Wednesday, December 3, 2008

Morning update 12/3

Good Morning,

Dow futures are down about 150 points this morning.

RIMM lowered its Q3 outlook, Freeport McMoRan suspended its dividend and ADP reported that more jobs were lost in October than expected (their track record vs. government statistics is not good, but who is right? Neither!)

The non-manufacturing ISM number will be released later this morning.

Treasuries are under pressure again with yields on the 10 year falling.

From a technical perspective, this is a dangerous time to have money at work in either direction. A lot of market callers I follow were actually quite bullish last night and may be surprised by what the markets did overnight. One possibility is that we are forming another triangle. IF we are, they are frustrating to trade until they break. BTW, IF we are building a triangle here, it will most likely be bullish in the medium term as this triangle would have been entered on a move up and thus it would be expected for it to break in an upward direction. Again, IF that’s what’s happening. Wave 5 down is also still on the table, and from my perspective, the fundamentals support that.

So, let’s talk a little bit about crosscurrents… Waves are formed all the time in the markets, and they are occurring on ALL timeframes. These waves sometimes get in sync with one another to make moves that are larger and more powerful. I believe that we are experiencing a grand supercycle corrective wave, the most powerful there is. But within that wave, there are crosscurrents that can be seen if you look at the different timeframes. For example, on a weekly timeframe we have either just triggered a buy signal or are close to it, while on the daily timeframe we just rolled out of overbought and are close to generating a sell signal. To me, that’s a crosscurrent and those are NOT the time to be entering into large positions with your money. I look for alignment across multiple time scales. I usually start at the 5 minute, look at the 30 minute, and the 60 minute timeframes when placing ANY trade. And the further up the timescale you can find alignment, the better and the longer the duration of the trade.

At any rate, I see crosscurrents both on the long term scales and on the short term scales. When I get time I’ll write an article about that and show what I mean with pictures.

Meanwhile the markets just opened and we are down about 135 points. Is it just me or does it seem like we’re getting fewer gap fills than we used to? Perhaps we’ll get one today, again, too many crosscurrents here for me. I’ll let you know when I see a good entry point.

Have a good day,