I hope you had fun at the feast while digesting three turkey games on the tube then washing it down by camping out at Best Buy. If you didn’t have enough, now you have Cyber Monday. How could this possibly be hyperinflationary? They seem to be giving away more for less and still not as many takers as they need.
It was a short week and there’s been much discussed about the ‘bubble’ in Gold. I’m here to tell you it’s not a bubble yet, but we are on launching pad. As the chart below shows, if we get any real acceleration this week, chances are we go through a barrier past the point of no return. But before we get there, prices have to deal with the last guard at the gate on the dollar chart.
Long term readers of my work know how precise the time windows can be. Some of you have seen my presentations with Dan Collins first in New York and then in Pasadena in June where we debated the merits of the ‘Technicals vs. Fundamentals’ argument. My contention has been and always will be that when we come to a key time window, an important news event always will manifest. It never fails and the news event that rises to the surface seemingly arrives out of the blue. This one is no exception.
As you know we’ve been watching that last guard at the gate which is the 262-trading day window to the pivot high in the Dollar from 2008. So it came to pass on day 263, this Dubai mess floated into our consciousness.
Where did that come from?
Well, they had to sneak it in there while half of America was en route to visiting relatives or basting their birds. Don’t you wish you could delay payment on YOUR 60 billion? Since it comes on the heels of an important time window, I’d take this news very seriously. If you need no other reason, some money manager went on CNBC on Friday morning and told us diehards who were not at the mall there was nothing to worry about.
They also told us for a long time that the subprime mess was contained.
Sure it was.
I know what you know but the initial reports suggest European banks may be on the hook for this one. If you remember the headlines from last December to March while the greenback was double topping, all we heard was buying the dollar was a flight to safety.
Sure it was. During that phase (which turned out to be the last phase of the bear leg), all we heard was the U.S. was doing "less terrible" than Europe. Nothing had changed in the fundamentals of the greenback. Paulson, Bernanke and Geithner had the blessing of Congress to crank up the printing press and help everyone except the car industry, so it seemed. Yet the dollar rallied.
Now the dollar may have found the last guard at the gate because it has once again hit a good price and time square in an important time window. News events that are now manifesting as I write this column may be very supportive to a trading leg in the greenback. I know I’ve said it before but if this one doesn’t do it, we really will be reaching for the lows.
Unless that happens, the gold market will be left on the launching pad. To me, it’s a very interesting phase because the gold market hit that invisible point on the chart at the same time this Dubai news hit the wires at the same time the dollar window has expired.
You know what that would mean for the stock market. This is the seasonally bullish time of year when the Santa Claus rally kicked off after nasty bear legs the past two years. This year may very well turn out to be the opposite. So does that mean the market treads water until January? I can distinctly remember another two years during the 2002-07 phases were prices topped in the first week of the New Year.
We’ve never had a decent pullback since March and as a result I think we are going to have a payoff because of it. But all is not lost. Consider the news hit the wire during a holiday and we didn’t get the usual microscope reaction. What we are going to need to see going forward is that ‘here we go again’ reaction. If that happens, whatever correction that materials should be painful, but mitigated.
If we hear news that downplays the event for any length of time, we could be back in the stew and 2010 could be a very rough year. A selling wave is a selling wave. The duration of it largely depends on reaction to it. Elliotticians know that B or 2nd waves tend to recreate the sentiment of the old larger degree trend that preceded the new pattern which in this case would be the move off the March low.
But if the reaction to all of this is similar to the sentiment from the October-November 2007 phase, the recovery could be in trouble.
I look for lower prices to start the week as my calculations do not show either a top for the new leg in the dollar or low in technology. The NDX has a great chance of finishing what it just started which is a leg down to 1730 and quite possibly 1670. The banking index appears to be failing at polarity near the 44 handle. It can hit 40 very easily. Don’t think that’s a big deal? It would be a 10% drop in a matter of days.
I’m back from my adventure to Las Vegas where the Fibonacciman road show played to a standing room only crowd. In case you missed it, you’ll have another chance to see how we use this methodology next week at the Futures I-Trade show where I showcase the work we do every weekend with the commodities charts. I’m going to show you when and why charts like Natural Gas and Corn bottomed when they did. I’m also going to show you how to catch key trading turns in these charts without having to know any of the fundamental data that confuses so many traders. You’ll be introduced to this methodology but the reality is we do this work every single weekend.