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The Biggest lie in Stock Market History Revealed

Stealth Bull Market Follows Stocks Bear Market Bottom at Dow 6,470

Stock-Markets / Stocks Bull Market Mar 15, 2009 - 03:03 AM GMT

By: Nadeem_Walayat

Stock-Markets Diamond Rated - Best Financial Markets Analysis ArticleAs stated in last weekends analysis and newsletter, following the Dow's Friday close at 6626 that the Dow Jones Index had now fulfilled its bear market target of 6,600 as per the analysis of 20th Jan 2009 and illustrated by the chart below. The primary focus hence forth was to "position for a bullish spike higher" that would CONFIRM the bear market low, and negate the secondary far less probable overshoot target of 5,700 to 6000. This occurred on Tuesday which saw the first of a series of BUY TRIGGERS both on the Intra day charts and then on the Daily time frame chart that confirmed the preceding weeks Bear Market Low and set in motion the anticipated spike that took the Dow up 12% by the end of the week to close at 7,224.


Charts Courtesy of Stockcharts.com

The Stealth Bull Market is Born

As I warned of several months ago, do NOT pay attention to the fundamentals, they are IRRELEVANT AT MARKET JUNCTIURES. Stock markets that rally on bad news are SENDING you a STRONG SIGNAL, for the market MOVES AHEAD of any POSITIVE fundamental news or data, which is why stocks have soared by 12% in just one week despite the catastrophic economic data that many now see as the beginnings of the Great Depression II, which my analysis of October 2008 discounted and contained the strategy for accumulating towards the final stages of the current bear market that was forecast to extend towards 6,600 in terms of price and Mid 2009 in terms of time, which hence brought into play the possibility of a downside overshoot to 6,000 which I more or less discounted last weekend on Dow close of 6626.

However You Do NOT BUY a Falling Market, You wait for the Buy triggers as illustrated by last weeks price action, and warned off in last weekends analysis.

"Having now fulfilled the primary target of 6,600 the next phase of the strategy is therefore towards accumulating on buy price triggers in advance of what I consider will become a multi-year bull market, which appears contrary to many analysts."- 8th March 2009 - Dow 6626.

Now watch ! How this STEALTH bull market will consistently be recognised as just a bear market rally to sell into and NOT to accumulate into. All the way from 6,600 to 7,600 to 8,600 and even beyond, the move will be missed by most as consistently bearish rhetoric and data will ensure only the smart money accumulates, for the small investor has now become Conditioned to the Bear Market Rallies of 20% and subsequently plunges to fresh lows. Many, many months from now, with stocks up 30%, investors will then WAIT for THE BIG CORRECTION, THE RE-TEST to buy into the apparent BULL Market , Well these investors will still be waiting as stocks pass the 50% advance mark, AGAIN only those that will have profited are the hedge funds and fund investors (Smart Money) WHO HAVE BEEN ACCUMULATING , as I elaborate upon next.

Hedge Fund Fraud on Investors and Tax Payers

The markets ARE manipulated, once you as a small investor come to agree with this statement then you can take the necessary steps to prevent yourself from being wiped out by ALWAYS keeping this in mind that Manipulated markets WANT you to act in a certain manner at certain times, they want you to buy into the latter stages of a bubble as the manipulators distribute, and the market manipulators want you to SELL into Market Bottoms and early bull rallies when the manipulators are accumulating.

Who are the market manipulators ? Today it is the Investment banks, investment funds, CEO's (stock options) and last but not least HEDGE FUNDS that created the stocks bubble through leverage of X20 or more that subsequently bankrupted the banks that were driven insane by short-term greed with trillions of dollars of liabilities which have NOW been fraudulently dumped onto the tax payers. I have not heard a single story of a hedge fund manager losing money, not one! They have BANKED their profits ! The losers are their investors who held on and the banks who leveraged them up to the tune of tens of trillions, and in the final instance the Tax payers who are being FORCED to bail out the bankrupt banks to the tunes of tens of trillions!

The hedge funds HAVE PROFITED FROM THE CRASH - Because they manipulated the bubble higher and then manipulated the crash, HOW ? Its in plain sight, they sold the banks short into price oblivion, remember Bear Stearns ? Hedge funds shorted the stock and then pulled their money out i.e. caused a run on the bank and its collapse. Hedge funds manipulated the markets by magnifying the crisis of confidence. Targeting bank after bank after bank whilst raking in huge returns as I have repeatedly warned over a year, as our very own HBOS fell victim to hedge fund shenanigans in March 2008. Unfortunately whilst the FSA regulator talked the talk about doing something about it they in actual fact did NOTHING! as March, turned into April, April into May and eventually along came Septembers CRISIS. Had the regulators acted then the close call with Financial Armageddon of September 2008 could have been averted as Hedge funds would have been forced into a strategy other than picking off the banks one by one! This just confirms that the regulators on both sides of the Atlantic do not have a clue as to what they are doing and probably never will as they are always playing catchup to the market manipulators.

The bursting of the bubble after the pools of manipulated monies have taken their cash off the table has subsequently wiped out the value of the all stocks to bargain basement levels. However this now means that the unregulated hedge funds are at it again accumulating towards the NEXT mega STEALTH bull market. Why is it a stealth bull market ? Because everyone, and I MEAN literally everyone is CALLING THIS A BEAR MARKET RALLY TO AVOID BUYING INTO ! Everyone has given up. When in effect THIS IS HIGHLY PROBABLY THE MARKET BOTTOM !

Stealth Bull Market Targets

My original analysis called for an initial 30% rise from the bottom into year end 2009 , so far we have seen a 12% spike higher in one week, therefore despite the inevitable correction from an overbought state, the forward overall trend will continue to maintain an UPWARD BIAS, off course 30% was a best guesstimate made BEFORE the market bottomed, so we may see a substantially higher year end level which will become much clearer once we witness the quality of corrections against the trend and how the market copes with inevitably much worse economic news. To get the latest state of the Stealth Bull Market - Make sure to subscribe to my free newsletter. Most investors memory is at this moment in time fixated on drawing upon the experiences of last October and November's volatile price action, where 10% rallies soon evaporated into fresh bear market lows, which is exactly the kind of mind set necessary for a STEALTH Bull Market, which allows the STEALTH BULL market to stealthy continuing rallying whilst only the manipulators and smart investors accumulate.

Yes I am aware of the on-going corporate earnings contraction forecasts that SUGGEST stocks should be going MUCH lower, though some of the estimates of where the market should be heading to are pretty ridiculous, were talking ridiculous price levels of as low as DJIA 400! However the stocks bull market was also elevated to Dow 14,000 on the basis of corporate EARNINGS forecasts that suggested that Stocks should go MUCH HIGHER. So what does that tell you ? It tells you that what you tend to read is always suggestive of the JUNCTURE being FAR AWAY, NOT imminent. IT IS ONLY LONG AFTER THE FACT, AFTER MARKET'S HAVE ALREADY MOVED THAT THE JUNCTURE IS RECOGNISED AND ANALYSIS PRESENTED AS TO WHAT WENT WRONG WITH THE SCENERIO THAT CALLED FOR MUCH LOWER PRICES.

Similarly wide spread consensus today exists for SHARPLY LOWER CORPORATE EARNINGS going into 2010 THAT MUST MEAN MUCH LOWER STOCK PRICES. However this earnings analysis that is so abundant today, should have been presented OVER A YEAR AGO ! in October 2007 I.e. at or near the market peak! So that ordinary investors could actually ACT on the information. NOT NOW AT THE MARKET BOTTOM ! We are again seeing REASONS as to WHY INVESTORS should avoid investing INTO the Stealth Bull market!, precisely as we all witnessed what was effectively Bullish propaganda during the final stages of the Stocks Bull Market, so we are NOW witnessing what is effectively BEARISH propaganda in the final stages of the Bear Market. Now, don't get me wrong, I am not saying that the analysis is not genuine, what I am saying is that IT IS IRRELEVANT! As it is always much easier to build a scenario in favour of a trend that has been in force for sometime that has generated much data and analysis in support of why it exists and therefore it should continue for much longer, then to "Think Out side of the Box" to disregard bearish data that has been magnified by the growing consensus that really should have been known more than a year earlier in favour of the technical picture that as the analysis of October 2008 stated, that a. we are NOT heading for a Great Depression (as I will further elaborate upon in the Q&A below) and b. The stocks bear market HAS fulfilled its bear market objectives in terms of price and time, more than anyone could have been imagined a year ago!

But now, even after the stock price wipeout to below Dow 6,600. The analytical weight bearing down of overwhelming information is that in support of a continuing meltdown for even as long as several more years towards Dow targets such as 4,000 or even as low as 400 by what can only be termed as perma-bear psychology. Remember Dow 14,000, NO ONE PAID ATTENTION to the perma-bears at that time. As the market was firmly in grip of the perma-bull psychology which was eyeing Goldilocks levels of 18,000. There were even calls that China's SSE at 6,000 should go much higher, despite being on a P/E of about 60. The uber bullish media played on the fact that the NASDAQ peaked on a P/E north of 100, so much for the earnings factor! In fact I pointed out in November 2007 that investors should get out of china AT SSE 6,000 and to forget SSE 9,000, its going straight down towards an initial target of 4,000. Instead today earnings is brought to the fore to support a further collapse of stock prices to what is commonly referred to as reversion to below the mean, AS AN EXCUSE TO FALL FOR THE TRAP OF PERPETUATING A DISTANT JUNCTURE BOTH IN TERMS OF PRICE AND TIME. Therefore repeating the same mistakes that occur at ALL market Junctures ! Which is DATA is PUT AHEAD of PRICE ! To which my answer is this - What are you trading ? Are you trading the Corporate Earnings Data or the actual Stock Index ?

The only thing that actually matters is the PRICE ! NOTHING ELSE! and I mean NOTHING ! Not earnings, Not fundamentals. Listen to the PRICE or you WILL miss the Stealth Bull Market!

Down Side Risks

Off course there is a downside risk to the new fledgling bull market, as I warned of in February 2009 that their exists the chance of a overshoot to the downside towards a target of 5,700 to 6000, forecasting is a measure of probabilities where you watch to see of if the market shows strength or weakness against the original forecast which is the primary purpose of the forecast. However, as I pointed out last weekend at Dow 6626, this secondary target is an overshoot to the existing target which has been fulfilled, and therefore the expectations were for a bullish spike higher that would give the necessary buy triggers. The buy triggers and bullish spike higher OCCURED during the subsequent week which CONFIRMED the market bottom. Now what the stealth bull market needs to do is put an even greater distance between itself and the market low to further reinforce the market bottom. Therefore the strategy is of accumulating on reinforcing buy triggers, whilst liquidating on non confirming bearish triggers that reinforce the secondary target. I am afraid there is no crystal ball, therefore one needs to rely on re-acting to the actual price movements as manifested by the buy and sell price triggers and price trend against the forecast scenerio. At this point in time the market is strongly confirming the bear market low. However the short-term overbought state does necessitate corrective action towards the support zone illustrated above to provide for a healthy stealthy bull market.

In Summary - We have in all probability seen THE stocks bear market bottom at 6470, which is evident in the fact that few are taking the current rally seriously instead viewing it as an opportunity to SELL INTO , Which is exactly what the market manipulators and smart money desires. They do not want the small investors carrying heavy losses of the past 18 months to accumulate here, No they want the not so smart money to SELL into the rally so that more can accumulated at near rock bottom prices! Therefore watch for much more continuous commentary of HOW this is BEAR MARKET RALLY THAT IS TO BE SOLD INTO as the Stealth Bull Market gathers steam.

Questions and Answers

This Q&A seeks to answer some of the emails received recently:

Q. How can you be bullish on stocks and bearish on the Economy.

A. The markets move ahead of the economy, whilst I don't profess to know the EXACT reasons of why they will move AHEAD until that becomes apparent AFTER the market has already moved, however I do have some reasoning in that INFLATION, Zero Interest Rates (Forcing savers / financial institutions to take risks) Quantitative Easing (money printing), and HUGE Fiscal stimulus packages that are laying all of the ground work for the next bubble regardless of how bad things appear as any outcome that prevents another Great Depression will be seen as bullish! i.e. even a low growth high inflation stagflationary environment WILL be seen as a positive outcome against the present day data that points to a collapse of global demand on a scale not seen since the Great Depression. The governments HAVE learned the lessons from the Great Depression and WILL succeed in inflating the asset prices and ignite the next perhaps even bigger bubble, meanwhile the stealth bull market will continue which by the time everyone realizes what's going on stocks will already by up by perhaps more than 50% from the low.

Q. Recommend a Good Trading Tool

A. My Favourite Trading tool ? No its, not Gann, Elliott waves or any other technical tool, my best tool by far has to be the STOP LOSS. The second most important is the Stop and Reverse (SAR). What does this mean ? Well it means that in the final analysis all one needs to trade is entry, reversal triggers and stop loss levels. Let me elaborate - All entries must be based on an entry trigger, i.e. even if you only choose to trade in a certain direction, say long, then you don't buy into a falling market, depending on the timeframe your trading you wait for an entry trigger as indicated by last weeks intra-day dow chart.

Q. Do you offer a subscription trading signals service.

A. No, and neither do I intend on doing so in the future. The point is this, I trade, and therefore I don't want the psychological baggage associated with sharing short term trading signals, where I can imagine feeling the euphoria of big profit trades that makes many hundreds of subscribers thousands of bucks, many congratulatory back patting and positive subscriber responses, only to be followed by the inevitable stress from the losing trades, with You $%£;@er, I lost $x, what happened ???. This would be a sure way to destroy my trading confidence and trading ability as it would reintroduce and magnify psychological responses into to the act of trading.

Each individual trade should NOT invoke any significant emotional response due to the fact that there will also be many losing trades as well as winning trades, I understand this ! But would ALL subscribers ?, I very much doubt it! Off course the inevitable outcome would be that I would cease trading as the confidence of pulling the triggers would be gone and just become a trading signal peddler, but with that would go the 'edge' of really trying to understand the markets.

Therefore as I allude to above it is MONEY MANAGEMENT that delivers the consistent returns. What readers need to do is to EDUCATE themselves into becoming successful traders rather than rely on the signals of others. In this regard I do plan on sharing my whole trading methodology, via a book and freely at walayatstreet.com (points to my Market Oracle archive at present). To receive my analysis in your email inbox make sure to subscribe to my Always FREE Newsletter.

Q. Where to invest during 2009 ?

A. Strategy here rather than stock picks. The strategy is clear, to accumulate stocks with stop losses in the decimated long-term growth sectors, the mega-trend sectors remain as I pointed in the October article are the Energy sector, that's crude oil and natural gas (hit fresh lows), Water and Agricultural Commodities, add to that Biotech, Health and Tech stocks. Continue to avoid the financials, they are insolvent. It appears the central banks are attempting to fiddle the books with regards proposed 'changes' to mark to market valuations so as to give the illusion of solvency. Yes financial stocks WILL soar, BUT like the penny stocks that they have become, they will exhibit much volatility where 50% gains one week could easily turn into a 50% loss the following week.

Again remember to use stop losses on ALL positions. i.e. you place the stop under the most significant low where the market cannot trade if you are right ! For you only get stopped out if you are wrong. The maximum for a stop on a stock is 20%, and you never move a stop against your position. ONLY in the direction of the position. It is such a strategy that turns a portfolio to cash during a bear market without seeing bull market profits turn into bear market losses.

On a closing note, I am more than happy to see many sites pick up my articles, but not so happy to see some sites edit out as much as 50% of article content to CHANGE the whole meaning of the article to support the site owners point of view, as I have seen happen with last weekends analysis. So please post in full rather than subvert the message to mean the exact opposite of that which was intended.

Your Stealth Bull Market Accumulating Analyst.

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 250 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.

Attention Editors and Publishers! - You have permission to republish THIS article. Republished articles must include attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

roberto
15 Mar 09, 15:46
RE: Stealth Bull Market Follows Stocks Bear Market Bottom at Dow 6,470

If you enjoy masochistic self torture, then by all means, start buying for a bull run. That 30% profit you may end up with will cost you your emotional health and well being.

I would rather not lose a dime by maintaining zero risk than shoot for a 30% profit in this den of thieves economy and manipulated financial market.

To each his own.


Nadeem_Walayat
15 Mar 09, 23:04
FTSE Trend Update

Note - The FTSE is in synch with the Dow and therefore will follow a similar trend, i.e. high probability of having bottomed on Monday of last week.


Syrus
16 Mar 09, 00:07
How to behave in a Bull Market?

Hi Nadeem,

Thank you for posting your "Stealth Bull Market Follows Dow Bear 6,470 Bottom" article. Also thanks in advance for reading my email.

In the two years that I've traded, all I've learned is that in a bear market supports don't hold, and resistance is nothing but a dream number. I've learned that if I'm patient, new buy targets will hit. Unfortunately I've been bullish (or call it foolish, or naive) during all of the two years and got hurt. Just recently I started to become a bit more conservative. It will be hard for me to start putting my new guard aside, but at the same time I also don't want to make the same mistake in the opposite direction and sell my stocks too early.

So here are a few questions:

- What signs do you consider confirmation for the topic of your latest article?

- What signs do you look for to determine whether resistance of a stock is going to be broken, or if the prices are deemed to bounces back to support levels once again?

- What's your general recommendation on when to take profit, so that it's not too early and not too late? (be taking your trailing %20 stop loss advise into account, one would always sell %20 below optimum price)

- Where do you see the CAD vs. USD trend?

I'd appreciate any information, and thank you in advance for your time.

Best Regards,

Syrus


Dave
16 Mar 09, 16:07
Source of Target Figures?

Hi Nadeem,

I am a first-time investor who has been reading a huge amount (without investing) for about six months now.

I happen to find your articles the most interesting and insightful of any that I have read.

However, one thing puzzles me: where do you get your target figures from? For example, for months you have expressed confidence that the Dow will bottom somewhere around 6600 - but why this figure? Why not, say, 5600?

Initially, you thought that the 6600 level would be reached around July. Now that it has been reached four months early, I find it interesting that you stand by this figure, rather than revising your forecast downward to reflect the steepness of the decline.

What makes you so confident about the 6600 figure? Or, for that matter, about pound-dollar parity? Or about a temporary spike in crude oil of up to $70-80? Your macro-analyses are fascinating, but by themselves they do not explain these relatively specific figures.

I would love to know where you get such figures from - especially when, as now, they outright contradict the majority view.

Can you enlighten me at all?

Dave


Nadeem_Walayat
16 Mar 09, 21:02
Inter-Market

Hi Dave

The forecasts are born out of accumulative ongoing inter market analysis and not a single piece of work .

Basically I condense all the analysis down into a single chart / price point, so that I do not have to keep past analysis in memory or have to continusly update.

A single price point / trend on a chart enables me to to focus on trading, as I measure subsquent strength and weakness against the forecast.

I.e. a Road Map until the forecast trend expires, or is negated, demanding an update.

For instance gold breaking about the $960 forecast peak implies strength, which immedialy implies that the correction will be weaker than originally expected, i.e. original expectations for gold in january was for it to rally to $960 by early march, and then fall to $820 by mid July. The relative strength of gold tells, me to cover shorts on gold towards $900 (i.e. tighten stops).

Again the purpose is not really to be exactly spot on, though after ones done thousands the skill improves over the decades, the purpose of the forecasts is to give me a clear road map against which to measure strength and weakness when trading.

The Dow forecast trend to 6,600 proved extremely clear cut and profitable, i.e. demanded little thought, in terms of trend against the forecast and subsquent gave me a strong warning AT 6626, to prepare for a bullish spike higher, so whilst I could NOT BUY at 6626, as I MUST have a buy trigger which occured on Tuesday at 6760. However the forecast DID focus my attention on getting prepared to GO LONG, without any further analysis. All I needed to identify were the buy triggers and buy, with the trailing stop triggers behind entry.

You see the problem with much of what you read on the web, is that it is NOT WRITTEN BY SUCESSFUL TRADERS ! As the tendency is to ramble on with IF's and BUT's but whats needed when trading is clarity, that THIS IS the forecast, now where is the price relative to the forecast, and hence do I accumulate or liquidate the direction I am exposed to.

I will cover my methodology honed over the past 2 decades in depth in a book that I eventually hope to write.

Best,


Nadeem_Walayat
16 Mar 09, 21:13
Stealth Bull Market Q&A

I will seek to answer the Many questions I am recieving in a future newsletter

Please post your comments here


Nick
18 Mar 09, 19:13
Stock Market Truth

Nadeem, thanks for your honesty, the average person that owns stocks has no clue. They are told by some broker to buy a stock and then they are left in the dark. It has been a traders market for years now. The old days of buy and hold for decades that are parents lived thru is gone forever. The hedge fund traders will see to that. Stop losses is the only way to survive in the stock market of today. Also, learn how to sell short. Its really how they are doing these days. Total market manipulation. Keep up the good work. You are providing people with the truth.


Mr Lemon
19 Mar 09, 02:08
NO stealth bull market

Few components of economics / fundementals

Profits corporate declining with no inflexion point even though banks may post cosmetic profits through TARP reserve growth

Unemployment rocketing up

ISM nosing down

Debts Public and private at highest levels since 1929 and see how a bull market is


MJ
21 Mar 09, 17:32
Make Money ?

Nadeem

I am relay impressed with your analysis – do you run a fund/stock pick – how does market oracle make money?

Best MJ


Nadeem_Walayat
21 Mar 09, 17:45
The Oracle

Hi MJ

The act of writing articles is an act of positive reinforcement for myself, it actually forces me to think deeper on the subject then I would otherwise have done had I solely focussed on just trading. The net outcome of which is better trade and and broader investment decisions. i.e. Before the oracle, I would not have done indepth analysis on say house prices as there would be no point in spending weeks on weighing up the various possibilities just for my own benefit, therefore the oracle induces me to do this work which results in better investment decisions.

I have no desire to turn towards a subscription type service, NONE, as I understand TOO WELL what would happen !

And offcourse I enjoy writing on the particular topics that grab my total attention.

The oracle primarily exists to propogate and evolve into ? We'll we shall see ;), but the journey is certainly compelling, like watching a child grow :)

Best.


joe
22 Mar 09, 03:58
DOW BUY LEVELS

first i was sceptical on your "only" 6600 bottom target but

the idea of a stealth bull strikes me.

thanks for all your free insights money can`t even buy.

dow buy levels: are they buy levels on a retrace or on passing?


Matt K
23 Mar 09, 18:41
Stealth Bull Market Q&A

Hi Nadeem,

My name is Matt and I'm a trader in Santa Monica CA. I have been following your analysis for the past year and a half and i want to commend you on your abilities in forecasting. Truly great stuff and I look forward to reading more.

I have a question though. I know back in early winter your forecast was for the Dow to hit 6000-6500, which it did, but that it would take until July to get there. Then on Feb 25 your forecast was for a March rally to 7800, followed by a more severe downturn to possible 5700-6000, and THEN followed by a long term rally after July or so. However after reading you latest forecast saying you are now predicting a long term stealth bull market, I'm slightly confused as to whether now that the Dow has rebounded to near 7800, if it will then fall to 5700-6000 like your original forecast predicted into July or just continue to keep going up in a full out stealth bull market without a retest of the most recent lows? Anything you can offer would be great and keep up the good work!

Matt K


Nadeem_Walayat
23 Mar 09, 19:19
Stealth Bull Market Q&A

Hi

The primary target was 6,600 by mid 2009, against which I measured strength or weakness to evaluate the market for real-time trading purposes, i.e. in reacting to the price triggers since the expectation was for lower prices, thus I would be reluctant to go long against the prevailing bearish trend.

In February I started to see signs that market was going to make some sort of a low given the severe price decline, at the time I interpreted this as a correction, which therefore implied eventually much lower prices.

Subsequent bearish price action going into March negated this as instead of rallying the dow fell, this confirmed the primary target and therefore suggested the low was imminent rather than later on, which I pointed out in the article of 8th March, before the first confirming buy trigger occurred at 6760.

Unfortunately, even though I wish I had a crystal ball, I don't so it is a case of looking for strength or weakness against forecast road maps, rather than trying to get it exactly right. As the primary purpose is in committing to high probability trades in a decisive manner. So the forecast has to be STRONG, DECSIVE in expectations rather than weak double speak that a lot of analysts tend to print.

I.e. for me to jump in with both feet at 6760 off of the low of 6470, I am not going to do that if my analysis is weak, saying it might be the low, and it might rise a bit, that’s not good enough ! IT IS the LOW and IT WILL Spike much higher. Therefore I WILL Buy on the price triggers.

Now I am committed and as long as the price action supports my positions I will continue to accumulate else the stops will be hit and the market will show weakness rather than strength, but I am not going to second guess myself when the market IS MOVING in the DIRECTION of the positions by thinking that IT MAY NOT BE THE BOTTOM, this is why I am reluctant to post buy / sell triggers, as without the confidence that comes from GENERATING them, there is not that certainty in following them with ABSOLUTE conviction, instead one gets the second guessing or revisting in hinde site which kills everything.

I will write a book to illustrate my trading methodology because in actual fact forecasting is not at the core, and in fact there have been periods of time when I have traded WITHOUT any road maps, but they eventually creep back in as they give that extra edge i.e. tipping from say 90% to 100%.

Best.

--

Nadeem Walayat,

Editor, The Market Oracle http://www.marketoracle.co.uk)


mark
23 Mar 09, 22:45
Great piece!

Your analysis is a GREAT !

I used to visit philsgang.com but the shmucks are trading signal hucksters who's only purpose is to get you to buy their garbage trading signals, Nadeem is right ! Learn to trade based on your own signals !


MIKE BRONZINO
24 Mar 09, 19:02
DOW TARGETS

DON'T KNOW WHO YOU ARE BUT YOUR ANALYSIS HAS BEEN OFF THE CHARTS GREAT.


Mark
25 Mar 09, 00:59
Excellent Analysis

Dear Nadeem

Excellent analysis! From your writing, its obvious that you're writing from the perspective of a trader, rather than an analyst who has no money at stake.

You mentioned writing a book! You should!! Pls let me know how I can get hold of a copy once its published.

Mark

Singapore


Gary
27 Mar 09, 17:51
Stops

Nadeem,

Do you think a 20% stop is sufficient given the dramatically increased volatility these days?

Nice commentary. It'd be interesting to see whatever aspects of your trading methodology you're willing to share.

Gary


Nadeem_Walayat
28 Mar 09, 07:59
Book

I will be sharing the trading methodology in a book, a one off, not a series etc..

20% is the maximum, if I can't put a stop at 20% or less on a particular stock then I won't invest. The climate following September has been a traders market, the only way to invest into it was when the bear market hit new lows as I pointed out in Octobers analysis, i.e. there was no point in waiting for a 20% bounce to buy as you WILL be stopped out therefore the better strategy was to buy at fresh bear market lows.I.e. a break of the october lows.

The Book will teach you how to trade.

Though it will not teach you how to forecast, as I don't believe it can be taught, forecasting is akin to composing music, whilst it is easy to play whats already been done but much more difficult to compose a new piece. The key is that forecasting ability comes out of already trading successfully, and not the other way round that many seem to assume. Therefore forecasting is not necessary and is the so called icing on the cake.


Larry
30 Mar 09, 15:23
Book

I will purchase your book as soon as it,s published.

Please notify when available.

Thanks, Larry


Nasaie
05 Apr 09, 00:23
Dow Next Correction

Well Nadeem,i miss the rally,i read your article too late.Now Dow jones is 8000points. Can you please alert us on the next correction?How low do you think it will go?

Thanks a lot.


Nadeem_Walayat
05 Apr 09, 12:03
Gold or Dow Update

I recieve a lot of emails wanting an update to my january gold forecast that now calls for a trend lower to $820.

However, my focus both in terms of trading and analysis for the past 2 months has been the stock indices so will focus on stocks for the next analysis email out in durng the next few days.


Nadeem_Walayat
26 Apr 09, 22:36
Stealth Stocks Bull Market, Sell in May and Go Away?
Here is my latest update to the stocks stealth bull market, to make sure you get my key analysis and in your email inbox on the day of publication, ensure your subscribed to my FREE newsletter

Stealth Stocks Bull Market, Sell in May and Go Away?

Best Financial Markets Analysis ArticleThe stealth stocks bull market that has soared by 27% on the Dow and 20% on the FTSE these past 7 weeks has left the bears battered and bruised after EVERY decline that 'MUST' signal the proverbial resumption of the bear market was subsequently BUSTED, with some of the herd piling in on the tail end of the rally these past few weeks with the bulk still awaiting the RETEST. To answer many requests for an update to may last article (5th April 09) of where next, this is therefore an interim update that aims to give my immediate term view on where the stock market could be heading. The full in depth analysis that will aim to map out the trend for several months will follow later, to receive this you email in box make sure to subscribe to my always free newsletter.

Stealth Stocks Bull Market Analysis Recap - Consistency and Certainty.

1. Stocks Bear market Bottom forecast - 20th Jan 2009 - Target 6,600. Warning that the bear market bottom WILL be accompanied by overwhelming and highly convincing bearish fundamentals that speculators / investors will need to ignore to prevent themselves from missing out on the BOTTOM.

2. Stocks Bear Market Target Fulfilled - 8th March 2009 - Dow 6526. Preparing for a spike higher that was expected to trigger the first of a series of buy triggers to start accumulating - As you MUST WAIT for Entry Triggers, so as to give the trades a greater probability of success, and again the message to IGNORE the media / fundamentals.

3. Stocks Stealth Bull Market Born - 15th March 2009 - Dow Bear Market Bottom confirmed on multiple buy triggers during the week - Warning to ignore the fundamentals or should I say fundamentalism, bearish commentary and in many cases double speak in favour to reacting to the ACTUAL PRICE movements.

4. Stocks Stealth Bull Market Carpet Bombs the Bears - 24th March 2009 - Short-term 33% Correction, before new stealth bull market highs. End year target 50% from 6470 i.e. 9,700.

5. Stocks Stealth Bull Market Closes above Dow 8,000 - 5th April 2009 - Psychology of investing and trading. There is no point everyone seeing the rally in a the rear view mirror if FEAR kept them from monetizing on it!

Getting straight to the point. Seasonal's ! - The seasonal tendency for the Dow is to sell off going into / during May is the most probable on the basis of the strength of the preceding rally and given this years mega rally, the probability of a severe downtrend is now pretty strong.

The anticipated target for the current bull market by year end is 50%, the move to date amounts to more than 54% of the target in less than than 15% of the time period which gives ample time for several reactions lower against the trend. Therefore the only question now is how deep could the downtrend be, in that regard we have price points, retracement levels, and the MACD indicator to look at.

MACD - The MACD indicator cross has given a SELL signal, at best this means sideways price action, but more probably a significant downtrend that will seek to correct the up trend from Dow 6470.

Trend Analysis - The rally has been strong AND powerful, but it is showing signs of running out of steam, this is evidenced by the shrinking gap between each up thrust following each correction with the most recent correction 'so far' failing to break to a new trend high which gives a risk of a lower high. The rally is tired folks, it needs to take a break.

Retracement Levels - 33% - 50% - 66% - The Dow has rallied from a trough of 6470 to a peak of 8190 totaling 1720 points, key retracement levels are 33% = 7,622; 50% = 7,330; 66% = 7,050. Therefore the minimum correction from the current swing peak is expected to carry between 7,622 to 7,330. Anticipating a rally to 8,750 this points to levels of 33% 8,000; 50% 7,610 - Which reinforces the target of 7,600, with probable overshoot lower implying 7,500.

Price Points - Immediate support levels are 7,800, 7750, and then 7,440. For the health of the stealth stocks bull market a correction should not carry below 7,440 this therefore implies support in the region of 7,500 to 7,440. Overhead resistance is clearly first at 8,190, then 8,400; with major resistance in the area 8,900 to 9,080. This implies the current upswing should continue into the area of between 8,400 to 8,900 with probability favouring 8,800.

Elliott Wave - My elliot wave interpretation implies that the market should continue rallying for another to 3 weeks to mark the end of the first impulse major wave towards 9,000. to be followed an A-B-C correction towards 7,500 for a larger wave 2 correction.

Swine Flu Black Swan ? - Swine fever is spreading, is this the big pandemic that we have been fearing all these years with the previous focus on avian flu. There is a good probability that the financial markets will discount the worst case scenario along the lines of avian flu a few years ago early next week, therefore this brings in an immediate bearish influence against what looked set as a continuing rally into early May which implies greater volatility than expected depending on the progress of the virus. Though amidst the overall gloom big pharma that produce treatments should rally.

Conclusion - Immediate term conflicting analysis, will there be a continuing rally into early May or not ? Clearly early week will be weak and a lot now depends on whether the support of 7,800 holds, the 280 point gap between the last close and support should give the market plenty of swine flu room to breath, it is a tough call but after that early week wobble, I would go with a continuation into early May to set up for the main move which is for the significant correction that targets a decline of about 14% or Dow 7,500 from 8750. If 7800 fails early week that implies Dow 7,100. So just as the herd is starting to pile in the smart money will be positioning for a significant correction and importantly the move will be TRADEABLE, none of these 1 or 2 day falls that have suckered the bears in during the rally, but for a sustained down trend though swine flu may bring this forward to the start of the week. Note this is an interim update, my in depth analysis will attempt to more accurately map out the Dow swings of several months so make sure your subscribed to my always FREE newsletter to get this on the day of publication.

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  • Stocks Stealth Bull Market - Significant Summer Correction?

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 250 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.


Mohammed
20 May 09, 04:56
cable

Hi Nadeem,

Excellent article. I am very keen to know what your opinion is regarding cable.

Currently its in the 1.55's region. Where do you see it going.

Do you think cable is expected to downturn anytime soon to the high 1.4xxx region?

Its seems cable is shrugging off all negative fundamental news just like what you stated for stock stealth bull run.

Do you expect cable to drop in June/July ??

Thanks again


Nadeem_Walayat
03 Jun 09, 04:31
Stocks stealth bull market quick update

Stocks Stealth Bull Market Quick Update

In response to a dozen email requests, this is a quick update to the ongoing Stocks Stealth Bull Market that began in early March 2009.

The most recent analysis of April 26th concluded that the Dow is targeting 8,750 by mid May 2009 which was expected to be followed by a significant correction of 14%, the Dow hit this target yesterday (Tuesday 2nd June) and therefore expectations are now for this significant correction to materialise as indicated by the original chart below.

However, I need to remind readers that we are in a stocks stealth bull market that has already delivered a powerful 35% gain to date, so whilst a stock market correction is expected into the end of June, it is still just a correction against the trend, that has been missed by virtually ALL analysts that either continue to re-write the rules in support of this still being a stocks bear market rally, clutching at straws such as contracting corporate earnings (old news) or attempt to re-write history so as to imply they saw this rally in their rear view mirror as I warned of at the beginning of April and which during this week was most evident in CNBC's "Mad Money Man" Jim Cramer attempting to re-write history to imply that he called the market bottom at Dow 6,500 as the below video illustrates.

My in depth analysis for the stock market that projects a trend for several months will follow my UK economy forecast update, to receive these on the day of publication make sure 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
08 Jul 09, 01:37
Stealth Stocks Bull Market Summer Correction Update
The analysis of April 26th concluded that the Dow is targeting a high of 8,750 by mid May 2009 which was expected to be followed by a significant correction of 14% towards a Dow target of 7,500. The Dow hit the target on 2nd of June which was confirmed in the quick update at the time, and therefore expectations were for the significant correction to materialise.

Quick Technical Analysis - The Dow spent early June distributing along 8,800, which gave plenty of time to put on short positions with tight stops. The key chart trigger was the lower high at 8,600 which targeted a break of 8,200. The pattern size is 400 points which projects to 7,800 before the next expected bounce. The overall pattern size is about 650 which projects to 8,200 minus 650 = 7,550, which is pretty close to the original projection of April 26th for the target for the Correction AFTER the peak around 8,750. The chart is also showing an head and shoulders price pattern witch the same measuring move.

Stocks Stealth Bull Market End Probability - The probability of an end to this fledgling bull market remains very low at less than 20%, as the Dow has so far done nothing to suggest otherwise with the trend to date inline with expectations for that of a significant summer correction. The quality of the stocks bull market for the balance of the year will become clearer as the current correction unravels towards 7,500, which will enable me to generate an in depth analysis for the next 3 months or so, however existing analysis is for a 50% rally which targets Dow 9,705.

Conclusion - The Dow is still projecting towards a target of around 7,500 as indicated in the chart above, which I am sure will be taken by the perma-bears as proof that the whole move from March was just a bear market rally, JUST AT THE POINT WHERE I EXPECT THE STOCKS STEALTH BULL MARKET TO RESUME!. The in depth update to the stealth stocks bull market will follow towards the end of this month, to ensure you receive this in your email box subscribe to my always free newsletter.

Corporate Earnings - Just as I voiced days before the stock market bottomed in March, Investors / traders will need to be on their guard against the overwhelming bearish corporate earnings forecasts for 2009, as the following chart that appears quite often illustrates -

However reminding readers of what I stated in Mid March -

Wide spread consensus today exists for SHARPLY LOWER CORPORATE EARNINGS going into 2010 THAT MUST MEAN MUCH LOWER STOCK PRICES. However this earnings analysis that is so abundant today, should have been presented OVER A YEAR AGO ! in October 2007 I.e. at or near the market peak! So that ordinary investors could actually ACT on the information. NOT NOW AT THE MARKET BOTTOM ! We are again seeing REASONS as to WHY INVESTORS should avoid investing INTO the Stealth Bull market!, precisely as we all witnessed what was effectively Bullish propaganda during the final stages of the Stocks Bull Market, so we are NOW witnessing what is effectively BEARISH propaganda in the final stages of the Bear Market. Now, don't get me wrong, I am not saying that the analysis is not genuine, what I am saying is that IT IS IRRELEVANT! As it is always much easier to build a scenario in favour of a trend that has been in force for sometime that has generated much data and analysis in support of why it exists and therefore it should continue for much longer, then to "Think Out side of the Box" to disregard bearish data that has been magnified by the growing consensus that really should have been known more than a year earlier in favour of the technical picture that as the analysis of October 2008 stated, that a. we are NOT heading for a Great Depression (as I will further elaborate upon in the Q&A below) and b. The stocks bear market HAS fulfilled its bear market objectives in terms of price and time, more than anyone could have been imagined a year ago!

Make a note of graphs like these as by year end everything has been revised higher and previous corporate earnings projections conveniently forgotten, off course by that time the market will have already moved. Remember you are trading the price and NOT the earnings forecasts which are a red herring!

Trading Signals - Whilst my analysis usually tends carry clear conclusions, however I have refrained from sharing my actual trading signals to date for a number of reasons which I have touched on in past articles. Good news, I will be sharing my actual precise position trading signals for free at WalayatStreet.com i.e. buy / sell triggers, stops, and stop and reverse (SAR) points for the Dow Jones Stock Index which I have been trading for the past 23 years. WalayatStreet.com has been under development since March 2009 and will go live this month, in the meantime WalayatStreet.com continues to point to my extensive articles archive.

Recap of the Stocks Stealth Bull Market Analysis

1. Stocks Bear market Bottom forecast - 20th Jan 2009 - Target 6,600. Warning that the bear market bottom WILL be accompanied by overwhelming and highly convincing bearish fundamentals that speculators / investors will need to ignore to prevent themselves from missing out on the BOTTOM.

2. Stocks Bear Market Target Fulfilled - 8th March 2009 - Dow 6526. Preparing for a spike higher that was expected to trigger the first of a series of buy triggers to start accumulating - As you MUST WAIT for Entry Triggers, so as to give the trades a greater probability of success, and again the message to IGNORE the media / fundamentals.

3. Stocks Stealth Bull Market Born - 15th March 2009 - Dow Bear Market Bottom confirmed on multiple buy triggers during the week - Warning to ignore the fundamentals or should I say fundamentalism, bearish commentary and in many cases double speak in favour to reacting to the ACTUAL PRICE movements.

4. Stocks Stealth Bull Market Carpet Bombs the Bears - 24th March 2009 - Short-term 33% Correction, before new stealth bull market highs. End year target 50% from 6470 i.e. 9,700.

5. Stocks Stealth Bull Market Closes above Dow 8,000 - 5th April 2009 - Psychology of investing and trading. There is no point everyone seeing the rally in a the rear view mirror if FEAR kept them from monetizing on it!

6. Stealth Stocks Bull Market, Sell in May and Go Away? - 26th April 2009 - Tradable significant correction to follow from a peak around 8,750, downtrend towards Dow 7,500 over the summer.

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.

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 250 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

skeptical
10 Jul 09, 16:52
excellent analysis and reasoning but..

First let me say that You have been one of the best that is featured on this site for at least a year. Thank you!

Next let me say that we are in a Depressionary process and money is not getting into the hands of consumers.....we may get a GS goose bump up between 9500-1000 when people see the March lows hold but i don't think any analyst can come to any type of "confident" conclusion in the economic climate we are in.

Sure the unemployment U3 will likely peak .....but U6 will keep rising and let us not forget millions of people will be running out of unemployment benefits and be soon considered "out of the workforce"

I look forward to reading you in the winter when we likely get a real test of bear market lows.


Nadeem_Walayat
11 Jul 09, 08:45
Forecasts

All forecasts are in the end of the day best guesses, however, watching what the manipulators are upto or want gives one insight.


Nadeem_Walayat
24 Jul 09, 01:49
Vicious Stocks Stealth Bull Market Eats the Bears Alive!, What's Next?

Diamond Rated - Best Financial Markets Analysis ArticleThe price action following the SELL signals earlier this month can only be described as a VICIOUS BEAR TRAP !, We got sell signals, good ones for Stock BULLs such as myself (as of Mid March 2009) it was a clear sign to get ready to accumulate more, for bears it was a sign to double up for the long awaited bear market RETEST and maybe to make back some of the money lost shorting the rally ?

Even though rising prices for a bull during the stealth bull market is good, however, the vicious rally FOLLOWING Clear Technical SELL SIGNALS is something that signals alarm bells, as while it can be entertaining to gloat at the crushing of the bears, however when I look in the mirror, I have to wonder will I be next to be caught in a vicious BULL TRAP ! This is a vicious market and whether one is a bull or a bear one NEEDS to be on their guard as the consequences of getting sucked into TECHNICAL ANALYSIS, as opposed to REAL TRADING i.e. REACTING to Price movements in REAL TIME, could easily wipe traders out. More on REAL TRADING in my site walayatstreet.com which will go live once it is ready, yes people have been patiently waiting but the site cannot go live until it has the requisite articles to explain the many aspects of trading as the consequences of not doing so will result in a deluge of emails, so as with the markets PATIENCE is in order.

Back to the stock market, let's dissect what happened, the precise point where the summer correction scenario abruptly terminated and where we are heading to next:

Original Analysis

The analysis of April 26th concluded that the Dow is targeting a high of 8,750 by mid May 2009 which was expected to be followed by a significant correction of 14% towards a Dow target of 7,500.

Dow Hits 8750 Target

The Dow hit the target on 2nd of June which was confirmed in the quick update at the time, and therefore expectations were for the significant correction to materialise.

Dow Gives Sell Signals During June and Early July

Analysis of of 7th July - The Dow spent early June distributing along 8,800, which gave plenty of time to put on short positions with tight stops. The key chart trigger was the lower high at 8,600 which targeted a break of 8,200. The pattern size is 400 points which projects to 7,800 before the next expected bounce. The overall pattern size was about 650 which projects to 8,200 minus 650 = 7,550, which is pretty close to the original projection of April 26th for the target for the Correction AFTER the peak around 8,750. The chart also showed a head and shoulders price pattern with a similar measuring move.

The conclusion was that the Dow was still projecting towards a target of 7,500 to suck in more traders on the bear side before the resumption of the stealth stocks bull market. The Mega-trend remained for the stocks stealth bull market to move towards a target of 9,750 by the end of this year.

Dow Busts TA Expectations by Triggering a Series of Buy Triggers

Technical analysis was busted - There is no point in second guessing as to why the pattern changed, the fact is simple technical analysis DOES NOT WORK MOST OF THE TIME, hence one needs to always have at the FRONT of their mind, (not the back) that the MARKETS ARE MANIPULATED! As I have voiced throughout the year at key market turning points to ignore the fundamentals and listen to the price, as you are trading the price not the data! Still the price re-action observed was not something that could have been anticipated by anyone, rather only reacted to in real time trading environment.

Where Next for the Stock Market

Near 1000 point moves spread over just over a week makes this a great traders market but is it still a forecasters market ? I have say it is tough to call a market as vicious as this but my existing analysis as of March 09 is for a rally to 9750 for the Dow this year, the price action to date is inline with this expectation. So taking into account that this is a potentially very vicious market here is my analysis -

Dow Analysis and Projection

TREND ANALYSIS - The rally off of 8,090 has been strong and powerful and could carry for some more points before correcting. The key change to the behaviour of the trend is the development of a new primary trend line that should now contain all corrections and in fact projects towards 9,750 into December 2009. Therefore implying that we could see the Dow touch this line several times during the year. The anticipated immediate correction is expected to bounce off of this line.

RETRACEMENT LEVELS - The Dow Rally from 8087 has retraced 100% of the decline from 8877. The correction therefore was 8877 to 8087 or 33% which is a sign of strength. A rally of 200% of the correction projects towards a target of 9667. With intermediate term targets of 133% 9137, 150% 9272, 166% 9400 as key potential resistance areas. Therefore this is suggestive of a sustained trend along these price points, to be accompanied by corrections of between 33% to 50%.

PRICE POINTS - Immediate support is at 8,600, which would represent a 50% retracement from the above 9137 % level. The heavy consolidation area between 8,600 and 8,900 is indicative of further price action in this range which is suggestive of the Dow spending further significant time in this zone for several months. This is suggestive of more sharp rallies followed by downtrends back into this price zone for some months. Key support is at 8080 a break of which would negate this scenario.

ELLIOTT WAVE THEORY - Elliott wave count is straight forward and has not changed since the Stock market bottomed in March. The abc correction followed by the strong rally, is highly suggestive of an impulse wave 1, therefore implying a bull run of similar magnitude of the rally from 6470 to 8900, which projects to 10,500 that's significantly above the original target of 9,750.

MACD - the MACD indicator cross has signaled a buy, which is supportive of an overall bullish trend, though not at a particularly oversold level therefore implying that the trend will be more volatile and laboured than that of the rally from 6470 to 8900. As well as signaling that the eventual peak may set the market up for a more significant decline.

CYCLES - The bull market is suggestive of a 3 months up, 1 month down overall cycle pattern, this suggests a target of late October for the rally peak before a more significant correction takes place.

SEASONAL TREND - The seasonal trend should be for stocks to decline into early September, therefore this is contrary to the building scenario.

FUNDAMENTALS - People always ask reasons as to why stocks should rise, though in reality the reasons always become apparent AFTER the market has already moved, as I warned in Mid March, however I did at that time also give possible reasons, which still remain as the primary reasons for explanations of why stocks are rallying into a stealth bull market -

A. The markets move ahead of the economy, whilst I don't profess to know the EXACT reasons of why they will move AHEAD until that becomes apparent AFTER the market has already moved, however I do have some reasoning in that INFLATION, Zero Interest Rates (Forcing savers / financial institutions to take risks) Quantitative Easing (money printing), and HUGE Fiscal stimulus packages that are laying all of the ground work for the next bubble regardless of how bad things appear as any outcome that prevents another Great Depression will be seen as bullish! i.e. even a low growth high inflation stagflationary environment WILL be seen as a positive outcome against the present day data that points to a collapse of global demand on a scale not seen since the Great Depression. The governments HAVE learned the lessons from the Great Depression and WILL succeed in inflating the asset prices and ignite the next perhaps even bigger bubble, meanwhile the stealth bull market will continue which by the time everyone realizes what's going on stocks will already by up by perhaps more than 50% from the low.

However in the final analysis one is trading the stock market and NOT the economic data, so yes reasons can always be found, but when it comes to actual trading they are irrelevant, especially at market junctures.

EARNINGS - Analysts are surprised !, earnings are surprising to the upside, the earnings 'fundamentalists' have been busy revising previous earnings forecasts that convinced many that fresh bear market lows were imminent and thus missing out on a stocks bull market that has already moved 40%!, Nevertheless its not surprising to me that earnings are surprising to the upside, expect even more 'surprises' later this year, after all where do you think all of the bailout billions have gone ? It has to go somewhere and we are seeing it the profit surprises in master market manipulators of Goldman Sachs and JP Morgan

STOCKS STEALTH BULL MARKET - My last analysis in the midst of the correction stated that the probability of an end to the current fledgling bull market being at less than 20%, with the rally to date confirming that we remain in a STRONG MULTI-YEAR stocks stealth bull market. I am amazed that a 40% rally over 3 months is STILL perceived as a BEAR market rally?, what happened to the 20% rule?.

MARKET MANIPULATION - The powerful rally following a HUGE technical SELL SIGNAL, is clear sign of market manipulation i.e. in terms of generating the sell signal AGAINST the bull market trend so as to PROFIT from the subsequent powerful short covering rally. Don't forget this is a BULL MARKET, All corrections are to get sucker money in on the short-side as an enable for a larger more profitable subsequent rally.

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.

To keep up to date on the state of the stealth stocks bull market, ensure your subscribed to my always free newsletter.

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.

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 250 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

Nadeem_Walayat
24 Aug 09, 10:39
Stocks Bull Market Update - 24th August 2009
Stocks Bull Market Update - 24th August 2009

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 I 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!.

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

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


Nadeem_Walayat
02 Nov 09, 04:58
Stocks Bull Market Forecast Update Into Year End

The update on the stocks bull market of early September called for a continuing trend towards a target range of 9,750 to 10,000 by late September / Early October to be followed by a correction in the region of 10% towards a target zone of 8,900 to 9,100, as illustrated below.

The market subsequently peaked in the middle of the target zone and began a correction which took the Dow down to 9,430.

This was soon followed by surprisingly quick and powerful reversal to the upside that that lifted the Dow to above 10,000, peaking at 10,120. Readers of my weekly newsletters will know that I was skeptical of this phase of the bull market because it had not allowed both enough time and price to correct the preceding advance and therefore was not seen as being sustainable.

Bull market Re-cap - The stocks bull market that began in early March has so far from trough to peak advanced by 56% on the Dow against the preceding peak to trough decline of 54%. Those that refer to this as a bear market rally do not know what they are talking about as the rules have ALWASY remained the same in that a bull market is recognised by a 20% rally from a bear market low and a bear market is recognised by a 20% drop from a bull market peak. It is only that many analysts don't follow the rules! Instead much rather prefer to re-write history. THIS IS a STOCKS BULL MARKET, and when it will resolve into a bear market depends on when we next get a 20% confirming trigger ! (allowing for short-term whipsaws), so until I see such a definitive trigger the market will be treated as a bull market.

Stock Market Crash Again?

Forget swine flu, the pandemic doing the rounds is that of another Crash with the 1930's chart dusted down and presented as near fact of what is to transpire on every correction. However the markets response has so far always been to push to a new high for the move.

What happens to the crash calls ? They again get rolled out again on the NEXT correction! However the damage has been done as short stops are hit and losses accrued, that no broker will refund for the next crash call.

Stock Market Crash Calls

1. You CANNOT know with any reliability that the stock market is going to crash until AFTER it has actually peaked and entered a downtrend. Anyone that tells you a bull market pushing to new highs is going to crash is going to lose you all your money, as the market rallying significantly from the crash call NEGATES THAT CALL where trading is concerned, because any short positions enacted upon the call are stopped out!

2. You can only enter a Crash TRADE barely a day or hours before the crash event. Crash calls made weeks, months or years in advance are WORTHLESS where trading is concerned, and where investing is concerned, all investors should have stops on their positions based on technical considerations of where they would admit their analysis is wrong on a particular stock.

Crash calls are dangerous in that bring emotions into play which instead of staying focused on reacting to price action, adrenaline gets traders to commit to positions that will soon most probably bust their accounts where EVEN if the market eventually does CRASH, they will have been wiped out by the intervening rally SINCE the crash call! It is this fact that that is always forgotten.

Don't believe me ? Go check ALL of the hyped stock and other market crash calls that in actual fact WERE FOLLOWED by moves that would have wiped out REAL trades had those calls been acted up on.

In recent weeks I have been sharing a some of my trading ideas that I do not have the time to turn into a book -

Depression, What Depression ? - US GDP soared in the third quarter to 3.5%, yes, the rate of accent is probably NOT sustainable, but the debt fuelled bounce will continue a while before it peter's out into. The key point is as I pointed out in the analysis of October 2008. That we are NOT heading for another 1930's GREAT DEPRESSION, and therefore scrub the notion of following the 1930's chart pattern towards anything like a 90% stocks crash. So far the analysis is proving correct.

Good News Turns Bad - Stocks fell following strong US GDP data, which tells you that the market wants to head lower in the immediate future regardless of whether the news is good or bad, this supports the view that the market wants to break below the 9430 low.

Corporate Earnings - Corporate earnings have FOLLOWED the stock market higher, so what happened to the doomsayers of 6 months ago that repeatedly stated that corporate earnings forecasts implied stocks could NOT rally ?

ELLIOTT WAVE THEORY - The elliott wave pattern is not clear, at best it resolves towards an ABC correction that sees an assault on 9430 and probable break.

TREND ANALYSIS - The Dow has now fallen to the major support trendline, which implies immediate term support, i.e. stocks 'should' rally here early next week. The question is will the trendline break or not ? Its a tough call but I would go with yes, which would target 9430. As you can also see the stock market is losing momentum as the last rally failed to reach the second trendline which is suggestive of a tougher trend into year end, though also implying that the market is not as overbought in terms of trend.

SUPPORT / RESISTANCE - Immediate minor support is at 9654, then the last low of 9430, 9250, then 9,100. Resistance over head is at 99,17, 9980 and 10120.

PRICE TARGETS - Downside price targets resolve into the 9100 to 9430 zone. Upside trendline projection implies 10,500 into December.

MACD - The MACD continues to show negative divergence to the price, though this has been ongoing since late August which implies an unraveling of the overbought state.

VOLUME - Volume has been WEAK during the rally, which contrary to much bearish commentary implies that this rally has NOT been bought into. So all of the talk of hyper bullishness is basically rubbish as there is no sign of such irrational exuberance in the volume, which remains heavier on the declines than the rallies and thus suggestive of selling rather than buying into the rally. Which is good behaviour for a stealth bull market.

SEASONAL TREND - There is a strong seasonal tendency for stocks to rally strongly during the months of November and December, following a weak September and October. The trend to date suggests right translation in the seasonal data i.e. pushed forward a month or so which implies that the trend into Mid November may be contrary to the seasonal tendency.

Stock Market Conclusion

There is nothing to suggest at this point in time that the stocks bull market is over which means that that corrections are for accumulating into, the overall trend is for stocks is to continue climbing a wall of worry whilst investors are scared by the vocal crash is coming crowd that will continue to re-write history to always be right in hindsight to again come out with more crash calls over the next few months as the Dow chart of the 1930's gets it's start / end date manipulated again so as to fit fresh crash calls.

The stocks bull market that has raged since the March low has fulfilled the original objective for a 50% advance, therefore upside for the next two months looks limited with greater risk of downside in the coming weeks though pending a break of the major support trendline which implies a rally in the immediate future. All in all this is suggestive of a downtrend towards 9,400 into Mid November with a year end rally to back above 10,000 targeting a rally high in the region of 10,350 to 10,500 during December.

Source : http://www.marketoracle.co.uk/Article14695.html

Inter market Implications - Suggestive of a mild dollar rally, and a mild uptrend for commodities.

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 400 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

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