It was not a short covering rally, which some distinguished writers are suggesting. Then why the bounce? Simply because we can. May be QEI effect has started showing up. If you remember, in one of the posts of last week, I wrote that it takes some time for QE to show up in the market and the initial reaction is a sell off. But I have given up finding reasons as to why the market goes up or down. I cook my own dish without any logical input. My recipe is a complex formula. My base sauce is my cycle timing model. Then I add little bit of sentiment sauce, few dollops of liquidity and generous amount of shenanigans of TPTB (the powers that be). Garnish it with bit of charts and TA. Voila! You have a good dish ready. And most of the time it is yummy.
Jokes apart, my views of the market are known to all of you. The crooks running the show know and understand how retail thinks and I try to understand what the crooks are thinking. The retail investors go through different phases during melt up.
We are far away from Euphoria. I think we are in somewhere in disbelieving stage. Nobody loves the market which has rallied from SPX 1267 in June. I myself have been mostly out of the market from June. I think I did few trades between June and September and no new investment. So we can expect the market to grind up. Cycle wise it is coming close to an important intermediate term top. The correction thereafter will be significant but not “the” correction. Played well, we should be able to make money both ways. But I am trying to stay away from these weekly cycles of highs and lows. I will call out when I see low risk entries in either side.
The morning note started today and you have been very kind to accept it well. The call was clear; do not short the market even if it appears overbought. It remains overbought and the last four hours SPX moved around at the same level with a bit of selling in between. It will be very unnatural for the market to continue higher and higher from here till October 24th/25th. I was expecting the market to seek lower level today but that did not happen. It may happen tomorrow. Knowing how these manipulators work, most likely we will find futures down 10 points when we get up in the morning tomorrow. It will be perfectly normal for SPX to spend a day or two at 1445-1450 level before starting the journey up.
Natural Gas refuses to give the sell signal and is bouncing off important support level of $3.40. Gold and Silver made some progress during the day but nothing substantial. If we do not get the desired price level by Mid-November, we will have to wait a little more. Bonds sold off and TBT made good progress.
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