Market comment for Nov. 9th

In the first several hours of trading this morning the Put to Call ratio was 0.59 and 0.60, which again is relatively low for the past 7 months. The markets are negative at this time but not by a lot. The Dow is down 35 points as I type this. This morning Wholesale Inventories data for Sept. was released. It was up 1.5% while expectations were for 0.6%. The month of August was revised upwards as well from a reading of 0.8% to 1.2%, which means inventories are building.

Yesterday's Dow candlestick pattern was a Hammer, which usually means a reversal to a trend. This is consistent with the Put to Call ratio going low and signaling a sell reading. Additionally, Insider Selling has increased as well.

May 28th market action going into long weekend (Final Update)

I have posted 2 charts going into Friday's market. Both are of the Dow and are of 2 month durations. I have drawn a Blue line to show you how I came up with a top of this latest rally at 10,500 to 10,600. One chart is of Candlestick patterns and as you can see now the close on WEdnesday was a reversal Hammer pattern indicating today should go up, which it did mightily gaining 284 points to close at 10,258. Investors may take some profit on Friday as we go into the long Memorial day weekend. But I do not see giving back all the gains made today. We only have about another 250 points before we head down again.

My TZA Puts gained today. I bought many of these two days ago for $0.90 each and today the Bid closed at $1.15 and the Ask at $1.25. Some shares sold today for $1.21, which is a paper gain of 34%.

When I sell these as we approach the comparable high for the Russell 2000, which should be around 680-700, I will also buy TZA Calls again. They should be cheaper than my last sale price of $2.25 each. Today they closed at $1.30 with a Bid at $1.15 and an Ask of $1.28. So they have dropped already to a reasonable level to buy them again, as this was a 42% drop.

The last chart I am posting below is the one I posted back last Friday when I said the market was going to drop and the pattern which was to develop. This should now close that prediction.

UPDATE: 6:00am PST.

Personal Income rose 0.4%, according to data released this morning. That is good news. The bad news is that Personal Spending dropped to 0.0%. The Consumer is saving their money, not spending it. This is confirmed by the Savings rate data which was at 3.6%. Futures point up this morning but it is going to be a back and forth struggle for this market going into the Memorial Day weekend.

Art Cashin of UBS Warburg stated on CNBC confirmed my prediction that the market is forming the right Shoulder of a Head and Shoulder pattern or what I have called the "W" pattern. He expects that if the market can hold most of yesterday's gains that in the next week or two we will go up. He too believes that we will not go back up to the highs, so my forecast of Dow 10.500-10,600 range might in fact be his thinking too. Stay tuned!

UPDATE: 6:55am PST
Data out on Chicago PMI (Purchasing Managers Index) for May was at 59.7 versus 63.8 in April. This is another piece of negative data. Dow, S&P 500 and Nasdaq are negative now. The University of Michigan Consumer Confidence went up to 73.6 in May from 72.2 in April .

UPDATE: 11:00am PST
I have posted below the Intraday chart of the Dow and have drawn Red lines to show the trend expected after each "W" pattern. The first "W" pattern, while going up initially after the "W" did finally come to a lower level. The signal now is a rise in the trend even though the Dow has gone lower at this point. Hopefully there will be a little rally to stop it from going much lower than down 150 points. The Vix has also gone up over 11% so far today to 33.30 as the market hits the ows of the day.

UPDATE: 1:20 pm PST
The market has closed and I have added the final Intraday chart of the Dow below, to prove my methods to you. Notice that even after the last Update above, it looked as though we were going lower than the 150 point drop, that I said the "W" pattern had pointed up and that we would go up. Well we did. As a matter of fact, even the folks on CNBC thought we might actually go up at the end of the day, until the market sold off again. But, it you were trading today, interpreting charts can give you the edge and, as I have shown, it is not difficult if I can do it.

Market Summary and projections for the weeks ahead.

What do you think you should have learned from this week's market action? Or are you going to keep your head in the sand and hope everything is all fine now? In the charts above there are some very interesting revelations if you know how to read chart patterns and Candlestick patterns. First, in the Dow 6 month chart, you will notice that we have recovered 2/3rds of the recent drop. To be exact, the market has recovered 61.8% of the drop. What's so special about that? 61.8% is a Fibonacci number. So one thing it should tell you is that the last Elliott Wave up, is finished! That is why Friday was a down day and why most likely Monday will be so too.

What else do the charts tell us? The second chart is of the Dow for 1 month, so you can easily see the candlestick pattern for yesterday. Why is this at all important? Because it gives a signal of a Hammer pattern. A Hanging Man candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer. That is what yesterday's pattern ended up as. Another point of yesterday's action was to look at the Volume chart. Friday's usually have less Volume than Thursdays. But yesterday the Volume was higher than Thursday. As a matter of fact, if you look at an intraday chart of Volume you would notice that over 20% of the volume yesterday happened in the last 15 minutes. Over 50 Million shares were traded in that time and it got the Dow off its lows to close down only 162.8 points. Hmmm, there that Fibonacci number again.

There is no way for certain to predict the future, but candlestick patterns give one a better than 50% chance. However, knowing this, there are patterns within a day as well and while it points to a lower low on Monday than today, it could just open that way and climb somewhat higher. However, it will not go over the recovery high in place last week. It should stay below that and my guess is that the market will go lower next week. Why do I say that? Because this market move needs to be looked at in a much larger context, say 30 years!. I have posted a 30 year Dow chart in the past month and shown that we are in a Super Grand Cycle where we now are ready for a major move to the downside unlike anything we have experienced in our lifetime. Exactly how and more precisely when this will happen is unknown. But it is coming.

Gold this week rallied to new highs confirming the lack of confidence in world currencies and fear that the only real safe place is in Gold. I do not believe this will last during this Super Grand Cycle, as Gold will eventually drop below $900/ounce and go as low as $600/ounce if we humans behave as we have in the past. But enough of the speculation for now. The point is that all the signs point to a major, seismic, drop like a rock. I have been warning about this the past 3 months. I have been using language like "Fair Warning" which is a term used by auctioneers that the impending sale is about complete. I don't know what else I can do to warn people, as it is we little pople who will be hurt, not the Wall Street tycoons. Fair Warning!