Thursday, December 4, 2008

Morning Update 12/4

Good Morning,

DOW futures are down about 120 points this morning 40 minutes prior to the open. They were down about 200, but then spiked up a little on the weekly unemployment numbers which came down 21,000 to “only” 509,000 for the week! Uhhh, hello? Last week was Thanksgiving… a shortened week. 509,000 is indicative of a deep recession, and it makes me laugh to see the market jump, especially when the headline immediately beneath says that AT&T is slashing 12,000 job! Ridiculous!

You know that Bill Miller got bullish AGAIN, as have a couple others who I follow. The good technicians are talking B wave up/sideways THEN C wave down. Those are the technicians who understand the fundamentals and know how to do simple math such as I presented in Death by Numbers. One market caller just this morning wrote that he sees too much bearishness and thus he is now bullish! While I agree, in principle, that when there is too much bearishness one needs to be on the other side, I DO NOT BELIEVE THE BEARISHNESS IS OVERDONE! In fact, I’m beginning to see way too much bullishness! That’s exactly what secular bear markets do… they draw in more fiat currency at every step so that it can be returned to the ether from which it came.

Yes, I see a potential inverted H&S pattern, and I see a potential bullish triangle, BUT NEITHER HAS BROKEN AND CONFIRMED. And, remember that blue line I keep talking about on the following chart? Right now it’s at 857, that’s the bottom of the old big triangle, and that line is a seriously strong magnet! Below is a 5 day, 5 minute SPX chart:

Looking at that chart, the blue line across the middle is the triangle bottom, and the other two blue lines are the POTENTIAL bullish triangle. BUT, there is also a potential BEAR FLAG that I see clearly and I have heard no one else mention it.

Also, if you read my end of day yesterday, you will see that I saw bearish signs, especially from my short term oscillators. Again looking at that SPX chart, you can see support will be found at the 840 area and then again at the 825 area, but we must first break beneath 850 which has also been providing support. If we get below 825, look out, the target on that flag is in the 760ish area.

Then again, if 875 is broken on the upside we’ll have some real bullish potential. I still see it BOTH ways but am nonetheless still bearish because I see MIXED technicals with a fundamental background where the math simply does not work.

By the way, the past two weeks of mostly rally have occurred while the bond market is pushing rates down. This still looks like “quantitative easing” or what I would call “fool you printing.” As I described in previous works, at some point in this deflationary wave it MAY be possible for them to throw out enough trillions to stick a knife in our currency Zimbabwe style, but any “rally” in the markets under such circumstances will not be “real,” it will be a false rally where the value of your currency is plummeting. That is defiantly NOT happening yet. The dollar is still elevated following a very large rally and is consolidating. The potential is still there for it to rally more as dollars are in HIGH demand as deleveraging rifles around the globe. Despite the potential quantitative easing, gold is still not responding strongly. I am still watching but am cautious. History shows that gold gets slammed during deleveraging, but then performs well afterwards. That’s what I’m expecting here and thus I have begun to SLOWLY accumulate small amounts of it.

The TNX is down (drag on equities, or quant. easing?), DOW futures are down 115 (careful of the gap fill), I will be watching my 30 minute stochastic indicator as I described in yesterday’s article and will be looking to take profits on the trade I established yesterday when the fast first reaches oversold as that is a very short term trade. I think we will likely see 840 at a minimum today, but don’t rule out a touch and go higher. Overall a time to be small or not at all, in my judgment. We break beneath 825, or above 875, then I might start to look at something a little longer term. Will keep you updated either way.

Have a good day,