Editor's note: click any chart to enlarge.
Yesterday I sent out the following message to members:
A message from Steven Vincent to all members of BullBear Traders on BullBear Trading
Keeping You on the Right Side of the Markets!
01/05/11 BullBear Update:
Last night I told you that I was not buying (or selling) the "imminent correction" hypothesis and that we should not sell out our long positions because we are in Wave 3 and that it will be difficult to get back into position. Indeed, it seemed that world markets had begun a round of heavy selling. But here we are with US indices pushing towards new highs.
The Euro has traded to support and may be a good speculative buy here. I would be very careful with it however since we may be seeing a long dollar, long equities trade emerging. Maybe.
DollarYen has broken out with a massive rally. The reemergence of the Yen carry trade is the last component of the full-on bull market in risk assets. Once that is firmly in place (and it appears that is close at hand), then the Wave 3 juggernaut will advance with little pause.
Gold may be at the tipping point. The key psychological point here is that most market participants have been viewing gold in terms of an inflation hedge or anti-dollar. The reality is probably that since the 2009 low it has been trading primarily as a fear/safety play. Since we are getting ever closer to "safety off, risk on", gold, as a safe haven asset, may suffer along with bonds.
Well those are my current views. As you know I always remain open minded and ready to change when the market tells me to. But this is what the market seems to be telling me right now. While most traders and analysts see what they want to see in the markets, like dreamers seeing shapes of animals in the clouds, I try to see things as they really are. Most are seeing "big correction" or even "bear market" because that's what they WANT to see. That's why I have been heavily discounting all the talk of a sentiment top. When you scratch the surface most market participants, even those who say they are bullish, are really bearish.
Well, more to follow soon....
SPX appears to be starting iii of (iii) of 3 of (3). This powerful wave should unfold over a period of weeks with little interruption.
Here's my 12/27/10 BullBear Update to members of the BullBear Trading room at TheBullBear.com:
At this time there is no reason at all to exit any long positions held from lower levels. The possibility of a short term pullback to support exists but if it occurs it should be very brief and shallow. It would be a buying opportunity, not the beginning of a bigger selloff.
Here's my preferred count of SPX at this time:
The market is potentially at or near the top of the first wave of iii of 3 of (3). It has achieved the reverse head and shoulders target at 1148 and a minor pullback, perhaps to the 1128 former high, seems likely. After all there is, as we are constantly reminded by the permabears, a lot of bullishness out there, and some of that could be worked off in a brief pullback. Many markets have recently broken out to new highs but it would be somewhat normal to see these initial breakouts fail with a pullback to retest and consolidate before the next major move. My current analysis is that when and if this should occur it will be the best buying opportunity that we will see for some time as Wave 3 plays out in all major markets.
Here's the SPX futures chart which shows my current short term view and the possibility of a pullback:
Yes, the bearish long term count is still in play. Yes, we could be near the tail end of a C wave off the 2009 bottom. But having taken out the 61.8% Fib retracement of the decline from 2007 is a signal that that is less probable. We have had scares over European debt and US Municipal debt and the markets have refused to pull back. Last night China raised interest rates and the financial media announced that markets would sell off sharply and they did not. Everyone "knows" that there are just too many bulls and yet no selloff. This "tape action" is bullish and typical of Wave 3 as new money coming into the market is buying any and all dips and the shorts are forced to cover over and over again.
Here are some more signals that make a resumption of the bear market in asset prices less likely:
Nasdaq 100 is mere points away from surpassing its 2007 high. It is showing clear signs of being in a Major Wave 3 of 3. Fibonacci projections target 3200 and then the former all time highs. Tech stocks back to bubble peak again? The chart says it can happen.
READ THE COMPLETE ANALYSIS HERE: https://www.thebullbear.com/profiles/blogs/keeping-you-on-the-right-side
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