The title statement has nothing to do
with an expected recovery rally, which has been trying my patience as every
time I mention it the Dow drops another oh... 500 or so points. The
title statement just means that even if the worst fears of investors are
realized (and fear is front burner now, think about it), the system is merely
trying to fix itself.
Now, I have been watching a bit more Kudlow, Cramer
and Cavuto than usual (which is usually none), and
on balance, I think the tone out there is changing as expected from 'austerity
now!' to 'somebody needs to do something!', which is code for
Keynesian solutions to come, which is code for QE panic by whatever name they
call it this time. Which is dependent on strong T
bonds (check).
In other words, the Keynesians would not solve anything, but simply kick the
problem inside this can down the road some more. Gold's bull is not
done, though the CME boyz and a healthy dose of
broad market relief would likely cool down ole' yeller for a while.
Depending on how unhealthy the knee jerked 'investor' base is, a reaction could feel pretty severe if the stock market
gets a strong relief bid.
The fear has been so palpable and is so striking when juxtaposed against the
still healthy general state of business that I think a serious rally can ignite.
Europe has euro strength over the last year to use in compromising their
currency in the name of plugging the dikes. Here in the US, we have
vast herds hiding in T bonds (I am going to consider shorting the long
bond).
In fact, with the depths that markets have dropped to I am allowing more
lasting bullish thoughts (than an anticipated relief rally to the failed neck
lines) to at least enter the discussion. Though, for now I think it is
best to just expect a test of said necklines.
For the Dow chart, that would mean around 12,000. This monthly chart
does not show the H&S top, but it does show a beautiful decline to a
visible support area that just happens to be at a 38% Fib retrace of the
entire rally in hope and inflation out of 2009. The neckline on daily
charts comes in at around 12k or just above.
If the market finds support here at #4, there could be a massive unwinding of
the fear trade. Unfortunately gold, the simple safe harbor that was
never meant to be a play or an instrument of fear, would probably get roughed
up as fear unwinds. By the way, I am not an EW charty,
so I have no clue as to whether there are other qualifications in play that
need to validate this 5 wave up scenario. It's probably screwed up, but
I know a bull setup when I see one.
Thinking outside the box, it is possible (though not yet probable) that this
may prove to have been an epic buying opportunity.
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Copyright © 2005-2009 Gary Tanashian
