9 replies to this topic

[TechSkeptic]

Seems like the blow-off top is what most people are expecting in the indices, but I thought I'd add a poll to get a better reading.

[fib_1618]

Past history has shown that equities have a tendency of making rounding tops and spike bottoms (as opposed to spike tops and rounding bottoms in gold and other commodities). So, I would expect any equity market top at this stage to probably take the same formation - and to happen when most won't even have a clue of what's actually taking place. Fib

[NAV]

FIb, I am seeing a neat rounded top formation here. The sideways churning from June-Oct has created this classic rounded formation, which are seen in the stock market tops. Even if we have a blowoff top here, the blowoff spike would appear as a spike only on the daily charts. The weekly charts would still show a rounded top. As far the clues, i guess most of us don't even have a clue of what's happening for the last 4 months, the bulls and bears getting whipsawed alike. That's the nature of the tops and we are already in that process. We are all, i guess, searching for the culmination point of this rally, which IMO is close. NAV

[catrader]

With so many people expecting a blowout top (including myself) at the all important 1068 for S&P, I begin to think either the market will peak at an entirely different level (maybe a top much higher than 1068), or the floor will just all of a sudden disappear for the major indices, thus catching most people by surprise (it happens probably only when this catches the government by surprise also). Besides an "important" level watched by a large number of players is either underreached or overreached and is unlikely to be reached exactly starting a reversal there. If there exists a powerful team of players that constantly watches the market to make sure things will look rosier in the name of patriotism (it's a difficult time after all), they will at least engineer a breakout above the important fibonacci retracement level at 1068 to see what happens. I looked at the choices in this survey "What scenario are you expecting" and didn't see an option that I agree with fully. 1068, if reached within the next few days, will lie on the upper trend line of a contracting triangle (I infer this roughly from the NDX graph) and I do expect a reversal there, but it is not a blow out top by any means IMO. And the market will probably go down until it reaches the lower uptrend line where it reverses up again. When will it breaks out of this contracting triangle? I just don't think the timing is right yet with 1068 being reached the first time and nor do I think the market will be allowed to drop a lot yet. And I somehow feel the triangle will break out to the upside (since I do believe the powerful team of players does exist and they prefer stronger stocks to currencies or bonds, as long as the last two don't collapse). Besides, I expect a somewhat major rally in the US dollar (thanks to its oversoldness). And this will probably coincides with weakness in bonds as foreign governments are less tempted to buy US bonds when their currencies strengthen. Just my thoughts for today (tomorrow is a different day).

[Porter]

Besides, I expect a somewhat major rally in the US dollar (thanks to its oversoldness). And this will probably coincides with weakness in bonds as foreign governments are less tempted to buy US bonds when their currencies strengthen.

I don't understand what you are saying here.

If the US Dollar strengthens as you expect, then that means that foreign currencies will weaken.
I agree that Bonds might weaken when foreign currencies strengthen.
But that is not what you are predicting for Forex.

Porter

[catrader]

Besides, I expect a somewhat major rally in the US dollar (thanks to its oversoldness). And this will probably coincides with weakness in bonds as foreign governments are less tempted to buy US bonds when their currencies strengthen.

I don't understand what you are saying here.

If the US Dollar strengthens as you expect, then that means that foreign currencies will weaken.
I agree that Bonds might weaken when foreign currencies strengthen.
But that is not what you are predicting for Forex.

Porter

Oh, I meant:

this will probably coincides with weakness in bonds as foreign governments are less tempted to buy US bonds when their currencies _weaken_.

[catrader]

I agree that Bonds might weaken when foreign currencies strengthen.

Historically, US bonds weaken when US dollar weakens. But because of world trade situations, export-oriented economies like their currencies to be weak so they can export more of their goods. So when US dollars weakens, they buy US dollar-denominated assets like US bonds. This thus beefs up prices in US bonds. So weaker US dollar correlates with higher US bond prices (in terms of US dollars). This will probably last until fundamental rulez again. And when US bonds weaken with US dollar again, watch out below for US stocks.

I hope I'm not confusing "strengthen" and "weaken" again.

[Porter]

Historically, US bonds weaken when US dollar weakens. But because of world trade situations, export-oriented economies like their currencies to be weak so they can export more of their goods. So when US dollars weakens, they buy US dollar-denominated assets like US bonds. This thus beefs up prices in US bonds. So weaker US dollar correlates with higher US bond prices (in terms of US dollars). This will probably last until fundamental rulez again. And when US bonds weaken with US dollar again, watch out below for US stocks.

I hope I'm not confusing "strengthen" and "weaken" again.

No, your argument is logically consistent.
It is just not the argument that I normally see.
It will take me a while to think this one through.

The argument put forth by the bears is that the Dollar will collapse and interest rates will soar.
Your argument is just the opposite.
And therefore it represents "out of the box" thinking.

[SideShowBob]

And therefore it represents "out of the box" thinking.

This means you'd never make it as a talking head on CNBC. If the argument is any different than the standard party line they boot you off and make you kiss Ron Insane's (spelled than way on purpose) a**.

SSB

[js11222]

We are passing through a seasonally weak period and I expect the market to be strong for a while. I do not see a blowoff top since the frenzy have not reached the man on the street.