Orchestrating a Bottom?

By: Joseph Russo | Sat, Jan 26, 2008
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A Work in Progress
Well, it is blatantly obvious that the (PPT) plunge protection team, presidents working group - or whatever they call themselves - found it necessary to intervene in the free-market in attempt to orchestrate a bottom.

Where are these guys when markets are a boiling-pot of unsustainable parabolic animal spirit? We suspect during such episodes, they are patting themselves on the back for planting the seeds for such bullish orgies.

Massive Undertaking / Will it be Different this Time
Might the inordinately early rescue efforts (which began pre-Dow 14K, in August of '07) be telling of the sheer size and scope that this particular bail-out requires?

This alone, may suggest that any short-term temporary political stimulus (even alongside the redundancy of emergency monetary policy interventions) may do little to mitigate what is quite plausibly a much longer-term systemic malady.

When does Change become Revolution
Given that both Democrats and Republicans are in general agreement (prompting both to mount strong campaign platforms of "change") that a critical portion of our government is fundamentally broken, we wonder how each candidate would define accomplishing "true-change" without radical consequence? Perhaps this may be why (R) Ron Paul is being ignored like the plague by his opponents and mainstream media alike.

In our view, the century for tweaking status quo paradigms has past. The 21st century demands a bold new sustainable vision of truth, preservation, prosperity, and security. Anything less equates to re-arranging the deck chairs on the Titanic.

We suspect change-denied, becomes revolution when a failing government's inevitable last band-aid-fix and race-against-time falls terribly short - prompting masses of regional populations toward revolt, and general civil unrest as a result of acute and sustained levels of economic pain and hardship.

Following this week's short-term trading summary, we will provide an update of our big-picture overview to monitor just how well the powers-that-be are executing their efforts to incite and orchestrate a perceived bottom.

Trading amid Intervention
How should traders and prudent speculators deal with massive government interventions in the supposed free-markets? Should they immediately get-long the intervention bandwagon, or should they stand pat on shorts, in attempt to fade the omnipotent fed?

In our view, the answer is none-of-the-above. Despite exerted efforts to manipulate markets, the short-answer is to simply trade the price-action as it is presented - contrived, fraudulent, or otherwise.

Short-Term Trading Environment: Week ending 25-Jan.
Last week's trade was frantic, excessive, and extremely volatile. The highlight was Wednesday's 600-point daily range-reversal off a retest of Tuesday's lows. We warned traders in advance to anticipate potential for larger drawdowns and the likelihood of larger potential losses amid the ongoing melee.

Re-Capping last week's trading points:
It was apparent on Monday's market Holiday that trade would open the shortened week with a significant decline.

Though markets were likely on path to putting in a near-term bottom on their own, the emergency intervention efforts simply sealed the deal, and set the stage for Wednesday's deep re-test and hyper-reversal to the upside.

The Near Term Outlook already had sell-side positions in place from the previous week, many of which achieved downside price target objectives amid Tuesdays sell-off.

We had also been anticipating and actively probing for a near-term low. Tuesday was no exception, as buy-side probes were quantified per our evening report posted the previous Friday.

Yes indeed, we faded the initial intervention rally on Tuesday to capture 300-pts of intraday profit near Wednesday's lows, while our longer time-frame buy-probes off bottom continued un-stopped.

The mega-reversal rally on Wednesday also triggered at least two additional short-term long-positions, one of which has already reached a rather profitable price objective.

By Thursday, we were back in what appeared to be a business-as-usual "levitation" mode, which often follows major price spikes, especially when fostered and mandated by "the fed."

Ignoring such political acrobatics, our discipline called for a short-term sell-side position which was indeed stopped for a loss on Friday's marginal new high.

With our usual resolve, the follow-through high on Friday open was also faded with three separate sell-side trade-signals - two of which have already achieved their downside price objectives on sustained weakness through the close of the week's final session.

All said and done, we grabbed well over 1300 points from the Dow by week's end - with one long and two short positions still actively working.

Below is graphic summary of this week's trade-triggers identified via Elliott Wave Technology's Near Term Outlook.

THE BROAD MARKET UPDATE (BIG-PICTURE)
On a grand-scale, major equity indices (with the assistance of massive interventions) are trying to recover from key-minor support level breaches. They are fast approaching a time frame in which a swift and forceful recovery must be sustained in order to re-claim and salvage investor confidence for the long-haul.

Should one have interest in subscribing to our long-term technical analysis and/or acquiring access to our proprietary short-term market landscapes, we invite you to visit our web-site or blog page for more information.

The Near Term Outlook covers the short-term Dow, S&P, and NDX five-days-per-week, and issues near-term updates for the Dollar, Gold, Crude Oil, and the HUI two times per week.

Trade Better / Invest Smarter...

 


 

Joseph Russo

Author: Joseph Russo

Joseph Russo
Chief Editor and Technical Analyst
Elliott Wave Technology

Joseph Russo

Since the dot.com bubble, 911, and the 2002 market crash, Elliott Wave Technology's mission remains the delivery of valuable solutions-based services that empower clients to execute successful trading and investment decisions in all market environments.

Joe Russo is an entrepreneurial publisher and market analyst providing digital online media solutions designed to assist traders and investors in prudently and profitably navigating their exposure to the financial markets.

Since the official launch of his Elliott Wave Technology website in 2005, he has established an outstanding record of accomplishment, including but not limited to, ...

  • In 2005, he elicited a major long-term wealth producing nugget of guidance in suggesting strongly that members give serious consideration to apportioning 10%-20% of their net worth toward the physical acquisition of Gold (@ $400.) and Silver (@ $6.00).

  • In 2006, the (MTA) Market Technicians Association featured his article "Scaling Perceptions amid the Global Equity Boom" in their industry newsletter, "Technically Speaking."

  • On May 6 of 2007, five months prior to the market top in 2007, though still bullish at that time, he publicly warned long-term investors not to be fooled again, in "Bullish Like There's No Tomorrow."

  • On March 10 of 2008, with another 48% of downside remaining to the bottom of the great bear market of 2008-2009, in "V-for Vendetta," using the Wilshire 5000 as proxy, he publicly laid out the case for the depth and amplitude of the unfolding bear market, which marked terminal to a rather nice long-run in equity values.

  • Working extensively with EasyLanguage® programmer George Pruitt in 2010 and 2011, the author of "Building Winning Trading Systems with TradeStation," he assisted in the development of several proprietary trading systems.

  • On February 11, 2011, he publicly made available his call for a key bottom in the long bond at 117 '3/32. Within a year and half from his call, the long bond rallied in excess of 30% to new all time highs in July of 2012.

  • For the benefit of members and his general readership, he responded to widespread levels of economic and financial uncertainty in the development of Prudent Measures in 2012.

  • He publicly warned of a major top in Apple on October 26, 2012 in the very early stages of a 40% decline from its all time high.

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