Thursday, September 23, 2010

A Crash is being setup...

I wanted to make this post tonight because we sit at a precipice in my opinion. I have built a rather large short position and I think the gig is about to be up. Tomorrow will be a very important day and looks probabilistically to me to be the initial thrust lower of a large move - finally.

This may show up as a triple digit loss on the DOW tomorrow but there are, of-course, alternatives and this expectation does not have to play out, or the market could try to break out to the upside of the current setups. However, since I think the probabilities are quite strong for a dramatic directional move, it is appropriate for me to post this and my belief that the move will be down, as indicated - potentially rather dramatically.

I would like to make another set of comments. The markets setup bear flags VIX looks setup in a nice falling wedge which is ready to break out and gold has set every gold bug and even a lot of non-gold bugs on fire. I for one do not really care to focus on the gold debate. But I do think that Mike Shedlock, though right about quite a few things, seems to have gotten just a wee bit over confident. I think his gold view, has merits but I think that despite the fed QE and general debasement there is a rolling shortage of hard unencumbered cash. If cash is expensive then assets including Gold will be cheap. I think gold has over-shot the pattern as indicated on my previous charts and is primed to help fuel the next big move into cash. 1.128 and 1.272 are derivative fib values that I look for as targets and have been fulfilled in the gold market. So, warning warning Will Rogers there may be something of a surprise lurking in them there woods. It will be interesting to see it play out. I am not that focused on Gold and do not trade it extensively, though I do use it and silver as an indicator. If it continues the breakout...that breaking and closing much above 1.272 will certainly invalidate my current perspective.
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