Downtrend still in effect

Even though the market rallied strongly yesterday, the S&P did not go above 1225. This is not to say that it might go above it next week. But today the market ended at 1199 so we are still in a downtrend. The market today was tepid, only rising about two points. We would like to think that wave 2 is over and that wave 3 has begun. Time will tell. The market can be perverse and can always rise to a new high. My strategy is to remain in cash or short the market.

On another note, the Euro could be in trouble. It is a house of cards. Once one nation defaults, the whole Eurozone could fall apart. The Irish could use cash to bolster their economy. The Eurozone wants to give them more money, but at a price. I hope the Irish see the new money as a Trojan Horse. They should not give up an inch of their hard fought nationality. Their main incentive for the US to set up businesses there is the low low corporate tax rate. The The Irish must keep this advantage. My humble advice to the Irish is to go it alone, keep their low corporate tax rate. Default if you must on the debt. Screw the Germans, French and the English. Up the Irish!

Trend change

Obviously, the trend has changed from up to down. However we are not sure if wave 2 is definitely over . The Dow and the S&P indexes have certainly crashed through the 20 day moving averages. The next support that must be pierced is the 50 day moving average. The Dow 50 day is sitting at 10967 and the S&P 50 day average is at 1165. Both of them are within striking distance within the next couple of days. Is it a sure thing? No! There is an alternative view that the markets still must complete wave 2 or B however which way you label the move. The strategy, if you think as I do, is to be in cash or be short the indexes. Be wary as the markets approach the 50 ma, as this may cause a reversal. Be on the right side of the market. All longs should have been closed out.

Is wave 2 over yet?

Well, we did think that wave 2 was over and that wave 3 had started way back in October. Hopefully, wave 3 has now begun. But I have been chastened by my last blog posts. Wave 2 has been difficult to comprehend and I have realized that this is always the case. Of course it didn't help that Federal Reserve injected more than 600 billion dollars into the system. Why did they do that? Obviously they think the economy is in deep trouble. They are actually trying to jumpstart inflation. Then need the consumers, that's us, to go out and buy. Will the strategy work. I don't think so unless they can find jobs for the 21 million people that are out of work. The injection of money was supposed to raise the price of stocks and of assets. It worked initally. The stock market jumped and the price of gold took off. But in the past week, gold and stocks corrected or began the start of wave 3. But we have to be careful. This might be another fake out. The market is trending down. But will it continue to trend down. We hope so. But there may be another petit wave up to complete wave 2. I think the best strategy at this time is to be in cash or be short the market. But be careful and be patient. Tricky wave 2 may still have some life left in it.