Tuesday, August 25, 2009

The Bullish Case

Is there a Bullish Case?

This is the best I can come up with, but there is a certain symmetry to it and in light of the proximity of a Buy signal from the Monthy ATR indicator, it's worth a shot:

The above chart illustrates the past 25 years of pricing in the S&P 500. Annotated upon the chart is a 10 year corrective ABC that bottomed in March of 2009. Also presented is the ATR which as of the last day of August, suggests that any S&P close above 1029.80 is a BUY SIGNAL, reversing the SELL SIGNAL given in January, 2008. The S&P 500 closed today at 1028.00

Here is a close up of the ten year long ABC correction:

What do we make of this? Looking at the previous signals generated by the ATR model, grudging respect IF 1029.80 is exceeded on the close next Monday. As for the wave count, geeziz, I had to use a Monthly chart going back to the end of the last century to come up with anything resembling a bullish EW pattern. Nonetheless, it's there.

This whole idea of a a "huge irregular corrective wave," comes from Don Wolanchuk, King of the Perma-Bulls.

Who knows, maybe he's onto something.

But I'm not on board, not yet, anyway.



Anonymous said...

The problem with this 10-year ABC, is that it predicts a large 5-wave impulse advance that should last for MANY years. There is just no way that all the negative fundamentals will support that. If our underlying economic system was like it was 10-years ago, I could buy this. Today, it is just not realistic...no way, Jose.

- cramar

Anonymous said...

Cramar -

Learned that anything can and will happen. We will see. If we start tripping many more bullish signals then we should wade in accordingly. Don't you think? Do you think also Allan?

jaybird said...

Bull market, lost money with this wave bs. nnvc may make a winner down the road

thomas said...

I like what youre trying to do here. I spent a few hours 'meditating and analyzing the big charts today myself.
I think it's a wise frame of mind that trys to look at Both sides of the 'possibilities' that could happen.

I wish I could post my charts somehow or be able to take one of yours and annotate it with my vision, but I dont know how to do it here.
Since this is your blog ,I dont want to write my thing all over it, but if you want to explore my 'vision' I saw today, I'd be happy to explain it in greater detail.
Basically it starts with the premise (a good one I think) that
1) the whole market is a rigged,controlled,manipulated game operated by governments (principally the U.S. /goldman sacks at the steering wheel)...and that they Have a Grand Plan they are somehow executing.
2) they are doing it in some way that 'looks' like something 'plausable' on technical charts, because the world looks and trades with these charts and numbers.
3) the real economic systems are collapsing,and will eventually, unless the U.S. economic crisis gets bailed out/rescued by ...China.
4) China and the U.S. are going to agree to cooperate in this rescue /stick save process....because the alternative would be world war3/bioterror flu pandemic,and unpleasantness all around for everyone in the world.
5)This 'rescue process' needs TIME to set up, so the whole wave process on technical charts needs to be stretched out in time.... the greater issue here is TIME ,more than price.
6) and for the Timing....I see this current wave topping in October (hence the swine flue fearmongering about october)
....but... the correction wouuld Not be a Major crash at This time,...they have to stretch out the time....so it would be another series of A-B-C waves,maybe 2 of them....taking the market to next January(a-b-c down ,for an intermediate bottom ) followed by the 2nd a-b-c going back up to double top the october high, and the real (wave 2 correction ) TOP ....maybe peaking around march-april 2010.
Followed by a 3rd attempt to break the top....and failing THAT(I see june 2010) as the Crash Time

....crashing to the ....("here comes China to the rescue" ) stick save at the March 2009 bottom.... (I might see that double bottom around October 2010.)
...and the world is saved by the new U.S./China Inc. new world order.

thomas said...

...a few more thoughts ...what to watch for... watch for the media hype and hysteria generated about the 'swine flu' these next few months into october. see how the fears have been subsided and no more hype in the media. I believe thats because the U.S. and China have agreed to cooperate rather than become mortal enemies.

watch..like what happened this week right now, to see how China (must have their own version of the goldman sacks market controlling systems) see how china keeps their markets under control from growing and expanding too far too fast...they need to stay closer to the U.S. market.
so going into the fall if we see the foreign world markets growing slower,pulling back longer, stretching out the sideways shuffle,thats a sign of 'cooperation' in the Global new world order Game.
They must not abandon the USA .
watch for a 'slow down' in the various global trade alliances that have been happening between the bric countries, abandoning the USA...see how India just made a big agreement with the u.s about nuclear power plants.... thats a good sign. we might all survive now.
so this is the idea.
China needs a soft correction. the U.S. needs a more sustained recovery,and a soft bottoming,anything that could avoid complete collapse.

What I really want to see, it could happen now,no reason why it cant, is a new open relations renaissance between china and the u.s. in trade relations. what the rest of the world is doing with china.... see the u.s. becoming a big partner as well.... specifically regarding the one great thing the U.S. has to contribute to China....Food. Agriculture. soy beans, coal, fertilizer,water systems, etc.... I want to see ADM get mega zillion dollar deals to work with china...that sort of thing. Lindsay (LNN) water systems to China... Bucyrus (BUCY) coal purification systems ...to China.

and we will all survive.
I could even marry a chinese lady if one would have me...

thomas said...

....maybe one more thought...the idea that Jim Rogers is talking about with farmland and agriculture as the next important theme....I agree...and mu thought is ...instead of this lame effort to stimulate the auto sales industry with "cash for clunkers" the u.s. government needs to recreate a major agriculture/farmland jobs program,reinvigorating our great heritage as a farming nation...this time with a campaign to "feed the world" ...just like ADM's slogan...but a real committment to regenerating a new world order of farming industry in America. something like That would have half a chance to really revive the collapsing economy.
Instead of selling weapons and bombs to the words , America could sell Food and help save the world.
and recover its integrity and humanity in the process. something it desperately needs. Jim Rogers has the right idea.
I just wish ADM's stock chart looked better.

Anonymous said...

Yes! Now your talking, I have

followed Don since the 80's

I think his work is the best.

I always wondered if you knew

him, both being from Michigan.

Get on board it's still early,

going way higher.

Anonymous said...

Good argument Thomas, but there are two weaknesses in it. First, this has all happened before and they failed. Second, the "they" in the analysis of what "they are doing" assumes that the players won't change during the course of events, and it will.

The belief that they big boys called all the shots, and dictated where the market went, permeated the thinking of the market back during the 20s. They cheered Morgan but soon discovered that his powers could only function when the system was functioning. I agree they think they are in charge of events, and they will do anything to save the international banking system, but as things get worse, they lose their ability to control those events. The big central bankers of the prewar period depicted in the book, The Lords of Finance, thought they were in control because they were the maestros of their day. They were much more important and powerful than Greenspan was, and yet they failed. In the end, they learned that this is all about power, and elected leaders don't give up power willingly.

When things broke bad, the maestros were shunted to the side by new leaders who came to power because changing politics arising out of the very events the maestros were battling. You depict a very logical argument for a multi year game plan, but as things get worse, the halls of government get swept.

This is the nature of things and the politicians know it. If that weren't so, we wouldn't have to measure success by the first 100 days, and stimulus would really be going to stimulate the economy. Instead, it is being used to garner votes. Does anyone really think Bernake advised Obama to spend TRILLIONS where he spent it? Does anyone think economists didn't advise to spend the money more wisely? Does anyone other than a politician think this kind of deficit spending is anything short of suicide? Bernake was reappointed because he bends before the political winds and keeps his mouth shut.

Multiply this type of political opportunism times the number of players coming and going in each country involved in this "international conspiracy" and you get a clearer picture. There is no conspiracy, just a bunch of politicians acting out of self interest.

I agree that they will try to keep the party going. I think they will succeed a lot longer than we think, that's why I picked December for the crash. I agree that it may be a series of crashes but that doesn't mean the USG is in charge of the markets. If they were in charge, there wouldn't be so much money on the sidelines.

You have a great argument, but the main assumption is that it is not a chaotic world and that world leaders act logically. We all know that isn't true, so they can't slowly herd us out of our problems. They can only delay the inevitable.


rob g said...

cvm on the move

rob g.

Unknown said...

>Basically it starts with the premise (a good one I think) that the whole market is a rigged,controlled,manipulated game...

Case in point:

FRE from 9:30 to 10 this morning.


Anonymous said...

"Cramar -

Learned that anything can and will happen. We will see. If we start tripping many more bullish signals then we should wade in accordingly. Don't you think? Do you think also Allan?"

I know Allan has wisely said, that prediction and trading are different. The smartest think is to use a trend following system so that *IF* the market does go to 1800 on the S&P you are following the trend. I'm just saying that it is about as likely as Detroit becoming the example of growth and prosperity in America!

- cramar

A said...

Re: Trading the trend

Absolutely, There is no right or wrong, it whether your methods identify and trade the current trend that matters. That trend has been up since March, but I treat every day as it's own trend and that is what I trade.

Anonymous said...

I agree about following the trend too. You can go broke predicting.

My point was just that the people who think they are in control are not in control. There's a big difference between manipulating the markets and controlling them, and that includes the government.


A said...

"God damn, The Pusher"


Anonymous said...

I came across this article today and it does a pretty good job summing up my thoughts on things.


Trader Dave

Anonymous said...

"Cash for Clunkers" ended. "Cash for Clunkers" sucked a year of future new auto demand into the present. Houses are selling, but steeply discounted and boosted up by the "First time Home Owner $8000 Government Bonus" which applys only to deals closed by November 2009. Seems logical the economy will soon be out of magic bullets. China will have to send the USA more magic bullets, but they may not want to? Joe/NYC

Lasertrader said...

Allan..since you like your Market Club buddies, heres their recent bullish take on the market