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Received this 3/21...
JW
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S&P (June contract)
The fate of the S&P was decided today! By closing
today above 1500, S&P (jun) will continue a manic
move higher towards 1875-1880 into late April/early May
timeframe. Greenspan decided against a more
aggressive 50 bps rate hike, which he will no doubt live
to regret. A 1/4 pt hike only encourages people to buy.
He needed to send a strong message. With OIL now selling
off nicely, and the Treasury Dept continuing their short-sighted
political manipulation of the yield curve by aggressively
buying in the off-the-run 30 years, thus holding long rates lower---
what the heck is gonna slow the economy & the stock market now?
I was wrong to think that S&P would not break above 1500
but I let you know beforehand where I would admit to being
wrong. I was wrong again to believe the yield curve would not
continue to invert. Today selling 30yrs & buying 2yrs picks
up 53 bps and it may invert further over the next few weeks.
BUT--I was not wrong about the adminstration
fiddling the numbers on CPI and PPI to understate true
inflation. Clinton did not invent this concept. As we've
stated before, CPI has been revised more than 18 times
in the last 20 years...each time with the desired effect
of lowering the stated rate of inflation.
The mistake politicians make throughout the
ages is that they have such a strong belief in their own power...
they believe that manipulating the markets can go on
indefinitely. The "Turning Point" due for May is a
strong warning. No doubt by that time OIL will have
bottomed out from a sharp Wave II correction, and begin
Wave III of its longerterm secular bull market....the chickens
are coming home to roost by late April/early May.
NOTE: Our models are not based on Elliot Wave. In this case
Elliot Wave analysis agrees with our view that OIL is headed to
New Highs above $40 over the next few years. I use Elliot in
describing the movements of OIL because many of you
are familiar with the idea of Wave Counts and in this case
Elliot agrees with our own analysis using the Reversal System.
Note also that just because the S&P may go exponentially
higher over the next few weeks, it doesn't mean I'm
recommending you go out there and buy it. If you are
a very nimble trader who can get in and out of the market
you might consider it. Risk is increasing here, not
decreasing. Many small investors will no doubt get
hurt badly when stocks finally do crash.
As to the NASDAQ, I have yet to change my view. My
view does not change because stocks went up for
one day. My view will change because my specific
levels have been closed above. For the Nasdaq
Composite that level is 5200. (4800 on the Nasdaq 100
June contract). If the Composite closes above 5200,
the Nasdaq will continue higher into April/May timeframe.
For now though, there is still a risk that it will fall apart.
Many biotech stocks are already down 60% and may
have further to go. A close below 4291 on the Nasdaq
Composite or below 4000 on the Nasdaq 100 (jun) will
signal a free fall.
TRADING PLACES
It is possble that the Nasdaq and the S&P might trade
places. If the Nasdaq begins a sharp correction, it
may in fact benefit the DOW and the S&P as we've
already seen last week. But again, if you see
the Nasdaq Composite close above 5200, and
if you see New Highs on the DOW, then all three
stock markets are headed higher into Apr/May.
As the Chinese say,
"May you live through interesting times."
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