August 11, 2010

A massively massively ugly day in the markets — on very light volume. This was not selling pressure. It was a complete absence of buyers — on a day when the euro was crushed and the dollar thus rose. If this is what a dollar bounce looks like, then expect it to culminate in a market crash.

Short-term: 1 yellow, 3 red – tend red
Intermediate-term: 1 yellow, 3 red – tend red
Stock targets: 66% swimming, 23% neutral, 11% neutral

I’m surprised that the intermediate-term indicators rolled over so sharply this close to what is an interim top. But it is not good news. We are a long long way from fair value. The last time the intermediate-term indicators were this negative was right at the bottom (June 30 and Jul 1) — but that was an expected whipsaw at the tail end of a near bear-market move down. With both short-term and long-term indicators so negative — so near a top; there is nothing for bulls to make a case for. Nothing is oversold. Nothing is “fair value”. And clearly no one is “buying”.

It is entirely possible that the world’s plunge protection teams will again try manipulating the markets upward here. But as for me, I’m simply gonna start preparing obscene stink-bids and wait — mostly in cash — for what is likely to be a very ugly autumn. Yeesh — we got this move down without even any rumors of sovereign debt problems or Israel attacking Iran or trade protectionism/currency disputes or somesuch. This brittleness reminds me of only one month — August 1987.

I still don’t know why the euro tanked today. That accounted for roughly 2.34 of the 2.82% loss in the SP500. There was apparently a rumor of Fed opening swap lines re Ireland, a rumor that the EU wants Germany to put its bailed-out bank liabilities on its sovereign balance sheet, a rumor that Spain has already quit its “austerity” program. Regardless, I’m not going to wait to find out. Long-term, the euro and pound are as crappy as the dollar. And it appears that the short-term “safe havens” are the yen, the dollar, and gold.

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