Summer Will Ultimately Prove Bullish

It is imperative that we deal in what is, not what we think or wish would be. Did I have designs on things going differently then they did this week? Well ya, to the tune of about 60% - 40% as follows:

• 60% probability that the market declines short term (to 800 +/-), scaring out a lot of chickens before forming the major right side shoulder of an interted H&S bottom with very bullish intermediate term implications. The plan was to be short selected areas to guard against bullish precious metals (mostly gold) positions, and then cover as SPX neared 800. Sounded like a plan but...

• There was the pesky 40% potential for the bulls to put their greed on full display, blow out the shorts and party on, led by Paulson's Plunderers (NYSE: PP). The inverted H&S scenario is now negated and this market is now in the realm of traders and pros who know what they are doing and can be nimble.

In my view, the odds are now 90% that this is ultimately going to be a tragic suck-in. The last leg that pulls in the remaining stout holdouts who sold in March in order to wait for the worst to be over.

NFTRH goes back to its original targets for the S&P 500 and for Hope '09, but first there is strong resistance right here that the market needs to overcome. I believe it will eventually do so and that the summer will ultimately prove mostly bullish. With the impulsiveness of the bull fest this week, while a decline from immediate resistance is likely, eventual upside is implied.

This all brings back into play the potential for the classic Fall agony. Potential mind you... but if we had gotten a strong decline here and now into a right side shoulder, things would have looked really good through the end of the year.

Alas, it is not meant to be. It is what it is. We'll deal with it. On the plus side, as a newsletter writer, this week was great for me. Finally, directions are being chosen and mapped out. This is the official end of the summer doldrums, at least for me.

Comments

[Spartacuss:]

You can chart your way into beleiving whatever you want despite the facts.

And the facts are ugly. Boomers retireing on what? Lending getting worse and not better especially ow that CIT is going bankrupt. Where are the small to medium businesses supposed to go for money?

What a bout the gross misallocation of resource by the government and the FED. What about the massive distortions being brought about by Obama's redistribution of wealth efforts.

What about all the damage that has been done to prime industries in the world.

In the climate we are in, charting means nothing. It is as Mark Twain said, "there are lies, damn lies, and statistics".

Put another way, there can be no recovery until the private sector brings one about with new investment. The private sector is in gridlock in case you haven't noticed.

Jul 19 08:55 AM

[OldLimey:]

I agree entirely with the article. Assuming we can get through the June high, the bulls will have won a short-term victory they would have been much better off losing. The higher the manipulators take this market without a meaningful correction, the harder it's going to fall. Maybe that's their plan.

Jul 19 10:31 AM

[jeandit75:]

Not much fundamental analysis here my friend. If you looked at all the probabilities and scenarios, you'd have to take into account the possibility of further problems at banks arising from the CRE and Alt-A refinancing, then earnings trajectory that may disappoint many investors. All in all, there is a huge possibility of a double bottom in the economy and also the market....so good luck on the H&S stuff.

Jul 19 01:20 PM

[wendling_r:]

I have to agree with the potential Inverted Head and Shoulders buying formation. According to the work I do on my site and the monthly report on the DJIA that I put out I believe that the market could be pushed up to the 10,500 plus level before a short, sharp pullback happens to shake out investors before the next major bull market starts.

Government intervention, poor earnings, and other information are not what drives the market up or down, it is the specialist system and their wants and desires.

For information on the upcoming move higher in the DJIA and how the specialist system works go to the attached site with this message.

For disclosure purposes I am currently 100% invested in the market place until late September or early October.

Richard W. Wendling

Jul 19 03:43 PM

[1uncle:]

If you re nearing retirement, you don't have time to earn it all over again.

Jul 19 04:22 PM

[Gary A:]

Short term victory for the bulls. But certainly this is not going to turn out well. Retail will take a hit in back to school and especially at Christmas. People aren't buying big ticket items and are eating at cheaper places. It has to turn bearish because the people are still tapped out. And CNBC keeps pumping.

Jul 20 12:50 PM