Sunday, November 11, 2012

Value Line Geometric

seems like I should be writing a post here every six months or so, at least that's been the tendency. and today felt like a good day, with our new kitten "Mr Jefferson" on my lap, and it being a bit cold and windy to go bird hunting with "Richard Padovan," GSP. candycane Brutus swept through the prairie this weekend, dropping as much snow as we probably got last winter in its entirety. not at all a life-threatening storm, but perhaps enough of an event to make the riff-raff think a moment about staying/coming up here.

I had been about to write something on the Value Line Geometric Index ($XVG) and its persistant divergence from the more widely followed market indexes, however right prior to composition, I did a quick search and found someone had already done the work for me:

while the piece was written this summer, the implication remains valid today. I feel silly postulating bearish after a downswing has already ensued, but no one pays me for market timing these days, except my own account. besides, the potential of the $XVG divergence is of such major importance that a preceding five or 10 percent decline in the market will eventually look quite minor. 

the following chart is perhaps more newsworthy in the near term:

we see that on a log-scale chart $XVG has violated (finally) its .618 speedline. I drew this setup who-knows-how-long ago and it's been sitting in a stale chart book ever since. but it looks relevant now. 

based on this setup, we should look for a fairly sharp decline over the next couple months. perhaps we'll find some tradable support again around 280? whatever the level, I won't be stepping over to the long side of the equities market without seeing something constructive happen with my main indicator, codenamed "Column AN":