Market comments for Aug. 13th: That's Friday the 13th bad luck! UPDATE

Here we stand on Friday the 13th all wondering whether the direction of the stock market will have a reversal today based upon the recent few days Candlestick patterns, because that is what the patterns say. We should have a minor reversal today. Economic data will not be the determinant today. It won't be the social mood of traders. It will be whether the Fed wants the market to go down another day ending the week.

Even though we expect CPI data today to come in near zero or a negative reading adding to the deflationary case that has been made by many including me, it will not be the decisive data to determine market trend. That direction will need one more week to be determined. Next Friday is Options Expiration for August and 2 weeks before the start of school. Speaking of the return to school, Retail Sales numbers will shed more light on the Consumer as its data is to be released momentarily. Dow Futures before the data release was at -27 for the Dow. So here is the data:

CPI for July came in at +0.3% The market had expected +0.2%. The prior month's reading was -0.1%
Core CPI for July came in at +0.1%The market had expected +0.1%. The prior month's reading was +0.1%

Retail Sales came in at +0.4%. The market had expected +0.5%. The prior month's reading was -0.5%.
Retail Sales ex Autos came in at +0.2%. The market expected +0.4%. The prior month's reading was -0.1%.

The Dow Futures have now moved more negative with the Dow Futures now at -50, so the initial quick reaction was more negative. TIME WILL TELL WHETHER THIS PLAYS OUT FOR THE ENTIRE DAY TODAY.

Michigan Sentiment comes in in about 1 hour and 25 minutes at 9:55am EST or 6:55am PST and I will update this post top add the data so be sure to check back if you are as interested as I am to post it. The market expects 70.0. The prior month's data was 67.80.

Be sure also to visit over the weekend as I will post some charts and show where we are headed and where resistance is on both the Dow and S&P 500. You see on a micro level it is much harder to determine short term market direction. But at a Macro level it is much clearer. Thanks for visiting the site. I also am going to post soon several non stock market commentaries. One will be on the Proposition 8 Court decision which took place this week reversing the ban on Gay Marriage on Constitutional Grounds. The other article I am working on is about opinions by the Chamber of Commerce on Prop 19 in California, which would legalize Marijuana use in California for adults. I have some definite thoughts on both topics.

As I finish writing this post, the Dow Futures have recovered to only -6. So it might not be that bad a Friday the 13th for the Longs but instead could be for the Shorts. Have a nice weekend.

UPDATE: 6:55am PST

Michigan Consumer Sentiment came in at 69.6%, which was not quite 70.0 but close and better than July.

What do the Charts of the Dow, Nasdaq and S&P tell us? Down is inevitable!

As the title suggests, when you look at 3 charts, they point to all Indexes going down from here. There is no other explanation that merits serious consideration. Let's take them one at a time. I know this may seem too technical but I have tried to explain it in a way that you can understand it if you follow along with each chart. It would be wise to click on the chart to enlarge it as a separate page to view while you are reading the text.

Starting with the Nasdaq Composite Index chart you will notice that it looks back a decade to when the Nasdaq reached its peak over 5,000. As I drew a downtrending Blue line from that peak to connect where the Nasdaq reached its high of 2,800 in the Fall of the year 2007, I drew another red line which covers the period of 2007 to now. While there is a slight difference in the 2 lines, it is not significant enough yet to distinguish. However they point to this downtrend line continuing. We will NOT break above these lines and the 200 day Moving Average line, denoted as a yellow line hugging close to the data points, until we truly return to a Bull market. That day looks to me interpreting the way forward, not to occur for at least 1 year and possibly 2 years. That is when we will see if we can go above these downtrend lines. The line at the very bottom in blue says we most likely will not go below 1,300 in that 2 year time from today, if that is of any comfort. The Nasdaq Composite Index closed Friday at 1,692. Now let's turn to the Dow chart.

The Dow chart is also a 10 year look back and a projection of the downtrend line continuing. Here too we hit a peak in the Fall of 2007 and then dropped in a series of stairs, each one up leading to a sharp step down. The blue line dropping from the Spring of 2008 connects to almost exactly where we are today where we closed Friday at 8,277, a little above where this blue line is but very close to the 200 day Moving Average. In fact, if you don't know how to, or like to, draw these charts, using the 200 day Moving average accomplishes almost the same thing. As I look at the chart and the lines I have drawn, we will be lucky if we can stay above the lower floor of the Dow at 6,400. But there is going to be a test of this level, most likely this year. When it will happen is difficult to predict, but I will give it a try. It looks to me it will be tested again this Fall. It may start by testing the low 7,000's like first the 7,800 level followed by the 7,500 level and then the 7,200 level before its final decent. It can bounce up from each of these tests, but remember it is like a staircase. Each test takes us lower.

There is no guarantee we will not break below 6,400. As a matter of fact, there appears to be a 50/50 chance we will. Why do I say that? Because of the steepness of the blue downtrend line. If we do break through the 6,400 level, I am hopeful we will set a new bottom but that bottom could only be at Dow 6,100, not the Dow 4,000 that so many have predicting. If that occurred and we did go to 6,100, we could bounce back up off the low and start to climb and start breaking above the blue downtrend line and form a stable floor for the market to climb out of. Again this looks like Fall is the timeframe as much more news about the health of the economy, unemployment, the Banking system and the auto industry will be clearer than today. If things look more optimistic we then could start a new Bull market, but not until then. We have been, and are, in a Bear Market Rally! The S&P 500 chart looks very similar to the Dow and I would expect this Index to behave the same as the Dow.

So there you have a look into what I see happening over the next 5-6 months and why I still have kept holding my ETF Short Triple Play, symbol TZA. If I am correct in my outlook, this could yield double, to possibly even triple, my original investment. To me it's worth waiting the 5-6 months and find out. If at any time we break above the downtrend line and it appears to hold, I will be the first to post it here and sell my TZA. Indeed, I would be very happy to be wrong here, as I would love everything President Obama and his Administration are doing to succeed. I win on either side of this bet. But your challenge will be to preserve your capital at all costs! Some are doing that buy buying Gold, as it has climbed most recently from $860 to $958 at the close on Friday. Silver also has advanced. Inflation has a way to go before it affects us directly, but that day will come too just when we enter a Bull Market rally. Come back and read my posts as I post almost daily and while it is mostly now about the stock market I also post on the news of the day when the moment or topic moves me. Good luck! And if you haven't taken my Mini poll on the right side of the page, please do. Thanks for coming.