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Stocks Bull Market Signals September Opportunity for the Bears

News_Letter / Financial Markets 2009 Aug 30, 2009 - 12:45 AM GMT

By: NewsLetter

News_Letter

Best Financial Markets Analysis ArticleDear Reader

The Stocks bull market continued to forge ahead with the Dow closing at 9544, after hitting a high of 9630 during the week, which is a stones throw from the target of 9,750, having advanced 3,280 points and more than 50% in less than 6 months, now it will be interesting to see how the market behaves as it enters the target zone for the termination of this phase of the bull run of between 9750 to 10,000, as my analysis of 5 weeks ago (updated this week) called for a more significant correction to follow than that which transpired during June to July, perhaps just about the time when many of the public bears throw in the towel and the not so smart money starts to pile in as greed replaces fear?


The perma bears having missed the whole bull market as each minor dip was THE end of the mistakenly labeled "bear market rally" for the rules are clear, pick up any reputable technical analysis book and you will read that a bull market is confirmed when an stock indices rallies by 20%, similarly a bear market is confirmed when an indices falls by 20% from a high, therefore regardless of the perma views of this being a bear market rally, whilst under the basis of technical analysis this rally has long since been confirmed as a bull market more than 30% ago! So much for the claims of following the basic tenants of Dow theory!

The stock market's powerful advance of 50%+ may soon give an opportunity for the perma bears to crow loudly as the market heads into the seasonally weakest period of the year i.e. Sept to October, especially as an technically overbought rally is well primed to achieve the anticipated 'significant' correction, perhaps even a crashette, where readers need to remember that the bull market would still remain intact as long as the Dow does not fall by more than 20% from the peak.

Rules exist for a reason, and that is to arrive at a FIRM TRADEABLE CONCLUSION, rather the deluded fixation that is indicative of a perma attitude that are perpetually fixated to one side regardless of the actual price action i.e. the whole rally has been supported by the crash is coming mantra for the past 6 months! A totally useless repetitive statement when it comes to the monetizing of analysis. There is no point in catching a say 15% drop if one fought against the 50% rally, as the net position is still for a 35% LOSS!

The target for the rally from 6470 has been for a move to 9750 to 10,000, at this point in time I continue to favour a price slightly north of 10,000 which would be enough to sucker early bears into losing positions, and as I voiced in this weeks update, the market's strong advance now points to an earlier peak.

Meanwhile the US Dollar continued to play out a double bottom pattern which is potentially bearish for gold, which in itself has traded in a tightening range that is likely to resolve soon, which again perma gold bugs hope will be to the upside though as my dollar analysis suggests it is more probably likely to be to the down side. I will cover Gold's probable trend in an in depth analysis next week as the existing analysis / forecast of January 2009 has expired.

On the topic of stock market plunges, Robert Prechter's latest 10 page Elliott Wave Theorist Newsletter, within which he states that the financial crisis is NOT over and gives a warning he's never had to include in 30 years of analysis. Its Free, so grab it while you can !

Your stock index trading analyst.

By Nadeem Walayat

http://www.marketoracle.co.uk

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

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

By:Nadeem_Walayat

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 ?

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5. Why the Federal Reserve Bank Must Die

By: James_Quinn

“The Federal Reserve in collaboration with the giant banks has created the greatest financial crisis the world has ever seen. The foolish notion that unlimited amounts of money and credit created out of thin air can provide sustainable economic growth has delivered this crisis to us. Instead of economic growth and stable prices, (The Fed) has given us a system of government and finance that now threatens the world financial and political institutions. Pursuing the same policy of excessive spending, debt expansion and monetary inflation can only compound the problems that prevent the required corrections. Doubling the money supply didn’t work, quadrupling it won’t work either.  Buying up the bad debt of privileged institutions and dumping worthless assets on the American people is morally wrong and economically futile.” Representative from Texas Ron Paul questioning Federal Reserve Chairman Ben Bernanke

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In past articles to explain the price action, I have defined the "this time is different" scenario. For example, at market tops we typically see negative divergences between prices and momentum oscillators that measure price. These negative divergences are indicative of slowing upside momentum and a point where traders are likely to look for the market to rollover. If prices continue to move higher despite the presence of these negative divergences, often times we find investors saying "this time is different" as prices accelerate much higher.

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Our viewers said it was “fantastic.”

One said: “That was one of the most honest and informative pieces of information that I have received in a long time.”

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