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[Trend-Signals]

This is my thought on market analysis.

We need to interpret market actions in the context which we are living in instead of picking a scenario from the past price actions. For example, we have bipolar market reactions to rate cut during 1997-1998 and 2001.

This is the same as comparing 2007 to 1929 or 1987 like comparing apples and oranges since we are in different economic and market cycles as well as underlying economic scope as we are in global economy than ever before, as we heard that CSCO CEO Chambers stated that we are in the best global economy which he has seen.

As stated earlier, we had 2000-2002 SPX 50% correction of 1980-2000 1331% rally after 1987 35% of 200% 1982-1987 rally. During 1995-2000, SPX advanced 200%. During 1997-1998, SPX advanced 65%; and 1998-2000, 68%.


As stated earlier, we have 2 ways to view the highly shorted market are:

1) We knew that we will have subprime problem over year and
2) We knew that we have LT bears at SPX 1550 Mar 2000 top.

So, it is reasonable to expect that we have highly shorted market when SPX reached Mar 2000 top SPX 1550 +/-.

However, what does not make sense is that we are suddenly having a massive media hype on subprime problem as if it is a new problem which we didn't know about.

I commented on that we will see the problem during Jan-Mar 2006 and others also have; however, the massive news is hitting public now. This is Timed News with massive hype at the same time when market reached SPX 1550.

So, this can be viewed as:

1) Market is intended to trade higher using high short level as fuel, or,

2) Market is using media to profit big from short-side by scaring public to exit markets.

And we know who own media. The big pockets which can be profited from both side of markets.


Based on my analysis of market cycle and sentiment; we will see market trading above SPX 1555 - #1 case.

We are in strong Global Economic Cycle as stated since Jun-Jul 2006 when I noted market cycles and sentiment.

Markets are at critical juncture; and market actions show that we are likely to see a break above SPX 1555.


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http://stockcharts.com/c-sc/sc?s=$SPX&p=M&st=1980-01-01&en=2007-12-31&i=p01305047575&a=115646387&r=4.png

NASDAQ TARGET 3131 as per IT Breadth Bottom with positive divergence:

Breakout from Jan 2004 to 50% retracement of Mar 2000 5132.52 - Oct 2002 is targeting Nasdaq 3000 +/- which is 50% RT of the correction.

The Jul 2007 top 2724 is 38% RT of the Mar 2000 – Oct 2002 1108.49 correction, and now Nasdaq is bounced off from the Mar 2007 2531.42 top breakout support.

The Jan 2005 break out from Jan 2004 top 2152.12 is failed, however, it again attempted the breakout 2219.91 in Aug 2005. However, it is again failed the second attempt; nevertheless, it formed higher/high price actions which subsequently traded to 2375.45 Apr 2006 top followed by Apr-Jul 2006 correction.

Price actions during Jan 2004 – Apr 2006 is a consolidation period of Feb 2003 – Jan 2004 price actions.

The Jan 2005 breakout attempt which was subsequently succeeded is targeting Nasdaq 3155 +/-. The Jan 2005 breakout attempt is technically consistent with “initial breakout attempt” is usually resolved in actual breakout.

Aug 2007 bottoming process with Mar 2007 low breakout support is consistent with the technical price pattern which a series of breakouts with higher/high price actions targeting 3155 +/- from Jan 2004 breakout.

http://stockcharts.com/c-sc/sc?s=$COMPQ&p=M&st=1995-01-01&en=2007-12-31&i=p37991314951&a=88255139&r=670.png


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re Rate Cut:

http://investorshub....age_id=22506745

re Rate Cut: It seems that it is good to cut interest rate at this point even though he says that there are different ways to help out the subprime crisis.

$USD closed at support and will react. As we can see, $USD could be trading below $79 support if we see interest rate cut.

The Fed is also worrying about inflation, but we are concerned about deflation and recession.

If stock market underperformed, i.e. trading under SPX 1555 - bear market, public sentiment is conditioned that we are surely going into recession and also as some mega bears are soliciting a serious recession like 1929 which is comparing apples and oranges in our global economy.

I think that market breaking above SPX 1555 will help public sentiment as it will negate the mega recession speculators. After all, public sentiment is conditioned by, often, what they hear.

We are all paying attention to what market does as many are worrying about their 401k performance.

Market falling below the current support will further hype of 1929-like-recession. The bear hype has already damaged public sentiment since 7/19 top as news media keeps on drumming the same subprime crisis drama. It is true that we are having crisis; however, for those who are responsible with the financing are good.

On the positive note for the recent housing bubble and burst, many home owners had the OPPORTUNITY TO OWN HOME, and they are keeping the home. For example, my young nieces were able to buy home a few years ago because interest rate was low.

For those who did take fancy financing are living the consequences as their payment has risen because of the recent rising interest rate; however, many are also able to finance homes with low interest rate.

Higher house price with lower interest rate is working out similar as lower house price with higher interest rate.

Foreigners are also interested is US Housing, i.e. buying US houses/condos, lands and houses, real estates, do not get devalued over longer period.

I think that it is a must that we see stable financial market to help consumer sentiment.

It is not just about housing market, also about the rest of economy. Further deteriorating market will affect our economy as many could lose jobs falling into deep recession.

Therefore, for those who took fancy financing should be helped, if the Fed can, but the economy shouldn't be threatened by those who took fancy financing and paying the price now. It is simple math to figure out that they will be paying more money as interest goes up; but I guess they didn't expect interest will go up?

This is not 1987 when stock market has risen 420% since 1975 bottom, 200% since 1982 before it corrected 35% in 1987.

SPX has corrected 50% of 1980-2000 rally during 2000-2002 which is a significant correction.

Breaking out of SPX 1555 in our global economy is reasonable.

In conclusion: Whatever necessary to manage stable market and economy, he will take actions whether it is a rate cut or surgical tactic. One thing for sure at this time is that breaking out of SPX 1555 in our global economy will help our sentiment.