Congress could not reach a deal on the Bush Tax Cuts today. In particular, the status of the Capital Gains tax remains uncertain. The lame ducks have until their self-imposed deadline of December 17 to work something out on taxes, as well as several other pressing issues.
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The fear of no compromise may be the "excuse" for a sell off (i.e. end of year tax selling)into the 12-17 // 12/20 timeframe, with an eleventh hour compromise the catalyst/excuse for the next launch higher.... or maybe not.
ReplyDeleteThis seems to fit the timing prediction very well. Agree that fear will likely causes sell off in the meantime.
ReplyDeleteI will bet that there will be a last minute agreement. In politics, the game is to debate to the very last minutes so that both sides demonstrate their significant contributions to the agreement. It is just a "reality show". The stock market should go up after the bullish agreement.
Parker, I agree that the tax/UI issues could certainly be an excuse for a sharp drop, and the agreement terms will likely determine the extent of the next rally. I have a question for you about MFTs on JNK.
ReplyDeleteThe JNK MFT shown on Terry's site this morning uses a centerpost that is not the MFI high. With the flash crash as the left side of the MFT, if I use the lower Aug 5 MFI high as Terry did for the centerpost, the MFT ends Nov 3rd which is only 1 day from the actual high thus far. Great. If I use the higher MFI high on Sep 20 as centerpost, the MFT ends around Feb 1. If I split the 2 MFI highs as a centerpost, the MFT ends Dec 15. If I remember correctly, you do not split MFI highs for centerposts, but which MFI high is the correct centerpost?
Interestingly, if you use the Aug 5 MFI centerpost as shown on Terry's JNK chart and you carry that time cycle past the end of the T, you get Feb 2 which is only 1 day different than the MFT with MFI centerpost of Sep 20. Can we say that Feb 1-2 is likely an important top?
And, interestingly, using the split centerpost gives a data of Dec 15 in the timeframe of the projected null echo low, so is it possible that the Aug 5 and Sep 20 MFI highs both project tops while splitting the tops actually projects a bottom?
Also, I am guessing as with most daily indicators that the Ts get less reliable when the timeframe/data-points get too narrow. But, if I assume Dec 13-17 is going to be a low in JNK like the null echo low projects for SPX AND if I assume Feb 1-2 will be a top, then the strongest part of the subsequent rally from Dec 13-17 would likely end Jan 6-11 in order to get another small MFT ending Feb 1-2.
In the scenario I just painted, we'd see a significant low on Dec 15 +/-, an MFI/momentum high on Jan 10 +/- and a final price top on Feb 1 +/-. That would seem to fit the timing of Terry's bearish T expectation, your MFTs and my consumer discretionary spending analysis which projects a 1-2 month drop from November followed by a 1-2 month rise. The problem is the price projection since Terry's T seems to suggest the lower band near 1120 could be reached and my spending analysis suggests a 9-10% move would be normal since 2007 targeting 1100-1120. That's either going to require a flash crash or a relentless 8-10 day drop averaging 10+ pts per day which has happened quite a lot of times in the last few years but is still a lot to expect. Based on my historical analysis of TRIN, ISEE and AAII presented on your TRIN post, it seems like a drop of 7% +/- to 1145ish might have to suffice and would hopefully get us a nice ADT low in Terry's theory.
It will be a treat if all this stuff comes together. Keep up the good work!
does anyone really believe we are going to 80-100 pts in 8 days. come on. mkt is just too strong for that to happen.
ReplyDeletemarketlive,
ReplyDelete9-10+ pt per day drops for 6-12 days have happened 6 times in 7 months including 2 of those after multi-month rallies. Why wouldn't you believe it is possible? BTW, I'm not ignoring the possibility that 1200 or 1170 could hold the next pullback but I doubt it unless SPX can reach 1240+ this coming week. Good luck.
Stu
ReplyDeleteI think the next top is ~Feb 1, based not only on the September JNK MFI peak (with JNK acting as a surrogate for equities), but also with the Euro and Volatility Money Flow Ts showing an early February top and bottom, respectively. See:
http://position-sizing.blogspot.com/2010/12/currency-money-flow-ts.html
I am going to trade whatever low we get in the next couple of weeks by going long through the end of January.
One more thing...there was a disagreement recently about whether Terry recommended buying the projected centerpost T low in mid-December. He clearly stated in today's audio that he does not recommend it if the mid-channel holds at SPX 1170ish and didn't exactly seem enthused about it for more than a risky 4-week trade if the lower band is reached near 1120.
ReplyDeleteI think the story of another rally into February 1st +/- after a December drop works well with a couple other things I've observed besides my discretionary spending analysis. If you look back at virtually every quarterly earnings period for 4 years, you'll notice there is typically a 5-10%+ reversal within 2-4 weeks after earnings season starts. November 5th was a case in point and the correction may not be over. And, I believe margin compression will show up more and more over the next couple quarters due to QE2, so that will weigh on the markets after people see a couple weeks of earnings in January and get over the tax/UI/Xmas rally effects. However, QE2 is having an effect on stocks and is currently scheduled through April I believe, so the market could very well hold up pretty well into Feb 1 and then bounce in a wave 2/B into Mar/Apr near the end of QE2. Of course, the QE3 story will probably play out upon the right excuse. Just a thought.
Thanks for your thoughts, Stu.
ReplyDeleteThe more I have analyzed it, the more I think Martin Armstrong's 8.6 year cycle low in economic confidence (around June 10, 2011) involves a cycle confidence low in the US Dollar.
Which should bode well for commodities and commodity stocks heading into the May-June time period, even if we get an early February high in equities followed by a stock market correction.
In addition, Terry's volume oscillator and AD oscillator Ts show a right end in the May-June time frame. He originally posited that this would be a bearish T, but he has since taken that language off his chart. It may turn out to be a real T.
so if it becomes real T then it is 6 months T ..correct . so mid dec to mid june?
ReplyDeletearmastong cycle 3142 days has may 17 2011 as 3142 days from Oct 10 2002 low. also may 23 2011 is 393 days from april 26 top. so seems to me may 17-23 is important enough.
ReplyDelete