I’d never been to Chicago until this time a year ago when I was a speaker at the conference celebrating the achievements of Dick Arms. It’s a great city, I liked it even better than I imagined I would and all I can say is too bad they didn’t win the bid. I lived in Los Angeles when they hosted the 1984 Olympics and for years we heard how it would tie up traffic and attract a terrorist act.
It was the greatest event that ever happened to the city. Those of you who have ever lived in a host city know exactly what I mean. I think the only thing that could ever be better for Chicago than getting these games would be seeing the Cubbies win the World Series.
I’m sorry my friends in the Windy City won’t get that chance. But there’s always wait til next year with the Cubs.
While that was probably a snub to the whole United States, someone actually still has faith in us. Did you see the 30-year note? It broke through some serious resistance levels. It has made a landing above the territory it couldn’t surpass in July and early September. Unfortunately, we are not going to get to the bottom of it, but I sincerely doubt our Treasury Department has the capability of knocking the price up from 120-123 all by themselves. Our benefactors have to be involved. You know who they are, right?
While the U.S. lost the headlines to Brazil, they are quietly winning the bigger battle to keep the debt apparatus going. My whole problem with the bond chart is I just don’t think the Chinese are willing to keep buying at higher and higher levels. We don’t have a perfect inverse relationship between the long bond and equities but we may also be getting some rotation into the bonds from the stock market.
That brings us to our favorite subject. We are finally getting the follow through. I’m going to introduce you to a method of analyzing markets without using any tired lagging indicators in my October 28 Internet seminar. But my readings have been building for weeks. All they’ve been able to do in June and August was give us smaller pullbacks which were due to dollar weakness. But the dollar has been higher ever since its 144 day window off the March top. We know that inverse relationship is still working. But of all the readings, the most interesting is the SPX at 61.99% off the bear market bottom. As we scale down even further, we get a housing index (HGX) up 60% since the July low and 115% overall as it hit the 116 handle. The housing index is off roughly a point in terms of % gain to the price handle on the chart. Those of you unfamiliar to this kind of technical analysis, perhaps you should tune in. This sort of thing happens more often than most people realize.
Did you notice what is leading us down? It is housing again. By the end of the week, support from August and September was taken out. You might remember which sector led the bear down. Yes, it was housing and this time we don’t even have a sub prime mess to blame. If you are looking to combine some fundamental news with all of this, why don’t they extend that $8,000 tax credit to first time buyers for a couple of years?
I never understood why that program should ever expire. But Friday was also a rough day for Chicago’s President on another front, the unemployment number elevated again. But I don’t think this is necessarily a bad thing. Oh, it’s bad in terms of the fact any unemployment figure above 5% is not good but look at the market’s reaction to it.
The Futures were down on Friday morning and if this were a year ago, they would have stayed down and tacked on some more for good measure in the end. That’s how you have days where the Dow drops 777 points. Since this is the one year anniversary to the TARP event, we have a good model to look at.
The markets actually spent a good portion of the day recovering. Of course they faltered near the end but I think we all know it could have been a whole lot worse. Which is why I’m thinking that if this were to be a resumption of the bear, this would be a 5th wave and not another disaster.
Here’s another thing for you to think about. The real downturn in business started in July 2007. I know, because I live in one of the seismic centers to real estate crash. Housing activity reversed in July 2007 here. The leading culprits were California, Nevada, Florida and Arizona. We were told for the longest time the damage was contained. It wasn’t until last Christmas they finally told us the recession started in December 2007. I don’t agree with those numbers but that’s not the point. The point is all you need to do is turn on the television and listen to media experts fan fears of a double dip recession. I have to look at it as a contrary indicator. It’s the one area that Elliott still delivers as well as any methodology. Second or B waves are very good at recreating the sentiment of the larger cycle or trend that came before it. In this case, its last year’s near total meltdown.
The more we have fears of another meltdown, the less likely it becomes. That’s how markets work. I know there is a lot of pain associated with each and every down leg but this does happen to be a silver lining. If and when the day comes that we test the low and don’t take it out. IF that day comes and people realize the low is holding it will be a very good day because we will then get confirmation the worst is behind us. Now we are hoping the worst is behind us. It may very well be, but we don’t have confirmation of it.
Okay, housing is now down 18.2% (Astronomic 182) and this is the first indication for readings leading up to a low. The NDX is down 5.5% (Fibonacci derivative 55) and 2.226 points (Geometric 2.236 or 22.5) for every hour off the top. What that means is we are starting to see indications we could be close to a low. IF we do get a turn by Tuesday the question is going to be whether this correction is going lateral as opposed to south. The key area to hold for the NDX should be down to 1640.
Did you see the full page ad in the October issue of the magazine? Turn to page 19. It’s an honor I don’t take lightly. The webinar has some great sponsors and because of that, it won’t be your average ‘free’ webinar that goes long on promotion and gives you some content in the end. This one is rich in content. It’s going to be like the U2 show I’m going to see this month. Its starts with a bang and ends with a bang. Every slide has valuable information.
http://futuresmag.com/web-seminars/fibo/Pages/default.aspx
All you have to do is click, sign up and show up.
