PLAY IT AGAIN SAM

Here is the weekly chart of the Dollar Index. It is clearly in a down trend with a bounce happening against the downtrend right now. This is in a sell zone right here and I am currently short this market. I have a possible future track of this market mapped out with red arrows. The reason I have that as a possible scenario is that the momentum indicators have turned upward. In a situation like this I take the sell then if the buy develops, reverse the trade position. You can see we are coming up to the typical period of seasonal strength, right around the first of the year. This has been a pretty reliable seasonal pattern if you look back and check it out.

For the moment though, it appears we have another wave up going in commodities and down in the dollar. There is no way to know if this will just roll over and tank or drift down, then reverse. Maybe it won't do either? There has been a recent tendency for a decline in January in stocks and I was told by a friend there are some Gann cycle people predicting a Jan 11 top. If that were to occur, that would tie in with this above scenario nicely, since these two markets trade in opposite directions nowadays. Gann analysis to me is completely worthless, but maybe a blind sow will find an acorn on Jan 11th? If you draw enough lines on a chart something will happen at one of them, yet nothing happens at most of them which is the problem with that type of analysis. How in the world do you know which of the 500 lines you have drawn means something?

As we roll into the new year, I doubt anything with the PPT will change dramatically. I suppose they could take a breather in January now that they have carried the world on their back for a whole year, but why stop now? The mission is to artificially inflate things until they can carry themselves on their own. I have no idea if this plan will work or not, but I am sure that the market would not hold these levels if they backed off with what they are doing. I doubt they will. Until we get some type of sharp break, then a rally that fails and price takes out the first break point, it is business as usual on the up side.

The next chart is something interesting to me to show with the BOND MARKET.

This is something Larry Williams pointed out to his students recently. I will not disclose completely what it is, fellow students who read here certainly recognize this. It is basically a measure of a fundamental in the market, and you can see that in the past when we have dipped into this zone, we have generally had nice rallies. Just like anything else there are a few exceptions, but for the most part this has held true. Many are calling for a major top in BONDS and maybe we have seen it already. However, we should get some type of bounce here and we have not so far. February has generally been a good place to short bonds, so maybe this will generate a rally into February that will provide us with an ideal short entry in this market.

Of course it is also possible that we will just roll over here. The one problem with that scenario, is that is going to mess up the PPT completely. If interest rates skyrocket, the "recovery" will be de-railed and the whole point of what they are doing is to create the illusion that there is a recovery. This is must see TV going forward here. Something has to give in all of this. We know that Bonds traded inversely to stocks and so does the US Dollar. Who will be right? The PPT is trying to get BONDS and stocks to trade together, and I don't think they can pull that off.