Friday, October 7, 2011

State Of The Markets

This market has had quite a decline since the May 2 high- 21.58%. That was enough to get CNBC to call it a "bear market"- as they define a bear market as any decline over 20%. So what happened? As usual when CNBC makes a call the market does the opposite. They weren't talking about a "bear market" with the SPX at 1370 in May. They were talking about the "good news" that Osama Bin Laden had been captured. Now they are negative because the market declined 20%, so the market did what it usually does when CNBC gets bearish: Reverse hard to the upside. The market formed an Ending Diagonal into the SPX 1074.77 low and staged a major reversal to the upside- as ending diagonals are supposed to, with a "throw-over" of the lower trendline, as illustrated below.

Now that the market has staged a major rally, the question is, what's next? I have plotted some Fibonacci resistance levels that should provide resistance. If this rally is corrective in nature, then it is most likely wave 2 up of the next major leg of this Bear Market. However, if the market starts impulsing to the upside. Then this market is set to take out the 1370 highs of May 2011. As I have emphasized before, however, it doesn't matter so much whether the rally is over or not. It matter that people get positioned for the long run trend of this market, which is DOWN. That means finding the safest possible cash equivalents and staying OUT of ALL traditional investments- Yes that includes Gold and Silver...This Bear Market could very well trump the 1929-1932 collapse...because the situation is much bigger this time....not to mention the fraud is on a MUCH more massive, scale....around the world.

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