2/20/09 - Equities, New Moon rebound?

Executive Summary Last week I expected the market to make a low near the 2002 lows of 770 on Thursday and we exceeded that level a bit on Friday. This week is also difficult, but we are oversold and New Moons are normally highs, so I expect a high near 820 on Wednesday morning to test the broken triangle and October/December lows before resuming the decline to new lows into early March. My alternative which is quite possible is to continue the decline this week with few rebounds and reach the 700 area by Friday , but either way the market is not making a low of significance yet and will need to make lower lows before a good rally is probable. ETF Trading I am long CAF, DBC and SLV into April for a rebound. I reduced my SLV since we reached one of my targets. I am long UDN into April for a pull back in the USD. I am long QID until a low is confirmed as a short term hedge. I reduced my QID when we got close to my SPX 750 target. I am long QLD and SDS into May for my Market Neutral system. I reduced my QLD and SDS since we exceeded all my targets. My performance at predicting the direction of the SPX before the open is below and my vote for Monday is bullish above SPX 775 Firebird - Your Score: 53.8% [G100 Ranking] Last 22 sessions: corrects=7, incorrect=6, omissions over limit=0. Session Opinion S&P 500 Score 01-21-2009 bullish up 01-22-2009 - down 1 01-23-2009 - up 2 01-26-2009 - up 3 01-27-2009 - up 4 01-28-2009 - up 5 01-29-2009 bearish down 01-30-2009 - down 6 02-02-2009 bullish down 02-03-2009 - up 7 02-04-2009 bearish down 02-05-2009 bearish up 02-06-2009 bearish up 02-09-2009 bearish up 02-10-2009 bearish down 02-11-2009 bullish up 02-12-2009 bearish up 02-13-2009 bearish down 02-17-2009 bearish down 02-18-2009 bullish down 02-19-2009 - down 8 02-20-2009 - down 9

Daily and Weekly Breadth Summation index (BSI) The short-term Ticks, Put/Call and Volatility are turning bullish. The mid-term McClellans and Percent of Stocks are bearish. The Next Day BSI is 60% bullish and too low to be reliable. The Daily BSI is turning from oversold suggesting a rebound. The Weekly BSI is oversold but too low to be bullish.

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Outlook for Monday is mixed

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All indicators are mixed, but the blue Nyse Tick line saw a lot of buying and stayed above the middle line at the close suggesting at least a little more rally on Monday before we drop again, possibly to lower lows if the Ticks can't both climb above the middle line. See the NDX minute chart here and the Dow minute chart here

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Outlook for next week is turning bullish

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All indicators are turning from oversold levels suggesting a rebound to the 810 area or possibly the broken triangle and October lows near 840 if a rally can last all week, which is doubtful. See the NDX 15 minute chart here and the Dow 15 minute chart here

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Outlook for late March is bullish

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Friday the 20th was a potential 6 week cycle low and we may see a short term rebound like we saw on November 13th, considering their similar sharp drop in the white Tick lines. The blue Put/Call line is also near a trend line that gave us good lows on September 18th, October 10th, November 21st and January 15th, although none of them lasted long. If the blue Put/Call line breaks above that 5 month trend line, it will probably confirm a capitulation wave down that lasts a few weeks and takes the white Tick line to the bottom of its range before a large rally starts in March. See the Nasdaq 60 minute chart here and the Dow 60 minute chart here

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Cycles and Wave Counting

Minute Wave 3 needs to drop to November lows to confirm

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The SPX futures finally reached my minimum target of the 2002 lows for Minuette Wave 3 and we will probably make a short term low above the November lows today or Monday morning for a New Moon rally back to the January lows near 810. Any significant move above SPX 810 would raise doubts about this count, but the low Put/Call still predict a larger decline ahead no matter what the correct count is.

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Short and Medium Term Breadth

Bonds and Rates

30 year Yield is probably making a double top

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The 30 year Yield is breaking the parallel geometry and is likely to start dropping to the 2.8 to 3.2% level towards the next cycle date of March 6th.

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Currencies

The US Dollar turns down from double top near 0.88

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The US Dollar turned down from a possible double top, and is probably headed lower to the 0.80 level by the next expected cycle lows of mid March, with a possible rebound for the March 5th cycle high.

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Commodities

Commodities break down as Oil collapses

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Commodities broke the recent lows, despite the divergences in the PPO and a lot of this is due to Oil which broke down badly, but the higher futures prices going forward called Contango suggests that this drop should be short lived and we will probably test the 20 year resistance level near 250 or more in March.

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Oil lost the 40 level and is the biggest drag on the CRB

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Oil failed to hold the 40 level as suggested by the bullish on Oil January 26th cover of Barron's and I should have paid more attention to it. Now that all these Barron's readers have bailed out of USO in disgust, maybe Oil can finally make a low and rally, especially since the USO is weaker than the futures.

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Gold almost reaches the first Fibonacci target of 1010

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Gold almost reached the first Fib target of 1010 as it touched the upper channel boundary, suggesting an overdue pull back into the February 27th cycle date. If it holds the 920 area, it will be in a good position to make a run for the previous high of 1033 and the next Fib targets of 1060 and 1150 by the expected mid to late March cycle highs.

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