To taper or not, that was the question. Our take was they wouldn’t, and they didn’t. Why would they when Bernanke has only four more months to go? What troubled me was the media machine that started traders down a different path around 24 hours prior to the announcement. I listen to these media economists, and they certainly sound like they know something they clearly don’t. But it’s convincing enough to lead some traders down the garden path. Such is life on Wall Street where we have Goldman Sachs joining the Dow this week.
American Cotton Oil, predecessor to Bestfoods, American Sugar Company which became Domino Sugar, United States Rubber Company, Kodak, Borden, Chrysler, GE, Anaconda Copper, Bethlehem Steel, American Can, Caterpillar, Boeing, 3M. This is a Who’s Who of American business. Then you have Goldman Sachs. I’m sorry, but you’ll never get me to go along with a company having such a notorious reputation being part of the Dow 30. If it wasn’t enough, they made a decision last Wednesday it wasn’t even two whole days where one Fed chief came out with the notion they could start tapering next month. It was enough to sink stocks right there on our seasonal change point on Friday.
I ran through all of my tests and came to the conclusion that while we were due for a high if for no other reason markets do turn with the seasons, this does not look like a market setting up for a new bear market even if this is the season when important things do happen. The best indication we have are a couple of Gann square of 9 readings, which suggest a change of direction should be at hand but the recent turn back up indicates a longer-term market more willing to go higher than it is to go lower.
The problem here is no market goes up forever unless they decide to party like its 1999. These markets are due a change of scenery even if a correction turns nasty for a spell. There is reason for it to turn nasty as we go from geopolitical negotiation back to domestic squabbles. I don’t represent the GOP nor am I even a fan. Just so you know, politically I’m an independent. But I can appreciate a good poker game. Considering its debt ceiling season, the stakes have been higher. In fact, if I were sitting in the shoes of the Tea Party, I’d be doing exactly what they are doing right now. How many times has the GOP attempted to stop Obamacare? We’ve all lost count. But if they are ever going to have leverage, this is the time. If they are ever going to play their hand, they have to do now or forever hold their peace. This is it and they are not going to win. The very best scenario they could accomplish is to delay implementation by a year. If they do it consider a miracle. With a market that may be changing direction at the seasonal change point, if you are looking for a real justification, it’s not some Fed president on some saber rattling tangent. Round 3 of the President vs. Tea Party is about to begin and short of World War III, there’s nothing the market likes less than this dysfunctional debate. So if you think this is a market looking for an excuse to shake loose the weaker hands and perhaps a little more, you have it right on schedule. But my calculations don’t show anything profound setting up like we had in 2007, 2008 or even last year. We do have the 162 month window to the March 2000 peak but now we have a market that has already inverted back up at 233 weeks off the 2009 Haines bottom.
Looking at a couple of other key components we had the US Dollar breaking down in the patience of a saint trade. We’ve been looking for it to break below 80 since July and now it has that chance. Whether it does it now or a couple of weeks from now it’s still the higher probability outcome. The other key component is the Chinese SSE which broke down from its important trend/attractor line before it went on break. That Shanghai Exchange is very crafty. It seems every time the market comes to a key time inflection cycle point, they have a holiday. Before the break they attempted to bounce based on a small degree but important Fibonacci interwave calculation. But the bigger picture still has an a and 161a at the key trend line. The chances are greater it will decline here than it will break through and give us a fresh leg up.
I think there’s a great chance for a turn here because we are way overdue. If markets fail to correct out of this sequence I’m going to start thinking bubble.
Since our last post there have been a couple of major tragedies. First we had the Navy shipyard shooter and Saturday a team of Islamic Jihad terrorists opened fire at the biggest mall in Nairobi, Kenya. I’m no longer going to sit silent while these things happen. Another mass murder on American soil and its being blamed on the gun laws. I suppose lives were saved since this guy couldn’t get his hands on a major assault weapon. I’ve done careful study of this issue for several years and have come to the conclusion that changing the gun laws will do little if hearts are not changed. Morals in this country have been going down the drain for a long time. Look who they are putting in the Dow. Need I say more? It’s not a gun problem, it’s a character problem and ultimately it’s a spirituality problem. There’s a direct link between character and spirituality. As long as people think it’s okay to do things they can get away with because they think nobody is looking, the character problem won’t get solved. Until the culture once again embraces some degree of spirituality we are going to have more massacres, more debate, more table banging and ultimately handwringing. Nothing is going to change. Change a person’s heart and you change the world.
Socionomics is the study of crowd behavior based by movement of the stock market which ultimately has broad economic, political and geopolitical implications.
The latest stunt by Islamic Jihad is the equivalent of walking into the Beverly Center in Los Angeles and opening fire, what a disaster! This is a mall that has been targeted for several years and also happens to be owned by Israelis. Let me clear there are a lot of moderate Muslims who do not condone this act but people need to wake up to the fact the greatest threat to our way of life is radicalized Islam. They’ve developed a more profoundly dangerous strategy. I’ve been watching a show called Stakelbeck on Terror and he discusses captured documents from back in 2004 that proves the Muslim Brotherhood has an organized plan to take over the United States internally. Don’t laugh. They are doing it by immigration and putting key leaders in high places politically and the marketplace. They already have Aljazeera America rolling. Here’s the dangerous part, they are in no rush. They have all the time in the world. If it takes them 20 or 50 years, that’s what they intend to do. But the average American doesn’t understand or thinks this kind of thing is impossible. Look to the U.K. where they already institute Sharia law outside the British government. Still not convinced? There was a guy named Hitler, you may have heard of him. In the early 20’s he wrote a book called Mein Kampf. It was his radicalized strategy and view of the world. Nobody paid attention until it was too late. From my socionomics corner, I’m starting to see history repeat itself.