Objectivity

After a long time Traderman wrote something on the markets instead of his love life or his muted watching of CNBC. So I thought I will reproduce his diary here.

" Dear Diary: I love my ability to completely ignore objectivity and see things only that support my disposition at that particular point of time. In fact I do not just see things that support my point of view, I even actually manage to look at things that do not support my view in such a way that they begin to support my point of view. Please, dear diary, do not scoff at this incredible ability. Objectivity is for fools and scientists. It requires great intelligence to be able to rationalize everything to make it support you.

For example I am now long on the Nifty for some time. While I can give a positive twist to everything that is happening in the world including the European situation, it requires great ability to give a positive twist to even accepted norms of technical analysis. For example the Daily RSI is currently above 70. Dear Diary, even somebody with very little knowledge of technical analysis will tell you that this is a sign of an overbought market and therefore a negative sign for somebody who is long. How does one give a positive twist to something like that? Will I finally fail in my task of rationalization? Will this situation stump me. Have I reached the end of my creative abilities?  No Dear Diary, trust me to be up to any challenge.

If you see the attached chart, the RSI was above 70 last in April 2011. Since then the RSI has languished below those levels and has actually moved below 30 on several occasions. Every rally since April has stopped before the RSI could even reach the overbought level of 70. The Nifty rallies simply did not have the strength to do that. But the current Nifty rally has been the first one since April 2011 to be able to display that strength. Given the fact that we have dropped significantly since April 2011 and this rally has shown enough character to touch RSI 70 levels we can look at this as an extremely bullish sign. The Nifty could therefore in the coming months move up to test 5400 or more.

Did you see that Diary? Is that not beautiful? Tomorrow if my trading system asks me to SELL, I can use the same RSI 70 levels as a justification for my SELL. All I have to say is that the Nifty RSI was overbought! What brilliance! I am sure Dear Diary that you are totally impressed by this!

I wish Sonia could recognise my brilliance :( She seems to have made up her mind to ignore me totally. No wait. I need to give that situation a positive twist too. Maybe she is too overawed by my brilliance. Maybe she thinks that she will be totally overshadowed by my powerful personality if we get together. I get it now. I think I should tone down my brilliance when I am with her. Thats it Diary. I realise now that I should apply what I do unconsciously in my trading life to my real life too i.e. look at every data to suit my position!"

He went on about her but that might not be fit for public consumption. So I will cut his Diary short and will let you go but not before reminding you that I am long on the Nifty and will cut my long positions and go short below 5042.