THE DOT - if this turns orange or red be alert

Wednesday, May 20, 2009

SPX the bigger picture with some common sense

If you have not noticed by clicking on the chart you can enlarge it. The weekly 10 years SPX chart I will take up to see by common sense that this is a sucker rally by all means. The much milder recession of 2000 -2003 ( was rather more a mix of tech bubble, 9/11 and the start of the IRAQ war) had a length of 3 years and the bottom building was almost 1 year. The current one is now in its second year and the 'bottom' was so far half a year although this one is the most severe since the big depression. The difference between the 50 week MA and the 200 week MA was 285 points in the former one at the peak and at that point the market was already trading above the 50 week MA. Now we are about 275 and far below the 50 week MA. Most importantly though is that at this point of time the SPX had broken above the downtrend and out of the consolidation pattern. None of that has been accomplished at the current situation.

If any comparison is possible its more we are at the stage of the 2001 Sep lows and hence the following strong recovery before the final drop occurred. That also fits with my count as we are in wave 4 up currently in a bigger count and wave 5 down will bring us to a new low level. The better comparison would rather be the 46% recovery the market had after the initial drop in 1929 in both cases the recovery lasted up to 5 months with some corrections within. Never before has there been an intervention of 9 trillion by one central bank ( with some of this moneys in unclear channels as no one can answer where are the money went even the supervisor of the FED has no clues). 9 tril matches the total debt of the USA before the crisis just to put it into perspective and the deleveraging is still in low pace as the BIS reported yesterday only 13 % of all derivatives have been closed still over 500 tril. outstanding. Hence the risk in the system is still insane and all bullets have been used up. Actually the over 15% contraction of Japan and that its lost AAA speaks volumes as that is the trend for all developed countries. Japan's bear market started 20 years ago from a level of 39000 currently we are at 9000 (rounded numbers) and they have zero interst for almost the same period.

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I am a professional independent trader