I guess its election time, as the week was highlighted by something you heard in the national news and something you might have missed in my local news. First of all, realize I live in one of epicenters of what they used to call the subprime mess. It was reported that the median price of a home in the metro Phoenix area dipped 2% in July, sparking fears of a double dip recession. You’ll probably hear it today on CNBC. What you already know is the administration has plans to provide another $3 billion to homeowners who are in foreclosure and unemployed. To be sure, these programs are very complex but my understanding is that least one of them is designed to act as a bridge loan until these people can get back on their feet.
If you are a Keynesian economist, you have to wonder why they don’t just take that money and do a massive rebuilding of infrastructure and give these people a job. Isn’t that what people need to save their homes anyway? Don’t get me wrong, I’m not a big fan of Keynesian economics but I do think that if we had the will to fix our infrastructure in the early 2000s, we never would have had to waste billions to make sure the ship didn’t sink in 2008. Had something sensible been done in 2001 as opposed to THANKS FOR TRAVELING, we are probably well on our way to a new bull market by now. (Anyone who was on the road after 9/11 will remember that campaign.)
But social mood was looking for an instant fix, and years down the road leadership has reached the desperation phase.
We don’t concern ourselves too much with what the Fed says because we rely on the chart to tell us what is coming down the pike. But the Fed did speak last week and I suppose the most positive spin you can say is they are lowering our expectations. See, when the sky was falling a year and a half ago, anything positive was met with a buying impulse. Since all things are relative the stock market doesn’t really want to go up anymore.
How does this relate to our work? The public gave the new administration a chance as they should and responded with a nice rally off the bottom. But if you compare it to the 1930’s which everyone does, be advised that a total push with the programs did create a 5 year bull market. I’m not telling you I think they should go Keynes full board. What I am telling you is when they were all in, a five-year rally resulted and I don’t think the current administration is all in. That’s what the charts are telling me.
On April 26 we had a top which is the top for the year. I’ve given you the calculations; they are in Tech Talk in the August issue of Futures magazine. This top has excellent geometric features as we’ve discussed many times. Greenspan said the economy hit an invisible wall. Yeah, it’s called price squaring the range. But never forget that all of our calculations are nothing more than geometric representations of human emotions. Everything else that has happened is a result of that.
How else does this relate to our work? Well, it’s August and is the month we look to see what is setting up for September. My concern has been a housing sector that has been lagging. I mentioned it last week in this space. Housing and banking go together like iron and rust especially when there is no answer to the unemployment riddle. This week the structure started caving in a bit. You have to wonder if it’s going to even hold up until September. I suppose the best thing the market has going for it is we are into the second half of August when people truly are more interested in the last trip to the beach or lake before the kids go back to school.
But it was a week where we may have seen the low in the dollar for awhile. The Greenback came within 25 ticks of hitting my 90 degree Gann target of 79.92. The confusing part was after the Fed meeting it left an upper tail near the close and looked for all practical purposes like it was going to retest the low the next morning. What happened instead was an acceleration higher. Prior to that the Dollar threatened a bungee jump against the Yen but practically nobody was looking at one important piece of information we gave to subscribers on Tuesday night. Those of you who consider a serious study of Gann know we pay close attention to anniversary dates. Why is that? On a square of 9 we are looking for the amount of times the price action goes around in a circle. As we know the Earth goes around the Sun in a 360 degree orbit. We look for price action to spiral the same way. On the Gann calendar prices spiral at 360dg a year. In this case, an important top was made in the USD-JPY on August 11, 1998. As you now know, this low is sitting 12 years to the day. That’s why I’m in favor of a continuation in the move for the Dollar against the Yen.
But that doesn’t explain the move in the Euro against the Dollar because, quite frankly, I had to dig really deep to get good readings for this high. Then you had China and its SSE which retested its one year anniversary high off the top in 2009. That eventually failed and it may have taken a day or so, but we got the message and joined the fun. But China closed the week at near term support and is attempting to get the bounce going again. Here’s my take. China was hovering around near term support just above 2579 when trading opened on Sunday night. If that breaks its good for another 100 points where much better Gann support sits at 2478. If it breaks, it means the commodity trade here weakens again and metals like Copper take it on the chin. This column is written on Sunday night and with the information I have China started out well which means the initial indication is support wants to hold. But that doesn’t mean anything definitive yet. I’m looking at the 2630 level as key near term resistance. If the SSE gets above that level then maybe commodity bulls have something to talk about.
The confusing part is Copper has decent readings at this support level and with China that will also likely start better. The US Dollar looks like it wants to go slightly higher. I’m looking for the Dollar to bounce to 84.69 by the middle of this week where there are several important time windows which can stall it out. The confusing part is I doubt the Dollar and Copper will go the same way. To start the week it looks like better Copper and less good Greenback. But things can change.
But I have to stress again the time of year. What may be great today may be terrible tomorrow. I’m looking for the status quo more or less until the end of the month. This is a great environment for intraday trading. The less aggressive of you who like to hold positions for several days into a couple of weeks should probably sit this one out. I’ll end where I began, there are times in the year to sit on your hands and just tune into what the market is telling you. What its telling me is we don’t have to look any further than our own backyard to see that banking and housing are starting to get in trouble. But also watch out for a potential change of direction right in the middle of the week.
We are doing a lot of new work with Gann and lunar cycles. Our newsletters are exposing people to very rare information you would be hard pressed to find anywhere on the Internet concerning how the Lunar cycle affects intraday charts. If you don’t know this information you are dealing from a distinct disadvantage. If you want to get in gear I recommend you take a trial subscription to one of our newsletters and if you sign up for a download of the Market Analyst software at www.lucaswaveinternational.com site, you not only get a free month of the software, you’ll get a free one on one session with me where I show you how I use this tool to navigate the square of 9.
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Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.