Friday, August 28, 2009

Market Observations

Today, we had the gap up reversal that I was looking for earlier in the week. The Russell 2000 which is the primary index that I trade closed down 10 points from the high - futures even more. The index is forming a rising wedge diagonal that could be getting very ripe for a breakout.

Also, last week we had 3 very shallow, small move McClellan oscillator days. That definitely portends a breakout of some sort. If its going to breakout over this divergence it seems like the stage could be set to try that...or a nasty selloff.

A break of the lower wedge trendline in the indexes in combination with a VIX index breakout will create a significant technical event. Markets fullfiled minimum ideal targets today...though there is divergence here on many indicators, there is also divergence occuring in the metals, currencies, BDI index and the Junk Bond index. Ironically, the gold and silver markets look like it would take only a little bit of panic or fear to get them to move against the expected patterns and make an upside push. If that were to be the case we could get a sell off in the market and then follow that with one last rally to take us to a retest or a new high. Additionally, that could also provide impetus for the dollar to have a pullback to the lower wedge targets that I was mentioning in my earlier posts (77ish). All in all a very interesting setup.

Ideal timing is for Sept 11 (poetic right?) for a market top and thus the end of primary wave 2. I would be happy with a top earlier since this rally is nuts - so I hope today is it. But they bottomed the SP futures at 666 - so given the minds behind all this ponzi scheme accounting and government by banking concepts - why not take the market up until 9-11? So, I am going to watch carefully even if they take it down hard next week to see if there are clues for a continued move up.

Though I am very encouraged finally based on today's action...(encouraged in this case means that the market may be setting up for a reversion to the more rational and understandable behavior - ie down). I am planning on being very careful until we get some definitive cooperation between the dollar, gold, silver, VIX and the indexes together.

One of the other problems that i have with the market topping here is that we have not seen a single hindenburg omen. I would expect to see atleast one before we, this does leave the possibility of a A = C situation - possibly pointing to the 10,000 to 10,500 area on the dow and 1,100 to 1,125  on the SP500.
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