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Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Stocks Stealth Bull Market Crushes Bears Hopes (Again) as U.S. Dollar Weakens

Stock-Markets / Financial Markets 2009 Aug 24, 2009 - 12:15 AM GMT

By: Nadeem_Walayat

Stock-Markets

Diamond Rated - Best Financial Markets Analysis ArticleThis article seeks to update the recent stocks stealth market and U.S. Dollar bull market analysis.

Stocks Stealth Bull Market Crushes Bears Hopes (Again).


The weeks price action on the major indices once more illustrated the dangers of letting emotions influence ones judgment when it comes to trading and investing. Which was never more evident than during the early week correction that once more suckered many bearish commentators into calling an end to the 'bear' market rally, right from the top of the analysts food chain right through to the bottom. Again nothing new was called on to justify FIGHTING against the trend other than references to the 1930's depression era rally! Well Shall I let you into a little secret ?

EVERY BEAR MARKET / MAJOR CORRECTION IN THE STOCK MARKET since the Great Depression HAS BEEN COMPARED TO THE 1930's BEAR MARKET RALLY BUT NEVER ONCE HAS IT REPEATED !

The only way people REALLY learn from their analysis mistakes is by getting burned in their trading account / portfolio balances, nothing else works, analysts and economists living in ivory towers will never learn!

Look, I beat the GREAT CRASH! Yes that still means 1987 ! BUT being naive, and young at the time, I believed in the 1930's DEPRESSION model and the FIFTH of a FIFTH on Elliott Wave which I learned within a short period of reading Asimov's foundation series therefore was primed to believe in elliott wave being a manifestation of psycho-history, What did I know? After all it all seemed highly convincing, so I fought against what had actually made me a fortune during the crash and continued to view each post crash peak as a shorting opportunity for a good year ! Much as the bears are doing so today ! This is 2009 and NOT 1930 ! and the Markets DO NOT REPEAT ! It is ALWAYS DIFFERENT EACH TIME!

If your finding yourself keep shorting this rally then you seriously need reappraise as to why you are fighting against the price by means of the diffusion responsibility onto indicators, fundamentals, theories, historical patterns and such like which is not what you are actually trading !

It is simple, you stick to the direction that increases your account balance! Don't try to THINK to hard about it! It is THINKING that will be your downfall. Where trading is concerned, THINKING is not good, in fact if you THINK too much you may wake up one day some years down the road to wonder, what the hell have I been doing for the past 3 years???? I have learned all these wonderful theories that produce diddly squat when it comes to actually making money!

Here's a tip for if your stuck in a losing streak, SCRAP everything you know and use a coin toss to pick the direction, then focus on the proper application of money management (i.e. targets, stops, stop and reverse, adjusting position sizes etc), and see whether or not you start to make money or not ;). I demonstrated the winning coin toss trading system 5 years ago on in REAL TIME on moneytec.com (Mr 50%) trading the British Pound That yielded a 380 pip NET profit over ONLY 11 trades. Also ensure to bookmark walayatstreet.com, which when when its live will cover REAL TIME TRADING (100% FREE).

Stocks Stealth Bull Market Road Map into October 2009 - July 23rd 2009 Conclusion

CONCLUSION - My earlier fears about a bull trap appear to be unfounded, the stock chart is talking that we are in a stocks bull market, and is suggestive of a trend higher towards a 2009 target of between 9750 and 10,000, with a high probability that we may get there before the end of October!. Key danger areas for this scenario are a. for the trend line to contain corrections, and b. that 8080, MUST HOLD.

Current Price Action

The Price action to date has shown relative strength against the forecast of a month ago, this suggests a higher target than the original 9750 to 10K before the end of Oct 2009, the secondary stated target was 10,450. However it also suggests that the market may put in an earlier peak. I am still leaning towards the next correction AFTER the peak to be of greater significance than the last correction from June to July. Also, whilst my in depth economic analysis is on the UK economy, however much of the conclusions could equally be applied to other western economies, the analysis of February 2009 has been projecting towards a a DOUBLE DIP recession (updated June 09) which has negative implications for stocks during 2010, but for now DON'T be silly, don't fight the stocks bull market (time to drop the word stealth). To keep up to date on the state of the stocks bull market, ensure your subscribed to my always free newsletter.

Financial Crisis Worst is Not Over?

Robert Prechter in his latest 10 page Elliott Wave Theorist Newsletter states that financial crisis is NOT over and gives a warning he's never had to include in 30 years of analysis, Read it now for free!.

U.S. Dollar Bull Market - 14th August 2009 - Conclusion

Conclusion

The USD at 78.40 is not far off its recent low of 77.40, so whether or not it breaks below 77.40 before going higher, the overall conclusion is positive for the US Dollar to exhibit a volatile uptrend into the end of 2009 and probably beyond. Key resistance lies at USD 90, which it should achieve before year end. This scenario remains in force unless the USD breaks below 75. The implications of a dollar bull run is generally bearish for commodities such as gold, which I will cover in a future newsletter

Current Price Action

The U.S. Dollar reversed direction after failing to break above 80 and still some way below the confirming trigger of 81. The corrective move to date is of little consequence to the forecast which remains as is.

The most recent price action implies the following -

a. That the USD puts in a double bottom before busting through above 80/81 for a strong rally.

b. A break below 77.40 would trigger a sharp drop towards 75.80 which would seriously risk a re-evaluation of the whole dollar bull market scenario which would be negated on a break below 75.00.

At this point in time I continue to favour outcome a. over b.

To keep up to date on the state of the USD, ensure your subscribed to my always free newsletter.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 300 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

malvo
24 Aug 09, 09:28
counterintuitive logic

Your assertion that the present market will not be a re-run of the 1930's, I accept. Without repeating what can be found in almost all bearish analysis, is this current run-up just a little ahead of itself with regard to what is being priced in. Is it really implausible that this rally could go the way of 2001-2 considering the gravity of the structural problems now existant, and the simple fact that the causal problems have in no way been adressed by government action thus far? I refer to debt/GDP ratio, inadequate writedowns, labour mkt etc... Surely the credit creation cycle cannot be so soon restarted?

Now I trust you have considered this, and deffering to your greater experience and understanding, is 2009 a 1987 style bottom year?

An admirer of your work.


tony
24 Aug 09, 15:39
index - dollar relationship

Hi

Interesting article Nadeem from you on both index and dollar here.

In recent times the dollar relationship and index has been: index up = dollar down and vice versa.

As you can see the dollar has been down and dow going up.

From your analysis, it appears you believe there will be a break in this relationship which of course is possible.

If you believe the dow will continue higher surely the dollar will fall lower below 75?

Do you believe in a change in this relationship?

Your comments is much appreciated as your analysis is of much interest.

Tony


Nadeem_Walayat
24 Aug 09, 20:40
Malvo - Stocks Bull Market

I focus on impulse and corrective swings, i.e. the current swing up is impulse, with the june - july swing being corrective, which is the expected behaviour of a bull market.

I recommend you read and study the book how to trade commodities by WD gann of how I view the markets, as really I don't treat fundementals as being significant when it comes to trading swings.


Nadeem_Walayat
24 Aug 09, 20:44
Tony - Dollar

Yes I am aware of that, as well as implications of other intermarket relationships. However the sum of all analysis is in the final conclusion which needs to be strong enough for me to put money on it. Therefore it is the conclusion rather than individual components of analysis that I refer you to.

and Yes, in this respect my conclusions for the dollar and dow are CONTRARY to what is the widely held belief that both cannot move in the same direction. But again I iterate the relationship is only one component as is elliott wave theory, and one cannot hitch themselves to what a single component is signalling in which regard anyone can pick any indicator to support their point of view, rather than to try and determine the most probable route with a view to making money.


Ian Dawson
25 Aug 09, 02:36
The US has been accused of a crime.

Hello Nadeem,

I read your articles regularly. I think you have a great summary of what's going on in the finance world.

However, I have come across something that you need to also alert the readers about.

I give you the site and you can read about the crime in progress that will have a devastating result on the finance system.

Forced mass flu vaccinations

http://www.theflucase.com/

Ian


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