it turned out to be false and moved back down. Although this can be frustrating to money managers like ourselves, we've been through it so many times before that we know to simply get back on the sidelines and be patient. These sideways markets always work themselves out and choose their ultimate direction. Our job is to have all our assets intact when that occurs.

If hindsight is perfect, then the volatiliy indicator for the S&P 500 index (the VIX) may be hinting as to what is going to happen next. Without boring you with charts, the VIX, over the last two years or so, has been very good at telling us which direction may be next for the market. Don't take this as the Gospel, but according to the VIX (NOT VIXen, Santa's reindeer) the market will be choosing down as its next longer term move.

If I were going to refute this piece of market evidence, I would look for positive signs within our economy that are strong enough to overshadow. In reality, at this point, I would be looking for something in Europe's economy to refute the VIX evidence. Unfortunately I can't find anything on either side of the ocean that would be a strong enough positive.

Everyone has been looking for a Santa rally over the last week or so. It hasn't happened. The only thing that has happened is indecision at all cycle time frames. When price patterns form triangles, it indicates indecision in the market. Take a peek in the Briefing Room and you will quickly see triangles in all three cyles at the top of the page. In fact, since I'm not writing this briefing until Monday afternoon, I have the convenience of looking backward. the 1.2% beating the S&P is taking today shows me that at least the shorter term cycles have decidedly turned negative.

I mentioned a week or two ago that some of the countries in Europe were going to try borrowing money and chances were they wouldn't be successful. Success being defined as borrowing at a cost that was affordable. As it turns out, they were highly unsuccessful. This is a sign to me that the deal put together is not much of a deal afterall. The action of the market is substantiating my thoughts.

I'm happy we are out of this market for the time being. If something changes we will be sure to let you know. If I don't see you or talk to you between now and Christmas, then Merry Christmas to you and yours. May God bless you with a happy new year.

Have a great day!!

John Norquay
CEO PivotPoint Advisors

In order to view the graphs and charts in our newsletter, please click the link at the top of your email to "always show images from PivotPoint Advisors"

Resources

Check out our
Youtube Channel

Like our FaceBook FAN Page

We manage money inside 401k plans. Know anyone who may want to use us?

Click "Forward to a friend" (immediately below) to share this newsletter with friends you think may appreciate our services.