Weekend Dec 20 , 2014
Doug Short - the world rally resumes.
Bob Prechter has a great analogy for whether the FED can lower interest rates indefinitely.
Tom McClellan says it is still a bull market. As usual he pairs different time frames on the same chart. This time he concludes the market could hold up until next October. As we showed in the 200-2001 time period, that is what happened then with a broadening top formation. See our previous post. As he says the FED's fingerprints are all over the charts, and that is probably the best analysis at this point. How else could the markets have so violently reversed the last three days?
Wave Count Two Hour Chart
Several forecasters identified the late Nov and early December highs and reversals of various indexes as The High. If that was the case, those highs should not be violated. After two huge up days, the markets wre more subdued Friday even counting options and futures expiration. It is possible the markets will stall here and reverse, or not.
Please examine our last two posts, Massive Accumulation Day and A Look back at 2000-2001. And as Tom McClellan points out, the FED's fingerprints are all over these markets. I am going with the theory that we have an extended period of highs and lows just as in Year 2000-2001. The FED will do anything to kep this going and has.
2000-2001
Note the four prominent tops. Note how each is amazingly lower than the previous high. So this can happen, and it can take considerable time. If in fact we are correct about a forty or eighty year high, much less a 233 year high, a few more months is not a lot of time for things to play out.
Our friends at Elliott Wave EWI believe this is the culmination of 233 years of American progress beginning with the victory at Yorktown. 233 is a Fibonacci Sequence Number.
I am thinking we are not so much no in a bull or bear market as a transitional market from one lone up move transitioning to the next move.
XLE Energy Stocks
I am not sure what the wave count is for crude oil but the XLE appears to have completed five waves down. a normal re tracement would take us XLE back to 87.5.
Of Two Minds Suggests this Gap is Likely to be Filled.
XES Energy Service
Wave 2 and 4 lack alternation but a five wave pattern is there. A move back to 36 could happen this week.
NOtice there are gaps on both charts. The next event may well be that those gaps are filled before the downtrend resumes.
Speaking of this week, the market closes early Dec 24, all day Christmas and apparently will be open Friday. So trading will be light. I suggested in one of my PhD Classes that Congress should make Christmas and New Year's per manet three day weekends. New Year's Day would be a Monday. This would eliminate fractured weeks like this. As a matter of fact now I recall that I suggested all major holidays should be three day weekends, including Labor and Memorial Day, MLK Day is already a Monday. Thanksgiving is more a four day weekend.
How Cheap is Oil /
Oil Priced in Gold
Of Two Minds had an interesting look at oil and gold but this is the way to price oil in gold It take 4.5% of on ounce of gold around $1200 to buy one barrel of oil for $55. other things about this chart
OIl is approaching a long term low in price.
After the 2008 collapse, the ratio never crossed the 200 bar moving average again.
Many of the moving averages have converged as they did in 1999.This is usually the pre-cursor to a tend change. While 1999-2008 was above the 200 bar MA, can we expect th ratio to stay below that MA for some time now?
Bonds Short Term Yields Rise
Short term yields are rising in anticipation of a FED increase next year. Percentage wise this is a double.
The bond market is still on a tear to the upside by the way.
US Dollar has jumped to a higher trading range. This re enforces the idea that in a world of trouble the dollar is still the currency in demand, certianly not the ruble.
The Bottom Line
With a shortened day Wed and the next two Thursdays off, we could see the locals move prices around but the real story may not be revealed until next year when full trading resumes. In the meantime a bet to th eupside on XES or XLE might be aninteresting bet.
Bonds still look like the place to be. We will update you after Monday's close.
Social Mood
We are well into our analogous period for 2015-2016 which is 1973-74. Back then Ground Zero for discontent was New York City, which then Mayor John Lindsay termed the second toughest job in the world. Police are circulating petitions asking the Mayor to stay away from any police funeral.
St. Louis Police are asking for an apology from the Rams Players. AFter working over time to insure a peaceful game the police were not amused at the protest by players against police.
Obama and Putin from Frosty to Frozen, The Cold War is Back
Boko Haram sells kidnapped girls
Syria Shattered - by subscription to the WSJ.
And meanwhile, Venezuela is a bankrupt, abandoned by Cuba.
We could go on ad infinitum but
recall our theme of The New Civil War in the USA. We note that social mood like the markets moves in fractals. We now see fractals of mood within cities like St. Louis and NYC. Societal break down in Nigeria and syria is on display. Yet another front is openned with Obama recognizing Cuba as Raul Castro declares his adherence to the 'wildly successful Communist Economic Program' on the island.
The FED is holding up the stock market in our opinion. There is too much negative social mood for the markets to be this high. As we mentioned last week, the re purchase of stock by various companies has also kept the markets up.
But up is up and the NYSE Weekly Advamce Decline never lies. The trend in stocks remains up for now.
We think the better interpretation at this time is simply that the markets are now in a transitional phase neither up nor down but moving from up to eventually down.
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