Market Thoughts and Analysis: It eased into the water like an old man into a nice warm bath - no offence.
August 04, 2009
– Comments (23)
I was going to name this post, Calling a Temporary Top ... Take 8, but even I know how ridulous that sounds (and if I realize that it is ridiculous, then saner people should hold on to their hats!). Do I think we printed the top for this leg of the rally today? Yes. Does that mean anything? Nope. But that never stopped binv from sharing his crazy thoughts and charts, now did it? :)
Despite the fact that I like we have topped, I am not calling for a crash, just a correction. I am not aggressively short here (70% cash / 30% short). But I think we will get a pullback to 930-950 (lot of support at 950 and 38% retrace level for the rally from July 9 @ 869 to today @ 1007). I do think this overall bullish rally (correction) within the overall secular bear market will go higher than where we are today, but we need a mild correction here. Hence the title of the post :).
Just as a timeline with my calls and trades, so we can see the progression
- July 09: stated were in large Wave B of P2 of my old preferred count. Still short since June 22. Trading the right shoulder / broken neckline sceanrio.
- July 15: S&P rallys hard of support. Head and shoulders pattern is almost broken, but I call it as broken. My preferred count is broken and I adopted new preferred count (the triple zigzag). I cover my shorts on July 16, as I said in comment #14 of my July 15 post. (For a loss) :(. But my count was broken and I am trading my count, so I covered. I said that the rally was going to continue for several days. I took a lot of flak for this call (see comments #29 and #33 of my July 15 post), but it has turned out to be right.
- July 20: Rally continues. I said we were getting close to the top but that there was still upside. Still 100% cash.
- July 23: Called the top around 10 am. This was based on the first chart below, which in retrospect is not right and I have revised. But it is close to right, so I am still comfortable with my call. I think there is a little more upside tomorrow (S&P 985 as my max target). If the rally continues into Monday or exceeds 985, then my call is wrong. I established a short postion today (10%) around the same time as my call. Also I made some Caps picks at the same time so that I put my Caps points where my mouth is.
- July 28: We the top was not in when I called it. I believe the top was made today. However the SPX did not break 985, so my call last Thursday was partly right.
*However* early is still wrong, so I will call my Thursday prediction wrong. Just being honest for those keeping score :)
- July 30: Still wrong .... sigh. Beautiful weather we are having. How 'bout them Mets?. Oh, BTW I think we have a top ... again. It happened today ... or maybe will happen tomorrow morning at the latest, I mean it!.... .... anybody want a peanut? :)
- Aug 3: Went short another 10%. See comment #24 of this post
- Aug 4 (today): Charted the ending diagonal of the ending diagonal. Made a comment with charts at 1:00 pm. Went short another 10%. See comment #35 of this post
Here is a list of most of my short term market update posts (this current series):
- Market Thoughts and Analysis: Calling Temporary Top ... Take 4 Jul 30, 09 - LINK
- Market Thoughts and Analysis: Ready for A "Crash"? ... Not Yet Jul 28, 09 - LINK
- Market Thoughts and Analysis: Calling Temporary Top Jul 23, 09 - LINK
- Market Thoughts and Analysis: The Next Moves Jul 20, 09 - LINK
- Market Thoughts and Analysis: ..... Wow. Jul 15, 09 - LINK
- Market Thoughts and Analysis: Summer Doldrums or
Hurricane Season? Jul 09, 09 - LINK
Here is a list of most of my in-depth market analysis posts:
- This Rally was Pure Weapons Grade Balognium Jun 22, 09 - LINK
- Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow
up on the Gold Blog Jun 17, 09 - LINK
- Market Thoughts and Analysis: The Gold Blog. Gold/Silver/GSMs (and a
little Oil for good measure) Jun 15, 09 - LINK
- More Thoughts and Analysis: Timeframes - Bearish, to
Bullish ... to Bearish May 17, 09 - LINK
- Still Bearish: FA and TA on S&P500, Observations on the Economy May 10, 09 - LINK
- Technical Investing Themes: MacroTrends, USDX, Oil,
Gold, S&P500, etc. Mar 27, 09 - LINK
- Is Natural Gas Potentially Bottoming? Mar 23, 09 - LINK
- Update on Oil, Gold and the USDX Mar 19, 09 - LINK
- Short Term Oil Jan 7, 09 - LINK
Here is a list of very good commentary posts that discuss inflation / deflation / monetary policy / macroeconomics, etc.
- Steve Saville: Market Value, Money and Credit - Good layman's description of TMS and its importance
- Quantitative Easing Explained - Just a good funny article on QE
- Steve Saville: Why We are Gold Bulls - A good inflationary summary
- Steve Saville: Money Confusion and Inflation/Deflation - Good discussion as to what constitutes money and why some monetary discussions are invalid
- Zeal: Big Inflation Coming 2 - Good discussion of inflation and deflation.
- Mises: TMS - Good Definition of True Money Supply (TMS).
- Saville: Inflations New Upward Trend - Misuse of the Velocity of Money concept
- John Mauldin: The Endgame - Very good deflation arguments.
Purpose and Background
Okay, I am going to dispense with the normal rant. Just leaving this link for those who have not read it before. Regarding my analyis and Elliot Wave counts specifically: Read this RANT.
Many of us EW Technicians have what we call a “preferred count”. This means the count and analysis that is the most likely to happen, in our opinion. We may have several different counts that are viable based on the unfolding price action (because ultimately any pattern is incomplete until it is in the past). But we select one that is most likely, the “preferred” one. And per the observation made above, any good analyst knows that even the best guess is still a guess. So even the analyst who makes the count does not put an absolute 100% likelihood of occurrence on it..

Yes indeed, this is binv's Tin Foil Hat Area! Actually many people don't agree with my fundamental analysis, especially regarding inflation / deflation. And even less agree with my TA, especially my Elliot Wave Counts. So if you find yourself actually agreeing with what I write, then might I suggest wearing a Tin Foil Hat? I will gladly sell you one for just $19.95! (plus shipping and handling of course) .... :) (just kidding). On to the analysis!
Fundamentals
No update necessary as nothing has changed. This is pure greed buying (prices are getting higher becuase prices are high) in Q2 earnings season becuase earnings didn't stink up the joint as bad as expected. However, read my speculation spiel at the top of the post. Everybody was ga-ga for (fairly unimpressive) earnings, but largely ignored pretty bad revenues. I think this will come to bite us in 3 months.
.... continued in the Comments section ....