I see and read in many blogs and forums that folks are
talking about “Top” and as we had a failed test of high, the trend is now
changing. Knowledgeable writers are saying that market rose from June low on
the hope and expectation of QE and this rise was in fact a hope rally. Now that
the surprise factor has been taken out and as tops are formed at the high, time
is ripe for a major pull-back.
While I do not doubt the fact that it was a hope rally, I do not
agree with the assertion that we have a top. I have learned that calling a top or
a bottom is a fool’s errand. However I do see is a giant top formation
which, according to my analysis, will take few more months to complete. We must
also keep in mind that the powers that be is pumping money at a rate never seen
in the history of mankind and that itself will delay the fall.
I have been on the sideline since June and I see lots of
impatience all around. Taking a trade because we think we are missing out on
the next big thing is a sure recipe for losing money. Instead, I have suggested
watching the range. It is almost certain that SPX will now test the lows and we
will see a correction. Rather than guessing how far it will go down and front
run based on that guess or some secret instrument like one particular TA which
you think has never failed, why not watch the range? Like I said yesterday, if /ES or emini or SPX
Futures goes below 1430, we know that the correction has some substance and we
may take the short side. But if it bounces from this level, we can think of
going long, at least till it re-test 1468 again.
Given that we are at the final stage of the election cycle
and having shown all those beautiful charts and graphs, may be you would agree
that folks who can manage to show that employment rate has indeed gone down
below 8%, are capable of pushing the stock market to new high. That was the sole
purpose of QEI. If you remember my posts of May/June/July, I did mentioned that
QE will definitely come and it will come in September, simply because they will
have sufficient time to juice the market for election. Timing is everything.
Too early and the market will peak well before election. Too late and it is of
no use. So a QE made sense in September purely from the election point of view,
however much Bernanke may say that his decision has got nothing to do with
politics. Pure baloney.
Technically speaking, in the weekly chart of SPX, I do not
see any negative divergence like the one we saw in 2011.
After election, these folks would not care much about what
you and I think anyway. If O wins, you will find a much different
administration because he won’t care much for compromise which was his effort
in the 1st term. After all, he cannot get re-elected for 3rd
term and therefore, he could care less. Therefore a severe economic contraction
is guaranteed in 2013-14 but we will cross the bridge when we come to it. For
now, for the next week, let us see, if SPX futures are able to bounce from the
range, whether gold and silver hold their line which I mentioned last night and
play accordingly. Wait a little while longer before taking the plunge.
Thanks for all the
donations and supports. Your continued help and support is important to me to
keep the blog running. There were some excellent comments from traderwanabe and
old_lefty. Tomorrow I will write about surviving a blog financially.
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