Wednesday, November 4, 2009
I'm Letting the Rally Play out, Simply Watching....Waiting
The bullish signals I mentioned yesterday proved reliable as the wave count and some technicals needed to be alleviated and corrected. And what better time to do it than right before a Fed announcement? And we all know how extremely relavent and helpful our Government has been the past couple years..........well, we all know how helpful they've been to millionaires.
So today's internals are bullish as the bears usually slumber up to Fed announcements, but that can quickly change right after the announcement. The dollar has continued to pull back as normally the Fed could care less about slaughtering the dollar so I'm sure people are preparing for that and are selling ahead of the news, and buying gold to move out of their US dollars and into a hard assets. Which is what Warren Buffet essentially did yesterday by the way. He wanted out of cash and treasuries so he bought a railroad on a commodity play essentially. So the DJ Transports rallied 5% yesterday because of that, but did not come close to breaking above their daily trendline and today they are practically flat. Today we had worse than expected jobs and ISM data, so kinks in the armor of this "glorious recovery" are starting to show.
But enough rambling, there is no change to the top and collapse call I've been listing here on this blog. It's still underway, we're just in a corrective rally phase. Looking at the possible S&P cash wave count, we should be in a sharp wave C within a wave (2) right now (see chart above). Corrections usually go to previous 4th waves before reversing so lets watch the most recent 4th wave at 1067 for resistance. As a wave 2, it can technically go to 1100 and still be valid according to EWP, but since the trend is down in my view I'm going to constantly looking for topping and reversal points as it rises. Right now, I'm eyeing the 1067 level.
I know with the VIX buy signal executing yesterday there's a good chance we'll rally for days, so I'm prepared for that in case it does happen. The key again is the 1101 S&P level. As long as that stays intact, nothing changes the bigger picture.
Now we just sit back and wait a few hours for the government to try and manipulate our free markets and continue rallying the stock market on dollar inflation and smoke and mirrors.