Monday, November 30, 2009

Morning Update/ Market Thread 11/30

Good Morning,

First of all, I want to thank those who have taken a couple of minutes to make contacts on behalf of Martin Armstrong. Today, however, is the most important day to do so, I ask that everyone please redouble your efforts and get on the phone and talk to them (or even just keep their lines busy) while at the same time we email and fax! THANK YOU!

The futures are down slightly, below is a close up of the action in the DOW futures, left, and the past couple days on the right side in the /ES.

The dollar was down mostly, but has climbed back up and is now positive over Friday’s close, sitting just beneath what was key support, now key resistance. The dollar has some serious issues, that’s for sure, do not take its failure to advance lightly, the dollar dropping further from this point will wreak more havoc than those who think that we must keep it going down think. Bonds are about flat, oil is off substantially, and gold is down a little too.

Dubai markets just closed down 7.3% in the first day of trading following their default – oh, and don’t be fooled, that IS a big deal, yet another sign of a world gone mad, a world that inappropriately saturated itself with debt.

The Chicago PMI is out at 9:45 Eastern, the highlight of this week will be the employment report on Friday.

Let's start with a daily chart of the DOW. Here you can see that the action of the rising wedge is very similar to the way we topped in 2007, this is the strongest of the indices, and that chart just looks, well, scary:

I was very busy this weekend on the Armstrong stuff and did not get a chance to post my technical thoughts and charts that I had gathered. So, here are a few charts from Friday with just a few quick thoughts:

Friday was a disaster internally, way more than 90% of the volume was on the down side. During the rise off the bottom, the internals did NOT improve materially, that is a divergence against price. Normally the market rests after a 90%+ move, therefore in the short term I expect a pause, or slightly higher in the market. However, the signs are accumulating that wave B up may be over. But we can’t say that for sure still because the E.W. rules still has not eliminated higher as a possibility.

The VIX rose sharply off the bottom of an expanding wedge formation. That is a classic trend reversal pattern. There was a huge gap up and a hammer was produced. In circumstances like that, I would expect it to initially pull back along the stem, but later would expect it to advance. The P&F chart is still targeting 52:

Below is a daily chart of the Russell 2000. This chart is a classic double top Head & Shoulders chart. Interestingly, the RUT is down as I type, diverging from the XLF which is higher. This is an ominous sign, as the RUT tends to lead the market. While the DOW looks relatively healthy, they are but 30 stocks. This is a much bigger market, and it does not look healthy here at all. It looks to me like it’s done making its right shoulder and is moving down to the neckline. That is not a confirmed pattern until the neckline is broken, but it sure looks like a high odds proposition that it will:

The XLF gapped down and made an inverted hammer. You expect prices to reverse back up on a hammer like that, and that’s exactly what they are doing today. What’s important will be the action after the gap is filled:

The banks are even weaker than the XLF. Below is a bearish P&F chart showing the target on the banking index:

We need to pay attention to what is happening in the rest of the world too. The Japan Nikkei index is CRASHING, having moved down 15.6% in just the past couple weeks from its most recent high (15% move is considered a crash). Note in the chart below how it has fallen beneath its 200dma:

In this next chart, I have placed the SPX behind the Nikkei index… note how they generally move together, more or less, but now it has diverged huge against our own market. This is a key sign, I hope everyone is paying attention to this!

Below is the Nikkei P&F diagram with bearish target:

What’s happening in Hong Kong? Pretty much the same thing. Check out the P&F chart of the Hang Seng:

The German DAX is also producing bearish targets:

The DOW Transports as well as the NASDAQ Transports have produced bearish targets on their P&F charts, as has oil:

Below is a 10 year monthly chart of Gold that I saw in a very good article from the site Gold versus Paper . Please go to that site and look at his analysis and comparison of this parabola versus the pre year 2000 NASDAQ, it is very interesting. Parabolic moves can be VERY powerful, and they will end suddenly and without warning. But they can go much longer than rational people believe is possible, again, a good article there, please visit his site and read it:

Next is the chart of the NDX when it was at the same stage in 1998. The chart that follows this one is stunning, I’ll leave that to his site:

So, overall, there are more and more cracks developing world wide. We do not operate in isolation, the world is saturated with debt because of a money system that is based in debt. That system is the dream of central bankers, it has made them fabulously wealthy. As they try to fight debt problems with more money, all they get is more debt. It IS an impossible situation, the math simply does not work, and thus we are going to see a very troubled world until we get a new system in place. Hopefully it will be one based on rational thinking, one that works to support real growth and yet keeps the math under control. I think I have the workings for such a system. Not everyone is going to agree initially, unfortunately, but as time goes by, I believe more and more people will come to see what I see. I am still working to build consensus on it which is difficult, but regardless am going to start going public with it soon. There are certain features that I think are a must in order to maintain control and yet allow for flexibility and to absorb shock. I’m going to take up this fight and when I do, I simply won’t back down… the future depends on it!

Tom Petty - I Won't Back Down: