Here is a chart I posted in here quite some time ago which portrayed a certain map for the market to follow. I seem to recall I put it up in May but I do not remember specifically. This whole map is based upon something that makes no sense to me as far as why it should be this accurate. It is the map of another market and some internal things with it. It does have some relationship with the stock market, but not one that should serve as a predictor. Ironically this has been incredibly accurate, so as a result I am going to keep watching it. It currently shows a projected low for stocks on October 7th of this year.
No matter what I look at from seasonals, to the maps that project price, to cycles, they all predict continued weakness in stock prices at the very least through the end of September. This is just more confirmation that we should be looking to sell rallies here in the coming weeks. How you look at individual entries is up to you, the way I see things we need at least another day before the short signal for the Indexes is lined up on a short term basis. I am expecting this correction here to be a little choppy due to the huge down draft we had to get down here. We all know that the political fate of many is at stake with keeping this somewhat under control, and Comrade Ben is making his case for the public to beg him for QE3.
I think his strategy of completely backing away and letting people see how much they need him for stocks to rise is a good one. I hate the idea, but he is playing the hand of cards very well. My feeling is there should be no hand dealt, it should not be up to the FED to artificially manipulate stock prices. However, it is where we are so it is what it is. He does not need my approval to do it. Once he does launch QE3 we may see a rally, but it is all speculation at this point, and for all we know he will do it at the beginning of October which will line up with the cycles and seasonals, and that could setup a big rally. Until then, look for more downside action.
This is the Coffee market which I feel is setup for a rally. I have been talking about this in recent days, and it appears ready to go right now. We can see we are at the seasonal low point give or take a week or two, and we have quite a bit of COT buying indicated by the red line on the middle graph. We also have had a good bit of Small Spec selling and open interest has been declining. This is a pretty good fundamental setup, worth a shot on the long side.
Here we have everyone's favorite market, GOLD. One of my sisters was just in town and I found out she had bought some gold coins for her kids and has been indoctrinated as a cult member. I heard the store of value argument etc... For all I know the cult is right, I have to admit that I have never seen such a frenzy in my lifetime that has lasted this long, and I do not see any obvious reason that it will stop any time soon. However, I do see a possible short term opportunity here.
If you look at where I have my red arrow, it is showing the sentiment reading has now reached a reading of over 90% bullish. If you look back at most of the prior readings at this level, we have had retracements following those readings. We also has a possible seasonal inversion here in that the seasonal has been declining while price has been rising. Inversions are always tough, most often they are clear long afterwards but not at the time they happen. If we are to accept that a possible inversion is happening and we combine it with the COT position declining back down to a low level again, we do have a case for a short term selling opportunity. As I have said repeatedly, Silver is much weaker, so that is where the sells should be done. They are not the same market, but they do generally track together. Net, Silver sells this coming week.
Just a few other things, it appears Dollar buys are in play and also Cotton on the long side and Cocoa. I still think energy bounces are sells overall, look at Crude there. I am also watching Natural Gas for a sell, but we are also approaching the seasonal and cycle lows in a couple of weeks. If a sell does not show up this week I will likely be looking for buys going forward.