THE DOT - if this turns orange or red be alert

Thursday, September 4, 2008

technical update - its gettin ugly?

SPX and NDX are testing the extreme levels, NDX even more than anticipated a strong support at 1800 was taken out on a daily basis but we need to see how the weekly close will be. Today should be the climax of the ugly short term move (astrologicaly) with the Sun conjunct Saturn and a Pluto stationary only 3 days away. At the same time some positive angles will kick in around the 7th when Jupiter goes stationary in a trigon to Saturn - the sentiment picture looks better as well now with the VIX at 24 and Rydex at .60. - but some price patterns give way for more downside action before short-covering should kick in.

SPX has a target set by its price pattern (wedge) of 1210 thereby at 1230 we have a small support which might serve as well (but less likely) as the bottom. NDX has the 200 week MA at 1740 which stopped all former severe corrections and should hold again for now as well. SPX is trading below the 200 week MA for 2 months now but the crucial aspect midterm is that the 50 week MA is falling steeply towards the flat running 200 week MA and might cross it (likely) sometime in Q4 but that is only a confirmation for our overall assumption that markets are heading lower mid and long term.


Lets get back to the short term action - we could see a trough around the coming WE followed by a sharp short covering rally but its also possible that the selling spreads into next week as well with a capitulation like low and we get still a Sep. rally thereafter. In any case the VIX around 20 did not show the level of caution markets should have and will test the 27 level before we get a turn around short term. Basically for a mid term outlook this weeks price action prepares a sharper decline in Q4 - thats the its gettin ugly part.

A guy from Deutsche Wealth Managment said a strange thing today that markets are implying a decrease in earnings of 30 % by the drop - thats a logic I do not get even if earnings are stable and we have a flat momentum markets can reprice the same ( far too high earnings assumptions) plus we have totaly underestimated inflation hence part of earnings are nothing else but inflation and should be repriced anyway independent from any change of real earnings. That Bond markets the biggest current bubble are totaly mispriced because some central bankers introduced phony calculation models does not change the fact that peoples money looses buying power far more than shown in statistics and need to be awarded with far higher yields. Basically thats a hidden tax (putting it in diplomatic terms) governments are taking these days, they are very creative with taking taxes.

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