Wednesday, January 20, 2010

A Mini P3 Rant And SPX Weekly Chart Update

Do we get P3? Hell yeah we get P3! Most know that I believe every bit of gains since April are all a farce. IMO they are purely manipulated numbers driven by backdoor deals pumping QE funds into equities forcing massive short squeezes and using HFT to drive the markets up. For some reason EWI and most TA purists don't get this.

The market is all they have left. RE and CRE are and will be toast for some time to come.The banks and AIG are insolvent. Consumer spending is gone as credit crunch, increased savings and unemployment rule the day. The treasury is at it's ceiling. States like Cali are insolvent and more are to come. China and our foreign allies are no longer purchasing treasuries at a rate that will support our needs.

Monetization will continue the reflation/Ponzi trade, but when it fails it will have done nothing more than dug a deeper hole for us to get out of. The carry trade will end and the dollar will get crushed. Deflation is a must IMO to wipe the slate clean which means depression must happen. Inflation will come eventually. When they first raise rates the game is over. That is when they throw in the towel for this round and they begin the process of really trying to save this country from the failed reflation trade. This will be the great battle. (I speculate that they will raise rates this year, BUT will almost immediately send them back to zero for an extended period.)

We have not recovered one bit. It may have stalled but not recovered. All we have done is save the TBTF's thru accounting fraud, zero regulation policies and mortgaging our future (WE did not do this - THEY did this and it will screw us all). The Brown election has kicked off what I believe to be the largest turnover in Congressional history. Incumbents beware. I believe our president needs to look out as well. Rham will be the first to bite the dust from his cabinet as he scrambles to save face and his legacy. The finger pointing from here on out will be very loud. I expect to see the worms squirm to save their seats and the fight should be more than interesting. 

Will the people revolt? Eventually, yes. With pensions destroyed, SS dead, Medicare dead, tax increases to balance budgets, stagnant to continued increasing unemployment, increased productivity (is great for business and the markets but not for employment), zero regulation, enormous bank bonuses, and the death of the middle class; the people will have had enough. We will raise hell and be in the streets one day. They will hear us. I really like the Move Your Money platform. It is a great start to a peaceful revolt. They are screwing you so screw them back. One other way may be to use the power of the internet to organize and have a bill free month (you heard it here first!). Yes, one month where we all decide not to pay ANYTHING. Shut it down. I'm not saying to not pay period, make it up the next month. I am saying to take a month off from payments and see what it does to them. We are in control. We are the power. We can shut them down in a moment if we chose to. Do we need them? Yes we need banks, but not these assholes. Support your local banks!

Our country is teetering on the brink of disaster. Actually we have crossed the line. There is no way out except to for our fearless leaders to perpetuate the fraud and Ponzi scheme that they have gone all in on (and we all know that will not work either). We now have no room for any natural disasters or events that could cripple us further. No room at all. Another $50 billion hurricane would wipe us out. Earthquake in Cali? Terrorist attack on our soil? Maybe the epic Brown victory was the catalyst to start this ball rolling downhill. This is no way to manage your finances. As a planner, we preach about an emergency fund, well we have spent it and more.

Konichiwa Bitches! We are the next Japan so get used to it. The purging will be a deep colon cleanse that will not be pleasant. The rotten feces in our country's gut will take some tome to clear out, so we may have to endure several rounds of treatments.

Have faith though! There will be opportunities to do well in this market (if Barney Frank does not get his way) thru playing the volatility and at the end ther will be a ginormous bull market waiting. The journey to the promised land is upon us. It may not take 40 years, but 5 may do it. Be patient. For those of you that are not traders, actively manage your portfolios. Buy and hold will get you nowhere. Rotate and rebalance and do not be afraid to go to cash. I'd promote the use of ETF's over mutual funds (Alpha? LMAO, the only thing they add is fees and more fees and a portfolio that is so large it is like managing a lumbering elephant thru a china store.) Most importantly, don't get greedy!

On to the chart - 

Since Stockcharts was so kind just to eliminate ALL annotations on this chart I had to draw it again. A profound thank you to the incompetent SC staff and computers. Maybe if you went to work for the government we could get this top issue settled.

SPX weekly shows the topping process clearly. Most know that when a weekly chart tops, it tops. It rarely embeds  like this one. When it does, extreme over bought conditions persist.

Two scenarios presented. 1) ABC and 2) possible A-E triangle formation. Right now we are all on the ABC and the A-E is only a very hypothetical possibility at this time. Some are calling a "bow tie" top (I hate it but I see it as you have seen me draw big circles on this chart in the past). I see a possible diamond top reversal pattern. The SPXA50 is above 400 again which has been a reliable indicator for tops on the way up. Look for it to travel to 100 again soon. Bear market top TL has been met and pierced. 50% retracement of the fall has been passed. Daily and weekly indicators are embedded.

You can see the piercing of the upper bear market TL. Where does it top? I have no clue, sorry. I plan on calling it, but I just don't see it right now. That is why I put a really large black box on the chart. It may have likely topped yesterday (I wanted one more higher high). I have annotated the "Great Wall of Resistance" above price (green rectangle). I am not willing to even consider anything above that (even though some have the potential H&S target above 1300). Most of you know I am watching the red RSI support line closely. A minor RSI support line is cracking right now (red arrow), but I do not believe this one is THE one. This will however set the high for RSI I believe and the much desired and anticipated divergence hopefully can now be set. I thought the divergence had been set and am not sure if the double top in RSI could count, it may, we'll have to see.

The pullback I have been calling for is happening, now, do I still have the balls to call one more higher high? I'm still contemplating that. Jack be nimble. You want to clear that candlestick and not land on it. I may still betting on the manipulators and the PPT, but not for much longer if I do.


Link to the same chart HERE.