(July 13th) The Dow ended the week down 188 points 11101, after falling as low as 10978 Friday. The S&P 500 lost 23 points to 1239, its lowest finish since July 18, 2006. The Nasdaq gave up six points to 2239. The market is heavily oversold and all the bullish indicators from last week are still in force and have even improved. For instance, our Global Futures Sentiment Index fell to a new historical low while public short sales (dumb money) went through the roof. The total number of short sales compared to NYSE volume is also at unprecedented levels (Charts of Interest). An extremely bullish message comes from our Smart Money Flow Index, especially if we look at the historical chart. Our Global Futures Top Indicator is as well clearly in bullish territory, and it is also bullish that there is now concern among Wall Street pundits that the Dow won't bottom until it hits 10000, and the S&P may drop under 1200 and could conceivably hit 1150. But we would like to remind you that the major indexes have crashed through support level after support level since May, and this must have wiped out a lot of small fry who had their stops around these levels. The Dow is now 1601 points below its 200-day moving average and more than 85% of S&P 500 stocks are below their 50-day averages. Such readings have been extremely bullish in the past and should not be ignored. It is also noteworthy that they showed a bear in last week's Internet editon of Barron's. Usually, when the people there find out that we are in a bear market the worst is already over. We are aware of the fact that we expected a bottom around 12000 because of heavy purchases by NYSE specialists around this level. But the markets always overshoot and the more they overshoot to the downside the better they perform afterwards.
Well, those are some indicators adding to the situation and as VIX reached intraday 29, we got close and the GSE panic is another component. Though I am not sure if Paulson is either (a) not smart enough to take care of his wording since he triggered the Friday selling or (b) he does that deliberately, important is the effect. The only thing disturbing is to many smart guys out there, including myself, calling in a low soon - but nevertheless we are in a temporary capitulation. The big one is in time and price far away and we will see a sucker rally. The XBD is not finished yet and DOW, NDX need to lose another 1-2 % in the next few days, with MER coming on Thursday more downside is likely to 130 XBD and the VIX need to get closer to 30.
This week is option expiration and full moon, which has a exact angle to Uranus. This means volatility with a negative bias, since it will be in Capricorn, which is unpleasant. But with a Jupiter close by, it might hint to a climax and final sell out. The Mars - Saturn conjunction comes to an end, since Mars moves away and will be in a positive angle to Jupiter in 2 weeks - hinting to a sharp short-covering rally around the new moon. The special situation we have around this new Moon is that it will be a total solar eclipse in LEO, which is also the speculation sign - not a sound investment. Around the expiration, we will get our temporary low for a few weeks, since one big astrological event is coming up on the 4th of November, the exact opposition of Uranus and Saturn (one of 3 within 2 years), which brings along big trouble for the world and markets. Astonishingly, it's almost exactly aligned with the US elections, which carries the potential of big trouble around these elections. The closer these planets move though, the more difficult it will be to keep markets in a positive spin. The total lunar eclipse on August 16th (full moon) will be on Neptune, which carries some trouble potential and will impact oil big time, since its almost at an exact conjunction. Basically, it suggests a high, which should be severe and last for a few months. The only problem is that astrology gives a event bias but not exact dates. We are heading for a severe top in oil, which will last for months. The price target of 146/8 has been reached but it may be that they print the 150 levels still. The arguments about oil are simply pathetic, since supply and demand has NOT CHANGED WITHIN THE LAST 12 months, but the price has more than doubled. This bubble will also burst but only partly (100/10), since one new factor drives all prices. That is INFLATION. To save the financial system from collapsing, the central banks are pumping liquidity in the markets on an already high money supply. We enter hyperinflation mode, which will drive all kind of prices higher and, at some point, trigger a crash in the Bond markets, which will be the second big wave down for the banks and trigger bankruptcy.