Monday, October 8, 2012

Tiresome corrective action was pointing to 1761.30 early Monday morning (see inset), predicated on a breach of the 1768.00 midpoint support shown.  The 1808.30 rally target of a larger trend remains in play, but it has been extremely slow in coming. We'll know bulls are getting serious if and when they push past at least two 'external' peaks on the hourly chart without pausing for breath.

A very stale rally target at 1477.50 is still viable, although the long wait has made it just a theoretical curiosity at this point. It was confirmed in theory when the low of Friday's selloff came within two ticks of its midpoint sibling, 1450.75.   More immediately, the minor downtrend projects to 1446.00, the 'd' target of the pattern shown.  Because it falls between two distinctive 'external' lows, any bottom-fishing is best attempted using camouflage. Night owls should be alert to a possible upturn from 1451.50, the 'p' of the corrective pattern.

[ Erich Simon, author of jeremiad below, is a hard-core survivalist and the second most bearish person we know, out-doomsdayed only by a Nostradamian pen-pal who believes, for starters, that two World Wars will be fought within a generation.  Although we shudder to imagine a world in which all of Erich’s predictions have come true, we do not think his fear is misplaced that Americans will awaken one morning to learn that the banks have closed indefinitely. Our suggestion is that you keep a shoebox filled with $1s, $5s, $10s and $20s for that day, since “plastic” will be useless.  Much more elaborate preparations will be needed, however, if you share Erich’s very dire outlook. RA] The financial vultures are all around.  Things took a sharp turn for the worse three years ago, when a wave of store-closings turned strip malls across America into eyesores.  In just one year, 42,000 manufacturing businesses in the U.S. closed shop. But the recent announcement by the Fed that it would “buy” $40 billion of mortgage-backed securities every month was a defining moment. What can it hope to accomplish?  Printing-press money no longer subsidizes anyone but fat cats – corporate VIPs who can flee in their Learjets to the Southern Hemisphere when troubles that have simmered for years finally reach a boil. A generation ago, it took $2 of debt creation to generate a dollar’s worth of GDP. Then it took $5…and then $7 before Obama pushed the number off the chart.  Now, there is no longer measurable growth relative to each new dollar of credit "stimulus.” In fact, despite all the QE Bernanke can gin up, the economy is sliding backwards. Production is contracting and unemployment is poised to take off, even as new hires take jobs that will never pay them anything