THE DOT - if this turns orange or red be alert

Thursday, July 3, 2008

close to the short (medium) bottom - technical update

The indicators a bottom needs are accumulating:

· Leh made a low around our 20 target;

· Bulls at 31.9 Bears at 44.7;

· Price targets have been reached almost NDX 1780/1800, SPX made a new low, DOW 10800;

· Dow has a 12 TDM combo count in a week 7;

to name a few, VIX is still too low for a real bottom. I read a nice piece of research why Vix is low, but the this time everything is different excuse does not work at all. I am once again reading the must-read book "Reminiscence of a Stockoperator", which was written over 100 years ago, and I can assure you the essentials do not change and it always gives me the creeps to read those kind of explanations. For a real bottom, 30 VIX is mandatory and, as we know, 50 marks the big ones. We made it to 26 yesterday with markets down 20% - but the clear message is that there is more yet to come. But that will unfold in waves, today is the last trading day of this week and a new moon. However, this week might finish in fear but a rebound for a few days is very likely and the driving force might be the BKX, which has its exhaustion 13 and is due for a technical rebound. The XBD is far from over and will be the source of another wave down later this month with the SOX. The next week, for the most part, should have an upside bias but around the 10th another selling wave should occur. Most importantly, watch the VIX for clearance.
The indicators a bottom needs are accumulating:

Oil is close to its high at 146/8 but the bad news is the Dollar is poised to drop further short term and the Euro should climb above 1,60. I have no idea why Bernanke is still smiling because he does a miserable job - this low interest rates only helps Wallstreet but not Mainstreet and not the US economy or world economy. SEC and FED have failed completely and allowed banks to make hazardous bets and the regular people have to pay the bill while the guys responsible have walked away with 10s of millions of bonus checks. Wallstreet payed out into the face of the biggest disaster since 1929 the highest bones ever but the owners of this companies have lost over 50% of their stockvalue. Bank robbery needs a new definition I assume.

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