With the turn in China I’m concerned for pullback in Europe which looks strong in the longer term but perhaps near term extended. That should be a major theme this week.
It appears the gun debate is only beginning. Larry Ward, Gun Appreciation Day founder went on CNN to suggest had African Americans been able to possess firearms slavery could’ve been prevented. This is the kind of insane mindset that takes over in a mania. Mr. Ward was defending the Gun Appreciation Day rally scheduled for the 19th, 2 days before MLK Day. What Mr. Ward conveniently forgets is slaves were property shipped here from Africa who had little choice in the matter, let alone be able to go to the local Wal-Mart to pick up an AK-47 on the way home with a 6 pack of brewskies. And according to Think Progress’ Aviva Shen, there were many armed uprisings by slaves as early as 1526 which almost always failed. The most famous was a rebellion by Nat Turner and resulted in 160 deaths, 100 of those being slaves. The justice system was on the side of the slave owners and the state executed 56 blacks accused of being involved while mobs beat to death an additional 200 in revenge.
For our social observation of the week, the Montpelier, Ohio school board has approved armed janitors to stop school shootings. Now we can have the person entrusted to clean over flowing toilets somehow get to the gun case in time to stop the next Rambo from shooting up some other school. Somehow, I never figured ED NORTON from the Honeymooners being the backstop for our little kids. The least they could do is get Ralph Kramden. Somehow I never did see the episode the day Norton forgot to take his depression meds and was confronted by the school bully so he decided to take out the school all by himself.
It’s just more evidence of a mania for guns that rivals anything we’ve seen the past 15 years with stocks and real estate.
So let’s get to the action and take a look at this Chinese turn. The factor is 3.767 which rounds to 3.77 which is interesting to say the least. Its 20 trading days, 31 calendar days so on first observation not seeing anything else and basing it on past pivot calculations it appears this is NOT the end of the rally and returning to the pit remains the lower probability.
But it had to end sometime and with a parabolic move up the turn was more likely to be violent than not. We’ll look for 2100-2150 to provide some support. In other words, let it test the triangle from the north side and we’ll really see what we have. How dangerous is the VIX? You tell me, this is the monthly chart with the daily. If it wants it can get a little more insane. The lowest point is December 2006 and markets didn’t start peaking until July the following year. If they want to get euphoric, we can really get out of control this year however I don’t think we have the proper environment for it. It can go on a while longer like this but a turn is most likely to ripen once bears figure out they can short the negotiations that are due to start up soon with the debt ceiling.
Next page: Matter of when, not if?