Here's a brief description of Wed.s market action. Amazing what the fed can do at will. Devaluation of the dollar has me extremely worried. Housing has taken its medicine the market needs to also 401 K's be dammed. Heck at this rate the future retirement dollars will be worthless to a fixed income retiree.
BTW I am adding to yesterdays DIA plays at the open if possible.
Everything pointed Wednesday to massive Plunge Protection Team hyperinflation intervention. The Dollar tanked, precious metals busted higher, and Oil set another new all-time high. These are artificial gains, the result of simply throwing more money supply at limited securities and commodities. The result is higher prices. The Master Planners have been conducting a once-a-week intervention rally, that gets mid-day legs from fearful shorts who cover - not genuine widespread buying from Bulls - and has served the purpose of stopping gathering downside momentum. This week is options expiration week, so the Master Planners want to protect put options writers with a rally. For those of you keeping score at home, weekly rallies have seen 416 points Tuesday, March 11th; 420 points Tuesday March 18th; 187 Tuesday March 25th; 393 points Tuesday April 1st; and 256 points Wednesday April 16th. The PPT did this from July 2006 through March 2007 and pushed prices a couple thousand points higher inside a completing Bull market. Now they are hoping to keep prices sideways in a Bear market long enough for the Bull to take over on his own. Amazing, and it is legal. However, we still have lower highs over the past six months, we have one new Hindenburg Omen Observation, and an interesting point is that rallies actually set up conditions necessary for further H.O. observations. Once we get two, it is an official comfirmed signal, meaning a major decline is likely, in this case a further major decline since the Bear has already taken 11 percent off the Industrial's highs.
It is amazing to see Trannies rise 190.64 points on a day Oil hits $115 a barrel, a new all-time record high. Guess higher fuel costs is a good thing for transportation company earnings. Hmmm. We have indicators that tell us the quality of each day's rally or decline. The DP/SP indicators tell us today was plain and simply an unhealthy short-covering rally where those most pessimistic about the markets are forced to buy stocks they have agreed to sell at a fixed price without owning those stocks.
However, enough of that. Let's get to the brass tacks of what is the key technical factor to keep an eye on Thursday. Once again, prices in the Industrials are bumping up against a 2008 upper horizontal resistance boundary line. A decisive breakout above 12,750 would argue that a Bullish multi-week breakout is occurring. In fact, that could argue that the Bear market is over and a new Bull market has started. Elliott Wave analysis doesn't quite buy that as there is a plausible scenario where Industrials rally toward 13,000, yet still are corrective, setting up another major down-leg. But this four month sideways trading range needs to be respected.
Oil closed at another new all-time high Tuesday, at $115.02. The Dow Industrials rose 256.80 points to 12,619.27 Wednesday. The NASDAQ 100 rose 52.16 points Wednesday, closing at 1,846.89. The Russell 2000 rose 21.33 points Wednesday, closing at 713.39. The HUI Amex Gold Bugs Index rose 23.33 points, closing at 475.16.
Gold closed up at 945.1, inside an accumulation opportunity short-term. Silver rose to 18.31, and Oil hit an all-time closing high, at $115.02, headed for $130. The Dollar got crushed, down 0.69 to 71.39, along its journey toward the sixties, then eventually the 40's. Bonds fell a point and a half to 117^00, not liking the Fed's inflation injection. The VIX fell 2.25 to 20.53.
Right now we see the Dow Industrials and most major averages stuck in a sideways trend-channel. The Industrials have been range-bound all of 2008, unable to escape the support of 11,700 and the resistance of 12,700 on a closing basis. About a week ago, the Industrials acted like they wanted to breakout north, but the resistance line just wouldn't let them. They appear to want to try again this week. Charles Dow called these periods "lines." But we do know a couple of things. First of all, the longer this sideways range goes on, the deeper the breakout up or down out of this range will be. The second key point is, once prices breakout from this range, either above 12,700 or below 11,700, prices should run hard in a sharp up or down trend. If the upper resistance line holds, we may want to prepare for another decline.
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