Loading ...Plunger Hold’s Court
This is from the comments section which is some 40 deep to Sir Yucorn’s GDX Post at The Chartology Forum
Tempers have Flared …but Sir Plunger , being a Student of market behaviour and market history
has observed this rather combative thread and has the Following Comments and Observations :
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Since this has clearly become comments central, Here are some more comments; Haven’t seen this level of participation in a long time. Here is my observation on this discourse. First, my comments are in no way an attack on the bears as I know through hard knocks I could be wrong and they could be right. YC’s chart to me shows two logical outcomes. He is betting on a cycle down bounded by the upper trend line, whereas my bet is we continue to develop a bull flag here and then break out above the upper line. Pretty simple so far…no?
However the value I get from this discussion is the background of psychology I see being displayed. Here is the part that is not intended as insulting, just an observation: The first leg up of an unusually powerful new bull market is always met with skepticism from those who follow markets, that’s this crowd, whereas the general public isn’t even aware it is rallying. I have mentioned the analog example of the beginning of the super bull of 1982. The skeptics are positioned on the sidelines waiting and watching for a pullback to allow for an entry. This is the fabled “Gentleman’s Entry” that they hope for. Mr Market, however never accommodates them. Instead they are in-prisoned by their experience of the previous bear market. Shall we say the pain of loss has caused a market form of battered wives syndrome.
Even those few who actually got decent entries near the bottom get fidgety and can’t stand the tension of their initial success and fear giving it back which the previous bear’s dynamic has indoctrinated them with. So even those who positioned themselves correctly get thrown off the saddle of the incipient bull thinking they can out smart him and improve their position, so they too sell and find themselves on the sidelines waiting to improve their position or cost basis.
Where I think they are making their error is they fail to understand how bull markets develop. I believe in this first phase stocks return to “known values” that is what phase I is all about. And until this occurs their is no point in trading them. In the final phase of the previous bear market the bear pushed stocks below known values in the final phase. In bull Phase I it is the bulls job to recover this level. Once this occurs then we can expect the first”secondary reaction” which will separate phase I with Phase II. At this point accomplished traders should consider trading out of their non-core positions to buy them back at lower levels. That first secondary reaction will likely erase 33-66% of the gains made from the bottom.
Another point to consider is the meaning of the level of vitriol demonstrated by the bear side. Being a bull I actually welcome this as it tells me the rally has further to go. The fact that the bulls are described as Lemmings this early in a bull market only confirms my argument that this is the skeptical contingent reaching a level of intense frustration so extreme that it manifests itself in the classic Ad Hominem attack directed against the person rather than the position of the argument.
Robert Rhea defined a secondary reaction as a safety value which let’s off steam in a market. When the bull side becomes over populated the market moves to reduce the market ebullience. It is very difficult to time or call for, however it comes when everyone gets on one side of the boat. I just don’t see this as the environment for this to occur. Another sign that we have not yet returned to “Known Values” So its ok that we have this level of emotionally entrenched bearishness, in my view it confirms I am on the right side of the trade given the early development level of this bull market.
Plunger
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Thanks Plunger for making a positive post and point out of a negative exchange
Fully the Bully
Excellent post, your descriptions are right on. I wonder if you were a reader of Richard Russell, who was a fan of Rhea. He described the 3 stages of a bull market, and always said that there would be a giant correction between the 2nd and 3rd stage. I have pondered if that could have been what we just went thru the past few years- could it possibly have been the correction between the 2nd and 3rd stage? If we look very long term? 20yrs? 30 yrs? (just a thought) –
I’m with you and holding tight for now.
Again, thanks for the great post. And this great board.
http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart
Turtle, Yes, of course I cut my teeth on Russell. 20 year reader of his work. One of the greats. In factI have a CD of all his writings and have recently been going back and reading selected time periods. Fascinating stuff.
Yes, Rhea falls in the pantheon of great analysts. I have come to see today’s modern analysts as greatly inferior to these men, Dow, Hamilton, Rhea, Russell. There is so much to learn from them.
I have a long answer to your point of what we saw in the last 5 years. I will be writing an article on it in the future. But in a nutshell it was a cyclical bear market within a secular bull market. I don’t care much for Elliot wave but it has some value when categorizing a markets move. I believe this super 5 wave bull actually started in 1968. The first wave (bull market) lasted until 1980. The next wave was 2000-2011. Its my guess that the 5th wave starts now and will encompass that third final blow off sequence that you speak of. But that wont come for quite some time. I actually think the bear of the last 5 years was simply a down cycle within the 2nd phase of the secular bull market.
One doesn’t have to get too dogmatic about this stuff, just know its a bull market, which I believe it is. Hence one should be right…sit tight
Plunger-San,
I will rue the day you stop contributing to this site which I am so thankful to have found some years ago!
You are a true student of the markets – historically, fundamentally, technically, behaviorally – not to mention you actually attend miner conferences and more which is far more diligence then most of us can hope to do.
Most of all you are honest and forthright in your posts that are balanced and for me educational.
Your posts in the bear helping navigate Plungers flush to augment Rambus, Fully, and all the Knights work here was leadership in a form.
Your acknowledgement that even you succumbed to becoming too bearish on the miners and overlooked PO being met in your prior analysis is part of your honesty and humility in knowing that your posts are read by so many who say nothing but could be influenced by your views. A burden few know I suspect.
Right or wrong, thank you for your constructive commentary and insights. Buyers and sellers make a market at the end of the day all and can do their own due diligence and choose a side.
Best regards
NTHOMPSON88
Thanks for the response- I’m excited that you see the REALLY big picture (and appreciate Russell!!). I am maybe a bit older, my dad met Russell when he was handing out his newsletters on the corner of Wall and Broad- he subscribed back then, and honestly I read Russell from the time I was 6, until his recent passing. Loved that guy.
So back in about 1999? 2000?, Russell said, “great wealth lies ahead for those that can take a position and just hold on thru the entire bull mkt”- and he also said, “those who get in at the beginning of the third, and final blow off stage will make just as much if not more money”. So I do wonder if that is now- I’m both- have some I’ve held onto since the beginning, and now some nice positions, surprisingly in many of the same stks.
Sometimes it does feel like one giant correction- sometimes it feels like being kicked in the teeth, but lately,,,,,,,, hopeful here.
A few comments: Yes I am aware of those Russell comments, I was a reader in those years 1998-2000. I generally agree with a few exceptions. I have come to learn that when one enters into a phase III one should look for the top and then sell. One should NOT hold on in a bear market, especially in the resource sector, it simply is too damaging, it destroys one financial but more important intellectual capital. Get out and go find another bull market. One could make a case for staying in the general stock market for the long term, but not something as volatile as the resource space. I am not sure what Russell meant by making more money getting in the final stage. Different ways to parse that statement, I will just leave it alone as what we want to do is get in at the beginning.
I believe we are in the second phase of a super cycle in the PM stocks. We just finished a bear market within that second phase. We now begin the next bull market within that second phase that started in 2000.. It will end with a major crack in prices possibly taking the form of another bear market, likely not lasting as long then we have the final blow off phase. Its my guess that the top of that final phase could lie ahead up to 10 years from now. Not a precise forecast, maybe just better to say a long time from now.
Incidentally. it wont be a fun time to live through.
Excellent post is right. Having read this, and Trader Dan, I find myself emotionally jumping half a ditch. If the correction Dan refers to is upon us, it will be a painful plunge and huge gains will be coughed up. Or should I say, given away. Yet if the choice is to sell and re-buy during the correction at much lower prices…the bull will surely take off. So much of investing is dependent upon emotions, understanding them, and being able to ignore them while making money decisions. If this be the resumption of the bull, then sitting tight makes the most logical course of action.
Like you, I read Russell for years. What a guy! I visited his home town (La Jolla) in CA a couple of times. His epistles on life issues were as good as his market commentaries. Miss that guy a lot.
Silverboom
A great example of thought supporting Plunger’s observation that many people are still waiting to pull the trigger. The PM trade isn’t as crowded as many believe.
http://www.mining.com/web/its-still-too-early-to-re-enter-the-metals-sector/
YYZ, do you happen to know if or when Gary entered the PM Stock market? Did he miss this one or not? Did he buy then sell? I don’t know but would like to know. I have an interesting view of Gary and his perspective. I usually don’t agree, but hey he is trying and its tough to put ones calls out there in writing, at least he is trying
Gary caught this last move up. He has been buying the cycle lows as if the chance at a bottom is there every time. He’s saying if one missed the last move, it’s to early to buy and expect a bigger pullback. He has a really hot hand lately.
Don’t know if he will be right or wrong on that, but what I do know is that’s way too tricky for me. I would probably end up on the sidelines sucking my thumb as it marched higher. I got in within 2 weeks of the bottom and I am holding as I sense we are about halfway through phase I. No point trading this move is my strategy. If he can trade the squiggles good luck