Replies to post #32437 on Short Term Trading Member Forum

[zentrader13]

Arjunah,

At what level do we get a 54M FLD cross on the SPX?

TIA,
Zen

[arjunah]

SPX: I'm not a fundamentalist, but I have pondered what might cause the SPX to loose 150 to 350 points in the next week or three. I think the most likely event would be that the Fed throws a party and nobody shows up. That is, confidence is lost in Bernanke's ability to save the world.

When the Fed fails to deliver, the markets let it know immediately. The 25 bp cut on October 31 was followed by a 100 point sell-off in the SPX in just 8 trading days. The 25bp cut on December 11 was followed by a 70 point sell-off in 5 trading days.

The Fed did get a 40 point pop in the SPX on 9/18/07 with its 50bp interest rate cut, and a 70 point surge on 1/22 following the 75bp cut. Then there was Tuesday's 40 point run after the Fed swapped $200 Billion in Treasuries for unmarketable junk. And even more recently, today's joint venture with JP Morgan to keep Bear Stearns afloat. But even after all that, there are still lots of fingers hovering over the panic buttons, and we are very close to making a new 19 month low.

I have attributed the Fed's repeated intervention for extending the current nominal 4.5Y cycle to 5 years. In support of this, consider the following: If the Fed had done nothing since August 07, is there any doubt that we would already have seen 1150 or lower in the SPX by the end of the January or earlier?

[arjunah]

SPX: I have linked to a post I put up last March showing a Hurst projection to 950 (the SPX was near 1300 then). At the time, I was expecting that target within weeks, as a 4 1/2 year bottom, not in seven months as it has turned out. I still consider March 2008 to be the most likely occurrence of the 4 1/2 year bottom and, as I've noted before, that is a very bearish scenario as it implies the highs for this current 4 1/2 year cycle are behind us and there will be a long term downtrend in effect into the end of 2012.

Both the 9 Year and the 18 Year FLDs have been broken to the downside, implying both the 9 Y high and 18 Y highs are behind us. The 18 Y downside target has been surpassed and the 9 Y target is about 650. Again, evidence of an extremely negative long term trend.

The only hope for the bulls is that we are now experiencing the 4 1/2 year bottom. But to support that position, I would like to see a a complete cycle analysis, consistent with Hurst's principles, from the last bottom in March 2003.