I think this will tell us how robust the speculative energies are now. We don't want to overstay our welcome. Low priced stocks often make a person wait a long time to get out even once they break-down late in a bull market. The "expanded Buy B9", the typical behavior of DJI "V" formations and the still positive internal strength readings of the P-I, V-I, IP21 and OPct lend hope that this will be a shallow decline and that it will prove to be a constructive consolidation.
Watch the current Accumulation Index. It fell by a large amount today. The IP21's dropping below its day ma may give us a Sell S4.
Whether it does or not, its falling below its day ma now with the DJI having failed to make a new high would look bearish. Professionals have become net sellers for now. Short- covering can no longer hold them up. The number of bullish looking stocks that warrant consideration for new purchase has been greatly reduced. A "Line in The Sand" I think we have to draw a line in the sand, as it were, where a minor pull-back would start looking too much like an intermediate-term retreat.
Right now the DJI's day ma and its rising day ma are nested and so should be good support. However, a close below would make the current chart appear to look different than earlier "expanded B9s" in a rising market. Odds would then shift for the market's outlook.
The stage then would be set for a re-test of Bullish plurality "Expanded Buy B9s" are rare. There are only three earlier cases of it appearing in a market with a rising dma and dma. In this case, the DJI did not stall out before it surged to new highs. It appears our case is not so strong. The next two instances followed a long bear market. But the key moving averages were rising strongly. Here the DJI rose for six weeks after the B9s before breaking its dma. The Buy B9 was different from our case in that it took place below both a falling day and day ma.
The conclusion I reach, based on these few cases that resemble the present "expanded B9" is that we should not now see a clear violation of the dma by the DJI if this case is going to play out like the first three cases below.
Right now volatility is waning. Consolidation just below resistance seems the governing technical principle now The different markets have reached their strongest resistance levels.
But cannot breakout. The DJI, which Peerless focuses on, seems unable for now to get past But its "V" pattern is usually favorable unless the Accumulation Index drops all the way back below its rising day ma. Most often, after a period of consolidation, these patterns produce upside breakouts. It's best to take profits in them. But I said yesterday that I thought the pull-back will not be deep.
Since , the DJI rallies only Over the past year, Mondays have risen only Wednesdays are worse, rising only But Tuesdays, Thursdays and Fridays are up Daily price change volatility is diminishing and may wane some more.
Right now, it is retreating reluctantly.. But year interest rates are starting to rise, the V-Indicator has turned down in over-bought territory , the DJI has not achieved a breakout and the NASDAQ seems unable to surpass it rising resistance line. In particular, the weakening biotechs may cause speculators generally a change of heart. There's a limit to how far even biotechs can rally and how much the Government may be willing to pay for pills under the new Obama Care.
We see lot of warnings in the form of red popsicles in the key ETFs. The steep uptrendines in the Closing Powers have mostly been broken. But such breaks are more potent after they fail to confirm a new high. That has not happened yet. Breaks in CP confirmed uptrendlines often means "consolidation" rather than "retreat". So a major March top is unlikely for the DJI and, since history shows how closely bank stocks correlate with Peerless, for the Big Banks.
It shows a speculative market and often there is not much support underneath the market for a long ways down. Added to that, the leading biotechs keep selling off on high volume and many show a Closing Power that is near the stock's yearly lows. This is how over-speculated, "bubble" stocks top out and turn down after a wild, public-buying binge.
Dangerous to Your Health Biotechs are now dangerously priced. Consider GILD. Biotechs are now being priced as though there will be no populist backlash against biotech profiteering. They are probably correct given the current Congress and President. But investors should look further ahead, too. A few have already fallen through a trap-door. CEMP seems to be on the verge of doing that. It has only 38 employees, But its lead drug to treat hospital-born bacterial pneumonia is in Stage -III.
Why are Professionals dumping the stock? As long as the Closing Power is falling, it must be considered a candidate for a serious breakdown. Compare the V-pattern now with the "V" pattern of last September-October. Back then it took a two week consolidation to prepare a run to new highs.
I suspect that's what the DJI must do now. Study the DJI-formations in history. We probably should mostly pay attention to the cases where the DJI first retreats back below the lower band and then rapidly recoveries back to the old highs. After a pause and consolidation, V-formations usually bring breakouts unless the internal strength indicators have turned negative or we get a Sell Signal. The two notable exceptions to the rule that V-formations bring breakouts are December and October In both cases, the internal strength indicators are were positive at the top.
So, Sell S4s are important. They occur when the Accumulation Index falls below its day ma. These can occur in the year of mid-term Elections, as February shows. Professionals are not yet selling.
March is not usually a market of tops. On the NYSE, the number of new highs expanded. Bullish plurality Biotechs have weakened somewhat, but big banks, a good measure of Fed intentions, all rose today. It's bullish that leveraged BAC and leveraged semi-conductors generally advanced. True, gold and silver rose; so, this could bring on a much weaker Dollar and then higher interest rates.
However, TNX is still below its falling dma at 2. This confirms the Buy B9, I think. China will be likely be the beneficiary as the US risks a new Cold War, with Obama and Kerry trying to claim the high moral ground in condemning Russia for invading the Crimea based on lies and trumped up charges. As I've said before, there is no way Russia will be dislodged from the Crimea, its naval base there pre-dates the founding of the United States. But all this heavy-handed posturing could become very dangerous.
This would bring on a highly dangerous reverse Cuban Missile Crisis! For now, the stock market seems to like all this macho posturing. As always, it sees profits in war preparations. It's the actual fighting it reacts badly to. If you doubt this, see how the DJI rose in but fell apart in ; how it rose in and much of but fell apart with the German torpedoing of the US Greer in and then with the US Oil Embargo of Japan, which was the prelude to Japan's attack on the US.
Or how the DJI rose throughout the s and until when the Cuban Missile Crisis came very much closer to starting a nuclear exchange than most Americans realize. Most do not know how close we came to war. Read the story of how Vasili Arkhipov single-handed stopped the Soviet submarine K from launching a nuclear-headed torpedo at the height of the US embargo of Cuba in WWE WorldWide Wrestling has found a way to cut out the middle-man, lower prices for consumers and make money for shareholders.
If successful, its model will be closely studied by other companies that still hold the rights to their media content. This is another story-area for investors that will surely quench the thirst for some big profits long-term. Other big gainers among Chinese stocks were: ZA 2.
None showed much prior Accumulation. So, they are probably not tightly held and should quickly give back their gains. CBPO, China Biologic Properties , on the other hand shows lots on insider buying and should run much higher on a move past This makes it hard for a Sell signal of any kind to appear.
Negative Non-Confirmations of a DJI advance to the upper band were the way bull market normally signed off. The "expanded Buy B9 is proving its worth.
Small caps are now the leaders. Bullish plurality We saw quite a recovery today. A move by it above would likely start a swift vertical ascent to The lagging DJI closed at a a downtrending resistance line drawn through its December and January peaks. Running the Tiger Power Ranking program now against the leveraged ETFs should give us a good idea where to place aggressive trading money.
It appears to be on the verge of moving past its rising resistance line. Its internals are superb. Both Opening and Closing Power are rising. Perhaps, cooler heads and diplomats will win out. Obama's solution, a billion dollar loan to the new Ukrainian government, should bring much needed stability and public safety if the Svoboda tough guys go back home. How popular are they when elections are next held? Will they accept the result and calm down? Will their party be given police powers in the new government?
Giving a a billion dollars to these extremeists seems absurd? How can that be avoided? RSX's sharp break today is the way the West plays financial hardball with the Kremlin. As expected, the US has responded verbally and diplomatically, but not militarily. US interests are not at stake presently. Russia has had de jure or de facto control of the Crimea for almost as long as there was a USA. We'll keep watching this chart to see when the crisis over.
Cooler Heads It will take a while for the players to sort through the complications of the civil strife in the rest of the Ukraine. The rebound in the Futures today partly reflects the return of control to "cooler heads" both there and miles and 9 time-zones away back in New York. Professionals started buying after 4 hours of selling today.
At last, the low interest rates may be getting some traction with Main Street. Bullish plurality The "expanded" Buy B9 has not been reversed even short-term. Next, it may be the DJI will be able to take out the overhead resistance line this coming week. Since , the DJI has risen But the upper band will not make that easy.
There is another thing to worry about. It only a matter of time before the very sharp rise in commodities, especially food prices, gets press and public attention. This makes it seems risky now to take on more than very short-term long positions. And this seems remote now. For now, we are in for a return to new Cold War. Russian ETFs will be punished. The real danger is what happens elsewhere in Ukraine.
The Russian claim to the Ukraine is much stronger. I do not expect Obama to admit this. So, we could be led back into a new period of war preparations and cold war. It all depends on the diplomats and the American mass media coverage. The Russians are not going to turn over the Crimea again to the Ukraine as Krushchev a Ukrainian did in Fortunately, the Operative Peerless Signal is an "expanded B9".
Breadth is just too good to predict a big market decline. We need a new Peerless Sell signal to even consider that a possibility. March tops are relatively rare. When they occur, they usually occur because the P-I or IP21 is negative at the upper band. All our Peerless key values are positive now. I think we are safe for now. But without a Sell signal, the declines have been limited to only dropping the DJI a little below the day ma.
The Ukrainian Crisis looks like it will bring such a pull-back. Our Tiger Stocks' Hotline is fully hedged while we wait for Peerless to give a Sell Signal or for breaks in these uptrends. There are times to take risks in the market. This is not one of them. Stock prices for the moment are now dependent upon political rather than market forces. Bullish plurality Fears of a new Europeon War in the Ukraine will surely bring a pullback. The DJI's Futures are down At this week's Tiger Meeting see work materials from it , I expressed the belief that this would all soon blow over.
The market's technicals, I said, should be sturdy enough to limit the decline to the DJI's day ma. Look at the heavy trading in it. Upon further reflection today, I'm not sure Obama is strong enough to resist the pressure on him from the American right.
Surely, one hopes, he realizes that history in such matters has not been kind to such American involvements. Unfortunately, all my adult life, America keeps making the same mistake, in my view, over and over again getting involved in distant foreign civil wars when they can be couched in a US versus Russian or Communist framework for average TV American viewers by the mass media here. America better back down. Russia will not. They see the new Ukrainian leaders very differently than our media shows them to us.
They see them as the new Nazis next door. It's not clear what difference to America or Europe the formal Russian control over the Crimea really means.
Ukrainian and Tatar speakers are a minority. For Russia, the Crimea represents a warm port, a wonderful place to go on Summer vacation and a show case for Russian movies. Krushchev, a Ukrainian, turned the Crimea over to the Ukraine in in what seemed to be only a token administrative change back then. But memories of the Cold War, which really began in , do not fade quickly. It is the rest of "the Ukraine" which is the big problem.
Too many Ukrainians seem to see their country's divisions as being beyond peaceful resolution. The Eastern half is Russian speaking and orthodox. Wall Street observers need to see if Trump can stay on track to deliver what he has promised. More than anything, many will want to see Trump remove doubts about his belligerent and shoot-from-the-hip style.
Wall Street. Right now, fears and doubts about what a Trump Presidency may mean are temporarily outweighing the potential good his Administration could do for investors with by much lower taxes and a more lenient regulatory climate.
This is may only be temporary. It all depends on how Trump carries himself as President. Right now, Professionals want to see some evidence that he will be able to deliver on what he has promised. They are quietly in selling mode, on balance. Tomorrow and early next week, we will see if the all-important DJI can still find find support near its recent lows near The nagging fear I have is that the partisan Trump buyers will become the "bag holders" if the DJI does not manage a breakout this week over and Professionals do not become net buyers causing the Closing Power downtrends to be broken.
We must be careful now. Goldman Sachs fell again today and closed below its recent support. Without other leadership, how will the market withstand a bigger bout of profit-taking in the handful of high priced stocks that produced the point DJI gain since the Election?
Watch now to see if FAS also suffers a price breakdown below its recent support. This should limit any decline to a test of the lower 3. Below we see how strength in the QQQ after the DJI had topped out in , did not prevent very big declines. Note, however, in all three cases Peerless had given its normal S9s and S12s. That is not true in our present case. Who Is He? The President-Elect himself is partly behind the recent market weakness. Janet Yellen's statement that the US is essentially at full employment now so that interest rates should go up to prevent inflation is also a bearish influence.
But Yellen's cautionary words no longer disturb the markets like they used to. Trump is the real problem. Republicans, by and large, were delighted with their election victories in the House and Senate races. And they can not find fault with the pro-business and anti-regulation millionaires who will make up Trump's new Cabinet.
So what's the problem? Rather, it's his pro-Big Government stances. First, he demands the right to be allowed to tell individual businesses where they may not invest. By implication, Adam Smith's "golden hand of the free market" does not work well in trade matters and Big Government knows best.
For many Republicans this a big step in the wrong direction. If Big Government is allowed to play a role in the domestic economy in trade policies, why not in industrial relations and in environmental matters? Worse, Trump still sounds like a populist on health care.
He is coming very close to telling Congress that they must make sure that no American is left without affordable health care. He has made himself arbiter of when Big Government knows better than private market forces. Given his frequent shoot-from-hip twitters, in what other ways will he challenge and weaken basic Republican orthodoxy? It's his impulses in the wrong directions that are giving some of the recent buyers of stocks second thoughts about him.
The DJI is moving farther and farther out to the end of what will either be a flat and narrow trading range to propel itself higher on an upside breakout or a high diving board from which a steep sell-off will soon follow. A breakout decisively above will bring a judged Peerless Buy B A breakdown close below will bring a Peerless Judged S The DJI's tight price range that we are watching so closely started on December 13th.
If it is not resolved by the end of this week, it will be more than 5-weeks old. Such longevity is usually bearish in these patterns. Their importance is directly related to their price. No other stock is nearly as important as GS, which declined much more than the others today.
How it behaves then will be very important, as Goldman Sachs GS is by far the most heavily weighted stock in the most watched index of the stock market, the DJI Today GS sold off partly because of general nervousness about its earnings plus the new President-Elect's criticism of a strong Dollar because of how it hurts exports and US manufacturing and helps imports of non-US goods.
Wall Street roots for a strong Dollar because they want the US to be the world's financial center. Probably the Buy B10 should be changed to disallow such cases. With or without a Buy B Usually there is a Peerless Sell signal before the decline. I studied this phenomenon a year ago Below are the false breakouts above flat and well-tested resistance with Buy B10s.
But can we really say that? On the day after the breakout, on Friday, the 19th, the DJI tagged its 1. The P-I was a negative The V-I was and the IP21 was only. All this took place on exceptionally high red volume, suggesting churning. Since the DJI and the other indexes and key ETFs closed near their lows, this was also a "dumping day" by professionals as well as a bearish "red popsicle" day.
In light of the broad market weakness now, we should look at the internals in these three earlier September cases of sharp IP21 drops of. Cases 2 and 3 are the closest parallels. The first instance followed soon after the terrible bear market of There were no paper losses in any of these cases. The average drop for cases 2 and 3 was only 3. Such a decline from last Friday's close would bring a drop to only , about points lower. But because of how poorly the broad market has behaved, it would probably have been much better if Peerless has given a Sell.
Good Short Sale no paper loss 1. While no other month reliably works well with such a signal, Septembers are the most bearish month of the year. While we have buy signals based on the bullish seasonality of November and December, we have no Sell signals now that are generated only in the bearish month of September.
I will put this in as a Sell S17 in the next week or so along with some other improvements in the flagging programs and the Tiger Buys and Sells. Broad Market Weakness Worsens The gap between the DJI and big banks on the upside and average stocks and those in the Russell representing the broader market widened today. We see this most clearly in the percentage of stocks above their dma in each group. See here and below. This is not comforting. See below. This tends to hold up this venerable blue-chip index because its gives greater weight to the highest priced DJI stocks, exactly those that are holding up the best.
Group Pct. Reits 6. Utilities Bonds Just maybe, it will not even fall below its rising dma at See the examples of , and below to appreciate just how good the DJI is at holding up even though most other stocks are falling. The average for the A-Z directories is half of that. See the current statistics on this for these directories and the different industries.
This situation is not unusual late in a bull market. This mans their Closing Power will be much closer to its day low than is current price is.
The IP21 will drop below zero before, or soon after, the stock falls below its dma. Get the Killer Short Sales e-book for much more detail. There is a rush to cash, especially in many smaller stocks.
Fears that we are in a Deflationary economy are growing. Cash is king in these environments. I think there is also a growing fear that the Fed is losing control of the economy. Monetary policy cannot create enough jobs. But with Washington stalemated, there can be no massive Public Works program, as in , or , to provide stimulus. Rather than being bullish, the rapid fall in the prices of commodities, oil, gas, precious metals, steel We must watch this closely to see if the neckline is bearishly broken here.
And with the Dollar on a rampage, US manufacturing will face hard times as competing imports get still cheaper. Where will a future growth in profits come from? More mergers? Compare the chart of the Russell with our chart of the "Big Fidel" stocks.
These are the 27 blue chips that Fidelity's different sector funds have their largest positions in. The hourly DJI chart below shows that today's drop of by the DJI has not yet produced a close below the point of breakout. But the decline was deep and broad. The DJI's next support I reckon to be at and its dma.
That support is at Without a new Peerless, a deeper DJI decline seems unlikely. Just as we have the very rich and the poor and we have importing and exporting companies, so do we also have fifty or so blue chip mega-corporations that dominate their markets and, not incidentally, the politicians that make the rules and all the rest of the business world.
More and more, the present can be compared to the Fall of when there existed a group of "nifty fifty" big blue chips and growth stocks at the top level. These were said to be "one-decision" stocks. Despite PE's of , they were the institutional favorites. They were growth stocks that one simply bought and held tight.
At least, that was the plan. This un-nerved the institutions and soon even the nifty-fifty stocks were being dumped, too. My guess is that was like this, too. As fewer and fewer other stocks kept rising, those still did so got more and more funds from those playing the performance game. This is what allowed the DJI rocket up so much even though the rest of the market was already very weak by mid DJI: The DJI held up the longest because of the presence of so many of the nifty-fifty among its components.
That was when the real decline commenced. But the weakening internals will likely produce a new Sell if the DJI rallies 1.
Expect good support on a quick DJI re-test of this week. Smaller stocks are, however, much more vulnerable. It looks like we have an entered an era of increasing Deflation. The rising Dollar and Deflation falling precious metals, falling gold and silver and falling fuel prices hurt Main Street, in general.
Wall Street loves this environment, so long as profits do not turn down because of unsold inventories. Hedging is fine, but I would not turn bearish. Keep in mind that there have not been any big September or October declines without first a Peerless Sell. This is true going all the way back to In addition, appreciate that Septembers in bull markets are generally much more bullish than Septembers generally. We need to see how the markets behave when there is no triple witching expiration and no huge new public offering.
A sharp IP21 drop in the DJI, such as we saw on Friday, is distinctly bearish in Septembers, not withstanding how reliable Peerless has otherwise been in this month. See this new study of sharp drops in IP Valid Buy B10s in all-time high territory should bring a strong follow-through. Friday's was not. To avoid a false breakout, the DJI will need to stay above , 79 points lower.
If it fails the breakout, it will still have good support at its dma at False breakouts on Peerless B10s have not previously brought any declines below the lower band without a new Peerless Sell.
A false breakout would not come as a big surprise. No other Buy B10 had both these key values in negative territory. By itself, back to , such a big one day drop in the IP21 is about as likely to bring a drop to the lower band as bring a very big loss to a short seller. Septembers are more bearish. All would have been profitable to a short seller. There were no intervening rallies of more than 2. This makes an S9 possible if the DJI rallies another 1.
In this condition, a drop by these ETFs below their dma with their IP21 also negative, is a reliable short-term Sell. Bearish negative readings are shown in red. So far, there are bearish Closing Power divergences, but we need more than this to become bearish in an intermediate-term.
Up QQQ. CP turned down from resistance. Bearish plurality BABA BOOM! We might hope that the trading was simply distorted by options' expirations. But the nagging fear I have is that the breakout B10 was artificial and used to guarantee the success of the massive new issue of Alibaba , BABA.
That is right in line with Facebook's FB. O valuation of 39 times forward earnings but nowhere near the lofty valuation of Amazon. O multiple of More and more, the NYSE is international, not national. The bullishness of the DJI's breakout past well-tested flat resistance, as now, into all-time high territory should not be underestimated. Such a pattern occurred at the start of the bull market.
Nor should we discount the new Buy B10 because it is now September. There have been 5 earlier September B10s. To be valid, prices should move higher on rising volume. A breakout failure would put the DJI back into its sleepy narrow range with support at the rising purple dma at Still, this Buy B10's bullishness is suspect.
See above that both the P-Indicator and the V-Indicator are negative. In all the 47 earlier B10 cases back to , there has been only instance where the P-I was negative, as now, and no cases where the V-I was negative. This is a warning that if the DJI were to jump up to the 2.
It looks like we will get a big jump at the opening today, partly due to the DJI's breakout and partly due to the expected Scottish vote of "No" to independence from the UK.
The breakout puts a lot of pressure on short sellers. This should give us a few more days of price-follow-through. The old adage of selling on Rosh Hashanah Sept. If there is a retreat, there should be excellent support on the first test or two of Unfortunately, the B20 signal does not tell us to expect the markets to advance very far.
But the Fed's latest news will help the markets. The two dissents by the old guard on the FOMC tell me that the FED is still on the right track and not about to raise rates or jolt the markets with an unexpected rate hikes.
This should allow the DJI to make a flat topped breakout. Shorts must then be expected to push the DJI up another points. The next move should be modestly higher as the most astute traders watch to see if the breadth of the market is strong enough to permit big gains or, oppositely, whether the DJI will rise alone to a significantly unconfirmed major top, as has often happened in the past.
Keep in mind just how normal it is for the DJI to get way ahead of the rest of the market late in a bull market. The resulting divergences should bring major Sells when the time is right. So, we are left to watch the progress the DJI makes in eating up the resistance and in bringing along the other averages and the market as a whole. While we wait for the markets to become unstuck from the unusually narrow range they have are locked in and while we wait for the FED to give us a clearer idea of when rates will go up, I think the best strategy is to be long some of the Bullish MAXCP stocks and short some of Bearish MINCP stocks.
It often happens that, we can make on both sides of such a hedged position. In the absence of Congress and the President being able to develop any consistent fiscal approach, monetary policy and the FED are kings.
And if the FED is king, the big banks will get special treatment and show strength until the very end of this bull market. Beaten down oil and gas stocks should bounce back. This is a perpetual contract representing Crude Oil Futures.
We will be watching to see if the DJI turns back again at its well-tested resistance or if it can manage a breakout surge, perhaps on a bullish Fed announcement regarding interest rates. The FED appears to have decided to delay raising rates, at least for a longer time than than many feared.
Today's breadth was as positive as yersterday's was negative. For traders this sets up yesterday's low as key short-term support for the major indexes. What caused me to spot this was how useful big jumps in the blue Tiger candle stick charts are. The tables below also show that many stocks recently have shown unusual buyiing by Professionals. I will need to develop and test a corresponding Sell signal. The charts shown here show Tiger Buy B7s. But I'm thinking of renaming it a Buy B That signal now can be placed on our charts using a different pull-down choice, so we lose nothing in replacing it with the Closing Power Take-Off Buy Signal.
I want to see if the reverse works as a Sell signal. This week the DJI may violate its dma at 16, The next likely DJI support would then be its lower band near Bearish plurality What Is The Significance of Weakening Breadth?
Today, even though the DJI rose See the lengthy study I did tonight of such breadth weakness when the DJI rallies. Be careful what you hold long now. Secondary stocks are probably much more volnerable that the remaining high caps still in uptrends.
Remember that it is the job of the blue-chip DJI to hold up the appearance that all is well on Wall Street and to hold up longer and stronger than more nervous smaller capitalization stocks do. This may be the beginning of such turning point now. A little later, when the breadth divergences become even more severe Peerless will give a Sell S9 on a false new high near the upper band. The usual breadth divergence is more visible now when we look at all stocks, not just those on the NYSE, and compare them to the DJI Tiger lets us do this quite easily.
We can readily compare these numbers with the same pair of statistics for the DJI This week the markets are running scared. Traders, especially overseas, are fearful that their economies will slip into certifiable recessions and that hot international money will rush to American blue chips because of the strong Dollar and the prospects of higher interest rates in the US.
The "No" vote on Scottish Independence seems to be slightly ahead. As long these hold up above their dma's and the DIA's longer-term Closing Power stays in an uptrend in the chart below, I would think the DJI may surprise the fearful by advancing to new highs. Unfortunately, if beadth remains this poor that will bring a Peerless Sell S9 and then we will be in trouble. All bets will be off if the FOMC announces this week an early date when interest rates will be raised. As I said this weekend, I think that would be a dangerous blunder and could well accelerate us into a deflation spiral.
Primal fear would follow a market panic and we will all discover the meaning of a "liquidity trap". A liquidity trap is caused when people hoard cash because they expect So many such patterns are fair warning that a significant top has probably been made. The next likely DJI support is at its lower band near The Fed may be on the verge of a collosal mistake.
Tightening money now when the signs of deflation are everywhere and a Europeon recession is so close could be a major monetary blunder. Since compensating fiscal policy is frozen by political stalemate, there could be no going back and fixing the deflationary spiral that might result from such Fed action. Bearish plurality Fortunately, US Professionals still have hope that such dire consequences will be avoided. These things and the absence of a new Peerless Sell should gives us hope that the DJI will not drop significantly this September.
There were more Decliners than advancers on the NYSE and has now set up a convenient short-term downtrend that we can use to judge when the decline is over. The weakness owes to a growing sense that the FED will not keep rates low much longer. And, in fact, the yield on Year notes have advanced from 2. I would not have thought the FED would be raising rates given the unusual strength of the Dollar and the many other signs of Deflation, falling crude oil and gas, falling gold and silver prices , falling food commodity prices and falling non-US general market ETFs See the Tiger Index of foreign ETFs below.
This could be a collossal error! With 47 million Americans on food stamps, the Job Participation rate at its year low and Money Velocity at a year low and the stock market near its month high, the divergence between Wall Street and Main Street is dangerously wide. Raising rates now could well break extended price-uptrend lines which will generate a lot of heavy-handed dumping of stocks and, at the same time, drive up the Dollar, thereby hurting US manufacturing exports and inviting the export of more US service jobs.
This would all be done because of seriously misguided fears of a non-existent threat of runaway inflation. And, if the Fed says it is mainly concerned about the misallocation of funds due to the stock market's runaway advance, they should consider raising margin rates and ending the use of the full range of leveraged vehicles that have encouraged so much short-term speculation.
They are apt to wait for more headroom before tying to mount a decent rally. But today the general market ETFs broke their steep downtrendlines. This should take some of the selling pressure off the market and keep it within its narrow range for a few more trading days unless we see unexpectedly weak openings. See how in DIA's case below the tightening Closing Power triangle formation sets up a trading range that now matches the narrowing price trading range prices are in.
To become bullish for the general market we will need to see these ETFs' longer term CP downtrends broken. The links below have been fixed. Though this is a sign of an aging market, we can play the trends of Closing Power to advantage now and get out quickly when the CP uptrends are violated, especially if there is red high volume reversal days after big advances.
We have been suggesting shorting the weak natural resource stocks, especially in coal and also the Yen. Though retail stocks have been weak, the stronger Dollar will help them a lot as importers. Domestic auto makers like Ford will have a hard time. Bullish plurality Caution is still warranted because it's September, because the signs of a bearish deflation are growing and because the DJI's ceiling or resistance level is less than points away. This does not give much headroom for a rally.
August and September Buy B20s are weak Buys. So any rally now is probably not going to be strong enough now to break the DJI above the well-tested flat resistance at So, staying hedged still seems reasonable.
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