Tuesday, November 2, 2010
Fed Manipulation? Buckle up, the Rest of the Week Should be Wild
Internals today were strong, matching price at the close. I don't think much of the action one way or another the past week or so since it's all been leading up to expectations of the elections tonight, and more importantly QE2 tomorrow. The market's uptrend remains intact, the Nasdaq Composite came within less than 1 point today of making a new high on the year to confirm the new high in the Nasdaq 100, and the rest of the market seems to want to go higher to probably make new highs on the year before topping as well.
With the Nasdaq 100 making a new yearly high weeks ago, and the Composite poised to do the same very soon, it seems like the Nasdaq 100 was telling us something when it made that new high. These Tech heavy indices tend to lead the market, but the new high to the bears was interpreted as a "non-confirmation" and therefore bearish for the overall market whereas I have mostly been cautious of the action. I would have been much more bearish if it was the S&P or Dow that made new highs and the Nasdaqs lagged instead of the other way around.
Anyway, the market is stretched to the upside and internally appears ready for a major decline. But with the uptrends intact and new highs on the year in arms reach, we still have to leave room for the market to continue higher from here. The volatility and action tomorrow afternoon should break this slow directionless action, and get us back on track to counting waves better on an intraday level.
"Market Manipulation" Is Not Why Most Traders Lose
Just because the Composite and the blue chips indices make new highs on the year doesn't mean all is lost for the EWP bears. The daily chart above tells us a lot about the long term picture. The financials continue to lag the overall market very badly. The market cannot sustain a long bull market without the financials. Our economy is not fueled by production or manufacturing, it's fueled by credit since all we really do is consume in the US. So we're dependent on borrowing money from banks to live the American dream. So what would fuel economic expansion when credit and bank balance sheets are contracting? As long as financials lag the overall market, it paints a deadly picture for stocks over the longer term.
The Fed and "Plunge Protection Team": Are They Manipulating Stocks?
The latest down up move in the euro puts the bearish count as a much less likely possibility here. The 4th wave triangle count is now top choice. I'm looking for a thrust higher out of the triangle to make a new high which should be quickly and completely reversed. That should be a good shorting opportunity with stops just above the thrust's high. A top in the euro should translate to a top in stocks soon after.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.