Monday, July 5, 2010

Weekend Analysis

I hope everyone is enjoying the long weekend and celebrating the birth of this great country. I know I don't usually drop in any of my political opinions, but I feel strongly about the freedoms we enjoy here in the U.S. of A, and I'm very concerned at the reckless attack we have on our freedoms and the rule of law with the current administration. To name a few:

- the tax payers get put on the hook for mass fraud facilitated by the gov't (fannie mae and freddie mac)
- the senior bond holders get pushed back in line with the sale and gov't bailout of Chrysler Corp...
- back room deals and obscure senate procedures get healthcare passed against the will of the people...
- the student loan industry gets nationalized for no better reason than that they can
- the oil industry gets shut down in the Gulf because the regulators failed to do their jobs, but ALL the blame goes towards the greedy oil industry in attempt to make energy more expensive for everyone (cap & trade); note I absolutely believe there is no way BP would get away with not settling its bills with the people, but the $20 billion fund is only another opportunity for gov't to inefficiently settle the claims...
- Arizona gets attacked for trying to solve its own immigration problem while the gov't continues to refuse to secure the borders (one of the few actual jobs of the gov't)

Why do I bring all this up? Well, I strongly believe that supercycle wave 3 will test the very fiber of this country. I'm hoping that the market's downward spiral will finally push the people to remember that $$$ is not the most important thing in this world, but instead come to realize that what made our country great was freedom, personal responsibility, and moral values grounded in a belief in God. I'm hoping that once again the people will take the gov't back from the career politicians and full-time lobbyists and return it to themselves. I believe that is what is needed to create the environment for the next supercycle bull market.

Now, on to the charts....

Let's start with the 60 min chart. Based on the price action since the top, I believe Thursday - Friday count best as a 4th wave with the 5th wave starting tomorrow. I'd like to see an acceleration gap down to support a subminuette wave 3. I know we're already oversold on a number of indicators, but sometimes that is when we get our best price movement as market participants realize that price is not responding to the condition and switch sides. Based on ratios and trendlines, I'd like see minute wave 1 take us all the way to 955 this week, but I realize that buying may come in as early as 980. Stops should be positioned at Friday's high.

When we finally do bounce, I'll be looking for the 8 SMA on the daily chart for a minimum minute wave 2 target. If we can get down to major support for minute 1, then we can expect a 70-120 pt wave 2 pushing us back to the broken trendline. If we can't get that far, then I expect a smaller wave 2. Either way prices should get significant push back by the daily 34 SMA.

Looking at a bigger picture, we should have continued selling on the weekly chart staying comfortably below the 34 weekly SMA until intermediate wave 1 is complete, which should be near the 666 low.

Best of luck!
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