We’ve come to another key point in time. I suppose financial markets are not the only area where important decisions are being made. Health care passed the House by a couple of votes. The parallel here is scene shifts back to the Senate where they have to decide what they want to be. Politicians will now be influenced by the crowd will have to make a very important decision. I think the jury is still out as to how the ultimate bill materializes.
This market now gets to decide what it wants to be. Since our time windows hit, I might add we topped on the day technology was 227 days off the bottom and 722 days off the old bull market top for a .314 perfect Pi ratio. You need to remember that because markets spiral in all degrees of trend all the time and we are now working off perfection at least in the NASDAQ and NDX. It may not even be possible for tech to set a new high.
But that doesn’t mean the Dow can’t do it. It hit on the time window but missed its perfect Pi day by a handful of calendar days. I know I’m digging deep under the hood to present these readings to you. When we come up to the surface for more mundane issues, we find a Dow led move off the recent lows. Healthy markets are not led by the Dow. I like to see rallies led by the NDX and SOX with the Dow pulling up the rear. Dow led rallies inevitably bite the dust at some point. Up to this point, the Dow has traced out a 78% retracement which means it is testing the top or if it turns here, it can be tracing out a much larger sideways consolidation. As it stands now, we are very early in that estimation but I bring it up because triangles do materialize when the B wave back up quits near the 78% line.
The NDX is sitting at 61% which has its own special significance. This is a higher probability point on the chart where it could quit. But sentiment got white hot on Thursday as traders who double as media correspondents brought out their Dow 10,000 smiles again. We mentioned this last month but the markets topped several days after the folks on the floor of the exchange brought out those Dow 10,000 party hats. Folks, there is no such thing as happy in the stock market unless you are on the way to the bank. Since there is no crying in baseball (Tom Hanks), the only people allowed to be wearing party hats today are Yankees fans. It’s not lost on me that the Yankees are Wall Street’s team and Friday was the trip through the Canyon of Heroes. Will the markets top within a handful of days of this party? I wouldn’t rule it out which is why I brought it up.
But to cool off sentiment there needed to be a quiet day where nothing much happened. Friday was such a day so I can’t rule out further bullish activity either. All of which brings us to the next condition, the U.S. dollar. It shouldn’t be lost on you either that the Greenback spend the last three days testing the descending trend channel line it just broke on the way up. If you can forget for a moment that we are dealing with the dollar any chart that breaks through a pattern such as the one we’ve just experienced will spend additional time testing its channel line to see if it can become support. It is almost a prerequisite for a bigger move. Think about it, you wouldn’t take calculus without first taking algebra. It just wouldn’t fly. But even if you took algebra you could end up getting a C in calculus. What is the parallel there, you ask?
It’s very simple, since this is likely a bear market rally, it shouldn’t surprise to see a steeper retracement for the Greenback. You’ve heard some tell you they are extremely bullish on the dollar. I’ve been looking for a rally but don’t think we can come close to the deflationary scenario some would have you believe. I’m looking for the Greenback to have a pattern that corrects off the April pivot, not an outright reversal. It is manifesting itself right here by showing the proper amount of underlying strength AND WEAKNESS. If you aren’t sure what all of this means, you should watch my Russell webinar which is on demand where this concept is explained in greater detail. Also, the best calculations at the recent dollar high come back down to the secondary low. That low is really close to the bottom so that is why we are getting the bigger correction right now.
But we are coming to point where all of this "stuff" has a payoff. We have a relatively lighter volume stock market move led by the Dow against a top which materialized on one of the best time windows of the year. We’ve done it with sentiment that has reproduced the emotions that got us to the high in the first place. The market only turned after they got out the party hats. If B waves are supposed to replicate the move on the way up, this one is doing its job very well. Think about your emotions. Don’t you just feel like the market never wants to stop going up? It’s okay to feel that way. You just have to take a step back and realize feelings have meanings.
So we’ll come full circle. I watched the Sunday morning political shows for a change. In addition to everything else, one topic was a deficit that should explode out of control again. My dollar chart still has room to fall even as it holds the bottom. I don’t think this bill going to the Senate is immediately dollar friendly. So the initial reaction will be bearish. Then it will hit the Senate where it’s going to hit stiff resistance. The parallel there is a dollar that could find its low. I don’t often engage in this type of hypothetical speculation; let’s see how close that comes.
My book has been released in Germany and when you go to the Lucas wave international web site you’ll see the cover of the German translation. One always hopes, but when I wrote that book I never realized it would have the global reach that it does. You know the big webinar will be available for you to study for the next six months. My next appearance will be in Las Vegas on Friday, Nov. 20 at the Mandalay Bay. That presentation is going to be geared more to the U.S. dollar. Nobody covers the dollar like we do. But I am going to be part of a Pre-ICE Track Webinar hosted by DTI this Wednesday at 11 am Central time at the DTI web site. All of the ICE speakers will be talking about their presentations in Las Vegas. This panel discussion is free.
Here is the information you need for that webinar:
Here’s the link for the Las Vegas Expo:
URL: http://www.moneyshow.com/lvot/main.asp?scode=015780. Here is the link for the Expo. Why should you consider attending? It’s simply the best trading convention of the year in the US. New York is very good but let’s face it, Las Vegas is Las Vegas. There’s no place where you can mix what you love (trading and meeting other traders) with one of the most fun places in the world.