Thursday April 12, 2012
We showed various re tracements yesterday and concluded the SPX 1300 area was a reasonable expectation.
Yesterday's bounce was just that a weak Wave B in an ongoing A B C correction.
I did not attempt to label the waves but the 60 point down from 1420 is not doubt Wave A, we are in a Wave B now and a C should follow to lower levels. Note how quickly CNBC et al jumped on the Dow snaps back bandwagon yesterday. This is typical of counter moves. Prepare for a low next week around 1300. That would lead to the final Wave 5 up from December and the end of the rally from March 2009. Of course we could be wrong but our recommendations to accumulate CEF stand, and even if we are wrong on the overall pattern CEF is a good buy in here. Gold shares and gold are making lows prior to the overall stock market low a typical pattern.
don't miss the article on page C 12 in today's WSJ, the Fed's Four Trillion Dollar Man. The article suggests that Bernanke has been successful in stopping any dollar rally in its tracks, that the dollar is just beginning to rise. He knows a strong dollar will end the stock market rise here. But even short term the Dollar bottomed last September. The stock market has managed to rise in-spite of dollar strength. This next graph shows just how sensitive the stock market is to the BUCK.
Green is for go or up. Red is no go. Here it is clear that when the Dollar advances in the main chart, stocks go flat. When the Dollar flattens as it has so far this year, stocks rally in the top panel.
This FED stuff is not that complex...nor is Bernanke that powerful and this is a picture of that power about to slip slide away.
Siip Sliding away, slip sliding away
You know the nearer your destination the more you slip sliding away
Simon and Garfunkel