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Capitulation Open Thread

Posted on September 26, 2006
Filed Under Uncategorized |

Dear Friends and Thinkers,

I may have been stupid enough to try to call a market top, but I’m not stupid enough to argue with new highs on the market. At the close of trading today, Tuesday September 26, the Dow was up over 90, and the SPX up over 10. Both are sitting at new highs for the year. Breadth has been good, and volume decent. Importantly, the SPX has managed to best its May highs, hold its territory and add to its gains. The Dow is not far behind. As I said in Part II:

…I want to reiterate, if prices do move up, they could very well keep going for quite some ways, so beware!

Looks like prices are on the move…up! While I may not like it, may think the gains are not justified, that the market has no business rallying, that it is probably being manipulated, whatever — I cannot fight the trend. The market is bigger, badder and stronger than me. The only thing I can do is humbly submit. This is the life of a trader. When real money is on the line, you get out of the way of a speeding freight train.

The Dow is only a few hundred points from an all time high. If it can bust through that overhead resistance, there is no telling how far it will go - not because of any “fundamental” reasons, but because technical trend followers will see that signal as an all-clear to party.

Think TPB doesn’t want to see that before the election?

The Dow is only 30 stocks - it is not hard to manipulate. The S&P 500 is easy to manipulate through the use of futures contracts. We have the ex-Chairman of the most powerful investment bank in the world sitting in the Treasury hotseat, and elections coming up that this administration very badly wants to win.

Considering the circumstances it was foolish of me to try to pick the top.

There have been some excellent comments and discussion on the numerous open threads on the blog section of the site. Thank you all for participating and sharing your insights. I look forward to your comments on this post as well.

I will have a more complete summary of market action at the end of the week for subscribers. Subscriptions, like all the best things in life, are free!


Comments are closed. Thank you.


105 Comments so far
  1. JDR September 26, 2006 12:37 pm

    I miss Cornhusker already. Michael, why didn’t you make mention of his very timely predictions and insights over the past couple of days? Seriously, as abrasive as ‘husker is, I would love to read a daily column or blog with his thoughts. He’s scattered, but I sense some genius lurking in the background.

    I suppose I’ll wait until December to hopefully read the results of his research.

  2. muleskinner September 26, 2006 1:07 pm

    Ayers Byland at the Fotley Mool is predicting a market crash.

    Who’s the fool?


    Cornhusker is a bit uncanny with his correct predictions, though.

    If the price of gold can increase from three hundred dollars to six hundred, the market can go highter, too.

  3. muleskinner September 26, 2006 1:09 pm


    My brain is slippin’ and slidin’.

  4. turk September 26, 2006 1:20 pm

    In the end, it really is a crap shoot, all charts and theories aside.

  5. Ron September 26, 2006 1:35 pm

    turk is right, at least for us on the lower rungs of the ladder. The big boys will run the market up until they have enough profits and then they will take it down. Don’t take that statement too lightly, the institutions have the buying power and the selling power to move the market where they want. Those of us who trade the market go along for the ride, and if we are good at reading charts (and intentions), we can hop on for some of the ride. Long term - it’s anybodys guess (again, like turk said).

  6. Rich September 26, 2006 1:47 pm

    I’m dumb enough to call “no top” to this market!!

    If real estate is deflating somewhat, and it is….right!?

    Then something else is going to have to fill the void that it leaves behind, unless we are to believe that NOW is the time for the Second Great Depression to really begin.

    Personally I’m of the opinion that the dance won’t stop for some time, maybe another couple of years.

    So, what asset class can be inflated that is large enough to goose the global economy the same way that house prices have. Well the answer, and its been said before here on this site by me and others, is the DOW.

    15,000 to 20,000 has been thrown around by me, stranger and cornhusker.

    Now I don’t believe its rational or supportable logically/intellectually, but it fits the pattern we’ve seen for the past 5 years+.

    An asset class must be inflated. Otherwise we crash.

    Its as simple as that.

    Now corno has been saying house prices will continue to climb next year, that is different to the DOW going crazy. He also said rates will increase. But when asked how rates will rise AND house prices rise he didn’t respond. I don’t think that can happen - too many bad loans coming due, not enough wage inflation and no impetous for consumers to continue to buy houses.

    The DOW will rise substantially over the next 12-24 months, house prices will fall somewhat, rates may come down a little to soften the landing - - or just stay flat from here on out.

    The dance will end in 2008-2010, by then we need to have our ducks in a row.

    Of course, expect the unexpected, we could be bombing Iran by Thanksgiving!


  7. Jeff September 26, 2006 1:53 pm

    Too many things can derail the market right now, and I believe anyone who dismisses them will regret. As convincing as a “trend” might be, a slowing economy and geopolitical forces will trump in my opinion. A suckers rally.

  8. William Middlemas September 26, 2006 2:29 pm

    I don’t get it. The fundamentals are not there. We have a weakening housing market, bad debt being held by the banks and the market keeps going up ? I just don’t get it. I think we are heading for a big crash.

  9. Paul Boughton September 26, 2006 2:31 pm

    After closing above the May 8 high the SPX could conceivably reach 1386 in a blowoff type fashion, BUT some hurdles need to be crossed first: resistance @ 1341, a daily time slot @ Sept 27/29 (the weekly was last week so still within a bar) and the fact that this week would include end of the quarter window dressing, the market was goosed up by short covering the last few weeks, the tendency at old highs is to look for stops above and they just might have found some, caution flags should be out until the last high is tested on the downside.


  10. LAYOR September 26, 2006 2:38 pm

    What you gave was a very poor opinion - at best. Anyone who tries to call a market top/bottom is fooling themselves. You will either look like an idiot or a genius. There is no inbetween unless you use the CNBC phrase, “The market is backing and filling.” Markets have always been manipulated. Institutions buy at wholesale and sell at retail. When 60 million shares trade hands it means there is a buyer for every seller and most likely the institutions are buying at wholesale to inventory until time to sell at retail !!!!!

  11. futuresman September 26, 2006 2:45 pm

    Your call for a crash is to be applauded and your capitulation is to be applauded as well. I think you were just early, but you will ultimately be vindicated. Lots of reason why, Elliot Wave throw-over, harmonic gird (anyone wants to know what this is contact Michael and he has my permission to give out my e-mail address-note you may get caught in spam controls. )

    The head winds are getting stronger, but until the small investor starts chasing this in the futures pits, we could run. The higher it goes the more to be made on the short side. The trick is when to go short.

  12. Jeff Kassel September 26, 2006 3:04 pm

    I warned you, Nyquist, that technical smoke and mirrors are notoriously unreliable predictors. I cannot find my comments but markets move for all kinds of reasons. If people buy stock, markets move up. If they sell, they move down. For what it’s worth, I made about 20K since your last prediction. I have been on the short side but it never really worked out. On balance, markets go up over time. This is true even in third world economies like Mexico and Brazil. Will we get a recession? Maybe. But we’ve had them before and with the way the fed has created money, it has to move the markets. Since real estate is not a good place to put money these days, that excess cash will probably flow, to some extent, into such things as stocks and bonds and plasma TV’s. Trillions in new money were created over the last 6 years to save the economy. While these dollars are worth less in buying power. Stocks are now a lot cheaper than they were in February of 2000. So it is not insane to invest in stock. Jeffkassel@comcast.net

  13. Del Mar John September 26, 2006 3:54 pm

    I take this capitulation as a contrary signal: be ready for a reversal within hours. The intraday patterns at multiple time frames show the kind of “Parkinsonian” loss of progress that mark wedge tops.

    We’re close to a really scary reversal from here.

  14. shakesbear September 26, 2006 4:01 pm

    I am a proffessional money manager who works for one of the largest and most respected firms in the world also the best credit rating whatever that means these days. I am suspicious of the recent rally and the tone of this board ads credence to that suspicion, if hard core bears are throwing in the towel, who is left to buy? Remember a few months ago the HUI finally broke above resistance, but it turned out to be a break out fake out, we plunged 20% in a few weeks, in other words IF this rally fails and we then break support convincingly it we will be much more bearish than if we had never broken out of the range in the first place, our technically analyst at the firm is brilliant and highly lauded, deservedly so, he called this rally said the DOW would make new highs but there would be a divergence, IE non confirmation from the transports the nasdaq and the midcap 400, I say this market is about to turn, turn hard with a vengence and take every body by surprise…..THATS A BEAR MARKET!!!!

  15. nestor September 26, 2006 4:24 pm

    i can’t stop laughing at the bears.

  16. Gemstocks September 26, 2006 4:25 pm

    It’s a Bear Trap, a sucker rally, waiting to squeze the last dollar out of investors.

    Keep some cash for after the crash.


  17. Cassandra September 26, 2006 4:29 pm

    I question how real this is. From my own personal experience it seems to me that inflation is really barreling down the tracks at full speed. Assuming that this is not a straight manipulation, I question whether it is not a certain value of stock just being equal to more and more devalued dollars.

  18. Paul Boughton September 26, 2006 4:39 pm

    Let me clarify my remarks above in item #9, I’m very bearish here,and the market closing on the days high is another sign of an impending turn.

  19. the stranger September 26, 2006 4:43 pm

    I don’t think it’s stupid to issue a warning; not in this market. Actually takes some guts to lay it on the line. I think a warning is warranted on a weekly basis – but of course it would get old. I’m with Rich on this aspect; no telling what the market will do right now. Shakesbear’s comments seem quite reasonable, unfortunately.

    And kudos to cornhusker, for correctly picking the day the markets didn’t crash.

  20. shakesbear September 26, 2006 4:57 pm

    Humility is always warranted with the markets, as with everything else in life, that is why nestor you should beware of arrogance and haughtiness, a wise man one said “laugh now weep later.” Coincidentally a new high for the nasdaq does look a long way off, should I keep laughing at the bulls, nestor?

  21. nestor September 26, 2006 5:05 pm

    arrogance and haughtiness are for guys like prechter, and people issuing crash warnings. it doensn’t take guts to post stuff like that. they just make headlines. that’s all.

  22. Jeff September 26, 2006 5:34 pm

    nestor Everything makes headlines especially the bull slant on any talking head money show. Cramer’s not arrogant? Kudlow is a eternabull who doesn’t let his quest speak their neg view. The dow is near a high. I believe it’s been 6 years getting back to even. All the while your dollar has lost what? 30 percent? Party on.

  23. nestor September 26, 2006 5:43 pm

    i’m not an american. my currency and stock market has vastly outpreformed the dow. kudlow and cramer are morons. they should be banned from tv.

  24. the stranger September 26, 2006 5:53 pm

    “I can’t stop laughing at the bears” is kind of designed to get your goat a little. It’s kind of funny too. I want everything I say challenged, especially if it’s off base. I’m trying to hone my perspective. Nestor is consistent. I look forward to a disagreement with him; I may learn something.

    Some time ago, I took cornhusker comments and pasted them in a word doc. I knew something was off; but what was it? This isn’t picking on the retarded kid – cornhusker’s bright, smarter than me, I suspect. No, cornhusker is disingenuous, unlike nestor – cornhusker forms the Picasso screeds.

    Just days ago, he states gold will be 900% higher than now, but he’s waiting for a decent entry point. And the recent slam on Republicans is at odds with former comments. “I’m a contrarian, it’s served me well” I’ve heard several times; and it’s usually accompanied by some very mainstream perspectives. I actually am a contrarian, and I can think of many ways it’s left me uncomfortably out-of-step with others.

    Would you be surprised to find out that I’ve collected the five years worth of “financial” data from 7 churches and plotted them on a chart? You should be; it’s an extremely ridiculous thought. Keep posting cornhusker, nestor can laugh at me and I can laugh at you.

  25. muleskinner September 26, 2006 6:06 pm

    There is a wind farm in southern Manitoba that is generating electricity. My guess was about one hundred wind generators in the area where they were standing. All of the electricity generated by those windmills is free. The investment isn’t. It takes capital for the windmill to be built to produce electricity.

    Energy stocks, transportation stocks, electronic products stocks. People like electricity. They are more than willing to pay for the cost at a fair price. Energy companies come first on the charts.

    Honeywell is doing fine. It is over forty dollars today. I remember Cramer forecasting Honeywell down to 35 USD.

    Cramer is wrong on Honeywell.

    Honeywell at forty dollars is still a bargain. In 1999, Honeywell was right around sixty seven dollars per share.


    Honeywell looks like a buy at forty.

    I also remember watching a news cast about seven years ago now, it seems so anyway; the market maven being interviewed was also commenting about market highs. He was predicting a DOW at 30,000.

    It had better break out to 15,000 pretty darn quick to keep pace with market high mark predictions.

    Ford is a buy.


  26. muleskinner September 26, 2006 6:09 pm
  27. Shooter September 26, 2006 6:27 pm

    Did nestor make a pediction? or is he just one of those guys who likes to poke fun at others with nothing at stake?

    Kassel may have a point about money flowing from R.E. to stocks, but the main point is just excess liquidity and continued bearishness. Again, even today as the market moves higher the put/call ratio hit 1 intraday. There will be no market breakdown until everyone is bullish and bears have capitulated. I still see bears trying to get ahead of the next pullback. To be honest, I’ve never done well on the short side unless I’ve bought index options and sold intraday or a day or two later for small gains.

    When all the technicians pile on in the upcoming breakout, that is what will probably trigger the black boxes to sell. 60% of the market is done by program trading, combine that with a manipulated market and who the hell can predict with any accuracy what will happen?

    The only thing that stands in front of the train is event risk, something that only the big money players know about in advance.

    The other thing is the upcoming recession, and it IS coming, that should be obvious to everyone.

  28. Wallcrawler September 26, 2006 6:27 pm

    Being an options trader mainly (though slowly changing to a e-mini trader) I realize that what is going to get this market back in the friendship of the bears is to see more CALL buying which may have started yesterday… The challenge however, is that this will take more time to establish a top. JMP, course never is just one thing.

  29. Dennis September 26, 2006 7:07 pm

    Michael, you have been man enough to say cut!!!
    This is appreciated and is a powerful lesson to most market participants, especially newer traders. Keep it up.

    On another note, I think I have learnt in the last while that you cannot oppose momentum if you are trader!!! Either stay out or switch to move along with the herd, in either direction !!!

  30. Administrator September 26, 2006 7:33 pm


    GATA has documented the gold manipulation under Clinton & Rubin in the 90’s as a way to keep interest rates down and the stock market up. No reason to think Bush & Paulson aren’t doing it again.

    At the beginning of this year, everyone knew this was supposed to be the year of the 4-year cycle bottom. Since the cycle has become so well known to traders, it certainly must be known to those who are charged with watching such things for the government. As I’ve mentioned many times, an ex-Chairman of Goldman Sachs is now once again part of the Cabinet, as head of the Treasury. He knows how markets work, and certainly has the connections to manipulate them.

    Obviously I have no proof of this, but it does not seem to hard to manipulate the market. Any time the market looks like it is ready to break down, the bears pile in. All a skilled manipulator would have to do is make sure that the support doesn’t break — Buy just enough to inch prices back up - not a lot, just enough to scare the bears, get them to cover, push prices up, and attract the momentum players who smell the blood. This is not reckless buying of S&P futures, but strategic buying, by someone with an account of unlimited size, the knowledge of where to place the buys and how to strategically execute them.

    It may be far fetched - yes. Maybe I’m going paranoid. But I’ve been watching the market very closely this week - and every time it gets to the point where it should logically break down there has been a huge rush of buying, and it takes off in the other direction.

    Kudos to Corhusker. I miss him already, too. I’ve read The Creature from Jeckyll Island - everyone should. The fix is in. The question now is, how long can they keep it going? After today, I’m pretty sure that it will be at least through the election.

    “Its the economy, stupid!” That’s how Bush’s pappy lost the election the first time. I guess Bush Jr. learned that lesson, and won’t get fooled again.

    Thanks all, and keep the thoughts coming.


  31. Administrator September 26, 2006 7:44 pm


    All of my friends from China/Taiwan are quite dismissive: “Of course the government is manipulating the market” they say with a roll of their eyes and a wave of their hand. “The election is coming - what else are they going to do?”

    China has a long history, and anything that you can imagine happening to a country/government, has happened in China. Americans, they tell me, are naive.

    Maybe it is true - Take a look at this link (via whatreallyhappened.com) :http://www.msnbc.msn.com/id/3037881/site/newsweek/. It shows the international covers of Newsweek on the right side: Europe, Asia, and Latin America covers are: LOSING Afghanistan. And the US cover, “Annie Liebovitz: My life in Photos.”


  32. Not Anyone September 26, 2006 7:57 pm

    The Fearless Administrator wrote:

    “But I’ve been watching the market very closely this week - and every time it gets to the point where it should logically break down there has been a huge rush of buying, and it takes off in the other direction.”

    I recall noticing that kind of action back in the late 1990’s, and then reading of the alleged “Plunge Protection Team”. William Fleckenstein, noted contrarian, has been skeptical of the PPT’s existence for various reasons, as have others. It bothers me to even think about it, frankly. If you are correct, well, recall that the dot.com.bomb did not explode until AFTER the election year. So if this bull runs until election day, make ready for storms after that, PPT or no PPT.

    PS: The formatting of this site is kind of inconsistent. This page requires a much wider window to read than yesterday, the comments a couple of days back are weirdly truncated. Not to throw stones at whoever is hacking your XML, but he/she/they/it could use a little more care in creating and formatting.

  33. shakesbear September 26, 2006 8:13 pm

    Let’s be honest…NOBODY KNOWS…But as traders/investors let’s deal with the facts let us look at the history of the market for the last one hundred years there have been 20 15% plus declines, the market exceeded it’s 29 top by only50% in 75 that’s not inflation adjusted, we are in the midst of a secular bear or at best a trading range….66-81 or 29-54 these are the facts, record debt./..record low savings rate historically unparalelled geopolitical risk .. what can we say … that we know? no we don’t ..but I play the odds and the odds are better than even money that in the next few years we will see a decline that will test the lows of 03.. HOUSING HAS NEVER BEEN THIS OVER EXTENDED…….perhaps just perhaps we will dodge another bullet…BUT ONE THING I DO KNOW FOR CERTAIN IN THE END AFTER ALL IS SAID AND DONE THE DOW WILL BE AT ZERO……and there will be no pyramids, rumours of a lost civilization only dust and souls that wish they had spent their lives differently. To return to life at at hand what I said is if the the spx violates 1300 then 1220 is the next stop if that goes .,mark off another 10% I do believe we will see that in the next 18 months…all the best…watch and wait stay out fundamentals and macro technicals along with economic facts do not warrant being overweight u.s. equities for long.,..all the best.

  34. PB45 September 26, 2006 8:59 pm

    Gemstock IMO has figured this rally out. As in Gold the cartel looks to fleece as many funds and investors they can. Just look at the XAU falseout at 150. Easy to accomplish with a banana clip of 40,000 gold futures to sell. The stock market is just the same. I think it was best said by Dr Aubie Baltin in his latest article on Gold/Eagle when Baltin stated:
    “This week and maybe next with most analysts being so short term bearish could be the best time for DJII to break out to those New All Time Highs that I have been looking for. BUT make sure that you all are not caught up by that final BULL HOOK that always precedes the final TOP.” Dr. Baltin’s SM prediction or warning is not just a current one, he has for a year ( check his archives) been warning of such a scenario. The man is retired and has no axe to grind with investors. His plan is to educate and inform the unaware investor. The complete essay is below:
    Peter Boulton on this thread has an interesting point as well. The contention that stops will be triggered purposely by PPT, locals or hedge funds is a given. The momo crowd’s signature is just that feed off the broken or wounded investor.
    I am a futures trader so I do not follow minute to minute SM charts, but this is a very typical sign of a bull trap. It could look very very good for several weeks (after the elections?), but in the end an inflation induced recession, $60+ oil and a housing slowdown must culminate in an economic and SM slowdown. This is just a paper trap that has no real value or destination.There are very few value in this market./Peter

  35. khill September 26, 2006 9:27 pm

    Now we have some pain.Not enough but it’s a start.The bears are crying AND the bulls are getting giddy.I think the DOW has about 2-3% upside potential and 20-30% downside risk at this time.The DOW could see 6,000 and 3,000 over the next 10 years as the U.S. turns to dust but what’s the hurry.So let’s get the DOW up to 12,000 and try to sense the emotions for the turn.Long term Bulls,PREPARE FOR PAIN!

  36. Santalum September 27, 2006 12:34 am

    The pounding global grain inventories have succombed to this year through an exploding demand base and droughts in key exporting regions (Australia, US, Argentina) is unable to be manipulated and should hyperinflation occur in these markets, it will be the straw that breaks the camels back of the global economy. Inflation in food is coming and it will hit hard. Unfortunately for the Fed they cannot make it rain. I actually believe quoted global stocks are higher than real stocks. Grain stoves in North America were accounting for at least a million bushels of corn a day during the winter months, droughts encourage grain out of stockpiles to feed livestock unable to sustain themselves on pasture growth. Primary erosion the figures boys have no grasp on. Go long wheat, corn and rice on any retracements.

  37. Agric September 27, 2006 3:11 am

    I think there is some wisdom in posts 34. and 35. above.

    The probable upside in the DJIA is 2% to 5% from current 11,670, most likely within the next few days. There is plenty of scope for a 10% to 20% drop in the DJIA happening quite quickly but probably not until after the mid term elections.

    Food price inflation? Oh yes, in spades. Most of the higher energy and fertiliser costs are only just beginning to work through into final food prices; global grain production has been below consumption in 6 of the last 7 years, global grain stocks are at their lowest for many years, this year’s harvests are generally poor. Wheat prices in particular have a lot of upside potential, 2x and more is possible within a year.

  38. PB45 September 27, 2006 3:50 am

    Santalum raises an excellent subject of the food supply worldwide. There is inflation pressure built into all commodities that are not accounted for. These pressures create imbalances. For example: a soybean farmer or any farmer (or consortiums mostly today)have choices based on what the prices are for various commodities. An overproduction in soybeans one year may cause a switch to more profitabe crops such as rapeseed or canola the following year. So what was abundant one crop season this year becomes in short supply the next year. This applies to livestock breeders (hogs, cattle, sheep or poultry) as well. Low prices cause a restriction by breeder to overproduce the next year. The common denominator is feed and fertilizer which is sometimes oil based, but always shipped via trucks, rail or boat. The latent inflation effect (actualy is lagging as crops are planted and take months to mature)adds an incremental price increase to the next season.
    This applies to all commodities as well. Some metals are substitutable, but all are reliant for mine production, processing, fabricating and shipping on energy. The current selloff in POO is just that a sell off correction. POO will be back as strong as before simply because supply has not increased and demand reductions are superficial at this point. Does anyone think China, India or Russia will produce less appliances, automobiles, electrical grids or less infrastructure? So do not dwell simply on real estate( both commercial and local)construction which will not be the only driver for base metals. The same goes for precious metals. They are strong despite limited investment demand. When the Central Banks with limited reserves today(these include China, Russia, Japan and Autralia when compared to their actual fiat wealth) the PM market will learch geometrically higher.The investing public will drive PM prices too high and the final pricing will be a multiple of today’s price.
    My premise is not if stocks have a 10,20 or even 50% rise over the few years they are still not the preferred investment vehicle to be in today. Timing, when an individual must factor in possible govt manipulation, Fed fiat policies and geopolitical events is impossible to accomplish. We are forced to take the road that affords us wealth protection and simply wait for outcomes to develop.
    What unfortunately cannot be reproduced or regulated is Nature. Nature in the form of our globally polluted enviornments of air, land and sea. Our needs are being limited by climate which is definitely changing either by nature itself (cycles) or man caused pollution. The greatest need is not in the lopsided govt. controlled markets, but in the form of food and pure drinking water. We better wise up soon or our problems will be life survival not wealth protection./Peter

  39. dr. vision September 27, 2006 3:56 am

    2-4% upside potential from here than reality sets in, myopic traders on the big street chasing returns, as ALL now looking for new highs, expectations will disappoint bulls and housing slump, oil moving back up and geo-political events heating up again will weigh on markets-

  40. Shooter September 27, 2006 4:02 am

    I’ve always thought that we could have inflation and deflation at the same time. Inflation in the “must have” items, food, clothing, energy. Deflation in everything else including R.E.
    The market has not had a 10% correction in over 5 years, again the ability to print currency at will, has given the pigmen the ability to manipulate any market at any time.
    It is my contention that we will have no serious failure of the markets until the rest of the world says “no more dollars”.
    Amazing that they haven’t said it yet.

  41. Vincent September 27, 2006 5:25 am

    pb45,,,,,, is right on the money,,, as for me I’m holding my cash until ,, we get some of this election noise out of the market… lots of games being played in the futures pits right now,,,,,,

  42. creativemind September 27, 2006 6:34 am

    the economy is a disaster. if you believe the government numbers you are kidding yourself. no M3 numbers, balance of trade, TIC inflows, employment, inflation, the magic money machine of homeowning…all look grim. manipulating the market is the forte of GOLDMAN SACHS just up the new treasury secretary alley. inflation adjusted the dow needs to be closer to 15,000 for a new top to be in place. however in real time i believe a new top is quite possible, but it will be the greatest bear trap of all time.

  43. Justin Someguy September 27, 2006 6:42 am

    As seductive as PPT theories may be, isn’t it likely we are seeing the “hot money” rotating out of commodities and into large-cap stocks? With Amaranth (sic?) getting badly burned by natural gas, gold/oil/copper all topping or down, that money has to go somewhere. Clearly it isn’t going into the Nasdaq or small cap, so…up goes the S&P 500 and the Dow. The major question in my mind, like everyone else, is where the hedge fund managers will decide to jump next. Because when the “hot money” boys decide to leave large cap stocks, the S&P 500 and Dow will definitely go down, probably hard and fast.

  44. Rich September 27, 2006 7:05 am

    The markets are opium for the masses as much as sport and Hollywood. We all accept the media is controlled by 4 or 5 major corporations, so why shouldn’t we believe the markets are too? Are they somehow immune from control, I don’t think so. If a private group of bankers can steal the central bank of the US for 100 years are we really supposed to believe the markets are somehow “free?”

    Americans aren’t naive about this stuff, they are just plain deluded! This country has been in the grip of monopoly capitalists now for a century, there has been a shadow government running the show for all of that time.

    A couple of obvious examples: The NSA has 40,000 employees and a budget bigger than Microsoft, and none of us knows what they are doing!! Every call between the UK and US has been monitored legally since the end of WW II, and that is legal activity, an agreement signed between the two countries, but the people were never told or allowed in to the decision making loop - think about that.

    Internet traffic is all monitored (many ISP’s were made to put FBI monitoring devices on their equipment days after 9/11), now library records are legally monitored……I could go on, I could name the specific government programs and legislation that enable it all, but you all should know this stuff by now.

    So, again, if the above is true, then just how secret do you think trading is? Who do you think has foreknowledge of anything major going down? We have the illusion of a freemarket, we have the illusion of democracy - admittedly its better than the alternatives - - but don’t be believing the propaganda.

    From where I sit its not about market analysis, technical or voodoo, its about understanding what is at stake in the world and with the folks who run it.

    Asset inflation is necessary to keep the US population satiated. With an unhappy US population you can’t control the largest military machine on the planet. The balance of US public opinion and the elites global agenda is critical, without the US publics support the global agenda would probably unravel pretty quickly.

    So the people must be made to feel good materially, or made to fear so much that they capitulate all of their power to the government. Which is easiest to engineer, fear or wealth? If you control the means of producing both then you have the means to ultimately control, to a greater or lesser extent, the US population and therefore your global agenda.

    When I do the math I reach the conclusion that the only way to move this current agenda forward is either through massive fear or through the DOW rising fast - at least to partially hedge against real inflation. Oil down, market up, and a slowly adjusting real estate marketplace - that is a recipe for a few more good years.

    The alternative means a lot of fear, death and sorrow - and while I believe this may occur, I choose to hope for market manipulation as it is far more palatable!

    Cheers Rich

  45. Nish September 27, 2006 7:19 am

    Boys and girls,

    In times like these, the markets are pretty rational. Mid-term elections are coming, markets are up, gas prices down, a quite an impressive method to only vote republican or democrat. Christmas may be the last nice cake we are allowed to have. It is all downhill from there.

  46. Teton Valley Dave September 27, 2006 7:26 am

    Has anyone one found a good way (website or other)to know what M3 would be if posted today ?

    Also, do any Federal Reserve profits get returned to the Treasury or people in any way…. or is the system as entirely corrupt as many say… for the price of ink and paper they print money and collect those debts in real value… the labor, blood, sweat and tears of the people ?

    Thanks for the reminder “The best things in life are free.”. Adam Smith said … “What can be added to the happiness of a man who is in health, out of debt, and has a clear conscience.” Wise words !


  47. Administrator September 27, 2006 7:34 am

    Harry Dent has long had the argument that the Dow would make its way up to 40,000, something I wrote about at the beginning of the year: To Bull or Not to Bull

    He suggests that boomers will have to cycle back into the stock market, after the housing market crashes.

    Once the Dow hits a new high - either today or in the next few days - and it hits the evening news, the those investors that aren’t paying as close attention as we are will start piling back in:

    “Honey - the TV says the market is at a new high. Highest since 2000.”
    “Well maybe we should put some more money back in, dear.”
    “Everyone we’ve know has lost their job, but other people must be doing okay. Must be good times again. Maybe we should invest..”

    And new highs will be a self-fulfilling prophecy. The bears have provided the initial fuel for liftoff, and the retail investors can take over from here. It just took this little goosing by the PPT to keep it from breaking down completely>

    They may have succeeding in flipping the dynamic and “reframing” the argument. No more talk about the failures in Iraq, nor the flailing economy - how can the economy be flailing if consumer confidence has recovered and the market is at new high? Even new home sales (a number issued by the gov’t today - in direct contrast to Lennar’s report yesterday) are up 4%! Everything is groovy.

    Yes, I’d say little bush has learned well from the lessons of his pappy’s administration.


  48. Turk September 27, 2006 7:35 am

    Well, I got out my quija board yesterday and it told me to expect a big down slide in stocks on friday the 13th, only two weeks away.

  49. Ed J. September 27, 2006 9:41 am

    When a system can create “instant” money, and then pump it into the economy efficiently through multiple channels, the chance of a sudden collapse in any asset class is close to ZERO!

    Look at the facts, when was the last time the DOW declined more than 2% in a single session? 1993? Banks are opening new branches at a record pace, and M3 is no longer published. Do you think that’s a coincidence?

  50. Jeff September 27, 2006 12:48 pm

    Michael There might not be talk of Iraq this week, but how long do you think that will last? Weeks, maybe? By the way, consumer confidence is entirely a narrow focus on declining pump prices.Oil up $2 today, gold $10. Where will your thesis go if oil continues to climb and the saber rattling begins a new? The “bad” guys control what, 80 percent of the oil? One lull in the news and we all somehow forget. My only thought is they also are waiting for our elections so as to deal with a dumbed down electorate. Terrorist in the short term, housing crash for the long run. Oh, yeh almost forgot the massive deficit. How could I forget. Could it be that the press is only concerned with a Dow record and giddy at that. You have lost your way.

  51. Agric September 27, 2006 3:10 pm

    Very dangerous assumption, Ed J. “When a system can create “instant” money, and then pump it into the economy efficiently through multiple channels, the chance of a sudden collapse in any asset class is close to ZERO!”

    I totally agree that the micro management by official channels, their awareness and understanding of such operations, their increasing skill level, the diversity of instruments at their disposal - all these and more reduce the likelihood of seriously ‘unwanted’ sudden moves in important asset classes. They have got pretty good at that job, so good that you can make excellent money by betting on that competence. Their friends, some of which are also ‘instruments’, and many others who see the obvious, certainly do.

    However, it is not a ‘free’ market, it is a ’semi-managed’ market. Does anyone here contest that?

    I think there is a problem with this: it will continue to function smoothly and in the ‘desired and manageable’ ranges - until it doesn’t. While the markets are ‘under control’ there will be a tendency for some tensions to build up and not be successfully ‘managed away’. Fundamental distortions will accumulate over longer than previous time periods but the behavior of markets will not adjust.

    One day adjust they must, unless we are doomed or blessed by a managed centralist economy, possibly global, perhaps a communism of a capitalist elite?

    And when that adjustment occurs? The bloating of a decade or two of successful management will burst, that very successful management will be utterly overwhelmed by the corrective dynamics, the only limits on market movements will be the artificial time outs imposed.

    Markets have been much freer in times of past corrections, they have generally been allowed to find their own level. They have never been allowed, nay, encouraged, to become this ‘artificial’. If the current ‘management’ fails we really don’t know what will happen: this experiment has not been done before (on this scale in this way) on this planet as far as I know.

    Will it happen tomorrow at a DJIA of 11,750? in a month or so at 12,250? in five years at 40,000? Will it drop to 9,000, 6,000, 3,000, 0? Will it even have relevence?

    Now scroll back to the quote I began this post with. Unless we have conjured infinite wealth then it must be incorrect. Rather like the delusion of continuous growth within any resource limited environment / system.

  52. Ed J. September 27, 2006 3:30 pm

    Ah, but they have conjured “infinite wealth”. Austrian economists will spin in their graves, but if central banks make a pact to constantly increase the money supply at reasonable rates and never put the squeeze on each other, what is to prevent a constant escalation of this “wealth”? And by that I mean consumption spending in some markets fueling gainful employment in others. Now that is probably too simplistic a model for today’s globalist finacial elites, but it served the residents of Easter Island quite well, until they ran out of trees.

    They could do quite well under this scheme, until the reasonably-priced energy runs out. By then (as Maynard Keynes once said) we, along with all those central bankers, will be dead.

  53. Agric September 27, 2006 4:17 pm

    LOL, Ed J., and you know it well, they have but conjured its illusion (and I’m no fervent goldbug).

    What is reasonably priced energy? Is that not gone too? (Nay says the consumer, whose thirst has not faltered yet). It IS energy that makes the world and all else go round, besides energy money is naught. Dave Cohen did a most excellent post over at TOD (The Oil Drum, perhaps the most significant online place of all just now) today, setting our energy consumption in its widest context:

    Read and weep. I did, even knowing most of its truth before, for the pain of these almost great apes likely soon to be dust. Yet we still argue about markets, lol.

  54. shakesbear September 27, 2006 4:18 pm

    I just spoke with one of the most revered technical analysts in the world, here are his thoughts, the DOW will be capped around 12000, the at SPX 1360. Secular bears have followed secular bulls 100% of the time — this time is no different. The average duration of the bear is 8-15 years. Commodities will continue to do well - this is simply a correction we will turn soon in gold and oil if we have not already.

    High dividend stocks, especially defensive issues from europe and japan, treasury bonds — this rally is for real — look for the ten year yield below 4%, watch carefully for divergence in the market, a flight to consumer staples and defensive issues, interest sensitive ..ie utility… these things are ocurring.. Sentiment needs to become a little more bullish, the new high on the dow should accomplish that…….we are getting close, I have been both long and short the last few months with heavy exposure to zero coupon 30 year treasuries. I am preparing to unwind the long equity hedges and get aggressively short, as usual I will look for confirmation, nothing will stop this market from going down including the government.

    Prepare for a resumption of the decline. The long term downtrend will overule this cyclical bull move … let’s face it, the market looks tired and old, and just about ready to lie down…….invest wisely be prudent, but be ready to move ….I suspect another month max TOPS ARE ROLLING OVER - HGX RLX XBD RUT MID

  55. Michael Nystrom September 27, 2006 5:48 pm

    Bob Moriarty at 321 Gold says:

    It’s entirely possible that Karl Rove will incinerate America before allowing the investigations that would be part and parcel of a Democrat-controlled House of Representatives. They are the ones who vote on Impeachment and it’s clear to anyone who listens to Americans speak these days, if we lived in a democracy, Bush would be toast.


    ****Mogambo sez: Whether or not the current economic and financial weirdnesses are caused by the government trying to keep things up-tempo until the elections, they are surely trying. Remember that ever since Clinton, the mantra is “It’s the economy, stupid!”

    Their bigger problem is that the big Presidential election is only two years away, so they have to keep this bloated, stinking monstrosity of a world economy afloat for a long, long time yet. Your best-case scenario is that they succeed enough to keep the prices of gold and silver extraordinarily low the whole time, so that you can have two more glorious, fabulous years of accumulating gold and silver at astonishing, historic bargains, multiplying your eventual gain when it all blows apart!

    Link: Here

  56. Just Passing By September 27, 2006 6:25 pm

    “The Oil Drum” is certainly an interesting place. I don’t recall seeing genocide discussed so casually outside of some ultra righ-wing pits, such as the “white power” types. At least it’s “equal opportunity” genocide, they don’t play favorites, they just want most humans to die as soon as possible.

    Was I supposed to learn something serious there?

  57. the stranger September 27, 2006 6:50 pm

    Just Passing By, yes…

    Agric, I think you summed up this incredible string of comments with, “it will continue to function… until it doesn’t.” That’s it, that’s where we’re at. Because it’s now so managed, so far gone, in every conceivable way, it can’t self adjust. We can’t stop it, slow it down or fix it. We can only keep it going – till we can’t.

    And it comes down to oil. Not nuclear weapons, they’ll be deployed for oil. Not because of whether (in the short term) but because whether disrupts oil. I think you’re also right, Agric, that The Oil Drum is the place on the web.

    To all of you that think Peak-oil is a hoax, I think that’s a logical “shorthand” conclusion. Skepticism is healthy and usually rewarded. But aside from many great books there are many excellent websites. I knew it was a hoax until I investigated. Anyway, weather Peak-oil is real, or a hoax, affects your view of the markets.

  58. muleskinner September 27, 2006 6:58 pm

    There is no doubt about it: We’re all dead.

    There is no escaping death, but… I ain’t dead yet.

    While I am living, you need money to survive. The stuff does lots of things.

    It can buy you some spinach, you don’t even have to grow your own spinach. Might be a good idea to maybe start growing your own spinach, from the looks of things. Contaminated food supplies could be an horrific nightmare in the future. It would wreak havoc.

    Your own garden could save your life.

    Seriously, sometimes it isn’t all that rosie. Sometimes, it looks bleak.

    My wife’s Dad had a rat problem. Rats are a real problem when there is a population that has matured. There’s alot of them. See one rat in a rock pile, there are hundreds of them stalking you.

    Well, anyhow, he rigged up an iron gridwork on the floor of the building, connected live electric wires to the iron gridwork, and, voila, dead rats everywhere.

    Electricity comes in handy. Does wonders for our lives. Energy stocks are a no-brainer.

  59. Shooter September 27, 2006 7:15 pm

    Well said Rich!

    You are right about everything. Seriously, the U.S. is an illusion. Oops, 8 years of a Republicrat, better get a Demican in the Oval office before half the natives get restless. Throw em’ a bone, continue to dumb em’ down through public schools and reality T.V.
    Keep em’ in fear and debt, they must own a home to get the tax break, we must have the guvmint to protect us from terrorists. Amazing, not a single attack on U.S. soil from the bad guys since 9/11. No soft targets, zip, nada, nuttin’, and we have a boatload of Muslims living right here in the good ol’ USA.
    I continue to laugh when even VERY smart people believe that Bush is in control or Clinton is in control, or that their congressman actually gives a crap.
    Who in the hell would spend $20 million to get a job that pays $150K a year?
    Rich is spot on. Nice post.

  60. Just Passing By September 27, 2006 7:23 pm

    The Stranger advised me I was supposed to learn something at The Oil Drum. Ok, I learned that the death-cult of Leftism that worshipped killers like Stalin and Mao seems to have mutated into a death-cult of Gaiaism that yearns for killers bigger than Stalin, Mao and Hitler all put together.

    That’s an interesting thing to learn, I suppose. What does it have to do with the market?

  61. the stranger September 27, 2006 7:46 pm

    I’ve read some great articles on the Oil Drum. When the Prudhoe Bay reduced output I checked in to one blog several days in a row. It had great input from people in the industry. I haven’t been there in three weeks. Here’s some of the articles on the index page (haven’t read em). I think oil related to markets; the death cult I got to go back and look for…

    US oil reserves up for 1st time in 3 yrs
    Many skeptical of gas plunge
    Natural Gas - A Tale of Two Markets
    Opec supply down in September
    Experts look for the floor on oil prices

  62. the stranger September 27, 2006 8:21 pm

    Hey, speaking of petroleum and the markets, here’s a timely article on Dow Theory and the Transports. What Are The Transports Telling Us?

  63. Just Passing By September 27, 2006 9:12 pm

    The Stranger says:
    “I’ve read some great articles on the Oil Drum.”

    Ok, I’ll look at the homepage sometime.

    “The death cult I got to go back and look for”.

    Just click on the URL posted above by Agric and you’re there, dude.

  64. Dr Jane Karlsson September 28, 2006 2:30 am

    I think you were right to call the top when you did. What happened instead was Amaranth, which may turn out to have been the trigger. Do you believe they really had the tiny amount of leverage they are claiming?

  65. Gold Bar Tender September 28, 2006 6:00 am

    Dr. Jane Karlsson says:
    “I think you were right to call the top when you did. What happened instead was Amaranth, which may turn out to be the trigger.”

    On various bull weblogs, quite a few people are pointing at Amaranth and saying “See! See! Even when a hedge fund blows up, nothing bad happens!” then they cheer for a while. Recall that Greenspan pretty much papered over all the cracks bacn in 1987 with coupon-passing and other reflation measures; it sure would be useful to look at M3 in a time series right about now, to see if there was a sudden blip of liquidity after the latest “Master of the Universe” turned out to have clay feet.

    Up thread someone suggested we are seeing the “hot money” rotating into large cap stocks, and the Stranger posted a really useful URL pointing to an article about the Dow Transports. Has Ben Graham’s theory broken down, or is it just that we are seeing the effects of the Fed turning on a fire hose of liquidity to put out any possible fire sparked by Amarant? Ok, maybe I’m reading too much into the tealeaves here, but it surely is interesting, though, that we can’t see M3 anymore.

  66. Paul Boughton September 28, 2006 1:29 pm

    I realise now that this forum isnt for posting technical turns and price levels on the SPX,but since I already posted #9 and #18,I will follow through just to end my thread lol,the SPX stopped at the 1340 resistance level in the time slot,no more window dressing is required,anytime time after tomorrows open the same winners that were bought can be dumped,there is no guarantee of a selloff just that we are in the ZONE,if the market starts to selloff make sure the bars are LARGE and FAST or else the pros are just sucking in shorts that put protective stops ABOVE,these stops provide fuel for the next trip up.
    Cheers All And Good Luck


  67. nestor September 28, 2006 4:01 pm

    no decline. none. just pullbacks in a bull market. that’s all. no rising diagonal. figment of people’s imagination. markets are very bullish. reality or not. real estate collapse or not. peak oil or not. doesn’t matter. markets going higher.

  68. Agric September 28, 2006 4:13 pm

    Thanks for the comments, glad some have read and think.

    I see wheat went bonkers today, +5%, much more upside to go, it will probably be the biggest commodity increase over the next 12 months:
    see my earlier comment this thread for brief reasons.

    Oil, gas and gold look to have bottomed, but that is a harder call given the US slowdown I expect imminently, the Q2 GDP revision today had some ominous elements and substantiates my call for recession officially starting probably Q1 2007, certainly no later than Q2. Copper should be a profitable sell now with minimal upside risk and a plausible decline of 40% to 50% within a year.

    Yes, a fair few doomers at TOD (I admit to being one), but a decent smattering of more moderate and optimist. There is the usual banter but you don’t have to sift through much to find opinions, analysis, argument and substantiating links unequalled elsewhere on these (energy / oil) topics. There is a very sound argument that human population growth over the last 3 centuries is 90%+ explained by our increasing use of fossil hydrocarbons, it might therefore be worrying if that energy supply reduced.

    I specially mentioned that TOD link, heck I’ll do it again:
    because I think it gives such a wide perspective on our energy use. You will find lots more of interest at TOD if you look, even my financial forecasts for 2006, lol:

    NG at current prices is about a third of oil equivalent energy price, well below the recent ratio of about half. Will oil drop to $40 or NG rise to $6.50? I have a near uncontrollable urge to buy NG ATM since I think oil will see $70+ by November. The core hurricane season is barely half over, folks, and a nasty east coast one, Caribbean quicky up the Gulf, Atlantic monster stomping Florida perhaps en route to Gulf, are still possible.

  69. Agric September 28, 2006 4:34 pm

    To Nestor: your short term logic is sound, money must go somewhere and there is no immediate reason for it to go into most commodities or real estate, or even bonds. It isn’t going into stocks for positive fundamental reasons. Keep your stops tight. Do you seriously think stocks will gain 10% before falling 10%? Your argument says, to me, that there is a profound and continuing disconnect between stock markets and underlying reality. I would say that disconnect must correct before too long.

    John Williams’ Shadow Govt Stats site gives ‘continuation’ M3 data in graphical format but you need to subscribe to get detail:

  70. Paul Boughton September 28, 2006 4:44 pm

    Forget about patterns,at the time Edwards and Magee wrote the book they were valid,pros are contrarians so they dont work for long,forget about oscillators,market makers will watch your favourite and TIP it to get you to commit,EWAVE is great because everybody has a different count and everybody is confused,BUT there are times for caution when its dumb to have your head in the sand and now is one of those times,I wont get into complex time and price projections because most wouldnt understand anyway,but always watch intently the advance,distribution occurs on the way up at the end of the move,its called stair stepping up,NEVER TRUST A SPIKE TOP,if the market continues up from here it wont be far.

  71. Nineu September 28, 2006 5:58 pm

    In 1999 the NASDAQ surprised everybody going up more that anybody could imagine. The correct forecast then was to be bearish , also the correct forecast is now to be a bear in almost all markets except treasuries. But before deflation prevails, stocks prices must go up in a year or so and absorb all the speculative and greedy excess liquidity, then exhaustion will play its role while all the bears (not financially dead) are hibernating and finally deflation will prevail. I will never would dare to short this market, I prefer let it play its inflationary awful music until it fades and stops. So let’s say I am bearishly watching the folly from the sidelines.

  72. nestor September 28, 2006 6:15 pm

    the markets had thier chance to drop these last two months. they did not. that’s it. the 4 year cycle low is in place. it bottomed in July. the markets are going up. yes. there is a good chance, they will rally 15-20% HIGHER from here over the next year. there is little or no chance of a significant decline until aug-oct 2007.

  73. Paul Boughton September 28, 2006 6:23 pm

    It boils down to this,either a new bull market started oct 2002 or a retracement of the decline is in effect,and DONT look at the Dow.

  74. Paul Boughton September 28, 2006 6:57 pm

    Unfortunatley static cycles DO invert and if one understood that completely,they would be able to see that from the oct low of 2002 your next 4 yr cycle is due oct 5,thats next week folks,and if INVERTED which looks like the case from all other evidence,the pros have been distributing in advance.

  75. shakesbear September 28, 2006 7:11 pm

    I rode the bear a few years ago…now that was a market …I remember the sentiment on the bear boards then …it was the end of the world…I havn’t been short for years… but the very sound and tone of all these intelligent skeptics makes me feel in my gut of guts that the turn is just around the corner …..puke point for the bears after a four year cyclical counter trend move.

  76. Paul Boughton September 28, 2006 7:31 pm

    Now lets assume for a moment that one discovers a static cycle that works and publishes it,the minute its found as with any other trading system or lever it ceases to work the minute its sold or given away,there are enough GURUS out there selling crap its pathetic.
    A case in point,Martin Armstrong from I believe Princeton Economics (who is now behind bars I think)published his economic cycle of 51.6 yrs,when broken down to a stock cycle it was 2.15 yrs,this all became public knowledge around 1999,2000,I tracked the 2.15 cycle all the way back to 1909 with amazing accuracy,but it hasnt worked since published,so how the hell is a 4 year cycle supposed to call a bottom when everybody knows about it.

  77. the stranger September 28, 2006 7:35 pm

    There is an old saying that, “The function of a Bear Market is to separate the BULLS from their MONEY and that the function of a Bull Market is to separate the BEARS from their SHARES.”

    Which applies now? Is the market going to trick you out of your shares? Those Ford and Fannie Mae shares? Here, take em’

    Several here have conceded that the markets may shoot up; but not with much confidence. It’s prudent to consider everything you can think of. But how can people be confident of year or two bull? The risk is as unbelievable as it is and unprecedented. What’s the bull market in anyway? This is a fire sale. The Dow is close to its high from years ago, nominally. So what? Fundamentals break technicals, technicals don’t break fundamentals. Worse yet, there are no fundamentals.

    We are reading each other to gage timing; that’s all. The consensus is down.

  78. shakesbear September 28, 2006 7:48 pm

    Until the russell and the transports confirm I am a raving luanatic grizzly fresh out of hibernation and very hungry, Housing is the most classic leading indiator in the world in nine months the dow will look just like the HGX.

  79. shakesbear September 28, 2006 7:59 pm

    Excuse me I forgot something, a rally?you want to see a rally check out the moves that were common during the last bear 400 point intraday moves..now thats scary if your short…all this market is asking for is a gravestone and someone to shovel the dirt on top of a rotting cadaver with horns, please my bearish brothers remember an old saying…WHEN YER YELLIN YOU SHOULD BE SELLIN AND WHEN YER CRYIN YOU SHOULD BE BUYIN..

  80. Yogi September 28, 2006 8:03 pm

    I just have three things to say:

    Good pitching beats good hitting every time.
    Good defense beats good offense.

    I rest my case.

    Do not go long this market.

  81. Paul Boughton September 28, 2006 9:43 pm

    Ok,Ok,I dont believe in static cycles calling turns of any degree (major,intermediate,minor)with any sort of consistency,because if they did we would all be rich,they are so easy to figure out,and I studied these for a long time,I,ll share some of my research on static cycles here,we have the 4yr,the 8 yr,the 12 yr,the 10 wk the 6 wk and god knows how many others.
    A lot of people make their money from selling static cycles,and if they had the answer they wouldnt.The most recorded cycle in the stock market according to the cycles institute is 3.39 yrs,so cycle gurus start from a point on the chart and measure forward,then they backfit to see which other cycles fit and try to project them into the future,the point that is missed is that there is only 1 cycle,this might be hard to understand but instead of having 500 different concecutive cycles there is only 1 that keeps repeating from every point in time.
    Consider this,the market is one huge fractal where parts repeat over and over,if I take the 3.39 years from the cycles institute and convert it into trading bars I get a cycle of 852 bars,if I project 852 bars forward from every minor ,intermediate,major turn forward I will get a reaction 852 bars forward,unfortunatley the degree of the turn isnt projected,this is where the fractal part comes to play,852 months is 71 years,1929 + 71 is 2000,do the same thing weekly,my point is this,every single point in time is accounted for.
    Now for the reality check,overlay a dow chart starting 1904 to 1940 with a dow chart 71 years in advance starting 1975 to current,I spliced an SPX chart on mine from 2000 on.
    There are no myriad of cycles out there,just one, part of a larger,and larger fractal

  82. Paul Boughton September 28, 2006 10:23 pm

    Lets just call static cycles RIPPLES IN TIME and leave them there,every turn and price level in the market is related to one in the past.

  83. nestor September 29, 2006 3:24 am

    the fact that markets are breaking into new highs, after going sideways for nearly 2 years, is quite significant. markets don’t consolidate for that long, then crash. it’s a bull market (from the 2002 lows), and still a secular bear from the 2000 peak.

  84. Rich September 29, 2006 5:43 am

    So what is THE investment strategy for this point in time?

    We are here to debate Corno’s, he’s saying BUY, BUY, BUY we’re going to the moon.

    You guys seem to be saying that all analysis points to a major bear hiding around the corner.

    So what does one invest in?

    Do we head in to the deflationary era that Prechter and Michael believe is next, or do stocks and houses deflate while commodities inflate, etc?

    Do you believe that if the markets and housing go down then the big party is over and we’re heading off a cliff? And what about the geo-political landscape, how does economics affect what comes next there??


  85. muleskinner September 29, 2006 6:17 am

    There is approximately 7 percent correction on the stocks I hold. I do expect an increase over the next year.

    Energy, transportation, and good real estate stocks hold the trump cards.

    They’re not losers. They’re winners.

    Also, there are funds that are holding their own and provide some return with little downside. However, I have been caught holding the bag on some mutual funds that were alot of foam and froth. It’s like hitting your finger with a hammer. It hurts.

    Just an observation from the dark side of the moon…

  86. Deserted Rat September 29, 2006 7:43 am

    Seems to me that 2007 would be a good time to have a recession, as early as possible, for the Republicans. Get into it in 4Q ‘06 and be done with it by the end of 3Q ‘07 so’s to be able to tout the “good economy” going into ‘08. If the Fed jacked rates up one or two more notches and slowed down the money creation, that would do it. Then in ‘07 they could drop rates, turn the spigot back on, and off goes the market again. If my little notion is right, watch out for market action in November. What do y’all think of that?

  87. nestor September 29, 2006 8:05 am

    Prechter is absolutely WRONG aobut deflation in the US. Americans are broke. So is the goverment. They have NO savings. And the USD is a FIAT currency, NOT tied to a single thing. The US is NOT Japan. The US gov’t will print as much money as it likes to pay off it’s obligations. It’s as simple as that. It will be inflationary, NOT deflationary.

    As i said. Prechter is a moron. He can’t get anything right. In real terms, inflation adjusted, gold adjusted, foriegn currency adjusted, US stock markets will look horrible. But there will be no deflation.

  88. RaRa September 29, 2006 8:19 am

    The six years, so far, of this strange bear and it’s frustrations brings to mind an essay that I’ll always remember,- an opinion piece written by the now infamous Martin Armstrong about 7-8 years ago titled “The Path of Most Pain”.

    I won’t try to recap the whole essay he wrote but it was a brilliant insight (and foresight?)that the (bear) markets would confound and wound ALL participants in that it inherently would seeks to wreak the maximum havoc and to reward NONE in the end. And that it would do so in ways that would essentially defy the imaginations of most.

    In short, that the market will, by it’s NATURE seek the path of most pain for all and that includes the bears who presume to know and think they can be on the right side of it. In a large magnitude global bear market there is no right side,- not one that can be counted on in any event.

    I’ll end my own recap now as it can’t do justice to the elegance of his original essay.
    I’d suggest you google it if you can and read it. The contents of the essay truly are equal to it’s title.

  89. anon September 29, 2006 8:55 am

    You are right in a way, a crash is indeed coming. You were just wrong to predict it next week. This is because crashes are such rare events that to get the exact time right to within a few days is most unlikely. Your prediction ought to have been something like this.

    There is likely to be a crash in the next few months. I cannot say exactly when, and it is not certain. However, there are enough triggers out there, and enough of a sentiment that all is well, that it gets more and more likely all the time. It will happen when it is least expected. So what we should all be doing is making sure our investments are structured with this in mind. The probability is rising every week that goes by, and the costs of not being prepared are also rising. By Christmas is my bet, and when no-one expects it.

  90. puffdippy September 29, 2006 10:09 am

    I see alot of bears breaking down. This is what I want to see right before a market change. Someone mentioned the Real Estate market tanking and that funds would simply change hands from Real Estate to the SM. What kind of weed are you guys smoking? A falling Real Estate Market with the kind of debt in society today will mean weak consumer spending going forward. Weak consumer spending translates into weak profits which translates into……_____.
    I hope you guys can fill in the blank.
    Over and Out


  91. Gold Bar Tender September 29, 2006 11:11 am

    puffdippy wrote:

    “Someone mentioned the Real Estate market tanking and that funds would simply change hands from Real Estate to the SM. What kind of weed are you guys smoking?”

    Sorry, I don’t smoke. But rotation out of RE and into the blue chips is one way to explain what’s going on, and it’s a simpler explanation than the PPT or other manipulation ideas.

    “A falling Real Estate Market with the kind of debt in society today will mean weak consumer spending going forward. Weak consumer spending translates into weak profits which translates into……_____.

    A rotation out of stocks and into the bond market, which also seems to be happening. Last summer’s little sudden dip was real interesting, the big guys seemed to dump stocks AND gold in order to pile into bonds. That’s one of the things Prechter claims to expect after a crash, in his books. IIRC he also expects hyperinflation after that, a kind of “Ka-BOOM” of liquidity that drives gold to the moon in dollar terms.

    IF, and it’s a big “if”, we get a big crash kicking the economy into a deep recession, then we’ll see an odd thing: declining demand for commodities with declining supplies of commodities. I dunno how that plays out.

  92. Rich September 29, 2006 12:32 pm

    With real estate, what percentage of society is at risk with rising rates? Who are the people who will be hurt by higher rates and falling equity, and will they massively, negatively impact the global economy.

    I suspect that the next year will show the folks who have borrowed using exotic Option ARM’s, and other adjustable products, getting whacked as their options run out and their rates adjust up, this will compound if the Fed continues to raise rates.

    But what percentage of the middle class has leveraged themselves to the point that rising rates will be massively punitive. Can this segment run to the stock market for protection and additional upside if it is rising?

    If the market does not rise, but interest rates rise and housing drops precipitously, then the multi-decade old bubble economy is finally over and it will be time to pay the piper. Do we really believe NOW is the time? I’ve called for a crash multiple times in the past, and now doesn’t feel “special” enough!!

    Cheers Rich

  93. Rico September 29, 2006 3:41 pm

    New all-time high in points, but the US$ is worth 30% less across the board when you convert to other currencies.

    DOW has a ways to go to make up for that.

  94. the stranger September 29, 2006 3:41 pm

    Yeah Rich, housing is so enormous it will be crushing to the “former” middle class. And how much 401k dough do they dump down the market every week? Won’t a housing slump reduce contributions? You’re right, it’ll be punishing – and they’ll run away from the stock market, not toward it. Nestor, I agree the gov will print like there’s no tomorrow (ha, no tomorrow), so if it holds together it won’t be worth squat. But will that stragedy work? …or how long will that stragedy work? This isn’t Germany in the 1920s, it’s the whole international system.

    The first gust on new balloon takes you from nothing to something. The next puff it doubles. And so it goes tapering off with each breath. …puff 80, and pant 81 seem the same. Maintaining 1% inflation means increasing the amount of each puff. It could stop growing before we run out of air.

    Continuing this ludicrous comparison, I’m picturing blowing on a balloon the size of a giant Stay Puft Marshmallow Man. It’s got to be pushing back and how thin can it get? Won’t he run into something? What if his eyes pop out!?! But the balloon analogy only takes us so far.
    stranger’s law: balloons deflate, bubbles pop.

  95. Gold Bar Tender September 29, 2006 4:38 pm

    Say, whatever happened to that guy who predicted a gain of 300 points for the week?

  96. muleskinner September 29, 2006 5:51 pm

    Well, the DJIA did gain about one hundred points this week, so I guess he is right about 1/3 of the time.

    I’ll take my chances on my own guesses.

    I’ve seen stocks come and go. UGRD, a water processor with UV light purification is a goner. It was bought by Creative Eateries, CEATE, which became CEAT. It was selling for about a buck-sixty or so; it reorganized and became CEATE. It’s at two cents today.
    Not a high-flyer.

    Utilities, energy stocks, transportation stocks withstand the test of time. They hang in there. The proof is in the pudding.

    Go to your local library, look at your local newspaper on microfiche film from the dates of October 28 - 31, 1929. Look at the stock quotes on the finance column way back then. It migh surprise some of you. Canadian Pacific Railway was about 206 dollars per share then. It held its share price after Oct. 29, 1929.

    The market had crashed, but only the stocks that were all fluff is what took a beating back then.

    The effects of the Depression weren’t really felt until the summer of 1932 when the Bonus Army marched on Washington, DC and parked themselves at the Mall for several weeks. Herbert Hoover was President. General Douglas MacArthur along with Patton and Eisenhower attacked the Bonus Marchers and drove them out of town. It wasn’t pretty. Politicians were surily, communists were gaining a toe -hold in politics, general rabblerousing was par for the course back then.

    It was all over for Hoover before the election in November of 1932. The economy sunk even further into a depressed state. People had no money, none, nada, zip, nothing. If you were on the farm, you ate what came out of the garden, the barn, and the chicken coop. For many, that was their market.

    It took more than forty years for the DJIA to make it back to 1000, maybe more. That’s a bear market and nothing else.

    It can happen again. This time around, there will be even more to lose.

    Get to work, make it work, it can work.

    Hoover said: “Throw down your shovels and sit on your asses.

    Roosevelt said: “Get off your asses and pick up your shovels.”

    ‘You eat good by the sweat of your brow’

    Bonus Marchers:


  97. Gold Bar Tender September 30, 2006 10:41 am

    Huh. Once comments get down far enough, the start to disappear in Netscape. But I can see them ok in Safari. Guess this must be one of those “Outlook-only” web sites. Kind of annoying.

  98. vigocha September 30, 2006 9:21 pm

    It is indeed very hard to understand how anybody can look for a sell off (or crash) in these highly controlled markets. And that too so close to the election.

    If at all there is going to be a sell off, it will have to be preceeded by a break up of the Fed - Wall Street nexus?! If you ever come across the news of a few Fed-dissenting Wall Streeters - SELL!! Should not be too hard to work that out, right?

  99. Steve October 1, 2006 7:56 am

    Let’s not overthink here,
    1) Housing which added 30% of new/replacement jobs since 2003 looks to contract to about 50% of current activity
    Don’t forget thousands of suppliers to Housing industry. Many thousands will be laid off, hundreds of companies may close.
    2) Massive buy out of Auto workers at F & GM ongoing now. Where will these folks work when payoff runs out? And the COBRA insurance coverage) Don’t forget thousands of suppliers to Auto industry, again..thousands more will be laid off and hundreds of companies may close.

    So what can we look to for a higher market going through 2007?

  100. Average American October 2, 2006 10:49 am

    Steve - the answer to your trailing question is: God.

    The US is His country. He made W President, so says W himself! Over half of us believe in the biblical account of creation (according to CNN) What makes you think we have ANY long term worries about the DJIA, Basbeall, Apple Pie or Chevrolet? Never underestimate the mindless masses. We Rule.

  101. the stranger October 2, 2006 8:08 pm

    You’re right Rich, it doesn’t feel “special” enough. There must be a rocket powered ace-in-the-hole; something unique. Steve’s right too, it’s easy to over think here; if the market breaks out convincingly and heads up – that’s our signal, simple fireworks.

  102. bubblehead October 3, 2006 9:31 pm

    All these comments about the Dow? The Dow is a joke. So what if it makes new highs? The Nasdaq is still over 2700 points from a new high. The Dow is 30 stocks. Easy to manipulate. Change ‘em out if you don’t like them anymore.

    The market sucks in all who have forgotten history. Then, it gives them a history lesson. SCHOOL starts soon.

  103. bubblehead October 3, 2006 9:44 pm

    Oh, I forgot. How do the transports go up as oil rises to near 80 bucks? Airlines go bankrupt and are mysteriously revived and reinvented. It’s a con game that only lasts as long as there are still believers. GOT GOLD?

  104. tz October 4, 2006 12:54 pm

    I worry about the naked put writers, but maybe they are just thread-bear.

    Today (10/4) at the close should be the peak, or I’m going to the sidelines (the prop promotion team can keep things going for a while and I can stand aside).

    There are enough divergences to indicate things should fall apart quickly, but sometimes it just doesn’t happen. OTOH, this action reminds me of Gold when it broke above the 650 resistance and shot up and appeared headed “to the moon, Alice” as Bill Murphy might say.

    Right now I’m using QID and MZZ (ETFs from profunds, they are 200% inverse index which you can trade like stocks - they magnify-mirror the QQQQ and MDY, but there are versions for SPY and DIA, and bullish ultra funds as well).

    I missed some of the rise, but got back in expecting a drop too early, but that seems to be a habit - the mania runs a bit longer than I think it ought.

    Another point is it is possible some hedge funds which were short (or whatever those toxic composite mathematical derivatives are) are imploding. The markets are like the electrical grid - too much power can also cause trips and blackouts. With positions long and short highly leveraged, when they are liquidated, they send a capital surge through the market. There’s not a lot of natural gas, but the slight downward hiccup imploded Amranth that had to liquidate, so the stops were run.

    I would be really careful. This amplification effect is happening on the upside, but it will be worse on the downside. Even the PPT can’t stop everything.

  105. the stranger October 4, 2006 7:03 pm

    Just to clarify - I meant that a powerful up surge may be the signal that gravity is about to kick in.

    I think you’re right tz, there are enough divergences to indicate things should fall apart quickly – maybe a world record.

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