The technical theme of the week is the time windows. The way the year is setting up, we have several important cycle points between now and September. What I found most interesting was new Secretary Treasurer Lew stating the debt ceiling now won’t be hit until Labor Day.
Hmm, that’s just when the biggest windows of the year are set to expire. I don’t know about you but I hope we never see a repeat performance of 2011. It was a shameful sequence in the history of the country and did a lot of damage. More than most people are willing to admit. Just to reiterate, August puts us at 161 months from the top of the Internet bubble and also 233 weeks off the 09 bottom. It’s going to be a repeat theme we discuss around here all summer. I’m going to tell you the same thing I did last year at this time. You might recall we were looking at October 2012 as being the anniversary point of the 5 and 10 year turns of 07 and 02.
Right now we are sitting at 233 days off the June low of a year ago. Granted we don’t have the greatest Gann readings to go along with this pivot but a time window is a time window is a time window. Coming into the week risk is incredibly high.
Let’s look at the situation, here’s the best read I have.
From the November low to the early March high we have one sequence. Then we have a probable expanding triangle with a spike to the present. The latest rally leg has a 61/161 relationship AND the last leg down to the November low has a 161 extension to the current level. At 233 days up off last year, this is where we are. It’s either going to turn in the next handful of days near this level or another one bites the dust. You have to wonder what could possibly stall a freight train. We are probably not going to outright reverse it but perhaps slow it down. But like last year, I’d prefer if we did get a consolidation going over the summer so we could somehow end up with a low as opposed to a high once these serious time windows kick in.
I don’t always get what I want as you see but I have to tell you that if it would’ve worked out that way last year we are likely looking at a Romney White House. No election this year, just a run of the mill debt ceiling fight.
The other big story of the week is noise surrounding the Gold drop on Friday. Yeah, it was down but no sooner did they start calling out 1100 did they see the reversal back up. There’s still the potential for Gold to get to 1525 and while that’s in question right now, I’d feel a lot more comfortable with the bearish side if Friday had been a stealth move. Anytime you get a move that makes headlines you have to consider it could be closer to the end than the beginning even if the move started the same day. The most dangerous moves are always the ones that start slowly and sneak up on folks. The ones that get all the hype tend to sputter out after a few days and in this era of sneaky bulls we get back near highs before we even realize it.
The Dollar had a parabolic move up which is now an ABC that has potential up to 83.80. Since its straight as a ladder I don’t see how it sustains any more than that. So if the Dollar can be marginally higher, Gold can be marginally lower but I’m not giving up on the bullish side for the precious metal just yet.
For me, the biggest news of the week was Roubini going on television suggesting a bubble would be developing in the stock market over the next 2 years. I’m not concerned about 2 years from now; we have enough alligators to deal with. A strategist named Roche also saw trouble with the bond market and sees a potential crash. I do too as I’ve discuss in my various forums. In case you don’t know, what we are doing with clients these days is showing them supply and demand imbalance points. We are looking at the mirror image of technical analysis pitting one move against the next. If we get strength on weakness type of move, a crash might be the extreme but it is possible. When you look at a monthly chart of bonds over the past 10 years we have a lot of steep retracements after each rally. The chart tells us what could happen. It’s right there if you know what to look for. Then this guy Roche comes along and talks about the physical reason why it could happen. The manifestation reason is what will these bond markets do once they no longer get supported by central banks is a real concern.
Next page: Willing bond buyers
Here we are 31 years into a bull market and the only people who seem to be willing buyers are the government. And Moody’s came out to tell people they don’t think the bond market is going to overheat anytime soon. Did they really do that? I’m afraid they did. See, they have it all backward. They are mostly concerned about a bubble which means they don’t think prices are in danger of going higher. The problem is what happens when it goes lower? How fast will it accelerate? The bigger problem I have with these ratings agencies is they are absolutely clueless and also complicit with everything that happened that caused the original crisis to materialize. I don’t think any of them have a lot of credibility anymore. They cut ratings these days more on political concerns than anything else.
On Sunday night the market gapped down slightly. I want to see just how much juice this 233 day window along with those decent Fibonacci relationships in the NASDAQ turn out. It’s going to be the story of this week. For the moment think of the last 2 important windows. The one in September/October was important but did not bear any fruit. The Gann master time window in March didn’t bear any fruit either for bears. This is not the bears I remember. I don’t even think they are going to be the ones that influence a pullback should it happen. Anything that develops right now is more due to weaker hands getting shaken out as opposed to anything else. I think bears are traumatized and not likely to mount anything huge. At the end of the day we are due for a pullback/correction and the more people don’t think it’s going to happen, I think it can.
Finally, if Europe has been leading these markets higher since December then they are still leading because they broke free. For us to have any sustained action to the downside we are going to need European participation. The bears came up woefully short there as well.