GoodVibe Chart Of The Day - The bears are setting up the BBQ tables
After more than a year being justifiably in the bears’ camp, I switched to the bulls’ camp on Nov. 20, 2008 (solely based on technical indicators). Since then I had a strong believe that this low will hold. Fortunately I developed through the years the ability to trade the charts not my believes. So, I swung some with bulls and some with the bears. When the rally was cut short in mid January, I started to position myself in a defensive mode reducing my long exposure swing by half on Jan. 28. Also, I have firm stops for the rest.
Back then and still until today, I believe the market must get a relief rally from the leg down that started on Oct. 2007. Now, if and when this Nov. low get broken, a lot of bulls will throw the towel and the bears will cheer. I beg to differ. There is a sizable counter trend rally that must be fulfilled and the charts support my believes. The coming breach, if it comes, will be the last decline before a decent multi-months rally for the stock market. This is I believe and will trade.
A lot of bears will come to you and tell you; "Here we go again. I told so." The bears will set the table, the BBQ bulls will be served, the forks will pinched in their meat, the knives will slice, and even a bite or two will be munched on. Low and behold and from nowhere, the cash will show up with a stealth move dispersing the over confident fat and lazy bears who though that this day will never come.
I am not saying that the coming bottom is THE bottom; this is just A bottom but will be the strongest and longest one that will hold since 2007. The table will turn and the bears will flee their party. So, I'll say to you that things might get wrose before they get better but then things will get better before they will get really worse. I'll have another blog to explain why I believe this to be true. For now, let's see one day at a time:
The Big picture:
There are two things I would like to bring to your attention for they will tell us the direction of the market for the next couple weeks. These are T-bonds and gold.
No doubt, T-bonds is anticipating the global junk bond default rates, which will accelerate further in 2009. Investors are jumping to what they wrongly perceive as a formidable secure debt in the form of T-bills and bonds. Unfortunately, time will come when U.S. IOUs size and scope will destroy that myth of security and Uncle Sam will have to increasingly raise his yield to convince investors to hold on to their investment in U.S. debt. Until that day come, I see nothing but widening spread between low-grade debt and U.S. treasuries. The charts at these levels favor at least a rebound if not new highs in T-Bonds. against all odds, I am long TLT in caps and short TBT. Almost everyone else here is taking the other side of this trade even GMX bailed out on his call last month and took his gains off the table on that trade. I might get some heat from a lot of caps' players because of this call but hey sometimes right, sometimes wrong, but always honest. After all, it's a trade for rent not to own.
The U.S. dollar will not be appealing as the IOUs but still as long as deflation is in place, the U.S. dollar will stay in demand and the dollar will reach new highs. Cash is king and puts are gods! Once bonds fall, it's time to get out of every U.S. dollar you have for it will signal the demise of the U.S. currency.
For gold, I have only one question to gold bugs. If after almost 9 trillion dollars of pledged U.S. money to fix the problem of which 3 Trillions already spent, why gold is under its March high? By all means, every gold bug's dream and bond man's nightmare came to fruition but the opposite of what they expected occurred. Is this not enough evidence of deflation in full force? Gold being better investment than stocks doesn't make it a good invetment. That said, time will come where the yellow metal will outshine the rest. For now, until gold make new high or reach new lows around $600ish, gold is in well-established downtrend.
There’s a current but not final bullish Dow theory non-confirmation. The Dow Industrials didn’t close beneath its Nov. 20 closing low of 7552 while the Transports closed at 2959 below it’s Nov. low close @ 2989. This Dow theory bullish non-confirmation will turn to bearish confirmation if the Industrials follows the Transports and make new low.
For myself, I believe the Elliot wave principle is superior to the Dow theory and I will start to circle the wagon to scoop my long positions at what my wave count lend me to believe that a bottom instead of a collapse is happening. Sell hope and buy despair. Rule # 9 in GoodVibe's Trading rules.
I hope this added value to your thinking. Be happy, do good, and the rest will be taken care of. That I believe and aspire to live.
Strength & Honor
What am I doing right now?
Heigh Ho. Heigh Ho. Heigh Ho. It's bed from work I go!