If I didn’t hear some of the media spin, I wouldn’t believe. What passes for sentiment these days is most certainly spin and it borders on the absurd. I almost feel bad for beginner to intermediate level traders who don’t understand market psychology. If you listen to the spin for your trading strategy at all, you are sure to wind up on the funny farm.
Let’s start with Thursday’s selling session. What did the media blame it on? They said traders were concerned the Fed would taper sooner than later, perhaps even as early as next month. Fast forward to the very next day, on my calendar that was Friday. We had a better than expected jobs number so the media once again was concerned with better employment numbers the Fed would be taper sooner than, later, perhaps even as early as next month. On my calendar, that was Friday. What did the market do? Was it down another 200? This time the market got back much of Thursday’s losses depending on which chart you looked at. The Dow actually set a new intraday high. So now the market drops on fear of tapering and it also rises on the fear of tapering.
Is it any wonder so few traders make money?
Let’s get real, gang. We’ve discussed all the scandal and innuendo preventing markets from experiencing true euphoria. This is very real. Markets have been bordering on true happiness but can’t get due to one problem or another. Along comes Twitter and true to form markets were up on the open Thursday morning but happiness is an emotion one cannot sustain. Try it sometime. You can be happy for a day or three but eventually something comes along. I’m not trying to pour cold water on your parade. Something will either come along to piss you off or the emotion itself will fade. It’s hard to stay happy. Finally, people got excited enough that some of the smart money decided to cash in. Good for them. Many charts were challenging highs which were set the week before at the 89 day window off the June low. If you noticed tech is lagging here.
But the 2 charts in question, the SPX and Dow exhibit the kind of reversal candles you normally see at bottoms yet we are at the high. What Steven Nison has learned from the Japanese is this pattern is what you call a double lover’s suicide formation. If this formation manifests itself at a bottom it could be a buy signal, right? But when it happens at the top it’s not a buy signal. It may not be a sell, but it most certainly isn’t a buy no matter how good you think it looks. It’s called a double lover’s suicide formation because people fall in love with it one sequence too late.
So I hope that explains why the market finally had a selling event this week. The next thing you should know is because we are in a bull market and we don’t have the greatest calculations for a high the correction we could have this month is really nothing more than a consolation prize for bears. We had much better time window in September and even October which didn’t yield too much. For your information the next big time window is November 21 where we are 261 weeks from the bottom of the financial crisis is the NDX.
One more thought before I get to the next absurdity. Perhaps the market isn’t always the spoiled child. Perhaps the market felt the jobs report wasn’t that good at all. Maybe, just maybe the media has no clue about what to write but the market realized the labor participation rate was horrible with the lowest level since 1978 and the civilian labor force fell by 720,000.
The next major event happened in Geneva this weekend. This was the sequence where world leaders are considering giving Iran their own key to the nuclear vault. The feeling was this is a good thing that would cause the oil market to collapse because if Iran comes back on line, so will about one million barrels a day. They are leaving out one key consideration. Number one, this is a terrible deal. Just so you know the key element of the deal would be Iran suspends the work of 10,000 centrifuges. Sounds good, right? The problem is they only have a total of 19,000 centrifuges with 10,000 of them idle all the time. Iran makes no concessions while at the same time gets much of the economic sanctions lifted.
Are you kidding me? The reason we don’t have a deal tonight is thanks to the French who would not go for this. What the experts are not banking on is that at no time will the Israelis sit idly by with their enemy number one owning a piece of the button. If a deal materializes with Iran I would suspect oil prices to skyrocket, not plummet because it would put us on the precipice of World War III. Think it can’t happen? I am sitting here watching a documentary on JFK. What many people fail to realize is that if he actually invaded Cuba, the Soviets were sitting on the beach with nuclear missiles aimed at New York City and Washington. We were sitting with missiles in Turkey aimed at Moscow and there’s a great chance something would’ve happened. In an era where they just had someone named Ahmadinejad who was a first class holocaust denial king, do you really think nukes won’t be used at some point? I’m sorry but I’m not in denial here. If Iran were truly interested in using nuclear energy for peaceful purposes why are they developing missiles with a warhead capable of delivering a nuclear bomb?
I think few in this country really understand the magnitude of the stakes going on.
All of which brings us to the Greenback which has been parabolic and finally set sail on a new course. While this week could bring backing and filling we should see higher prices. While the stock market put in double lover’s suicide formation which is not a buy signal I’ll stick with my projection that we see a correction this month. If you go strictly with the seasonals it will be hard to get one in December because of holiday euphoria so this is the time for it.