Stock-Market-Observations

• Short Term
  
• June 15, 2011 – Present
  
• Action Status – Sell Signal On Penetration Of 1295 SP 500

Link to my charts at StockChart.com (updated constantly)

07-27-11 short term

07-27-11 INTERMEDIATE TERM

Today was another 90% down day (actually 95%).  That makes seven 90% down days and one 90% up day since the May 2nd peak.  That fact by itself is more in line with a downtrend instead of an uptrend.  90% down days are normally followed by a few days of rally but a continued decline would have a much darker meaning.  Both the DJ Industrials and Transportations closed at lower lows than July 18th.  That renders a short term sell signal in Dow Theory.  It takes a larger decline to actually have a full blown Dow Theory sell signal (below June 15th lows).  The count from the top appears to be 5, so a rally is likely.  If a rally is not forthcoming, that would not be good.  Jeff Saut has 1295 SP 500 as his fail safe and I will render my sell at that point also.

Looking at the above chart we see an ominous double top.  The first chart has three peaks, which could easily mark the termination of the rally that began on June 15th.  In the second chart we also see a market that hasn’t penetrated the significant lows of June 15th.   With a break of the June 15th lows, we would be in step 2 down that began on May 2nd.  That would render an intermediate term sell signal.  A long term signal would be a judgment call by me.

Things are very unsettled and Wall Street doesn’t like uncertainty.  It’s obvious how fervent and unyielding to compromise the Tea Party has become.   They have become a dangerous and chaotic influence on government.  I wonder how many Tea Party advocates are unsure what they have voted for.  If not, it would remind me of the saying: If everyone is running around in total chaos and you aren’t, maybe you don’t understand the problem.

I admire the goals of the Tea Party, it’s their timetable that is totally wacky.  Bringing government spending to an immediate halt is unbelievably hurtful to a tenuous economy.  The Tea Party wants to throw the baby out with the bath water, kill the golden goose . . . hopefully I don’t have to resort to anymore hackneyed idioms.  I gather you’ve got the idea???

Did you know that none of the methods used in 2008 by President Bush to avert a total catastrophe would  be possible under the balanced budget amendment?  Balanced budgets are fine but periods when the Black Swan visits, government must not have their hands tied.

If AIG had gone under in 2008, they would have taken a LOT of BIG banks with them.  AIG was saved for the moment in 2008 to be dissolved (sold) in an orderly manner in the following years.  That’s a healthy process, a complete and immediate bankruptcy would have collapsed all the dominoes and the government would have stood by unable to do anything.  To be effective in all situations, a balanced budget amendment needs some guidelines when it’s OK to violate the amendment.

Looking at the charts below, it seems that if we make significant lower lows on most of the important indexes, things will have turned to short term bad.  The DJ Industrials and the SP 500 are the really big generals in this march downward and you should watch them closely.   I’m watching the DJ Industrials chart to see if the we have a significant lower low and a broken trend line.  The final arbiter of an intermediate term sell signal will be the breaking of the June 15th low.

Save this link to my charts at StockChart.com (updated constantly)

07-27-11 indexes

Meantime I’m waiting to see what happens, but the Nasdaq (one of the stronger indexes of late) was down 75 points today, nearly 2.7% and that’s not good.  I have warned in the Weekly Update for many weeks that an intermediate term decline could be underway but I needed confirmation of that assumption (still waiting).

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This entry was posted on July 27, 2011 at 8:17 PM and is filed under UPDATE. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site.