THE NEXT LEG DOWN FOR THE MARKETS ?

There are many chartist out there and the one chart most are watching is the Elliott Wave on the S&P. The thing about these charts is each person can have their own interpretation as in which leg we are actually in at a given time. Here is a link to a short lesson on the Elliott Wave Theory http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory









I'm also posting this Excerpt which I came across at this link http://www.elliottwave.com/freeupdates/archives/2009/05/01/Dow-Below-1000-Seriously.aspx









Excerpted from The Elliott Wave Theorist by Bob Prechter, published April 18, 2009 Yes, Below 1000 in Dollar Terms

Readers sometimes ask if I am serious about the Dow eventually falling below 1000. People can understand that the Dow can fall in terms of gold, but they are so convinced about coming hyperinflation that they consider the idea of the nominal Dow in triple digits to be simply out of touch with reality.

The primary reason I believe the Dow is going to fall that far is its Elliott wave structure, which calls for it. But I can also see a monetary reason for this event. The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode.

The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it's time to pay. But there is no money to pay, only more IOUs, which cannot be paid, either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it. In the broadest sense, this change will constitute a collapse in the "money supply."

Such a monetary background would be consistent with the Dow falling below 1000 in nominal terms. It is one of the reasons that Conquer the Crash is subtitled How To Survive and Prosper in a Deflationary Depression . To be sure, the central bank does have the capacity to print banknotes. But I expect that the final implosion in credit value will be so swift that the authorities will not act in time to counter it. They will continue to try to maintain the fictions of full face value for IOUs until they fail spectacularly to keep up the scam. Then they will start to scramble, but it will be too late.









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Now I personally don't think the DOW is worth following as it's way to easy to manipulate with so few companies in the index.You get a much better picture when you look at the S&P which has a better spread of companies to get the story of what is happening out there. Here is a chart of the S&P with an Elliott wave plotted on it.

Link for this chart http://img7.imageshack.us/img7/5790/elliottwave1.jpg

Here is a second chart which I put a Fibonacci retracement on . The RSI on this chart could easly pull down from here also the slow sto is in danger zone here. The last two trading days are showing selling vol but not exceptionaly high. I'm beginning to think that with the first half of the year complete it's time to be very vigilant. Many stocks have had a tremendous run and the most likely ones to fall hardest are in my view the banks. Some posted great profits for the last quarter, but as we know these didn't reflect the true picture as they changed the accounting rules . The toxic assets are still there and will have to come into play sooner or later.

Link for this chart http://img7.imageshack.us/img7/8756/fibspx.jpg





Again This is only for discussion . Read my disclaimer at the bottom of this page.

FAZ / FAS

UPDATE

29/June/09

I phoned Direxion on Friday and asked if they were doing a reverse split on faz/fas. The reply was it wasn't been discussed as of yet. The guy told me there was another etf that had been done and I probably heard about that but there was nothing happening as of yet with the two I asked about. That was on Friday June 26 2009. Then this comes to my attention today. I got it from Stockwits.com .

http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=6396328

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This is one of the etf's I'm trading at the moment. I switch between the two depending on my view at the time in the market . Faz is a Direxion Daily Financial Bear 3X , while FAS is Direxion Daily Financial Bull 3X Shares . The investment seeks to replicate, net of expenses, 300% of the daily performance of the Russell 1000 Financial Services Index The fund will invest at least 80% of assets in securities that comprise the index. It will also utilize financial instruments that, in combination, provide leveraged and unleveraged exposure to the index. The fund is nondiversified.

As you can see when the purple line which is the 15-period ma crosses the yellow which is the 40ma it gives a buy signal . Also its the opposite when it happens vice-versa giving a sell. When I sell FAZ I tend to switch to FAS to catch the run on the other side. The 40 ma crossed the 15ma on faz yesterday near the close which was my signal to sell. I switched to fas for a $500 profit in a few min and closed out all trades. Nothing is guaranteed with this method but it has it's merits.

These etf's are dangerous to hold for a long time as I and many others have learned . They have a natural time decay so will over time get down to the possibility of a reverse split. They should be only used for a day trading play and certainly not held for a longer time period. A week is to long in my book.

Double and Triple ETFs Decay Their Value Faster - By Design

http://ezinearticles.com/?Double-and-Triple-ETFs-Decay-Their-Value-Faster---By-Design&id=2095978

Inverse exchange-traded fund

http://en.wikipedia.org/wiki/Inverse_etf

I'm showing this to let you know what I'm at these days and am not endorsing it as a play for you. Remember the stock market goes down as well as down lower, there has to be losers to have winners dont risk what you can't afford to lose . Everyone has their own ideas on how to play the markets and I for sure am no Jim Cramer thank God ;-) . Well that's my disclaimer done with, now do well with your trading........ Also not so long ago the Market was known to go up believe it or not.

You can get this chart here http://stocktiger.com/live/faz1540.php a site I would recommend as it is full of very useful tools for trading.

The tank is full of gas but the engine is seized

Well the old 1942 Packard Woody Wagon came to a stop a while ago, the tank was full of gas but the engine had seized. It looks like they have no spare parts left these days so the car is doomed to the scrap yard. That's the the same story for the US today the country of course was a shining light in it's prime and the engine was California . You can't go far without the engine and when you look at the state today you can only scratch your head and wish you had the parts to fix the problem.
In the last month California lost about 70,000 jobs and the total for the year to date is around 750,000. The Big O has said that the US needs to be creating 150,000 a month just to keep even. The banks were stress tested to a 10% unemployment rate nationally. The Big O has told us that unemployment will hit 10% this year. He is right if it even hits 12% as the 10% will have been achieved . Looking at the country as a whole this is how it stands with the Bureau of Labor Statistics it looks bad with some way worse than Cali
Alabama9.8%(p) in May 2009 Historical Data
Alaska8.4%(p) in May 2009 Historical Data
Arizona8.2%(p) in May 2009 Historical Data
Arkansas7.0%(p) in May 2009 Historical Data
California11.5%(p) in May 2009 Historical Data
Colorado7.6%(p) in May 2009 Historical Data
Connecticut8.0%(p) in May 2009 Historical Data
Delaware8.1%(p) in May 2009 Historical Data
D.C.10.7%(p) in May 2009 Historical Data
Florida10.2%(p) in May 2009 Historical Data
Georgia9.7%(p) in May 2009 Historical Data
Hawaii7.4%(p) in May 2009 Historical Data
Idaho7.8%(p) in May 2009 Historical Data
Illinois10.1%(p) in May 2009 Historical Data
Indiana10.6%(p) in May 2009 Historical Data
Iowa5.8%(p) in May 2009 Historical Data
Kansas7.0%(p) in May 2009 Historical Data
Kentucky10.6%(p) in May 2009 Historical Data
Louisiana6.6%(p) in May 2009 Historical Data
Maine8.3%(p) in May 2009 Historical Data
Maryland7.2%(p) in May 2009 Historical Data
Massachusetts8.2%(p) in May 2009 Historical Data
Michigan14.1%(p) in May 2009 Historical Data
Minnesota8.2%(p) in May 2009 Historical Data
Mississippi9.6%(p) in May 2009 Historical Data
Missouri9.0%(p) in May 2009 Historical Data
Montana6.3%(p) in May 2009 Historical Data
Nebraska4.4%(p) in May 2009 Historical Data
Nevada11.3%(p) in May 2009 Historical Data
New Hampshire6.5%(p) in May 2009 Historical Data
New Jersey8.8%(p) in May 2009 Historical Data
New Mexico6.5%(p) in May 2009 Historical Data
New York8.2%(p) in May 2009 Historical Data
North Carolina11.1%(p) in May 2009 Historical Data
North Dakota4.4%(p) in May 2009 Historical Data
Ohio10.8%(p) in May 2009 Historical Data
Oklahoma6.3%(p) in May 2009 Historical Data
Oregon12.4%(p) in May 2009 Historical Data
Pennsylvania8.2%(p) in May 2009 Historical Data
Puerto Rico14.4%(p) in May 2009 Historical Data
Rhode Island12.1%(p) in May 2009 Historical Data
South Carolina12.1%(p) in May 2009 Historical Data
South Dakota5.0%(p) in May 2009 Historical Data
Tennessee10.7%(p) in May 2009 Historical Data
Texas7.1%(p) in May 2009 Historical Data
Utah5.4%(p) in May 2009 Historical Data
Vermont7.3%(p) in May 2009 Historical Data
Virginia7.1%(p) in May 2009 Historical Data
Washington9.4%(p) in May 2009 Historical Data
West Virginia8.6%(p) in May 2009 Historical Data
Wisconsin8.9%(p) in May 2009 Historical Data
Wyoming5.0%(p) in May 2009 Historical Data
I wonder will we get the next stress test like we got the second Govt. handout after they found out that the first was way to low.

Then we have the debt of California coming up in the news. Will they default and what will the knock on effect be there. Moody's and Standard & Poor's rating merchants must be working overtime on this. California is responsible for around 14% of the total GDP for the US which was about $1.7 trillion ( in 2006). This shows how important the state is to the country as a whole. The Cali bond holders must be thinking cars too or should I say car companies GM comes to mind. The Municipal bond market could become the next tire to deflate.

Anyone interested in a car to restore . It has a tank of gas. Didn't think so


UPDATE

Deficit forces California to issue IOUs

http://www.ft.com/cms/s/0/1940d18e-64cf-11de-a13f-00144feabdc0.html?ftcamp=rss&nclick_check=1