from Scam (build up of troops to invade Iran?)
FINANCIAL MARKETS OVERVIEW for WEDNESDAY (10/3)
"We still think Wednesday is more of a down day than an up day for stocks and will give the chances for 1577 only about 20% before the employment report and maybe a bit more afterwards. Bonds look higher into Friday now as does the dollar; metals should be sold on rallies and oil confirmed a temporary top and rallies should be sold.
STOCKS and DEC. S & P e-MINI
SWING TRADING RECOMMENDATION: Hold Dec. S & P e-mini shorts with a 1565.25 stop. Exit 1540.
ANALYSIS FOR WEDNESDAY: (10/3) We missed selling the S & P by 1 tick and added at 1556 on our intraday email update. We think the market should quickly go to 1539 on Wednesday but could bounce on Thursday. If the market continues to hold up well through late Thursday, the chances for a last push higher to 1578 would increase. We think energy is weak enough on Wednesday to push this market down and we would stay short.
DAY TRADING ANALYSIS: (10/3) Floor support is at the 1555 and then major support at 1550 and 1539. We are expecting a 79% retracement of the recent range of 1533-1561 and that should happen quickly. We favor the deeper correction and would favor shorts on Wednesday. Even if the secondary high comes in, we would still favor shorts. Patterns are such that until the market takes out 1539, there is still a chance for another 26 points higher to 1577 but we think it is unlikely. There still is a small chance of retesting 1559-60 early Wednesday before the market fails.
OVERALL: Oct. 2-5 will be congestive before the employment report, probably in a 30-point range between 1561-1533. The best part of the congestion is the first drop, which is usually 78% of the move up from 1533-1561. Hence if 1561 holds for the high, we would expect a move to 1539 on the next push lower into Wednesday. If we see a slightly higher high at 1564 first, we may fall only to 1541.
PATTERNS and CYCLES: The minimum target for the upside is in. The chances for 1578-80 are small. A key cycle that peaks into Oct. 24 was last seen in the year 1806 but tends to create emotional depression, lethargy and can contribute to unexpected wars. It also can create unexpected accidents in infrastructure like we saw with the Minneapolis bridge tragedy and the effect of it could be felt all of October and all of November. The effect of that cycle may be felt after Oct. 2 and may prevent new highs into Oct. 12, which should be the last cycle high for the market. We think cycles from Oct. 15-29 have major crash energy involved in them.
CYCLICAL OVERVIEW: Lower into Wednesday; sideways to higher on Thursday and volatile on Friday.
BIG PICTURE SYNTHESIS (10/1) We can make a case for a minimum pattern completion at 1560-1 and will need a close below 1512 to really confirm a top. Chances for 1578 are small. I suspect we can scale in shorts via short stock index funds and buying puts and selling futures at 1560 but I am not sure you will get instant gratification and we think it will take until the week of Oct. 15 for something bigger to happen to break the camel's back.
BACKDROP for POLITICAL and GOVERNMENTAL UPHEAVAL CYCLES: We favor the more bearish interpretations based on strong war and government upheaval cycles in October. Will we invade Iran--which is what the extra troops are really there for--or will Bush get hit with a scandal that he cannot get out of? Even scarier is a secret report in the press suggesting that the military would stage a coop if Bush attempts to go into Iran. We think war cycles are stronger into May-June 2008 when we think a major Middle East war could breakout. Still a huge mess at the end of October that is likely to lead to something messy in the US and the result should be an unhappy stock market that is likely to fall more than a tiny "c" wave down to 1425. That being said, some of the patterns setting up for closure here suggest more that type of secondary topping we saw in the year 2000.
LONGER TERM: If cycles are as bearish as we think into late October, a 3-wave lower from mid-October and then into later in the month could be 304 S&P points and then 4th-wave congestion could happen for a number of months and a final 5-wave lower would be due into April 2008. The most bearish pattern for stocks into 2008 projects a move to 800 on the S & P and given the current climate and the fact that an oil crisis has not started nor a Middle East war or a crisis in the U.S. government, there is plenty of time to go down. Cycles continue to suggest that the US will do something really stupid and invade Iran and that could really set off major pandemonium in the markets as the ramifications may be rather messy. There is enough stuff in the change of govt. cycles to really create some damage and surprises so stay tuned through the end of October.
FUNDAMENTAL INSIGHTS: (8/17) Because of geopolitical and terrorist cycles are particularly messy into late October, I suspect a Phase 2 will develop where the FED may not be able to do much. The big question is whether Phase 3 develops and the rest of the world decides to dump US bonds and stocks. That could happen if Bush and company get into bigger scandals that they cannot get out of, and that is what we think is on tap into October.
LOOKING AHEAD IN 2007-2008: (8/15) Most bull markets over the past 150 years have had an average of an 8.6-year decline from the high to the low so it is presumptuous to assume that this market will go straight to new highs on all the indices and NASDAQ does not have a prayer and the S & P is more likely to double top at the 2000 high rather than make a new high. Moreover, the seventh year in the 10-year cycle is often lower. Declines off of bull markets have been often 20% and sometimes as much as 40% so this summer could be mess if the rest of our data is correct. At the moment, we are projecting a low into late October but the major low is not due until April 2008 and one patter on the S & P cash projects 792-800!
MONTHLY CHART STOCKS: (7/13) The 120-year model would allow for an early August high and then an Oct. 2007 low; in 1887, the market fell 16% during that decline. We are open to lower numbers and we think a potential crash in the dollar and interest rate dump by foreign investors could start something much deeper.
DEC. NASDAQ e-MINI FUTURES
TRADING RECOMMENDATION: Hold Dec. NASDAQ e-mini shorts with a 2181 stop.
TODAY'S COMMENTS: (10/3) Our intraday update had recommended getting short at 2133 and we will hold now NASDAQ shorts. We would not be too worried if we get some minor strength. Market needs to take out 2123 to negate a small chance for 2170.
DEC. DOW e-MINI FUTURES
TRADING RECOMMENDATION: Stand aside.
TODAY'S COMMENTS: (10/3) We took nice profits and while there is still a minor chance for 14235, we will stand aside. If it cannot come in by Friday, we think the chances of it happening are rather small. Still not in a mood to top-pick a market at record highs.
MUTUAL FUND OVERVIEW
(10/2) We exited our 20% Rydex Nova position on Oct. 1 to play it safe, as higher prices into Oct. 8-12 are not a sure thing. We got long the Rydex Govt. Long bond advantage fund with a 20% position on Aug. 31 and will hold into the October high. The market is currently doing a pullback that should be about done. Crude looks like it will do a secondary high toward 8200-8250 and set up the next short. Gold issued a sell signal and the XAU also so we will have a few weeks or more to wait for a buy. Gold cycles often go 5-6 weeks so it may be until early November before a buy signal sets up. There is evidence of a minimum pattern completion and a fall to at least 690 is due. On the dollar, a cycle low is due by Oct. 8 at the latest and that should be followed by a 3- or 4-week bounce. We took profits on short dollars into Sept. 28."
AI
