Today is Saturday, October 10th and I have a few comments for this last weeks price action.
We had an interesting week, in that we had another yet larger pivot point established in the reversal back up, close to new highs. It would appear that with Thursdays strength, overcoming the overhead resistance we have a good chance to hit the high side of the rising wedge that I had previously shown. Currently coming up to a double top in the major index’s, but I would expect at least a big push up to the 10,000 plus zone on the Dow and 1100 + zone for the S&P. This is very clear resistance in the charts. I believe we would have to have some amazing catalyst to push it past the upper range of the wedge. It is not likely it will go much past it, but you always have to see the possibility just in case.
I am going to give to two numbers. One for the Dow and one for the S&P. These numbers are what many traders are looking at and people who know how market rhythm tends to flow. The numbers are: Dow- 10,320 S&P- 1120 . This is not a science but it is something to be aware of. A natural flow of market price action would be for the Index’s to retrace back to a 50% re-tracement at a minimum. This happened back in 1929, during the crash and it has happened countless times in various time frames through out individual stocks and market index’s. Back in 1929, the re-tracement took about 6 months. We went from 400 on the Dow to 200. Then over the next 6 months we pulled back up to 300 exactly, a 50% re-tracement. What happened after that, was the “death of a thousand cuts”. It was a slow painful process of declines that took the Dow down to a low of 40 on the index’s, a 90% decline from the top, over the next 3 years.
For me, it is hard to see a sustained move higher in the face of our current financial situation. There is no job growth, in fact it is going in the opposite direction, a first for a real recovery. The dollar is coming under intense pressure. Japan, Middle east, China and others stated just last week that the medium for exchange in the oil market was going to be something other than the dollar, most likely the euro-dollar. That is going to hurt, badly. There is so many looming problems, but big ones, not small. The consumer is not spending, the driving force in our economy. The baby boomers are retiring, a very large group of our society by demographic’s, will not be spending big bucks, but just the opposite. In addition if so many are out of work, those people do not spend money.
The actual unemployment numbers are much higher than stated. Our fearless leaders thought it would be best if they don’t count the people who are out of work longer than one year. They just drop off the rolls. They may still be looking for a job but to no avail. Those people no longer exist, as far as unemployment is concerned. The real numbers are 17% unemployment, an off the chart number and getting worse, as previously stated. Bankrupcies are still rising, another off the chart category and credit card companies in an attempt to make more money have been jacking up interest rates on even there best customers to unheard of rates, 28 to 35 %. All of that extra money is being taken from them, snuffing out discretionary income. Looming problems, Cap & Trade,(government program) if passed is going to suck buying power directly away from the consumer and pass it to the hands of government for the stated goal of saving the planet?, Really! No comment.
The current debt of the country is “beyond belief”. Just this year, the annual deficit is in the Trillions, added to what is on the books. The Treasury auctions have not been going well and shadow entities have been buying these left over bonds so as not to create a panic by other foreign treasury holders. In fact, China has a current campaign to unload their treasuries back onto the open market, they are the largest holder of our debt, well over a Trillion $.
I don’t like reporting these problems and I know of many who would rather put it all out of their mind, what problems. Well, I feel a certain responsibility to at least point it out to my readers, as we get closer to this turning point that I have been talking about for 6 months. At the market low, in March, I initially called for a bottom in the market, followed by a sustained move higher after confirming signals were given. Since then, I have been saying that we were heading higher in a reactionary move from the March bottom. Well, we are getting real close. I did see the market sentiment turn more bullish last week. It jumped up to 50% plus. A reading of 55% or greater usually is an excellent indication of a over optimistic public, signalling an eminent drop. We are not there yet, but as we approach the 50% re-tracement point for this whole move back up, a potenial turning point is fast approaching, beware.
Capital preservation is more important than capital appreciation right now. The public will never learn, they become the most bullish at market tops and the most bearish at market bottoms. It is clear that “Greed & Fear”, powerful emotions, are to often in control. But, for those who want to see the truth and choose to take the “blue pill” rather than the “red pill”, stand to fare much better overall. This is one, I would like to get wrong. I get no pleasure in sharing what I see, but I would rather know.
The stock market prices will only be reflecting what is going on 6 months in advance. At this time, economic reports have been coming in and some showing growth, but all short term stuff from government spending and stimulus, it won’t last forever.
Below are the turning points for Thursdays market. Traders make money in up and down markets and overall direction is not really important. Catching the turning points are. The chart below is a tick chart of the S&P 500 futures market. Each increment of movement is called a “tick” and represents $12.50 when buying one contract. A contract is a leveraged agreement against the cash S&P500 market. Each day 1.5 to 2.5 million contracts are traded by a variety of people. Buying or selling one of these contracts and capturing 3 or 4 ticks of this movement at a time in a few moments, while risking 3 or 4 ticks, a 1 to 1 ratio, is just one type of order we place at Sniper Day Trading. The other type still only risks 3 or 4 ticks, but allows for the price to rise 8, 12 ticks or a whole lot more. Our indicators can tell us where to get out, but only after we have locked in partial profits at usually the 4 tick area or 1 S&P point.
This type of trading is not for everyone, but if it appeals to you and want more information, send me an email and I could give you more information on my new reduced price for my trading program.
http://www.screencast.com/t/gN1tHUhw Turning Points for Thursdays Market
Related posts:
- May be my most important post: History
- Important announcement at the bottom!
- Market update May 26, 2011
- Market Update and Recap of Next Market Move
- Very important post, long term picture
Tags: interest rates, market sentiment, Price Action, Rising Wedge, trading indicators
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