Don’t Miss The What?

By sheer coincidence a full pager I had taken out in the recent edition of Retail Suckers Monthly was placed right opposite of a Scottrade ad:

Will the last retail sucker please turn off the light once we touch SPX 400?

You rats think I’m kidding, right?

Tonight we’re starting at the 10,000 feet perspective. This is roughly the pattern I see ahead before we drop into Primary wave {3} later this summer or perhaps early fall. We either concluded Minor A of Intermediate (Z) of Primary {2} on Friday afternoon or will do so in the coming days. As bullish sentiment readings are now at fall 2007 levels we should either consolidate downwards or at least venture sideways for a few days. After that I expect yet one last push before we finally complete Primary wave {2} – possible targets are marked on the chart as multiples of Intermediate wave (W) of {2}.

The NDX and COMPQ was notably lagging the blue chips last Friday and it appears that a short term top might be in (notice the cautious language employed due to five months of bullish irrational exuberance). I however am not ruling out a few more handles to the upside in particular as several POMO auctions are scheduled for the coming week and beyond. Please note the cluster of resistance directly ahead as defined by a 4th wave top painted in 2008 as well as a several projected fibs measured as multiples of this leg’s third wave (highlighted on the chart above).

So, if we’re so overbought, why don’t I yet entertain the possibility that Primary wave {2} is nearing its completion? Throughout the 2008 downturn confirmation of an Intermediate or higher degree top has been preceded by an upswing or at least flattening of the BAA-TYX yield spread. Thus far she ain’t budging and we are steadily creeping towards the 2% mark. I would prefer to see this indicator make a turn to the upside before I would entertain any hopes that Primary {3} is in the works.

This is really our main chart right now – watch the Dollar. Based on two projected fibs we should have painted a clean bottom – the next cluster of resistance is around 76.4. But current sentiment measures in the Dollar indicate that a low might be in – I’m actually considering a long term FX trade which I am planning to hold several months. Commodities as well as equities will be greatly affected by a Dollar rally, so I’m watching this sucker like a hawk. Nothing spectacular will happen unless we see some green shoots in the green back.

Similarly Silver has arrived at an inflection point at which we either should have painted a clean a-b-c correction or will complete it soon. The next resistance cluster is around 15.3. I completely forgot to load up on Silver positions last week as the ride in equities took up a lot of my attention. I plan to use any bounce to the upside as an opportunity to grab either December SLV puts or to sell ZI contracts.

It’s 500 minutes until the bell – we got a full tank of gas – half a pack of cigarettes –  its dark and we are wearing sunglasses.

Hit it!

Mole