Friday, October 7, 2011

Just a quick update.
We are approaching another time window that may represent an end to this current leg down. Market movements in the primary directiontend to move in 5 wave patterns. On the S&P Master chart (attached) we can clearly see the starting of a 5th wave from the pattern beginning from the Top on May 2nd 2011. The end of this 5th wave can continue to subdivide as an extended 5th wave however we are approaching significant levels where the big money may support the marketsfor a trade able rally over the next 1 to 3 months before the next expected set back in the early part of next year. At that point a more certain and durable rally may begin with little fan fair. 
Sentiment indicators are at extreme bearish levels so averaging here is not a bad idea but a full position is not recommended because there is always a possibility of a panic move down to much lower levels. Again, if we do stabilize here this is not the start of a new bull market but most likely a significant retracement of the recent move down.
Watch carefully over the next week to see if we see divergence within the market. If we do we may have the bottom at least for a 1 to 3 months. 
The market to really watch is the bond market. I have always said the smart money is in the bond market. The bond market was forecasting what we are see now 6 to 8 months ago and the best investment this year has been north american governments bonds. I got a lot grief from colleagues at the beginning of the year, becausemy recommended allocation was close to 70% bonds and 30% equity. This allocation would yield you a positive return this year compared what the majority are holding. However government bonds are at a great level to re-balance out and position into corporate bonds or dividend paying stocks.

Take Care
This is just "One Man's Opinion"

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