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Tuesday, August 27, 2013

Don't Mess With The Bear

I missed it yesterday, but apparently we are about to pick a fight in Syria (why is beyond me, but the "whys" of U.S. government policies have been beyond me for years), and the market, at least for now, does not like it. One thing it is going to mean is uncertainty in the world economy, since Russia is involved, which could lead to a major confrontation. Normally it takes more than a week for the market to traverse the distance between pivot points; this time it took two days. We did stop at the S1 pivot point, whcih should be the low for the month, but we have the momentum to break that and head for S2. In that case, we are going to be in a major correction, and not likely to get out of it for several weeks. If we hold here, we will be in good shape until we see where the new pivot points for September line up. Right now the former looks more likely to happen.
It was going to take a geopolitical crisis to break the link between crude oil and equities, and we have one. Oi broke out past the resistance at 108 today, and is headed for the R1 pivot point, which may temprorarily stop it, but without a resolution to this crisis, and a resolution is highly unlikely, this is going higher.

I think the bear market in gold is over. This is about to run into the R2 pivot, which will probably contain it for August, but since August is almost over, it won't contain it long. I expect another pullback before it makes a run at the 200dema, but when it does break it, I expect one hell of a rally.

What Bernanke couldn't stop, a war could. The up trend in the 10 year yield is intact, but may be hanging by a thread in another day or two. Unfortunately, this will not likely help the stock market, which is no longer fixated on interest rates.

So far the Dollar index has had little movement on the news, but momentum is truning and this appears to be ready to make a pretty hefty move up. If it does, and more so if it does it quickly, that will have a very negative effect on equities.

So far, we are in no worse shape than we were in May-June, but I think we may have finally hit "'the big one", the big correction that will end the bull market that began in 2009. With the economy not improving, unemployment still high, and deficits out of control, a confrontation with Russia may be the catalyst for a major correction, and possibly a year long bear market. Of course, if we have a resolution, than we can exec a huge rally, but I am not going to hold my breath waiting for it.

I will have the new highs update shortly.

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