It's been a while since I gave an update. This one comes at what may be a turning point as significant as the one in March '09. Is the bear market beginning its next leg? Quite possibly. It’s important to note that I have been bullish since the March ‘09 bottom and I do not qualify as a permabear.
So far my outlook has been borne out very well. It’s worth noting that the markets did not achieve the bounce targets or even the 50 EMA before failing miserably. The 20 EMA has crossed the 50 EMA.
I think a fairly immediate test of the 200 EMA is in order and should produce a short to intermediate term bottom after some churning. If we get a sharp V bottom that may be bearish since it would mark a short covering rally rather than patient buying. The zone between SPX 1032 and 1017 should provide some support.
I would add that it is possible that a top is forming it may be a complex process that will still take months to unfold, and may include a retest of the recent highs. It will depend on the quality of the rally we see off the indicated support zone. I would also add that we may be witnessing another full fledged financial panic and there may be some extreme risk that needs to be discounted. The sovereign debt crisis, the US state and municipal debt crisis, commercial real estate and further residential real estate defaults are all very real components of a potential deflationary spiral.
The US dollar pushed through to the 80 level with little effort. This may be an indication that a deflationary tsunami is in process. I suspect that it will be penetrated along with the 38.2% fibonacci retracement level from the March 2009 high as stocks put in a temporary bottom. We also have a channel buster here which almost always occasions a top. A retest of the rising 200 EMA, which is soon to be crossed by the 50 EMA, may provide a good long entry on the dollar.
Gold rallied to the resistance area that I had indicated and then tanked as predicted. It’s got a date with the 200 EMA in the 1031 area. A rally from there should provide a good short entry for the real move back to the $650 zone.
I liked your latest BBMR "round table" report. I put in a limit order to short a stock etf (ERX) yesterday afternoon which was not executed because the market sank. It's looking like we'll get some bounce today though (based on overseas trading). Are you planning to wait for the market to reach the 50 day MA before going short?
I'm going to try to put out another update today or tomorrow. It does seem like we should get a substantive bounce for a week-10 days or so. Maybe 300 points on the Dow from here? Anyway, not the best time to go short, perhaps. The situation is a bit unclear at the moment. Like they say, "When in doubt, stay the hell out".