Well, so much for the idea of a post election rally....that's how it might seem...

But there may still be some more rally to go, after a correction..

Notice the rise in the breadth indicators after a very oversold condition...This would lead you to believe there's more to come...so maybe today's drop is a correction in a rally, not the end of the rally...It often rises to the top of the dashed purple channels before failing. But it need not make much price progress while doing so...It could just burn time...

But note that bounces off of a major time node, like this .25 node, are normally fairly substantial..more reasons why we might see more upside...

(Just to review, the .25 .50 .75, 1.00, and 1.50 are "major mathematical time points". Trend changes of some importance often happen there...The .50 and 1.00 nodes are the most powerful of the group)

election night situation...

For comparison purposes look at the BigCharts rendering of the same time period, which is the part of the top chart to the right of the thick black vertical line. It gives you some sense of the time compression involved in Exponential Charting...

It will be interesting to see what the election brings..

Probably a small rally...

Where we are now...

The bounce is clear on this chart...What has me frankly puzzled is that I expect a wave 5 down after this bounce is over, and all of the lower trendlines are sloping up. So either we bust these trend lines like we did the older ones, or we don't make a lower low on the next decline, which I have a hard time believing...

You can see in the top image the bounce has caught up to one of the blue trendlines and stalled a bit, but I expect it to go higher...

Where is the rally likely to stop?

I have a simple formula for using indicator divergence to estimate price targets. Originally I experimented with a formula in a book by Connie Brown, but after a while I came up with a variant I believe works better. None of these methods are foolproof, but currently using daily Stochastics, I come up with a target of about 1545 for the $NDX, which is a .382 retrace of the whole decline so far...

Positive divergence builds on $NDX...

In conjunction with the most recent and promising Exponential chart posted Saturday (see below), this conventional chart is showing good positive divergence with the price action on Stochastics,and MACD looks ready to cross-over positively...

Also from 10/31/07 to 3/17/08 is 99 trading days, from 3/17/08 to 10/27/08 is 161 trading days. Very close to Fibonacci on time...that is, the duration of waves 2 and 3 combined is very close currently, to 1.618 times the duration of wave 1...

Note also that the height from wave 2 down to wave 3's termination is approaching a 1.618 ratio of wave 1, which occurs at a price of 1132.5...

$NDX after the bell Friday...

This chart in conjunction with the one posted earlier showing a .25 node, could mean the bottom is in..but be cautious, as there is still one set of trendlines a little lower, at just under 1100, that could also be the bottom....

Futures are sharply down...Here are premarket charts..

The exponential charts on the $NDX show possible resting points at just below 1150 and 1100..

Here are three important $NDX charts, about one hour before the open today on Friday the 24th...
Notice we are still at the .25 node on the top chart..A buy condition is usually when you are at a .25 node and one of the trendlines is touched and/or slightly exceeded.. That condition may be attained today..
If someone put a gun to my head, I would say the bottom chart will provide the lower bounds for this move. If anything does...!!!

Complex .25 Node bottom still forming on $NDX...

Up to date....

It may start to move up on or around the 28th, as that was a 1.0 node on a smaller scale, or perhaps the 31st. as the end of months have a bullish bias...

Notice that the $NYSI breadth indicator is (so far) still respecting, but at the bottom of, it's old channel, The $NASI (breadth indicator for the $NDX) has shot down clean through it. Anyway you look at it, the markets are extremely oversold, and we are entering the most favorable time of the year....

Market is very much at a pause...

This bottom that's forming is certainly struggling, it could be that nothing significant happens until after the election...There has been so little price movement the Exponential charts look barely changed on either axis....

On another note, check out this European website. They see U.S. Financial Armageddon by next summer:

http://www.leap2020.eu/GEAB-N-28-is-available!-Global-systemic-crisis-Alert-Summer-2009-The-US-government-defaults-on-its-debt_a2250.html

These two Bigchart's indicators coupled with a .25 Node are pretty strong together..

This bottom looks real...

1970's era political observation...

In Capitalism, Man exploits Man.

In Socialism, it's just the opposite.

Iceland's economy collapses - portent of the future?

It's been circulating on the internet that Iceland can't use it's currency to buy anything. They have about 5 weeks of food left. Without foreign infusions of "acceptable" capital, they're in deep doo-doo...

Here's the link:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aVFtDRGwcc50&refer=home

This shows the extreme case of when a country's banks, and currency suddenly become untrustworthy. The currency still works internally, but not externally. Iceland being small, it is one of the first to succumb to the full effects of the credit crisis...They are self sufficient in energy (electricity is produced Geothermally, very advanced), seafood, some dairy and beef, but almost no grains or vegetables. So they won't freeze, but they could starve.

Many lessons here for the rest of the world, and a warning to us all...

Get prepared...



As a clue we may face a similar fate,

Reuters had this to say:
"Banks borrow record $437.5 billion per day from Fed"

http://www.reuters.com/article/newsOne/idUSTRE49F97920081016

Almost a half trillion borrowed by the banks in one day - does that seem sustainable to you?

Current chart looks basically the same as several days ago...

I was going to update the charts today, but since we are in the same approximate price point as on the 10th, the charts are really about the same. Today we sit exactly on the .25 node shown in the bottom $NDX chart of three trading days ago, which means the chart can be corrected one millimeter to the right. Everything else is the same. There is a chance that the $NDX could go down and tag that lower trendline I mentioned in that post, and do it within a couple of days of today (10/15/08), keeping it as a valid .25 node, since a little slop in timing is O.K.

Guess where we are now?

Many times people have said to me that the market drop from 2000 to 2002 was the analogue to the 1929 crash, and the rally from 2002 to 2007 was the bounce. That's wrong, because the time magnitudes are wrong. The crash WE JUST HAD is now the analogue to September of 1929, the rally we are starting now will be equivalent to the rally that ended in spring 1930, and the second, much longer, and more devastating decline will begin after the current rally ends. The full force of the Depression to follow will hold off until this second downleg makes it's appearance, and has run awhile.....

Another strange and dire situation caused by the credit crisis...

It looks as if things in the banking world don't get "fixed" soon, ocean-going ships with goods won't be able to unload in America's ports. This might include OIL. To understand this, and you should, check out this link:

http://www.marketoracle.co.uk/Article6745.html

Not only oil, but computers, TV sets, medical equipment, clothing, foreign cars, and anything else we don't make in the U.S.A., could disappear from our store shelves. But the most important of course, is oil.

The market is rallying now, confirming the .25 node I pointed out at the end of last week....

And here's the $NDX charts...

Same comments as below... AMAZING!

Notice the lower chart is near a .25 node...The date for that point is 10/15/08...if we don't get a bounce associated with this node, then I guess we go to ZERO. (I doubt that, really)

Notice the middle chart is approaching another lower trendline...does it hit that trendline on or near the 10/15/08 date that satisfies the lower chart, and then does a rally start? Could be, but no guarantees....

O.K. here is the $SPX charts with this morning's lows..

You can see I finally have the indexes matched up with new pivot points that work well, but no technical analysis in the world could have precisely predicted the drop of the last few weeks. The magnitude of this crash is amazing..

$SPX and $NDX have fallen to Quarterly Bollinger Bands

Pretty amazing how far it has fallen. This does look like a good place for a bounce because Bear market rallies often start in October.

$NDX with trendlines generated from new pivots..

Okay, experimentally, here are trendlines generated off of pivots that go back to the low of 2002..Let's see if they hold..looks like a bounce is possible based on this chart. On this set of new parameters, we are very close to a 1/8 node (.125) as you can see..we'll see what happens next...

Market below all trendlines

All of the markets are below current exponential trendlines. That means to find the new trendlines it is/will be following, new pivots will be chosen reflecting earlier and bigger patterns then the ones I have been using. This is a normal part of the process. The influence of the earlier pivots may still be felt, however. The $SPX has a 1.0 node on November 4th and the $SPX has a .75 node on 10/30/08 which are close enough dates to each other to bear watching. From a technical standpoint, the markets have fallen below their Bollinger Bands and could rally a bit here, but don't expect too much...

Mark L.

P.S. I see Carl Swenlin tracks a 9 month cycle and calculates a potential bottom around the 23rd or so...so the end of October to early November could be indeed be significant...I will try to find the next pivots and see what they say...

Where the markets are now...

$NDX in the top picture, $SPX in the bottom picture....as you can see the $NDX has really busted his trendlines...

The class wars are starting...

Now big business is "demanding" a bailout. Not just Financials, but a much bigger slice of Big Business.

http://www.reuters.com/article/domesticNews/idUSTRE48S96O20080929?pageNumber=1&virtualBrandChannel=0

This is directly in conflict with the will of ordinary people. It is already becoming clear the the U.S. population is starting to make the association between some elements of the business community (mostly Financials) and contempt for the "little guy".

Recent revelations of give-away money to Auto firms is part of the publicly disclosed bailouts of non-Financials.

If these bailout moves directed towards the wider business community get picked up on the people's radar (I'm betting it will) then the stage is set for a true and novel conflict within American society.

This is "metanews" - too deep and too hot for the general media to talk about glibly...

By now you know the Bailout was defeated..

This is a good thing, but there is still much pain down the road. We still are in a major credit debacle, and we will probably still go into some level of economic malaise normally referred to as a "depression" but at least the damage to the dollar could be somewhat less. Assuming this verdict on the bailout holds, of course...


Now, looking at the $NDX monthly chart, there are two things that stand out. (1) I think I see a huge A-B-C pattern, with a terminus around 1485.16. Also the price action has fairly deeply penetrated the MONTHLY Bollinger Bands. Very rare event. On the face of it, it could produce a violent snap-back rally. But be careful, we are still in a vicious bear market, it could still go lower tomorrow. In fact the $SPX log chart pictured shows that we are close but not yet on the lower trendline for that index. But we are close as you can see....

The $NDX log chart is coming, but just to let you know, it has busted right through all of it's trendlines...

$NDX - Somewhat cleaned up chart...

It does look like a bottom off of the trendlines, although bottoms are much stronger when they reach major time nodes like .5 or 1.00. This bottom is engineered, not natural, doesn't meet that criteria...

Watch this video...kind of explains what has happened and what could happen...

http://www.youtube.com/watch?v=s7tTwssCoZg

Please write or call your congressman or congresswomen about the bailout and stop it. Although I think a dollar collapse is inevitable, there are obviously different levels of collapse. The more debt is transferred from the private sector to the public sector (we, the taxpayers) the more dramatically the dollar will fall, and the more hardship we will feel as Americans...

Something you should read...Adieu, stage 1 collapse! by Dmitry Orlov

This guy lived in Russia during their collapse, so he has some authority....He has seen these patterns before...

http://www.energybulletin.net/node/46667

Check out the last paragraph:

As this process runs its course, the US will lose access to imports. Most significantly, it will find it more and more difficult to obtain the 2/3 of the transportation fuels that come from abroad, which are needed to keep the economy functioning. And that will bring on Phase 2: Commercial Collapse. That is probably what we are getting for Christmas this year, or shortly thereafter.

In the meantime, enjoy Stage 1. You will miss it once it's over.

I have added a link to his Blog..check it out...

Also be aware that many sites are pointing to an article on the Army Times (official Army mouthpiece) that battle hardened troops from Iraq (Third Infantry Divisions' 1st Brigade Combat Team) will be brought to the U.S. to "assist" in defending the homeland. From what? They are supposed to be practicing using "non-lethal" means. We'll see. Total number of troops 5000-8000. Deployment starts October 1st.

Empires always announce their impending failure when they bring troops back from the fringe to defend the "homeland". Rome comes to mind here....

Futures down sharply...

The patient construction of a bottom, by the "powers that be" that was showing up in positive divergences yesterday is about to be shattered by reality. Fortunately, a bunch of gutsy Republicans decided not to roll-over and accept the bailout in it's current form. Let's see if they can hold out against it after the market tanks. I'm on their side as I am against any bailout. But we'll see what unfolds..

Pretty good positive divergence in the markets right now...

So a rally indeed appears to be coming....Although if you duplicate this chart for yourself, and plug $NDX into Bigcharts instead of $SPX, you'll see far less positive divergence. This rally is hand-tailored for the Banks, so the difference in relative divergences between the two indexes should be no surprise...

"Not worth a Continental"....Remember that phrase?

This was the phrase used to express the disgust that early Americans felt when dealing with the wreckage caused by the use of one of America's first experiments with unbacked, widely (and wildly!) printed money. It's value eventually collapsed to 1/100 of it's face value...read the link below...

Let's see..we're now printing $trillions of dollars annually with no backing..no wait! It's different this time...

http://historywired.si.edu/object.cfm?ID=437

If anyone believes that, I'll sell them the Brooklyn bridge...Shown is a picture of the overprinted and despised "Continental" currency of Colonial days, from which the phrase, "not worth a continental" was derived ...

Guess what, we're about to do this again! Whether the inflation will be as bad as back then, or only one quarter as bad, that's still very bad indeed!

Results so far...

Here you can see the high points reached in the "bailout" of the U.S. Financial system. I don't think it's going to work,do you?

The next financial hurricane could be....

---------------------------------------------------------------------------



DEFAULT!



All,
You should check out Jim Willie's column over at the financialsense website.

The link is:
http://www.financialsense.com/fsu/editorials/willie/2008/0918.html

Jim Willie is making the valid point that the appearance of several of the U.S. Treasury Note price charts is not unlike what you see before a country goes into default.

That really would be "game over" for the United States.

With all credibility gone, the government will probably quickly use up what little gold bullion it has left to pay for whatever they think is still essential (for a while). After that, shortages of many things would/should start to appear..(my interpretation)...

For U.S. Citizens, it could seem like Armageddon...

I'm pretty sure something really evil would happen to the dollar at that point, and it may not be usable to buy anything sourced outside the U.S. (like OIL, for instance! We only import, like, 65% of it! What happens if we can't buy it!?!... Guess!)

Speaking of bottoms...It's very possible that Gold and Commodities have just made a very important bottom....

Looking at the USO (United States Oil) chart, oil has declined and bounced, off of the 62% retrace of the run up from January '07 to July '08. My guess is that we will now start the process of taking out the July '08 highs in crude oil, with the coincident rise in gasoline prices. Doubters of Peak Oil, may have a hard time next summer...

This is also my way of saying that the bottom in commodities, gold and oil we just made in here, will be more lasting and more significant in long term impact then the the short term bottom we just made in the general equities markets..

Will this engineered bottom hold for a while?

If you look at the $NDX chart, yesterdays bottom lies right on the trendline support, for the $SPX, it's a ratty bottom relative to the trendlines, not well supported...

Look at the Chart of $NASI, the $NDX breadth indicator. It doesn't look too good, does it?

Current $SPX and $NDX charts...

Watch the descending green trendlines for resistance...

The Moment of Truth

I think that the moment of truth comes not from the dollar, which may not in the end, decline to zero, but in the unwillingness of any entity, foreign or domestic, with money denominated in dollars, yen, francs, marks, or anything else to loan any of it to institutions that may be "nationalized" at any time.

The way this works is that the oncoming depression and deflation destroys the few businesses that are still functioning, and with zero credit, no new businesses can form to re-employ anyone.

In one way this was the story in the first great depression, but confidence in the American Culture allowed glimmers of recovery before WWII "rescued" us. This time, we will get a vote of "no confidence" that will last for perhaps 1 or 2 generations. Without trust, no credit, and no recovery. This will accelerate the transition to the world that James Kunstler (see link) has been describing...

I'm sure it hasn't escaped the notice of potential sources of future capital, that the shareholders in these nationalized businesses end up with nothing....

oil trading under $100 a barrel...

I said a while back oil might get to $75 to $85 a barrel before a bottom gets put in..I think that will be correct...it's currently trading at $89.75 a barrel...On the West Texas Crude Oil Index there is strong resistance level at $85 a barrel...

We have gotten through Ike...

We are quite lucky here, the power just came on, and we have 4 million+ people without power, so we are very fortunate....I recorded a minimum Barometric Pressure here of 28.67 inches of mercury as the eye passed close by here about 4:30 A.M....

Downsloping channels in the $SPX and $NDX...

So far, calls by many for a huge crash have been premature...Arguably, we are in a gentile downsloping channel on both major indexes...Note that the $SPX is a little steeper than the $NDX... I'm sure that's the admixture of Financials doing that...

Getting ready for some wind here in Houston...

I will probably post some charts tomarrow morning, just to catch up..some chance we won't have power here in Houston over the weekend...

Two views of the $NDX and one of the $SPX...

Note the $NDX chart (middle chart) with price action sitting on a trendline, and at a .500 node...Could be a bounce in here somewhere, although it won't negate the Bear market...

As always, click on the charts to enlarge them...

What hath the Republicans wrought?

The rise of Sarah Palin, in my view, is a rogue event, a game changer. She is tapping into a reservoir of angst among some sections of our society, and though her rise was engineered by Karl Rove, it may be beyond their capabilities to control the outcome.

This is good for neither the Republicans nor the Democrats. YouTube has a video of her addressing the Alaskan Independence Party, which advocates that Alaska should secede from the United States. This is reminiscent of the Confederacy and the Old South, and has shades to some degree of the candidacy of George Wallace, 60 years ago, but probably with less overt racism.

The great unseen underclass of the United States has been courted by both parties, but recently has affiliated most strongly with the Republicans. "Family Values" has become a coded phrase that means far more then merely supporting families. It is a statement of a group that is pushing back against modernism in a variety of forms, and a statement of anger at being "left behind" economically by the forces of change wrought by technology.

Originally, most of the people we are speaking of were aligned with the Democratic party, but that was a long time ago..The Republicans welcomed this part of the electorate into itself when the Democrats championed civil rights under Kennedy and Johnson in the 1960's and 70's. Now the party is being swallowed whole by this long-ago ingested organic force, with consequences no-one can foresee....

It's predictable that an economy in crisis would produce populist candidates, but this could be a particularly toxic brew. As the economy continues to worsen, any failure by the conventional parties to right things will probably feed more candidates such as this one, which abhor complexity and want things reduced to extreme simplicity. Needless to say, truth is often complex, and a ruthless drive for simplicity is usually associated with tyranny.

As our population is relatively unschooled and undisciplined, it will make this temptation and the danger of it all of the greater.

______________________________________________________________________________________

I've been alerted there's another blogger, using more colorful language (and making more assumptions then I would), but if you want to raise your blood pressure a bit, visit this site:

http://elainemeinelsupkis.typepad.com/war_and_peace/2008/09/triumph-of-the.html

Warning: She uses some rough labels...

The dam finally broke on the $SPX...

After a few days of non-committal chop, the markets broke down with a vengeance today. Whether this was purely technical, based on fundamentals or from the fiery start of a new round in the culture wars at the Republican convention, is hard to say.

Notice the vicinity of the 1.00 node (upper chart) and pulling away from the blue descending trendline (lower chart) that has limited up moves so far...

$NDX in definite downtrend, $SPX is thinking about it...

The $SPX looks like it might be making a rounded top just under the thick blue declining trendline. The $NDX is pretty clearly going down, (which started in the approximate time frame where the blue and violet lines crossed, as predicted) but in a volatile fashion.