I've come to believe that because these cycle turns are so frighteningly accurate as you say, the news of the day seems to be the justification for the market moves and not the cause.
So, with that in mind, don't buy too much into the idea of all these credit stuff really being behind what's going on with the market moves. I think the extreme volitility has more to do with the uptick rule ending and not some new paradigm as so many I see on TV say who obviously have no biz managing money.
The thing about credit crisis - which come every 10 years or so - is that they get resolved very quickly. Think about it - it was just Oct the market was at new highs on both the SPX and DOW. What are we now? 4 months? 5 months? and it's as if we're in a depression because of a couple large investment banks made bad bets that carried over to money center banks who are all going to be just fine in the end?
They can only have so much invested in this crap and as the billions grow on the write off amounts, you have to beleive they are going to end this this year.
That said, what no one talks about is the fact that commoditiy cycles also are out there and run in 20 year cycles. What happened? Well, the last commodity boom was in the early 1980s and guess what? 20 years later is right about now. The problem is that it turned with this credit bubble busting at the same time and those two are tough to deal with at the same time. But we're about there.
Overall, the longer term cycles all work out for us to have a rally actually going into mid to late 2009 off this low. The Nasdaq actually though seems to be in need of one leg lower with the DOW and SPX having already made thiers. So, if it works that way, expect those two to wiggle around down here not really going up or down in any big way, but the Nasdaq potentially drifting a bid lower into early April. Then a big rally comes into June/July.
Remember the old phrase, 'sell in May and go away'? Well, probably June/July things get dicey again. But late fall could be a very very nice rally into 2009.
So, now is not the time to get negative and don't buy into the news of financial crisis taking down the world.
Look at that SPX weekly chart at the top of the page. You can clearly count 5 waves down. But that's off the highs made in Oct. That means this entire 5 wave move down is 1 large impulse corrective wave, or a wave 'A'. So, this next rally will most likely be a wave 'B'. 1450 being the best case scenario. Then a wave 'C' pulls the SPX down to a final low possibly this year. That means DOW 11k's and SPX 1100's.
Keep that in mind before any large positions are taken.
Covered calls after June/july should be with $10 in the money options.
AI
