aarc

The 'Buy Anything' Market

FEAR of being left behind turning into PANIC buying?

Those are the opposites of August/September 2008 when fear of economic implosion turned into panic selling.

This ongoing 2 days rally is attributed to the daily 50ma support which was at 1020 at the time and the supportive role of August 9 high of 1018 or 9439 for Dow Jones. They formed a confluence zone of supports very hard for technical traders to not go long and buy the run down.

This could be the last chance to get long after a long long wait for a reasonably deep pullback that never came as we survive more on shallow pullback diets since March 2009.

That is good.

Regular shallow pullbacks keep us trim and healthy instead of getting obese with time during deep and prolonged pullbacks that tend to end up to the downside as more traders and investors bail out of the markets due to prolonged digestion of time with no rally.

We rally a little at a time and take appropriate price corrections and time consolidations until we are ready for the big one. Meanwhile, we keep ourselves lean and mean by not getting obese with excessive time consumptions going nowhere that usually means corrective or bear rally rather than a bull run - and thus results in further run downs most of the time.

Are we ready for the big one?

Projected target for this run is 1090 to 1110 for SnP 500 before we go for either 2 to 4 months correction similar to what happened in early May high to early July low.

Or, we go into a massive meltdown lasting 5 to 9 months towards 767 to 680 usual target range for a capitulation selloff.

Or, we go into a massive time consuming A-B-C corrective pattern that can last 8 to 21 months that should break below 827 but less likely to break below the last low of 667.

But I prefer the current potential setup of a Running Triangle on the daily chart that has formed since August 9 and has completed last Friday or Oct 2.

This triangle is a rare occurence and is a virtual unknown to most technical analysts.

But it has a potential to giddy up the markets toward 1165 or even toward 1260 minimum if market participants started a panic buying spree off the coming earnings season.

So watch out; maximum allowed rally for this run is 1110 based on usual Elliott Wave counts of 1-2-3-4-5 up from the July low of 870 using the daily chart.

BUT - if we break 1110 with force in the coming weeks, the next target will be 1165 before we get a hang-over and go down as fast as we go up from the daily 50ma support.

OR - if the 1165 got broken again with force; then expect 1260 the next minimum target and the quick and dirty target will be 1318 before we require a major correction that should last 2 to 4 months.

The last scenario is the best scenario for the bulls in order to achieve sustainable recovery rate of the Oct 2007 high of 1576 for SnP500 on or after September 2013 with 2014 limit time run. The longer it takes to recover toward 1576, the more time will be consumed and the more obese the market participants will be consuming massive time with lethargic actions or rallies.

Lethargy is the enemy of a bull run. A healthy rally followed by a healthy correction and appropriate time consolidation is what makes bull runs healthy in the long run.

Excessive rallies with no healthy corrections and also excessive corrections with no healthy rallies are what destroys a healthy market.


Those are the potential scenarios that has developed from the minor rallies and corrections off the March low of 667 and that of July low of 870.

The markets seldom give us only one choice; there are almost always many potential scenarios most of the time and very few of them happens to be the highest probability scenarios.

In that order, the highest probability scenario is a rally toward 1090 target then a 2 to 4 months correction.

Followed by the Running Triangle scenario that can catapult SnP toward 1165 but would also result in a vertical drop back to 1020 if the bulls cannot muster better than 1165 run.

Unemployment Is Likely to Go Higher

As far as the stock markets are concerned; unemployment rate and the main indeces INDU and SNP do not jibe well.

Dow Jones simply kept going up from $42 in 1932 deep recession toward $300 in 1939 during the Great Depression years of 1933 to 1939 when unemployment kept on climbing toward 25% in 1939.

When WWII started, unemployment virtually disappeared and there was massive demand for everything and anything but Dow Jones went down anyway from $300 high to $100 low.

When WWII ended and soldiers came home looking for non-existing work; unemployment shot up and Dow Jones shot up too from the $100 low of 1943/44.

From your chart; unemployment rate kept going up toward 1992 but Dow Jones kept going up too. When the unemployment suddenly decreased remarkably after 1992, Dow Jones rally was still anemic. Only after 1995 did Dow Jones went into parabolic rally but the decrease rate of unemployment started to taper off toward year 2000.

Now, during the techwreck years of 2000 to 2002; unemployment kept going up to mid 2003, but Dow Jones was already up and running since Oct of 2002.

Unemployment started creeping up late 2006 but Dow Jones only started creeping down after Oct 2007.

Now at the present stage; unemployment is still spiralling up, yet Dow Jones has already gone ahead with a bouncing rally since March 2009.

What is the value then of analyzing unemployment rate as far as investing and finding the correct time to buy or sell are concerned?

I tend to believe that the recovery can happen without a jobs recovery as happened in the past and may even be counter-trend, or should I say buddy buddy trends, to each other as in 1932 to 1939.

1932 seemed to have basic similarity with late 2008 to early 2009 although they may have different reasons and their intensity of effects have definitely different impacts - they were both deep recession periods when unemployment kept on spiralling up but did not end as the stock markets found their bottoms and started to spiral upwards.

We will know in the months ahead if unemployment rate and the Dow Jones will play buddies as in years 1932 to 1939 both trending UP.

It may not be different this time around.

The Economic Recovery That Isn't

Great!

At least we are talking now for the last several months on how to have an economic recovery rather than talking about how the economy might implode if the RTC-type $700B TARP package will not be approved by Congress way back August/September 2008.

The stock markets can then keep on going UP just based on that observation.

Remember 1929 to 1932 meltdown history and the Great Depression that followed the market crash?

Dow Jones went down to $42 in 1932 and the economy went into a severe recession in 1932 just like what we had early this year.

The US economy went into depression in 1933 and more than half of banks and presumably other companies went bankcrupt in 1933 to 1935 Greatest Depression years.

Dow Jones went up from $42 on 1932 to $100 into 1935!

Unemployment went so bad during the great depression of 1933 to 1939 the US unemployment rate deteriorated to 25% by 1939 and Germany got 33% thus leading the way for WW II to happen.

Dow Jones went up from $42 in 1932 to $300 by 1939!

Dow Jones then got a major correction $300 to $100 from 1939 to 1944 because of WWII. A major haircut but never break below the 1932 low of $42.

We'll, perhaps we will need WW III for the stock markets to go way below whatever we will go up to in another 8 to 9 years if we use 1932 to 1944 history as a guide?

Bearish on Banks - Why Now Is the Time to Sell

If you are trendtrading the banks medium term; definitely, the trend for $BKX is still bearish based on the monthly chart with an ADX reading of 44.97.

But if you are trend trading short term; the trend is definitely more upsides just by using the fast MACD on monthly chart which has just reached new momentum high. Meaning, $BKX will still make higher highs on daily and/or weekly charts before a divergence sell signal on the monthly chart can lead to a major pullback or sell-off.

As for being over-bought; it is simply not true. $BKX was only able to recover 30% of it's total losses from January 2007 to March 2009. Basically $BKX went down by 85.33% from it's Jan 2007 high of $121 to Mar 2009 low of $17.75.

Today it is still selling at 62% discount from it's highs. That is not an over-bought condition. So for longer-term hold; buying $BKX or XLF at these levels is still buying at a discount of 62%. You cannot be paying at an over-bought price with that kind of massive discount.

Some banks made several hundred percent rallies off their lows and may need some correction or consolidation ranges in order for them to sustain their rallies; but many of them are still way below their Jan 2007 highs.

What is $45B anyway to the total size of the banking sector? I don't know; but comparing the $700B TARP in which the government is expected to get a sizable profit; then what is $45B?

How about way back late 2008 and early 2009 when banks were willing to pay 15%, 20%, and even 25% premium on their bonds? That would translate to more than $45B premium if they were able to raise even half as much as what TARP provided on an annual basis.

FDIC which is a government agency will get itself (and the US government) definitely hooked into the banking sector if they charge that $45B upfront fees.

Could this $45B be a "cheap" insurance for the banks to get the government's unbridled support hook, line, and sinker?

Is that not a good news?

Sentiment Overview: Surprising Increase in Optimism

Way back August and September 2008; there was so much fear of potential melt-down that led to the RTC type of rescue effort which is the $700B TARP package.

The half-hearted ping pong Jekyll & Hyde show by the US congress regarding the $700B TARP package led investors all over the world to realize that the United States had abrogated it's role as the trustworthy leader of the world and that realization led to a global stock markets meltdown.

Now, a year later and a "torrid" rally off the March low for 7 months; the same months of August and September is transforming the fear of a meltdown into a fear of potential melt UP. The Fed had taken a full-gear rescue effort and the congress and the President had shown their resolve to rise from their mistakes of Aug-Sept 2008 and had instituted several market reversal actions including regulatory forebearand such as the temporary revision of the Mark to Market rules that was causing so much bankcrupcies in many financial bookkeeping in late 2008 and early 2009.

To have a better perspective of this rally from March to September 2009, we have to look at what actually happened from September 2008 to March 2009 with market data.

It took only less than 22 weeks for SnP500 to drop from 1080 to 667 from Sept 2008 to March 2009.

While it took the SnP500 to recover from March 9 2009 low 667 to the last high of 1080 in Sept 11, 2009 a total of 28 weeks.

So far, the reversal can still be considered "bearish" and/or "reluctant" in that the selloff from 1080 to 667 was consumated in only 22 weeks while the attempted recovery from 667 to the last high of 1080 went a long way toward 28 weeks of climbing the wall of worries.

At this stage, I believe that only a major catastropic event or a series of catastropic events with global implications can possibly cause a capitulation selloff similar to what happened in Sept 11, 2002 that led to the final bottom on mid-October 2002 for the years 2000 to 2002 meltdown.

The bears will need something much much worse than the collapse of the World Trade Center in Sept 11, 2002 to serve as a catalyst for the capitulation selloff since most seasoned traders and investors had already been hardened by their experience with the 2000 to 2002 meltdown; the 9/11 capitulation selloff; the Avian Flu in Asia; the Katrina flooding; the tsunami devastation of Thailand; the catastropic earthquakes in China and Japan; and lastly for 2007 to 2009, the global stock markets meltdown caused by the relentless meltdown of US housing sector that has started 2006 thus transforming the housing meltdown into the start of the banking credit crunch by Jan 2008.

It had been 9 years of bad news since the collapse of the dot.com bubble in the United States.

It will take a lot more devastating news than those of the previous 9 years in order for the "battle hardened" investors to go into a capitulation selloff.


Optimism or an abundance thereof is needed right now to decisively reverse the downside trend and finally remove any doubt in everybody's mind that this rally is a bull run and not a bear rally.

The fast approaching earnings season might just be the catalyst needed in order for the fear of potential melt-up to turn into a panic buying.

If anything else, a luckluster earnings season will only mean we are still stuck in the mud and we might as well spend the rest of 2009 going nowhere.

How Are You Liking October So Far?

A drop toward the daily 50MA support would be a welcome gift for technical traders who had been waiting for a "reasonable" amount of retracement for quite a long long time.

It is now rising toward 1021 and the price level at 1018 for SnP500 is also a reasonably strong support most bears will have to contend with.

Again, the Payrolls Report will either make or break those formidable supports the bulls are counting on.

How Are You Liking October So Far?

This is one of the very few counter-trend corrections we ever had since the March bottom. Most of the runs had been of the running type or higher highs - higher lows.

It is a garden variety type of A-B-C corrections bulls would welcome due to it's familiarity. It is better analyzed using the 60min or 120min charts and most traders call it a Bull Flag. Bull Flag until proven otherwise, of course.

C-wave target for an A-B-C down is the 1024 to 1013 range for SnP500. It may or may not get there depending on the employment report.

Below 1013 will be danger zone for the bulls and a vertical drop below 1000 can cause a panic selling that can lead to 984 to 956 area before the bulls can find some footing and start a retracement to the upside.

We will see how this initial start of October 2009 will pan out after the Nonfarm Payrolls Report Friday 8:30 AM.

Ten Reasons for an Imminent Stock Market Crash

This is still considered a recovery and not actually a rally.

As I understand it; during recovery period the economy and it's fundamentals are still in shambles and cannot be considered healthy (as when you are sick and still recovering, then you are still sick and not healthy).

But that doe'nst mean just because the economy is still sick it will crash. There will be ups and downs as the recovery progresses. The important point is that the economy don't get sicker than it was and the economy as well as the stock markets will get better and better althought the rate of cash flow or profits made may not be commensurate with the rate of recovery (it costs money to be able to recover and a sick person cannot make massive amount of money while still sick and recovering).

Like in 1929 to 1932; Dow Jones crashed down to $42 and it was able to make significant recoveries from the $42 bottom even during the massive bankcrupcies of the 1933 to 1934.

You would'nt expect economic indicators to be at their healthy state during the severe depression years of 1933 to 1935; and companies to be making lots of profits while half of them were going bankcrupt, would you?

But Dow Jones did make significant rallies from 1932's bottom of $42 toward $100 in1935 and onward toward $300 or so into 1939.

Those were recovery rallies of 100's of percent of multiples by a depressedly sick and getting bankcrupt stock markets and economies all over the world at that time.

Dow Jones did make a major but slow downward correction in 1939 to 1944, but that was caused by WW-II and not because of the Great Depression in 1933 to 1935 when it was at it's worst.

That is what I expect will happen again. Even if massive bankcrupcies do happen in 2010 to 2011 or longer or even perhaps we go into another great depression; the stock markets should still be able to run a lot higher above the crash low of 667 for SnP500.

Now, do you want to wait for a lower low perhaps toward Dow Jones 5,000, or buy the dips instead?

My strategy at this stage is to join the recovery rally as it progresses with protective stops and/or corresponding protective puts (I short the ES instead to protect my stock/etf long positions) once each rally completes and undersgoes another minor correction. Then add more long positions after each correction thus I will be able to add my profits during minor rallies after every minor correction.

That way, even if the rally goes on "irrationally exuberant" for years and years, I will not be waiting for Dow Jones to crash and burn toward 5,000 with an empty bag.

Which Contrarians Are Correct About the Stock Market?

We are in the middle of nowhere here as far as the US stock markets and the economy is concerned. That is where severe conflicts do happen among opposing forces.

I would rather be a contrarian when the stock market goes into over-heated or over-extended runs for extended periods of time whether it be to the upside or the downside.

Study the charts of stocks and stock indeces including commodities such as oil.

Over-extended runs tend to reverse in "split-second" timeframes with catastropic or equally forceful reversals that usually exceeds the initial over-heated runs in a much shorter time.

Look at Dow Jones 1920 to 1929 rally and the subsequent 3-year collapse that went below the last low of 1920.

Measure the Chinese indeces run during before they reached their summit in 2008 and their subsequent collapse of more than 72% in a much shorter time.

How about oil? It went over-extended toward $147 without going through the usual process of usual corrections and normal rallies. It over-heated so bad it collapsed back to $33 in a "heartbeat".

Those are the contrarian plays. Not when they are in the middle of nowhere as we are now.

10 More Reasons Why the Recession Will Last Forever

Good Goldman.

I looked at your charts and they showed .... ups and downs, ups and downs, ups and downs, etc.

But I believe your thinking is that nothing goes up and down in short periods of time but would rather go linear like a dead heart monitor for years, decades, and ... forever?

What kind of analysis is that?

Why not show us some linear charts of the past that will convince us everything will go linear or down forever?

Friday Outlook: Commodities, Global Markets

This anemic rally since March 9 is what is preventing retail investors to come and join the party.

There is too much skepticism in the air. Many do not believe this rally at all.

The bulls spent 29 weeks going from SnP 667 bottom (if you can call that a bottom) to 1080 high. While the bears spent less than 22 weeks to go from 1080 of Sept 2008 to 667 or March 2009.

Scoreboard is lopsided in favor of the bears; the monthly chart is still bearish and there is 65% we can still go into 3 to 5 months of capitulation selloff.

There is too much complacency among government leaders even if they acknowledge that the stock markets will need to be "propped" up in order to prevent the onset of the Great Depression II.

The daily chart is now trending for the second time since March 9; but the weekly chart is still anemic and can still support either a rally or a selloff.

What happens if we go thru another 3 to 5 months of selloff? Dissolusioned investors might shove off everything they've got and we definitely will be in Great Depression II by next year or early 2011.

What is needed is a concerted effort by the stock market leaders such as GS, JPM, MS, and the mutual funds, and perhaps even the hedge funds to support the stock markets in order to prevent the onset of GD-II.

There is a potential expanding flat that has developed on the 60 minute chart. It was not expected but it formed anyway. The volume went up during the last 2 days of selloff; but what do you expect of a C wave of an expanding flat? I have not seen any C wave without an accompanying volume spike.

The bulls can use that corrective patttern in order to support a rally toward the 1130/40 area, and possibly up to 1210. The daily chart can support a rally toward 1284 without going over-heated or over-extended. Of course, the daily chart will need a major correction after 1284 in order to be able to support further rallies.

A vertical rally above 1294 will enable the weekly chart to generate a new trend to the upside without going over-heated or over-extended (over-extended run is a vertical rally above 1558 that can result in catastropic selloff much like what happened to oil and the chinese markets last year, they over-heated and so have to pay the price with a vertical meltdown worst than what the US and European markets had suffered).

A vertical rally above 1294 will definitely reverse the bearish monthly chart and ensures at least 90% chance of additional rallies with only 10% or less chance of a major selloff or meltdown thus preventing GD-II.

The weekly chart can have a normal rally toward 1394 before it will require a major correction that can last 8 to 18 months.

A major correction of that duration can create a mini-bear market or a mini-recession by late next year or early 2011. A welcome sign for most seasoned traders and investors indicating that the stock markets and perhaps the economy had already returned to normal and the usual rallies and garden-variety recessions will again be the staple stuff for several years or decades ahead.

We will see in the next week or two whether this anemic "bear" rally will continue and thus risk a 65% probability of a potential capitulation selloff that can usher GD-II.

Or we go into a vertical rally toward at least 1294 to 1394 without the weekly chart going over-extended and thus prevent GD-II by more than 90% probability.

A Teflon Rally Running on Volume Fumes

There are 3 different types of rallies:

1. The most common is the 3-rd wave or the followup rally as the strongest;

2. Second type common is the 1-st wave or the first rally as the strongest; and

3. The least common is the 5-th wave or the last rally after the first two as the strongest and longest wave.

This rally off the March low is of the second type wherein the initial rally off the bottom is the strongest and thus resulting in also the shallowest pullback after the initial rally or the 1-st wave as we call it in Elliott Waves terms. The pullback is what we call the 2-nd wave. In this case, the pullback from June to July low is the 2-nd wave.

If you analyze this type of rally (or a bear rally depending on what will happen late this year or early next year); the volume during the initial rally is the highest, followed by basically anemic volume throughout the pullback or correction or consolidation as they are also known. We call it the 2-nd wave. The follow-up rally after the 2-wave or the 3-rd wave rally is shorter than the 1-st wave and lacks in volume as compared to the first rally. We are still in the last stages of the 3-rd wave rally and heavy volume is not expected during this process. In short, volume for this ongoing rally should not surpass the volume expended by the first rally from March to June.

This follow-up rally has a target range of 1032 to 1134 in normal cases with 1078 the usual target. We are now inside that target range using the weekly chart.

To fine-tune the targets; I usually use the daily and intraday charts. So far the daily chart can still support a rally toward 1084 to 1134 with 1110 the highest probability target at the present. Timetable for finalizing this 3-rd wave rally is late October or early November.

After this 3-rd wave rally (or basicaly an A-B-C or corrective rally or a bear rally as the bears call it) we either go into the capitulation sell-off that can last 3 to 5 months or we go into a pullback or a 4-th wave correction that that can last 2 to 3 months.

We still don't know what will happen next; only that the highest probability at the present is a sustained rally toward 1110 with 1134 the upper limit in the weeks ahead with 3 to 5 weeks pullback more likely to happen starting late this week in preparation for a last rally toward 1110 target using the daily chart.

So when comparing volume during rallies; it is important to identify first what type of rally is developing in order to be able to expect what kind of volume should happen during the ensuing rallies in an impulsive process.

You cannot simply compare them to all or selective rallies in the past without classifying them since they may or may not be of the same type as the ongoing rally.

Busting Yet Another Market Indicator Myth

In late November 2008 bottom, SnP was more than 40% below the 200-dayMA. In early March 2009, it was 37% below. There was a bullish divergence in both 200-dayMA %differential and the other usual TA indicators such as the weekly fast MACD and 14week RSI that led to this rally.

Most of the time, an action begets an approximately equal opposite reaction in stocks and indeces.

But based on the still anemic rally we had since March 9 as compared to the scorching selloff from September 2008 to March 2009; I am not expecting an equal reaction to the upside in the next 3+ months assuming this rally is sustained for the rest of the year. That means the 18 months of meltdown from Oct 2007 to March 2009 will not be met with an equal 18 months meltup rally toward the Oct 2007 high of 1576.

This expectation is based on 22 weeks of downside price action since Sept 2008 1058 level to 667 bottom vs. 28 weeks of upside price action since March 2009 to current level of 1058 - the rally off the 667 bottom is too slow as compared to the selloff from 1058 to 667 as measured in time.

Most people use their accustomed perceptions of price and time rather than the hard data which is indellibly written on the daily, weekly, and monthly charts.

The 21% rally off the daily 200MA is still not commensurate with the last run down toward 667 of 37% and 40% differentials.

Assuming SnP can rally with 30% to 32% differential opposite reaction; then SnP can go toward 1200 area by the end of the year just by making quick and dirty estimates on the daily chart. More accurate projections can be done using differential calculus since the daily 200ma wil keep rising in a gradual slope as the rally continues with minor corrections along the way.

Using the most optimistic price projection for this rally with Elliott Waves Analysis; the rally can possibly reach 1250 before it will require a massive pullback that can last 8 to 18 months. The weekly 200MA is sitting right into the 1250 area. Possible scenario but low probability since I've seen only few cases of such type of run with this type of price structure on the weekly chart.

Higher probability for the bulls is a run toward 1221 tops using normal price projection method on the current SnP price structure on the weekly chart.

Ideally, for the daily chart; a rally toward 1080 to 1100 this coming week will be needed in order to provide enought momentum and EW price structure that can sustain further rallies; 3 to 5 weeks of correction or consolidation will be needed after that rally toward 1080+ in order to sustain further rallies on the weekly chart.

Then after that 3-5 weeks correction; another rally toward 1111 to 1131 by late November to December will be needed in order for the weekly chart to gain additional momentum and complete the 3rd wave. The price structure with 1111 to 1131 target is also a potential ABC corrective pattern on the weekly chart that the bears can use to short the markets.

After the 3rd wave rally; a 4th wave correction will be needed that can last 2 to 4 months before the 5th and final rally toward 1150 to 1221 can follow using the daily and weekly charts price projection method of conventional Elliott Waves Analysis.

That is the conservative estimate for the a bull case rally off March 2009 without suffering a mini-bear market or a mini-recession.

For the bears; there are no price projections at this stage since they have not done any sustainable selloff since March 2009. A wild guess using the monthly chart is possible but that will remain a wild guess until such time that a significant selloff had actually happened in the daily and weekly charts.

Continuing on the bullish case:

After 1150 to 1221 for SnP target range; a prolonged correction or consolidation will be needed on the monthly chart to sustain further rallies needed and fully recover the last high of SnP 1576.

This major correction can start mid 2010 and possibly last 8 to 18 months and may result in a mini-bear market or a garden variety recession. A mini-bear market by late next year or even the entire 2011 will be a very welcome sign that the markets had entered it's normal garden variety recessions most seasoned traders and investors had experienced in the past as opposed the gut wrenching meltdown of Oct 2007 to March 2009.

Full recovery of the 1576 level for SPX is expected to be in the years 2013 to 2014 preferably no later than September of 2013 using the monthly chart projecting from the start of this secular bear market in the year 2000 before the dot.com bust.

Both daily and weekly charts can support that target timeframe for the monthly chart with their most current price and time structures. But they are still very young in terms of growth off March 2009 and are still very susceptible to sudden unpredictable stumbles.

For now, the strong rally last Wednesday enabled the daily chart ADX indicator to become trending again for the second time since March 9. Momentum indicators such as the fast MACD, the 14-day RSI, and the 14-day Stochastics were able to print new momentum highs. It means that more than 80% probability a pullback will be a buy for most traders using TA on the daily chart.

The weekly ADX is still not bullish nor bearish but can support either a rally or a meltdown while the fast MACD, the 14-week RSI, and the 14-week stochastics are already in their bullish territories and are gliding above their 60% readings. There is no divergence short signal except for the weekly fast MACD but since the daily is still trending, the weekly MACD divergence short signal can still be "massaged" into a new momentum high that can fuel further rallies. For now the 14-week RSI is definitely in a momentum run to the upside and will require higher highs before it can be shorted using the divergence method. While the 14-week Stochastic is already gliding above the 80% range and can still provide several higher lows and higher high runs on any break below that level that does not go below 40%.

Only the monthly chart is still trending to the downside but the fast MACD momentum indicator is now approaching potential new high that can blunt or mitigate the bearish ADX reading. It is very encouraging to see the fast MACD vigorously following the price runs in this case for SPX.

Major resistance using the monthly 20ema and the fibo confluence levels using the weekly chart was the 1053 level. Last week's lack of trepidation among bulls in mounting this massively strong resistance is very encouraging from the technical point of view. If 1053 is successfuly mounted toward at least 1080 but preferably above 1110; then the next major resistance is the 1145 area using the monthly chart or the target run toward 1111 to 1131 range.

There are still a lot more work to do for the weekly chart to start trending and start approaching their over-bought readings before they can start blunting the over-sold and bearishly strong monthly ADX reading. A very strong over-bought reading for the weekly chart is needed to finally reverse a strongly bearish and trending over-sold condition on the monthly chart. Tit for Tat. We need a trend on the weekly chart before we can achieved a trend reversal on the monthly chart and possibly start creating an upside trend for the monthly chart.

A fresh over-bought condition off the bottom for the weekly chart will create a new trend. While a prolonged over-bought or over-sold condition can result in a major pullback or a reversal of the trend. The monthly chart is already in a prolonged over-sold condition after an 18 month of sustained selloff and is susceptible for a major pullback or a reversal.

The monthly chart can take several years before it can start trending UP again if the bulls can reverse it's downward trend using the daily and weekly charts within this year.

But at least, last week's Wednesday's price action suddenly reversed both intraday, daily and weekly bearish readings and price patterns.

I was gearing up to shorting ES contract with a short-term intraday weak rally toward SPX 1053 resistance for several months protective hold of my stocks/etfs I bought last Feb/March; when all divergence sell signals were reversed by a strong rally last Wednesday on intraday and daily charts. Suddenly the bear rally since March has turned into a potential bull run in just 1 day of price action.

A very positive development that bodes well for the bulls as long as we make a minor 1 or 3 days rally this coming week toward 1080+ before we go into a 3 to 5 weeks pullback or consolidation range. Hopefully, the pullback stays well above 1018 high of July to early August rally and not go below that important high.

Technology Names in the 52-Week-High Club, But Is This the End of the Rally?

If more companies are making 52 weeks high but are still underwater from their Oct 2007 high; it could mean that they are gaining strenght and more chances of sustainable recovery rally.

Key word is Recovery Rally off the bottom rather than All Time High rallies that is susceptible to a meltdown. In order to be able to recover and prevent a double dip; more strenght will be needed to get out from the pit rather than a show of weakness.

At this stage, more companies making new 52 weeks highs is a welcome sign of recovery. Once they make minor or major pullbacks as opposed to a meltdown; traders and investors will be on the lookout to buy the first opportunity of trying to get prices not too far away from the bottom.

End of Bubble Rally is when there are too many companies making all time highs such as in year 2000 and in 2007. It is just a natural cycle of stock markets; rallies need corrections in order to sustain further rallies. Nothing goes up forever and none goes down forever too in the general sense of the whole stock market landscape such as the major indeces INDU, SPX, and COMPQ.

Those who cannot understand the difference between a bottom up rally to an all time high rally are interpreting that this rally is already in a bubble territory.

Far from the truth. Just look at the monthly charts, most stocks are still trying to rise from the bottom after an 18 month of scorching selloff. Looking at the daily charts is very misleading and good only for short term trading but not for long-term investment purposes.

Buy low is still the mantra at this stage, then sell high in probably another 3 to 5 years of rally for short-term investors.

For long-term investment, we may never see SnP 667 level again in this century just as INDU low of 42 in 1932 and the 570 low of 1975 were never visited again during the last century and in almost all probabilities will never be visited again until doomsday come.

If this SnP double top pattern on the monthly chart is to be compared to the multiple tops of 1,000 for INDU during the 1965 to 1970's period; then we may not revisit SnP 1,576 level again for more than 20 years into the near future and possibly in this century once we break above that level which is projected to happen by year 2014. SnP500 is a relatively young index as compared to Dow Jones and it is the major index favored to lead the US stock markets into the near future.

The dot.com bubble burst has taught many tech companies not to burn their cash reserves at prodigious rate and they were able to learn how to make profits instead of making empty promises during the 2002 to 2007 of 5 year-bear rally. Compq is still a very young index with lots of potential growth in the decades and centuries ahead.

Now that the housing bubble has bursted; it is a double whammy lesson for everyone to remember for a long long time into the next decades as long as those people who survived this 9 years of secular bear market lives and be in control of the government and the economy. They will learn how not to spend as if there is no tomorrow but rather how to save and how to make sustainable profits not only for the short term but for the long term (much like what the surviving tech companies did in 2002 to 2007).

Natural Gas Trading: Right Now, It's the Wild, Wild West

So, when is the time to buy UNG?

When it becomes an over-performer and the undisputed leader of the pack perhaps with backwardation to go along in a year, two or three years from now?

Seems like trend trading instead of investing.

I invest in natural gas.

So I will buy more UNG when the going gets tough and UNG gets hammered some more to the ground.

Then I will sell, sell, and sell UNG when it becomes the American Idol or the over-achiever ETF and the undisputed King of the Hill.

That is what I call basic investing principle.