Friday, December 26, 2008

Update – End of Day/Week 12/26

I hope everyone had a Merry Christmas, my time with family was fun and refreshing – it won’t be long now before we get to start 2009! Any predictions? I’d like to hear yours, so please comment below if you feel inclined. For what it’s worth, I believe ’09 will be very disappointing for those looking to put a good and lasting end to our current economic woes. In fact, 2009 will be the year of realization by the majority of people over how corrupt and out of control our system rally is. It’s that realization that will eventually begin wave ‘C’ down, but our eventual lows will not occur in 2009, just as they did not occur in 2008. Deflation will remain the theme for most or all of 2009, those who hold cash will still be king, and those with the gold get to make the rules as usual! I’ll write a more comprehensive article on my thoughts about 2009 soon.

Today the DOW finished up 47 points, the SPX was up .5%, the NDX gained a small .1%, and the RUT gained the most with a 1.3% advance.

Two news items set the stage for today; the first was that GMAC won approval from the Federal Reserve to become a “bank” which will allow it to offload a lot of its bad debts onto the taxpayer. So, instead of those bad debts being defaulted upon through the bankruptcy process, they will eventually become a part of the indebtedness of America. Words cannot describe how screwed up that is.

The other news is that multiple reports are showing that this retail Christmas season is one of the worst on record. No surprise there, and not to be a Scrooge, but if never ending sales growth over Christmas is your goal, then that only goes to show how screwed up that is as well.

Speaking of never ending growth, I think I’m going to post that great video series by the good Dr. Bartlett – “The Most IMPORTANT Video You'll Ever See.” That’s a great video. If you haven’t seen the entire 8 parts (about 10 minutes each), you should take the time this weekend, it’s worth it and will help you understand the math behind our never ending attempt to inflate the economy (impossible).

At any rate, the technical landscape has not changed much at all over the past couple of days. Volume has been VERY low, so it’s difficult to get a reliable read, that’s part of the problem with holiday weeks, and why I chose not to play at all the past couple of sessions.

We finished overbought on the 10, 30, and 60 minute stochastic fast, but the slow shows there could still be a little more upside in the very short term, but that condition points to lower prices sometime early in the week.

I’m going to put up just one chart today, and that’s of the DIA (DOW ETF) 3 month daily. Yes, the past two days have been the lowest volume days of the year. Note the volume pattern though, higher volume on sell-offs, diminishing volume on advances or even sideways moves. Also note how small the range was on the past two days – not even worth mentioning, other than that type of action brings the volatility indexes down. It also bought time and you can see that it allowed the daily fast stochastic to level off right on the oversold line. The slow needs to most likely come down some more before the next significant run higher. Also note how the Bollinger bands are narrowing down on each other. That Bollinger squeeze usually means that a sharp move is coming pretty soon. I also drew in yet another new potential triangle (green).

We’re right in the middle of a turn window and I expect that as volume begins to pick up after the first of year that the medium term trend will become clear. Overall we’re still in the same old range, but end of year seasonality means that we could easily continue to drift higher until we’re into January.

I think we have another eye opening year ahead in 2009, it’s probably wise to take this lull in activity to recharge your batteries. The economy impacts people’s emotions and psyche – it’s draining regardless of whether the headlines directly affect you or not.

Have a good evening and weekend. I’ll be back at writing and posting interesting material now that Christmas is behind us.