When you look at the short to medium term, the market appeared quite strong and resilient last Friday.
Now imagine you are taking a trip to the local supermarket that is 2 miles away. Or, imagine that you are going to the next town which is 10 minutes away to pick up supplies. Both of these describe a short to medium term trip time for many.
But what if we were talking about a trip to see the kids or grandchildren this Christmas … how would that change things?
Well, there would be a number of things that you didn’t consider in the other two scenarios that you would need to address We’re talking about “advanced or future planning” information that wasn’t necessary in the first two short trip instances … There is a reason for this analogy, so bear with me for a minute.
The things you might need to consider for the trip that was a “longer time period” away might include:
- Budgeting: When might you have the money for the airplane tickets?
- How soon would you need to book air tickets in order to not get caught paying exorbitant fees?
- Will you need to budget for new clothes on the trip?
- Would the overall trip expenses affect how much you spend on short to medium term items now?
I won’t go any further … here’s the point:
Long term scenarios may or may not affect short term scenarios or actions. Knowing that a train is heading for you down the tract may not be important if it is 20 minutes away and you are leaving in 2 minutes. But if you don’t long it will take to get where you are, then you react differently. The key is that you at least have to knowabout a possible future event in order to make a decision about whether you should incorporate the data into your short to medium term decision making process.
With that in prospective, I now want to share some “long term information” where we don’t know “when the train will arrive”.
The long term event has to do with what will happen if the Institutional Index of “core holdings” doesn’t change its long term picture. Let me explain …
The Institutional “core holdings” is not really a market index, so it is not trade-able as an ETF or anything else. The “core holdings” is comprised of the majority of their asset holdings at any point in time and our chart measures the behavior and change of what is essentially happening to the major portion of Institutional Investor assets.
Given that background, let’s now look at an actual 20 year weekly chart that show’s what has happened to Institutional Investors since 1992.
Here is the chart, the explanation of what has occurred is below the chart …
This chart is about a long term picture, a 20 year picture, of what has happened to the Institutional “core holdings” … keep tucked away in your head somewhere and use it judiciously when making decisions.
Here is what the above chart shows: It show’s a 20 year picture (going back to 1992) with its highest peak reading in March of 2000. Then it had a secondary peak in October 2007, and two secondary (lower) peaks in March and April of this year. What is significant is that from a Long Term Bull perspective, the Institutional index is in a Bear Market condition because it has made lower/highs, and lower/lows since 2007. Last Friday’s close was only 0.77% away from its Point & Figure resistance level, and 1.08% from its January 2002 high which happens to intersect with the October 2007 weekly resistance line.
If the Institutional Index moves beyond these challenge levels, it opens the possibility of moving up to its May 2008 peak for a double-top test. That level was 9.07% away from last Friday’s close.
Below is a close up of the 2006 to 2012 weekly chart. Here is the question for you: How do you use this information in your trading, or should you just ignore it because you trade short to medium time frames?
The Institutional Index tested the current fan lines resistance two times this year and didn’t go past it. It was about 0.77% to 1.08% away on Friday … will it make it past this time, or fail to the downside again? Should you tread lightly until it succeeds at making it past this level or not? … or should you be Bullish now because you know or think it will move past it this time? One last question … if it did move past it this time, would that change the trend to a new major Bull trend or not? If not, when would (or could) that happen?