Thursday, April 28, 2011


The S&P 500 did erase the prior little wave down in less time than it took to form, confirming that the uptrend is still intact. Sentiment is excessively optimistic, as it has been for some time. So it is hard for me to imagine that this is kicking off a new significant leg up in stocks, but until proven otherwise that is what price is saying. The benchmark for me is the April 18th low. If that gets exceeded on a decline, then I would take that to indicate that price is making a significant top.

It seems as though the current moves up in gold, silver, and oil will have to break before stocks break significantly. The US dollar has broke through a significant old low bringing out some bearish sentiment. A reversal higher from these levels to above the Nov 2009 lows would be a good intermediate to long term bottoming sign. But the next support would be the 2008 lows. I think either of these are likely reversal points. A break of the 2008 lows seems like it would be a MAJOR psychological capitulation point, possibly leading to a large double bottom chart pattern.

The cotton ETF trade, BAL, is off and running now, and it seems very likely that cotton has seen a major high.

I believe that the grain complex is near breaking down as well. I may recommend a short on DBA soon. The sell offs in several commodities should be pretty dramatic after the high is in. It looks most likely that the high is in for DBA already, but I would like to see a few more days before suggesting an entry on it.

For those who follow the metals markets, silver is only pennies away from its all time high in 1980. I expect that high will get exceeded at least slightly before a major high is in. But it could come down dramatically for several months if it fails at that high.

Tuesday, April 19, 2011

Possible Pattern Completion

Click on Chart to Enlarge

If the market surges up from here and erases wave "e?" in less time than it took to form, that logically confirms a continuation of the bullish trend. If there is a break of yesterday's low then most likely it would lead to further selling.

Tuesday, April 12, 2011

Expect Some Downside

Click on Chart to Enlarge

The US Dollar took a big hit Friday, but remains above last years low. Sentiment is very negative and could lead to a major reversal. The chart above shows a price oscillator which is nicely bullish divergent and is coiling suggesting a breakout soon. Also, the weekly oscillators are in a nice bullish divergence as well. A move back above the dashed green line would be a reasonable long trade entry signal.

News got around that PIMCO is net short the US treasury bonds now, which suggests an inflationary stance (falling bonds and rising yields). I just think this may be a nice contrarian sign that the dollar may reverse after the news is out.

Click on Chart to Enlarge

The move up in the S&P 500 since mid March has now equaled the time of the correction. Also the S&P did not make a new high, nor did the Nasdaq. So, it is likely that the psychological trend is still in a correction. I expect the market to at least pull back from here toward the 1295 mark, but possibly a lot lower.