Sunday, July 18, 2010

An Important Week Ahead

The week of July 19-23 promises to be an important week with regard to the future trend in global markets. Friday's dismal close in N.Y. bolsters the old adage: "Buy on Rumor--Sell on News."
Decent earnings reports and the news of the ridiculous Goldman settlement (proof that regulation is a poor replacement for morality) were met with reversals and bearish candlesticks galore by the close of business on Friday. If this market has any gas left in it...it had better put the 'pedal to the metal' this week.

Standard & Poors 500
The S&P continues to make lower highs and lower lows, the signature of a bear trend. Fridays dive following two bearish candlesticks on Wednesday and Thursday suggests that there is more downside to come--possibly MUCH MORE downside. There are some critical levels to watch this week:
  • A move above 1107 would be considered quite bullish and the market could rally to the 1130-1135 level quickly--destroying many bears.
  • A break of 1038 would set up a retest of the CRITICAL 1004-1008 level.
  • If the 1004 level is taken out it is imperative that the market holds the 984.00 Archimedes point. A close below 984 would confirm that the March 2009-April 2010 rally has terminated and the markets are headed for another significant decline.
  • There is another critical support area at 943-956. A break of this area would increase the probability of a market fiasco significantly.
  • Below 943 there is support at the 870-875 area, but it would likely prove temporary at best. Below 943 things become treacherous to say the least.



Toronto: TSX Composite Index.
Like its neighbor to the south, a five wave structure can be seen from the March 2009 low. Since the April high the TSX has been tracing out a pattern of lower lows and lower highs as well. The 4th wave of lesser degree @ 10990.41 remains the important pivot point. A break of 10990 sets up a decline to the 10450-10500. A break of 10225 would set up a HUGE decline--possibly to 7450-7570. This would not be inconceivable if the commodity markets decide to head south. Gold Copper and Oil will provide good clues as to where the TSX is headed.


Goldman Sachs


The Goldman slap on the wrist from their puppets in Washington is proof that regulation is a makeshift alternative to morality. Even the wording of the settlement is pathetic and does nothing except create a greater degree of moral hazard for the clowns on Wall Street. John Boehner recently suggested a moratorium on all regulation coming out of Washington. Considering the effectiveness of the regulation the government does impose on Wall Street, the oil industry and anything else that has lobbyists in Washington, they might as well abolish all regulation: it is all hypocritical lip service and does nothing to help anyone except corrupt politicians and greedy corporate thieves.
The Goldman chart is the quintessential example of 'il bacio della morte' (the kiss of death.) Many indexes and individual stocks rallied from below their respective 200 day moving averages, only to stop dead and reverse upon touching it. This is a bad sign--a very bad sign.
This stock is a joke and is likely head MUCH lower. One word can be used to describe the entire soap opera. DISGUSTING.

Mastercard and Visa

As deflation takes hold of the global economies, governments, corporations and consumers shun debt and take necessary steps to lower their debt exposure. Consumers are retreating from the delusionary orgy that they have been enjoying for several decades and leaving their credit cards at home or in the garbage can below the sink in their upside down house. Without the debt addicted consumer to bolster its debt processing function, MasterCard and Visa are doomed. If these shares continue to decline things could get very ugly quickly. I wont even mention what I feel the downside potential is--readers would begin to question my sanity. NOT A PRETTY PICTURE.


GOLD.
Like the TSX, a 5 wave structure can be seen from the October 2008 low in gold at 681.00. Currently spot gold is flirting with an important harmonic trend line (1.618:1) originating from the Oct 09 low. The fourth wave of lesser degree stands at 1166.50--a break of that important support would set up lower price targets with the area between 1014 & 1044 being a probable level of important support. Breaking below 1000 would seriously damage the psychology of Gold Bulls and result in chaotic market conditions, although at this point that scenario does not appear to be a high possibility. Watch 1150.00--below that things will get interesting.


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