Since the Dow hasn’t bothered to come through with my projected low – which might be as low as 4,000 – I got to wondering if I was completely whacked/out of my mind. So I picked up the phone after the market’s little decline on Monday and dialed up Robin Landry’s office.
“So what do you make of this here pig…?”
“The first thing George is that the bottom is NOT in contrary to what you’re hearing on television.”
“I didn’t think so, either. So how’s it look to you?”
“The indicators that I use are still saying that we have a fifth wave down. What’s changed since our last conversation is that they’re now telling me that we have reached the minimum of the fourth wave upside bounce and that we could turn down into the fifth wave at any time.
I suspect that with the holidays and the low volume and everything, that we will gyrate up and downs in a sideways move for a little while longer and create a triangle. That in turn oughta break to the downside at least the 7,400 area.
But, as you and I have discussed before, the fifth wave over the last few years has tended to be the longest and thus, the possibility of the 5,800 level is still feasible.
“We’re synched up there – how about a timeframe?”
“I believe that if we break down into this fifth wave that it’s going to be only an event lasting 2-6 weeks at most.
What has been interesting to me is the happenings over the last three days in the Middle East: That has caused the oil to rally a little and gold to rally somewhat and if the fighting spreads, then the alternative view I have for gold and oil in the short term would probably change to bullish. But, that would fit in with the fifth wave decline.
However, if the market goes down in the fifth wave, and the oil prices are still not able to rally, then the negative forces of deflation are even greater than I thought. The supply in Cushing Oklahoma, which is the storage for many of the oil futures, is at (or real near) maximum capacity and I hear that there are tankers out at sea floating around full, taking their time. So the ‘normal’ market reactions may not happen.”
“Why wouldn’t the price of oil keep dropping – just the Middle East jitters in the medium to longer term?”
“Yes. As long as we have the excess capacity and inventory it means that in the near future the prices of oil will, if they rise at all, will rise very slowly.
I am concerned that the fighting, according to my sources in the Middle East, could get out of hand and escalate. If it does, then the Iranian situation could really blow up.
The reason I bring this up is because for the first time in a year or so, we now have the Middle East background causing uncertainty on top of the global economic uncertainty.
Remember: It’s never the events that you believe are going to happen that cause the market to respond in a certain way; it’s always something out of left field.
“True enough…I’m a life-long left-field watcher myself…What’s your top couple of candidates for ‘left field events’ that could put a stake through whatever’s left of folks 401(k) plans?”
“If Iran does get involved and it begins to spread, and they are further along in the developing of a nuclear weapon, we will all be in deep, deep trouble.
Israel, as everyone who reads news of the region knows, has been practicing their ‘going it alone’ strategy. If that happens, then the Dow will go down. The question is how far. Of course we’d likely see a big run to Treasuries, and gold may go down initiative. I’m watching the trendline on gold from it’s recent high. We’re close to hitting it now. I believe it will take a very drastic event in the Middle East to cause it to break through to the upside from there, though.
If gold breaks out, then I will go long gold with a very close stop. The oil trade, on the other hand, with this large a supply picture, is going to be much more difficult unless we start seeing the market acting in anticipation of a cutoff of supply.
All in all, it points to a very difficult next couple of months as I see it.
And what happens after we hit either the 7,400 or maybe down into the 5,800 range, or my nightmare 4,000 drop?”
“I believe we are going to have a rally that will be a real barn burner. It will be volatile but very rewarding for those who have the stomach for the volatility. It will last at least into March of April and possibly into July and August, but that will depend on the domestic situation.
And that in turn may be driven by what’s happening in the Middle East
As a side note, it’s interesting to me that when the market makes dramatic declines the email requests I get for advice and assistance rise dramatically. However, once the market starts going sideways or seems like it’s stabilizing the calls and emails slow down. It’s like people are hoping it’s over. What they fail to grasp I believe, is the magnitude of the current situation.
Responding when things get bad is exactly the wrong thing to do. Getting advice and assistance in rebounds and the quiet periods to prepare and avoid the next decline is the wiser choice. But, that’s human nature, as you know…”
Ah yes…those pesky humans again. Darned if the world wouldn’t be a much better place if we had a lot fewer humans, though I’m not inclined to be the first to go any more than the next guy…
My friend Roger Reynolds has a further advisory out which is of interest:
“IN MY OPINION, A FEW DAYS AGO THE LONG TREASURY BOND GAVE A REVERSE WAVE SELL. IT HAPPENED LAST WEEK. I BOUGHT TBT TODAY. YOU CAN ALSO SHORT TLT “if” YOU ARE A SHORT SELLER. WHY WOULD LONG BOND INTEREST RATES GO UP AND T BONDS DOWN??? MAYBE LOTS OF REASONS, BUT THE CHART SAYS IT’S COMING. Investors doubt the accuracy of reverse wave signals unless they study them. But, remember that the DOW gave a reverse wave sell two days after the all time high in Oct 2007. “
In yesterday’s note, Roger said he was watching 6-stocks that he thought were pretty good. Here’s his email address to send your queries to: email@example.com
Readers of our subscription newsletter Peoplenomics will remember that a long while back I wrote a ‘heads-up’ paper called “Death by J.I.T.” which dealt with inflexibility of the supply chain when things get dicey for the economy in general.
Well, lookie here, now: “Toyota may modify Just-In-Time to ease Supplier Shock“.
I’ll just go over here and carve another notch on the pistol handle, what’s left of it…
The Gaza Distraction
The year-end stories about millions having their 401 (k) programs wiped out by the crashing stock market, down 40% (plus or minus a six-pack) is being shoved off the front pages by the Israeli attack on Gaza. Headlines like “Defiant Hamas hits Israel with dozens of rockets” should come as much surprise after 300 Palestinians were killed in the fighting. This is not ‘turn the other cheek’ stuff.
What’s being pushed into the background is the whole perilous state of the global economy and headlines like “Holiday sales drop to force bankruptcies, closings” or the Chinese report that the US lost international standing in 2008 while Russia gained…
For that matter, the USA socialist/bankster coup is going along almost unchallenged, except by a few in the Republican National Committee who are skeptical of the bailouts. Must be those darned Constitution readers again…
Oh, and speaking of the coup – you did see this morning where GMAC is being thrown $6-billion tax dollars - just as I told you to expect when the (not really) Federal Reserve granted bank status to GMAC in the wee hours before Christmas? Merry Christmas and Happy New Year to GM, huh? GM gets a $1 billion loan to invest in GMAC….
Latest “Conspiracy Email” Flood
I’ve been flooded with emails about the “Attorney Registration & Disciplinary Commission listing for president-elect Obama’s wife Michelle which notes that her last year registered to practice law was 1993. Seems to buzz is trying to imply something nefarious. But, when I looked at her work history, Wikipedia notes that starting in 1993 she was in a position administering not lawyering:
“In 1993, she became Executive Director for the Chicago office of Public Allies, a non-profit organization encouraging young people to work on social issues in nonprofit groups and government agencies. She worked there nearly four years and set fundraising records for the organization that still stood a dozen years after she left.“
What it reads is that she stopped practicing law voluntarily (probably because of malpractice insurance requirements)…but if you want to go chasing after theories, have fun. There are more important stories on our radar…like the Second Depression, just to name one. The record says “Public record of discipline and pending proceedings: None.
I’ve turned on a ‘garbage filter’ to take out emails about this…
On the other hand, it looks like Dan Rather’s lawsuit against CBS (which involved purported special treatment of George Bush in the Texas Air National Guard) will be going to trial in early 2009. That oughta be worth firing up the popcorn for…
Dancing Mountains? Seneca Guns?
While the linguistic work has lately been filled with imagery of ‘dancing mountains‘ a number of readers have noticed that the seismographs around Yellowstone have recorded 80 minor quakes over the past few days. Dancing mountains linguistics fill underway? Could be…