The Great Depression

  • Benjamin Roth: The Great Depression: A Diary

    Benjamin Roth: The Great Depression: A Diary
    It's all here, times change people don't -the endless govt programs that fail to stimulate the private sector -the ups and downs of the economy, the veterans pension stimulates just as the housing credit did, until of course the money runs out -Roth is a attorney in Youngstown Ohio who kept a diary regarding the economy from 1930 until WW II breaks out, he is objective, candid, and forthright which is more than we get from Washington DC now or then highly recommended

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November 25, 2012


Trader Kid

You certainly can count 5 down on IBM, and now you can count 3 back up which can mean the components of a larger 1,2 (and note that it has already moved up well beyond what that post shows just from Friday's session), but waves are not very good for individual stocks anyway.

My highest probability count of the $SPX is a nest of 1,2s and I am now looking for the crash towards the 1000 area I have mentioned before to resume in short order, so I remain short. This unsustainable explosion up over the last few days screams bear market short covering rally to me and the count just doesn't work as complete here like it does for the sell-off into June. I don't see any reason to believe the market can make it to the 1500s from here as while the more sensitive sentiment indicators came down nicely (but who knows now with the late week bounce), the longer term ones are nowhere near extremes, and too many analysts are looking for one more high, so I expect it to be the one everyone sits around waiting for until they realize they are at the bottom and they missed their chance to exit.

Congratulations for calling the bounce as I certainly did not expect one, but I suspect this is the last good chance to exit the market before a real, long overdue clearing of the weak hands.

I have now even unloaded some of my gold and silver and probably will get rid of some more next week. I did not expect such a bounce there either, but the pattern is clear enough now for me to act on. COT was plenty frothy even before this recent rally, we shall see what it looks like on the delayed Monday release which won't even include the late week surge yet. I am looking for a move back down to the huge support shelf in the low 1500s (which is also the .236 retracement of the entire bull run BTW) to clear everyone out again and then I will re-enter for the next leg up (assuming everything plays out this way of course).

I expected a little pullback in the dollar, but I must admit that that break was stronger than I would like to see for my interpretation that the bottom is in, but this needs a few days to settle down either way because of the ease of things moving around "too far" in such a low volume environment from the holidays. It is also almost at the 50 day SMA.

Since we agree there should be moves downward next week, the key is to observe the power of the move, if it is lazy and sloppy, it could be just a consolidation before moving upward again as you expect, but if it breaks hard and fast you sure won't find me catching a falling knife to buy the "dip".

Dennis Elam

trader Kidd

thanks for the response, if the market breaks to 1000 from here it will be the first time ever that it did so with the public safely in the bond market and out of stocks, with major stock outflows the last few months who is left to sell?

Trader Kid

I assume by "public" you mean the dumb money in which case the sentiment and COT reports show plenty of people are left to sell as I mentioned. I am not sure what else you would go on, or what you mean by "outflows", all stocks, bonds, currency notes, etc. are held by someone somewhere at all times, the price merely gets bid up or down, so there is of course always someone available to sell. I don't like to harp on this point since I think the concept is somewhat useful as a mental tool anyway, but I'm bringing it up because I already referenced the sentiment and I want to make sure we are on the same page. I see plenty of reason to believe a lot of weak hands are left.

Peak to trough hasn't even been 10% yet and people seem to be calling left and right for a bottom which is in itself a contrary indicator. The economy is very likely already in a recession and the business indicators are deteriorating rapidly. Unless you think that the economy is on the verge of recovery, how could this tiny correction be sufficient to compensate for these conditions?

We have already discussed the bond thing, and bonds are in the very late stages of a very long bubble. If anything the heightened bond prices shows traders are fearful enough about the economy and/or complacent enough about "inflation" that they don't mind the pathetic yields, implying that the stock market doesn't "get it" yet and needs to catch up with reality. But in either case, do you think that when the bond bubble pops and investors raise cash in fear that it will be bullish for the market? We are also near all time highs on the $SPX, if bonds haven't sold off to "move into" stocks by this point, do you really expect that will happen now? I accept that one should not go around willy nilly claiming This Time Is Different, but you also can't get fixated on a single correlation to claim that no one is left to sell.

Also note that one of the big factors for my bearishness is the massive wedge that has built itself across the last 5 peaks and troughs of the $SPX which is a very bearish pattern. I don't recall off the top of my head seeing technical pattern analysis on this site (by which I mean head & shoulders, triangle, etc., not searching for similar market period fractals) so I am not sure of you familiarity with it or if it has factored into your analysis, I read a lot of sites, so maybe I'm just forgetting, but wedges are expected to retrace to their origins which is where I get the 1000 area target.

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