Rally running out of gas pretty soon?

It was never much to start with...

We are clearly a week or two (eyeball estimate) away from the top descending magenta line that has sort of delineated market exhaustion points...

Obviously, I have gone to a new look for this blog...

I hope it's easier on the eyes....

Survivor, the Home Game

I think it's ironic that for the past few years, "Reality Shows" have been all of the rage in television. Only the most ruthless and shifty would prevail, and the rest were "cast off of the island" (to die, in a virtual sense).

Only a vicious and hyper-competitive culture would produce such a set of monstrosities and call it entertainment, I now suspect that this set of attitudes has been mirroring structural changes in our economy which now threatens to exile "everyone" off the island, except perhaps, bankers cosy with Goldman Sachs and such.

We can all play survivor now.

An article I think is correct in it's views...

On the money, I think:

http://www.timesonline.co.uk/tol/news/world/europe/article5559773.ece

Current $NDX charts...Haven't changed much...

Note that the secondary trend lines are all busted....no further support will come from those, probably...

The dollar and $Gold charts are virtually the same also...

Markets are dribbling along sideways...waiting for Obama Bounce?

Check out Mish's site for pictures of acres of unsold cars...Does anyone think they may stay unsold and be acres of rusting cars somewhere in the future? Somehow I think that could happen, and that would mean the end of the economic order that produced it....

Deep and sloppy $NDX bounce...

It's still suspect...

$NDX resting on major trendline...

It's got to hold here, or the Bear is back...

Actually, with Gold falling and the Dollar rising, these are the conditions that have signalled stock market liquidations in the recent past, so this is a perilous juncture we're at right now for the stock market...

Gold falling...Dollar rising...

Gold's bear market resumes as expected...Gold bugs are right, but early...

It might find some temporary support at the 2nd order trendline it's sitting on (brown), or the one below that (light blue).

Market looking weak here...

This is a closeup of the $NDX with today's low (so far). Notice the bounces off of the ascending blue line. If it fails at that trendline, then the whole scenario changes, and the bear market resumes. I have a new setup with new pivots, trendlines, and nodes, ready for when/if that happens...

Check out Mish's charts...

You might hop on over again to Mish's Global report. He's got some conventional charts worth looking at, back a couple of days ago, particularly of the Russell 2000 ($RUT). It shows a completed wedge at the 38% retrace. Although my charts don't show us at any particular node right now, that doesn't mean we couldn't drop from here... Be wary....

One of the current $GOLD charts...

Current $SILVER Charts...

Some .25 nodes coming on the Silver charts, down the road a bit....

Interesting (though sad) post over at Mish's Global Economic report...

It seems that layoffs are coming so fast that it's overwhelming the state's websites where the problems are occurring...

Pick that up over on my list of market related links over on the right hand side of this blog, I have added it to that group.


Obama's going to have his hands full...I don't envy the man....

Markets still slow....

All of the indexes I watch, plus metals, and the dollar, are largely in a very small trading rangs, so recent previous charts still apply...

Now we know what the crossover was meant to do on the $NDX...

The crossover, on 12/29/08 corresponded with a recent low on $NDX, right at the dark blue ascending trendline...Normally I've seen trendline bounces associated with reaching a time node, but this is the first time I've noticed one associated with reaching the timeframe of a crossover...But certainly it's not a totally unreasonable outcome...

The top picture is a "blow-up" of part of the bottom picture...

Crude Oil bounce at uncommon .75 node

The .75 node is a "minor" node usually..can't be sure if this has any power or not, usually they don't...

Markets showing a little life today...

Once we clear previous price levels, new charts will be forthcoming...

Updated $GOLD chart...

Back up at the magenta trendline...

Merry Christmas and Happy New Year to everyone!

Slow markets, very weak rally in stocks...

Goes without saying, not much happening. The Bradley turn date is behind us now, and it's hard to see that it meant anything this time. Usually the Amanita site, suggests a turn will happen within something like + or - 7 trading days. We're close to leaving that window behind...

and two of the $GOLD charts...

Current U.S. Dollar index charts...

$NDX making little upward progress...

$gold heading for magenta trendlines on the 1.382 chart below.....

That's my guess...

$GOLD after the Fed action today...

Heading after all, for resistance lines overhead....

Gold sneaks up a little higher...

Maybe it's heading for the declining red trendline before it capitulates...

Closeup of $NDX chart showing detail of Friday's low on top of two levels of trendlines...

Compare with the chart posted Friday, it's the same, just closer in...
Today's low was a "higher low" and doesn't change the chart...

current USO chart...

Bottom shown at the .500 node, and resultant rally...now fundamentals have to feed it if it's to be sustained...

Note the negative divergence on CCI versus Williams %R...

This kind of negative divergence within the confines of daily Bollinger Bands are usually what you see preceding a significant drop...Note also the .604 retracement (Fibonacci retracement from last Gold rally at 936.30). Not shown, but ROC is also showing negative divergence...

I think Gold will be in a Bear market for a while yet...

Note the current logarithmic chart. the double tops are at .12177 and .12907, both around the .12500 node. With negative divergence I would expect deterioration...

A "must listen" webcast....

Please, please take the time to listen to this internet broadcast from the FinancialSense website. Everyone is so preoccupied with the paper losses in the Stock Markets,
but an even more ominous storm is coming, and as usual our politicians are flat footed...

http://www.netcastdaily.com/broadcast/fsn2008-1213-2.mp3

This is the mp3 version...

http://www.netcastdaily.com/broadcast/fsn2008-1213-2.asx

This is the Windows Media version...

Basically it's about energy. the IEA is admitting that world oil fields are now declining over 6.7% a year. This is a recent development, obscured by paper manipulation of Oil prices.. To counter this problem it will require the discovery of a Saudi Arabia every two years just to stay flat...

Hard to believe with oil crashing to $40 bucks a barrel, that high oil prices are coming back, but they are, and in the not to distant future, there will be shortages...

So the world economy is going to have the double whammy of economic deflation even as we discover we have rapidly depleting energy resources. To address that second problem depends on lots of capital, which is and will be in very short supply...

$NDX bouncing off of 1st and 2nd order trendlines...

This should maintain the Bullish bias...

The $USD rally first pulls back at 1/8 node...

This node is generated by the entire down move from July, 2001. Since moves almost never end at the 1/8 node, this says a dollar rally of some considerable duration is ahead of us. The current decline is only a correction in a dollar bull market. The earliest possible failures would normally occur at the 1/4 node, which are sprinkled throughout 2009...The more likely 1/2 nodes for earliest termination of the dollar rally, are three time bands spread out from mid-2010 to late 2011. The actual value at this recent top is .12932 where .12500 (1/8) is ideal (3.4% off from ideal). The value of the currency basket in the index at the top is 88.46, as read off of Stockchart's output.

Even though I find the concept of eventual dollar devaluation compelling, this chart is suggesting deflation for quite a while...

USO and $WTIC showing energy in energy...

Note the bottom I called on USO a few days ago. Today USO is up 7.90% and it's cousin $WTIC is up 15.37%...they are moving...

Little change in $NDX so far...and other matters to discuss...

So far about the Stock Market, little to write about, still in a weak rally...

Probably of greater importance is the negative interest rates appearing on Government Bonds. It's slightly ominous when most investors are thinking the same way. Now that the hordes are all flooding into the presumed safety of treasuries sufficient to produce a negative interest rate, and knowing the market by it's nature fools most of the people most of the time, it feels like a trap is being set...
I still think a dollar devaluation is likely at some point, and that might be the trap, or maybe not, as that's probably a bit down the road. It may be something unanticipated..in any event we are in really unusual waters now...

Thinking about this a little longer, a rise in interest rates on those bonds could be devastating as existing bond face values decline as interest rates go higher. So circumstances that would force interest rates higher, especially fairly quickly, could be the mechanism, if not the rational or the trigger, for a bunch of people to lose more money, which is what markets like to do...As a trap, it has to be fast to provide no exit for a lot of people. Or if it were to happen more slowly, it could work against people because other options, other than bonds, could actually be worse. That would be another kind of trap. I will leave it to your imagination to think of scenarios that would provide these outcomes.

The Baltic Dry Index...

Anyone who thinks the current struggling rally is going to have any legs based on fundamentals should check out this site:

http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm

This keeps track of the state of international commerce. Basically, international commerce is just a couple of notches above nonexistent right now.

The nice thing about this measure is that governments can't spin it or alter it. It is what it is. It also led the decline of October 2007. It's a leading indicator.

If the "world economy" is "not happening" then a U.S. as well as a world recovery is nigh impossible.

Some of my current assumptions...

There is a big debate out in the world right now about inflation vs deflation, and who is right, and what it means for equities, precious metals, and stocks. I can see the governments of the world are printing huge amounts of money, which should be hyper inflationary, but collapsing debt structures are crumbling faster than they can run the printing press, and there has been a change in psychology around the world that will make it very difficult to reflate any bubbles, at least in the short term. I have run the numbers on $GOLD, you can all see it, it's a few days back. The likelihood for a bottom in precious metals somewhere in 2009 is what I think is probable based on the .250 nodes. The 1.00 nodes which are the second most powerful node after the .500 finishes way out there, like 2020 or so. The .500 nodes are fairly far out also. A bottom in precious metals that far out doesn't make sense to me.

So I could see the $GOLD price rise somewhere in 2009, probably near one of the three dates I have published, and this will be a sign of renewed dollar weakness, and that in turn, probably correlates to some sort of abatement in dollar based debt destruction. Hedge funds are being destroyed fairly quickly, although more have yet to fail in the short to intermediate term. When that process has ended, the dollar stops being supported by that mechanism, and assets will be under much reduced downward pressure (the pressure of forced liquidation by fund managers that have to raise emergency cash). This could allow equities to have a really decent rebound.
My assumption is that this process becomes visible next year, and this is my thinking behind my current interpretation of the Bradley dates.

There are some good comments on this subject on the previous post, worth reading.
Also I am open to other opinions, nothing is set in stone...

Click on the above chart to enlarge it...

What does the Bradley date, 12/14/08 refer to?

This is a time where we are approaching an important Bradley date. The question is, does this represent the end of the small rally we are currently seeing? Or is it just a late indication of the bottom just put in? I vote for the former so far, as the current bottom at 11/21/08 is quite far, time wise, from the 12/14/08 date given by the Bradley model. That said I tend to think the rally might stretch somewhat past that December date. One would expect a .382 retrace of at least wave 3 of the recent decline (see chart below with Elliott wave counts). It's going to have to really hook if it's going to do that and meet those price targets in that period of time...

$NDX is finally past some trendlines and moving up..

Here are this morning's charts. They may change by the end of the day....

Watch the dark green ascending trendline in the top graph and the dark blue ascending trendline in the bottom graph. One of those will likely stop the rally at some point. There is also a crossover not far away in time in the first chart, which has a chance of reversing it also, but I think it is too close in time to allow the rally to reach even a minimum retracement. So I would guess it won't be a factor.

The bottom chart doesn't show much trendline compliance, but shows the bottom forming at the .250 timing exponent or node as shown on the "X" axis, which is quite common. This one was, however a bit sloppy, with the absolute bottom shown at .273 rather than the ideal .250...

Compare that with the uppermost chart where the price action hit the downsloping magenta line precisely at .250 (acturally .25013) and formed a perfect bear market signal. The market collapsed from that point (on 8/15/08) as you can see. Note: trendline bounces and node hits don't have to be on the same chart, of the three I generate (as above), to produce a valid signal.

Note that I have added the Elliot count to the top chart...
Click on the charts to enlarge them...

United States Oil (USO)...

Note that USO is at a .500 node (top spreadsheet chart and the "x" axis label value that's most recent) and also at a crossover (bottom chart). Further the "C" wave of the up move preceding this chart also has a 1.00 node on Monday the 9th of December (on a chart that is not shown). Unless fundamentals firmly say otherwise, USO should bottom in the next couple of trading days...

On the top spreadsheet chart, notice the .250 node was a minor bottom...

Note that the Bigcharts hourly chart is showing that a MACD crossover appears close, and positive divergence is present on Stochastics. This seems to confirm the proximity of a bottom...

Check out the link to the Bradley site ...

The Bradley Siderograph is showing a major turn point in the Stock Market on or about 7/15/09...When that date is plotted on my $SPX chart, it comes in as a .494 node (can you say .500?, only 1.4% off) on the 1.272 chart...For a lot of reasons I think that this Bradley date will be a major low, and the rally we are struggling currently to see will eventually fail and produce a waterfall down towards this July date, in my view...

While we're at it, here's $Silver...

It looks like the .250 node at or around 12/19 (Friday) or 12/22 (Monday) might be a playable bottom in $SILVER. Worth watching...Should show up on the bottom chart (1.272)...It looks reasonable that it will strike and bounce off of the ascending blue trendline on the 1.272 chart at around $6 a oz., give or take a little bit...

As in the case for $GOLD, here's the node dates for $SILVER:

Date: Price:

.250 (1.272) 12/22/08
.250 (Average) 02/05/09
.250 (1.382) 04/13/09

.500 (1.272) 12/11/09
.500 (Average) 04/15/10
.500 (1.382) 10/15/10

Note the similarity in node dates between $SILVER at 04/13/09 and $GOLD at 04/29/09..., Close enough to be interesting...

What $GOLD looks like...

Watch for the .250 nodes..one of the three, (sometimes two of the three) could be playable...further out, the .500 node will, according to standard practice, probably produce an even better opportunity...

Notice the bottom chart shows a bottom at precisely a .125 node (1/8). Yes I don't talk about 1/8 nodes and I usually don't play them, but they are just another "power of 2" event, counting backward towards the present from the final 1.00 node.... (i.e., 1.00, 1/2, 1/4, 1/8, even 1/16)

When would GOLD bottom? Probably not at any of the 1.00 nodes, as those dates are too far out, timewise... More likey candidates are the .250 and .500 nodes. When are they?

They are as follows:

.250 (1.272) 04/29/09
.250 (average) 07/09/09
.250 (1.382) 10/20/09

.500 (1.272) 11/15/10
.500 (Average) 06/13/11
.500 (1.382) 05/02/12

My suspicions are that oil will bottom at or nearly at the same time (not the bottom we are forming now, but a later one), so I will shortly run the anaylsis on USO and see if I get a date for one of it's nodes close to one of these for GOLD. If we get convergence, this could tell us something...
like when Hyperinflation from too much money printing starts...

Data points used:
Date: Price:
04/02/01 255.00
09/11/08 739.80
03/17/08 1033.90

The rally is surviving so far, will update charts as soon as we clear the trendline...

Just added two more links...

Please check out two very good financial and market related links, the Korelin Economics Report and HoweStreet.com. Very insightful, and both have streaming audio of high quality, covering major market events...

Todays faliure at the trendline, as anticipated...

The $64,000 dollar question is "will the rally resume, after a pullback?" Watch the thin trendlines climbing up from the bottom (2nd order)...if those are penetrated (more than slightly), odds are the rally will have failed..

The challenge of what lies before us...

It's not totally appreciated that the United States desperately needs to re-industrialize even as it no longer has capital to do so. Most countries in history that have had to industrialize quickly (usually for the first time) also had to use labor in a brutal way, to compensate for a lack of capital. When you don't have money, you build your infrastructure in more labor intensive and less efficient ways. Also, bluntly, worker safety in these situations is usually badly compromised.

In the United States, the labor force is mostly in the process of retiring, and the young are fewer in number and not used to the idea of physical labor. Most of them want corporate jobs that won't be there much longer.

Put these two concepts together and you can see how intractable the future may become...

Japan ETF...

Here you see the Japan ETF EWJ as it works it's way towards the 1.00 node and perhaps the red declining trendline down towards $3 a share..The 1.00 node here occurs on April 14, 2009....

Market might pause here..but plenty of upside remaining...

Just a reminder, the 10 week cycle that helped produce this bottom, tops out on 12/23/08..not a prediction, but something to keep in mind...