12/27/12 – Long Term Prudence Warranted

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MARKET MESSAGES

12/27/12

HAPPY NEW YEAR TO ALL

The sky is falling, the sky is falling . . . Chicken Little (aka Bob)

Chicken Little

Chicken Little

Below is the chart with the wave count that has bothered me for some time.

Sounding like a broken record and restating that we could be finished with the bull market since 2009 because the count “appears” to be fulfilled.  I have said numerous times that I “expected” the bull market to end in 2013 and that’s why I hold out the possibility of a step 4 and 5 up.   Regardless of what I think, the market has been telling us for some time to be careful because we’re in the terminal stages of the bull market (step 3).  Now that doesn’t mean we can’t make good money if steps 4 and 5 materialize, but prudence is (has been) warranted.  There is still an outside possibility that we have only completed 2 steps up in the 3rd step (we’ll see about that).

All the big money is made in step 1 and step 2 up.  Step 3 is normally a topping step (saw tooth formation).  This was not true as we ran up to the 2000 peak (blow-off top).  Speculation was more rampant during this period than 1929.  Remember all the talk about the stock market at every party you went to in 1998-1999.  You couldn’t fail to make money . . . and that is always a warning sign in any market.

12-27-12 SPX DAILY

12-27-12 SPX DAILY

And this chart with its trendlines is a bit scary too.  The bottoms line is dead on and the top line is close enough.  But until the market turns down in a bear market, this is just an interesting chart.

12-27-12 SPX WEEKLY BARS

12-27-12 SPX WEEKLY BARS

The rally since 11/16/12 appears to have hit a correction point (3 steps up).  But did we just finish first step up since 11/16/12??

12-27-12 SP FUTURES 150 MINUTE BARS

12-27-12 SP FUTURES 150 MINUTE BARS

In the chart below, notice that we are nearing the bottom edge of the envelope.

12-27-12 IND 60 MINUTE BARS

12-27-12 IND 60 MINUTE BARS

Before I could post today’s update, the market put on a spirited rally.  I guess “they” thought we were close enough to the envelope bottom.  After the market close, the rally ran into profit taking.  But it’s very likely that we could have a multi-step rally that began late today and will last for 2-3 days (???).

12-27-12 SP FUTURES 3 MINUTE BARS

12-27-12 SP FUTURES 3 MINUTE BARS

12-27-12 SP FUTURES 55 MINUTE BARS

12-27-12 SP FUTURES 55 MINUTE BARS

We have a very small oversold in the market, certainly not enough to warrant the rally that we got late today.  Kinda suspicious, but if we got really good news from DC, I suppose all would be forgiven.  I just don’t have faith in Bozo the clown (“Say it ain’t so, Joe”).  For those who don’t remember Bozo, you’re young and I’m old . . .  or your memory has failed and you’re on your way to the home.  Now even Shoeless Joe Jackson is way before my time (1919).

12-27-12 McClellan Oscillator

12-27-12 McClellan Oscillator

“If Santa fails to call the bears will roam on Broad and Wall!”

MARKETS SPIKE ON NEWS THAT BOEHNER WILL BRING THE HOUSE BACK SUNDAY.

Yup, hope springs eternal.  Calling the beltway clowns back to DC doesn’t mean the votes are there and it’s going to take some moderate republicans stepping forward to create a compromise.  We’ll see if that’s going to happen.

It would be nice if the Tea Party could take a reality check on cause and effect in the markets and Main St. and see their way clear to cut spending in a moderate manner (instead of all at once).  Didn’t mom say, all things in moderation???  Asking for reality from the Tea Party is a real fairy tale . . . how naive of me to wish for such a thing.   I don’t think these guys know the first thing about how DC economics affects the public (or business) spending.  Did you notice how Christmas spending plummeted as soon as the fiscal cliff turned into a reality.

According to research conducted by MasterCard (NYSE:MA), holiday sales rose just 0.7% from the end of October through Christmas Eve—this is compared with last year’s 2% increase.

Prior to fiscal cliff reality, Wall St and Main St were going about their business as if everything was going to be OK . . . duhhh what me worry???  After Black Friday, the sales outlook was very positive . . . but then . . . Bah, humbug.

Unfortunately the bad taste still lingers for me after the national debt crisis took place in 2011.  Wall St didn’t forget or forgive either.  But I must point out one thing, “if it’s obvious, it’s obviously wrong”.  Meaning that history might not repeat even if Congress reaches a slow and pitiful non-agreement.  Kinda hard to rationalize, but the market is perverse and will do anything to screw you up.

So I’ve covered all bases and now I’m neatly hedged against all viewpoints.

From the sentienttrader.com we have the following cycles chart.  Note that a cycle bottom was anticipated around 12/24.  A bigger cycle bottom is due around February.

SP500-2012-12-22

SP500-2012-12-22

And here is a gold cycle chart for the gold bugs.  It works in a similar manner except the cycle dates denote peaks instead of bottoms.

GOLD-2012-12-22

GOLD-2012-12-22

Much longer update than what I was planning but that’s kinda normal.  When I neglect things, I feel that I have to pick up the slack.

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