Posted by: jhamon | June 3, 2009

The Big “L”

Today, we were talking in the office about the concept that the market is a food chain with just a handful of winners at the top (hunters) taking from a large base of losers (prey). 

Accordingly, markets frequently follow what I have coined “the Trajectory of Maximum Perversity” – that is, the path that will cause the most participants the most pain.  The most perverse thing the market could do here would be to grind sideways in a big “L” prevents participants with a directional bias, long or short, from making any money.  The Ellioticians looking for the next big leg down will get tired waiting; Perma-bulls will despair. 

But who knows, really?  It’s just fun to speculate… and it has nothing to with trading models.

That’s why I stick to trading individual stocks and only those that are in motion.  I don’t agree with Jim Cramer about much, but I do have to agree with the old saw he has often repeated: “There’s always a bull market somewhere.”


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