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.



adan said...

nice review and call on the corrrective (?) bounce -

even with less than consensus ism etc ;-)

rick santelli is letting it out as it is regarding how the whole thing is boiling down to the dollar -

but then, a stronger dollar would only help anyone who buys imported goods, isn't independently wealthy, wants to save and build a secure future ;-)

if the fed, and our administration, want to help the most americans, a stronger dollar, i think, would be one of the easiest things to help...

just my opinion....

Todd S said...

A stronger dollar would result in lower, more affordable prices in this country, so Americans can get out of the severe debt we're in now. 30_ years of massive credit inflation allowed prices to soar so high that the only way to get the American Dream is to go tens of thousands of dollars in debt. That needs to correct itself, and that means some pain will be involved, i.e. stocks and real estate prices collapse.

A stronger dollar would result if the Fed started raising rates which would rally the dollar and entice people to save more because they would get interest on their saved money. But this is not what the Fed wants; they want us to continue to feed the credit inflated bubbles that feed our government billions in tax dollars and keep corporate fat cats wealthier while average Americans lose more and more of their purchasing power and have to pay $500,000 for 700 square foot house in CA.

I don't feel our government has average American's best interests in mind or they would not act the way they have, i.e. bailing out billionaires and inflating our currency forcing us to get into heavy debt just to sustain a decent lifestyle. But in the end, as EWP states, the crowds will dictate where the markets go, not the government. And the crowds are tired of the debt and are setting up for a wave 3 or C collapse.

Good thoughts as always, Adan, thanks!


MK said...

Todd thanks for your answer in previous post. I completely agree with you and know the market will do a fantastic job in eliminating/killing all the bulls just as it did with the bears during the last few months.

I have to say I tried day-trading for some time but that wasn’t for me… now I am a long term option trader (on S&P). I bought most of my positions last month when S&P was around 1090 but refuse to sell and re-enter since I don’t want to miss the boat. Perhaps I am a little paranoid about how fast this thing could fall.

Todd S said...

I day trade a little myself when I'm sure I'm aligned with the larger trend. But trade small amounts here and there when I see good opportunities, it's not the core of my trading.

I also have long term option positions and know that getting in and out of options is very expensive with commissions and spreads. And I'm just like you in that I won't get out because the market will move so fast it's very possible to miss the move. I think the key is patience, and watch the 1101 level. As long as that holds, I'm calling a top and crash underway.

Good luck,