Friday, January 09, 2009


LT update
Like the Zen philosophers say

"Sitting quietly, doing nothing, spring comes, and the grass grows by itself"

A sustainable LT bottom will take time and the cycle needs to run it's course and then a new bull would start by itself. We don't need no stinking beaurocrats or politicians to do that job for us. The first signs of a LT bottom will become apparent on the weekly charts and weekly indicators. I will keep updating my LT indicator every few months to see where we stand. In my last post, i showed that we were nowhere close to a LT bottom, let alone a IT bottom.

All those folks who have been spared of last years massacre, have started asking again as to what's the best area in the stock market to put their money to work. A cycle degree bear market woudn't leave a section of the society unaffected, letting them catch the bottom of the bear market without pain. In other words, the next cycle degree bull will not carry a few million value investors, wannabe Warren Buffets on it's back. Most of these value investors will be financially and psychologically destroyed before the next major cycle degree bull begins. Investing and trading interest will dwindle to zero as has been the case with all other cycle degree bear markets. I really have no clue at this point whether we will simply zig-zag down or we do a large consolidation around the 700-1000 levels in 2009. It would be pure speculation. But one thing is writen on the wall. 2008 was the worst year in many decades for the stock market. 2009 will go down as the worst year for the economy, of the last many decades. Paying bills will take precedence over buying stocks. Cash will remain the best investment IMO until this deflation cycle runs it's course.

IT update

Before i left for my vacation, i said that a minor low was in place and we should see some sort of rally on the daily charts. And we got that minor rally to the SPX 940 area.

To save a few keystrokes, i wrote this on traders-talk 3 days back

I have many reasons here to beleive that we would fail on the daily charts i.e see a strong rejection on the daily charts. I can state them, but it's putting the cart ahead of the horse. We peirced the upper BB on the daily over the last two days, but closed below it. Now in a bull market, the next logical step would have been that the BB would have adapted to the rising prices and flared up. But this is still a bear market by all measures and the logical resolution would be a rejection from this general area with the upper BB acting as resistance. Looking at the MCOs, phenomenal amount of money has been thrown at the markets in the last 30 days against the intermediate trend. But with all that ammo, the power of the rally in terms of price momentum has not even been half of that 12 day decline from 11/5 top. We'll see...

Now we got the rejection off the upper BB on the daily charts. I have some VST projections to SPX 850 area and if that does not hold then a trip to retest the Nov lows or a breakdown below it will be in order. We are on a swing sell here. I will evaluate again, once we reach the 850 area.

The NYSE MCO superpike has been the discussion in many TA forums. I am still of the opinion that it was good money thrown after bad. All the money that flowed into the markets were thrown against the intermediate trend, with the hope of turning the intermediate trend. In a bull market the MCO spike is a precursor to the rally to follow, as that additional money flow would only accelerate/continue the uptrend. In a bear market, it would at best neutralize the downside damage. Like a scuba diver reaching neutral bouyancy, using a combination of his weight belt and BCD, this market will achieve it's neutral bouyancy sometime in the coming months. That should be apparent in the weekly divergences. If and when that happens, i will respect any spikes in the MCO. I am still waiting for that.

Good luck everyone.