Friday, December 19, 2008

Update - Danger, Will Robinson!

The DOW gave up all its gains, the dollar is higher, the VIX descended down to 41 but has since bounced dramatically back to 44 and could produce a hammer right on its lower Bollinger band. The indices just can’t seem to make it back above their 50 day averages. BTW, I want to point out that we are now nearly a month from the "Head" of the inverted head & shoulders pattern. This shoulder is now out of proportion to the time of the other shoulder and we are still caught at the neckline. My confidence in that pattern is waning (which probably means its break higher is imminent! {sarcasm}).

Last Opex we had a ram job higher into the close. Will it happen again? I wouldn’t bet on it. In fact, I’m not – I exited my small long position earlier and am now back to almost all cash. This is a very dangerous tape. The bullish follow through has not been there, the bad news just keeps rolling in, interest rates are at zero, the auto industry is now on life support, what’s next? Oh, yes, Hank Paulson going back to get the second half of the “TARP” money.

Have they not figured it out yet, or have YOU not figured it out yet? I think we’re witness to the largest heist in the history of mankind, but that’s just me. Don’t worry, it will all be over soon, once wave ‘C’ begins, there will be no more pretending.

We are still caught in a dangerous area between support and resistance, but that area is getting narrower. We’ll see what the close looks like, my inclination is to not do anything until the new year, although I don’t rule out a large move in the near future. It is apparent that bailout after bailout have simply made the unworkable math only more unworkable, yet all the “experts” seem to believe that more and more stimulus is needed. I say that less and less stimulus is needed to go along with less and less government. Change is needed at the roots level. Obama said he would bring it, but so far I don’t see it.

I think it’s highly likely wave ‘B’ may be over before most people think. A lot of people are targeting the March time frame, but I’m a skeptic, I think the market knows what’s coming and may get ahead of it. Thus, my position is now neutral. If we zoom to 1,000, fine, but my inclination is to start preparing for “The Great Ungluing.”