China Bubble Approaching Key Levels

Great comment in StockTiming today on the Shanghai Index approaching key levels.  See chart. 

If the index tops and falls fairly hard, it will be an early warning signal to US markets.  Also, it would be a harbinger of the nearing end of the Chinese stimulus.  This will have ramifications on other investments, notably the Aussie Dollar. 

Gary Dorsch gives a great explanation of how the China Bubble has propped the Aussie Dollar, which is now the sixth most traded currency.  As he puts it:

The Australian dollar is increasingly popular with currency speculators, because of its volatile price swings, a relative lack of central bank intervention, and lends exposure to Asian tiger economies and the "Commodity Super Cycle." The "Aussie" dollar is currently the sixth-most-actively traded currency in the world, behind the US-dollar, the Euro, Japanese yen, British pound, and the Swiss franc, and changes hands in roughly 6% of worldwide foreign-exchange transactions.

Comments

[Mamma Boom Boom]

2nd half of the year should be quite interesting. Trillions in bankster dollars and stimulus dollars will start to run out of gas. New realities will set in. http://www.bushongbusiness.com/webbbs/index.cgi?noframes;read=18172

Traders need to get in the proper frame of mind, if they want to make money.

BTW, did today's churning have any significance? Muh!

[barood]

SPX made new high and closed red for Wednesday. I repositioned to the other side of the trade. Amazing strength in NASDAQ. It is the market to buy when this bear is over. There will be a technological echo worldwide of 2000 bubble. It looks like 2000 was a show of whats to come in technology companies in the upcoming years.

Could this be the trigger that reverses the markets. just hot off the wire..

CIT bond advisers to push for bankruptcy- Bloomberg
Wed Jul 22, 2009 9:15pm EDT

Market News
NEW YORK, July 22 (Reuters) - The advisers to the bondholders that provided lender CIT Group Inc (CIT.N) with a $3 billion loan facility this week are recommending it be restructured through a bankruptcy following a debt tender in August, Bloomberg reported on Wednesday, citing a person familiar with the matter.

CIT has started a cash tender offer for its outstanding floating rate senior notes due Aug. 17, exchanging $825 for each $1000 principal amount.

But even if CIT manages to get 90 percent of those notes swapped at a discount, advisers will push for a pre-packaged bankruptcy and have CIT restructure out of court, Jeffrey Werbalowsky, the co-CEO of Houlihan Lokey Howard & Zukin, the investment bank advising the bondholders, told them on Wednesday, according to the person cited by Bloomberg.

Earlier this week, bondholders provided CIT with the emergency loan, allowing the 101-year-old lender to small and mid-sized businesses to stave off the threat of imminent bankruptcy.

Werbalowsky and CIT spokesman Curt Ritter didn't immediately return calls seeking comment. (Reporting by Phil Wahba; Editing by Gary Hill)

[Forkoholic Serge]

Bull Market or Broadening Top?
http://forkoholic.com/images/BullMarketIndic.jpg
http://forkoholic.com/images/megatopspx0722.jpg

[Sherman McCoy]

Interesting post. Except for the lack of carry, CAD looks much better on an RV basis, especially since they are both commodity currencies. CAD is the one currency Jimmy Rogers recently admitted ardour for the LT. I've been long since the "C" wave ended on the spread chart a few weeks back. I'd follow MXN and BRL as well.

[Glenn Loser Neely]

I warned you guys..
I am a loser!!

Glenn Loser Neely

[Virginia Jim]

After receiving some very current short term opinions last night, I’ve reconciled my views to several items that have been bothering me (and still do but I’m at peace). The biggest fly in the ointment has been Prechter’s resolute belief that SPX has to go to 1013 which is the minimum retrace of the whole move from October 11, 2007 to March 9, 2009. His belief that a complete impulse occurred during that period puts the market in a wave 2 that should take the market’s retrace into September/October with a significantly higher high than current levels.

Prechter’s formulation does not reconcile to work of notable cyclists Steve Puetz or the incarcerated genius (IMO) Martin Armstrong and does not comport with my independently developed cyclic view. My cycle view is consistent with June 2007 being the beginning of an impulse wave that may have ended either in November 2008 or March 2009. If it ended in November 2008, then we have a grand 4th wave triangle or complex irregular flat that is now coming to an end. If it ended March 2009 we have a complex correction or smaller 4th wave triangle. Either way, these formulations fit perfectly (to the day) with two well proportioned cycles that independently arrive at August 6 as final high before a great fall (August 6 could be a lower high if 962 prints today). The importance is that a long position is not where you want to be after August 6. If you follow EWI’s or McHugh’s formulation, then you’re looking for continued highs into September.

With all that in mind, here’s my take on the days leading up to August 6. Three major inflections coming. First, today I'm looking for SPX attainment of the 38.2% retrace of the impulse high at June 2008 to the low in March 2009 at SPX 962 (alternately, 962 might be attained at the third inflexion point on August 6). That will be the high for some time unless marginally exceeded on August 6. Second, a quick downturn into July 29 with a 907 target. Third, a quick rally into August 6 at 948. However the 962 high is reached (whether today or August 6), long is nowhere to be after August 6.

A very large downtrend will begin August 7/9 that will continue through November 2009 and possibly through the first quarter 2010. This time period will comprise the wave 5 of the impulse from June 2008 high and may include the larger degree wave 3 of the impulse from the October 11, 2007.

Just one opinion, be safe, good luck, Jim

http://www.screencast.com/users/Virginia_Jim/folders/Jing/media/5938fc8a-a763-4228-84e7-426f1ec22ab9

[Sherman McCoy]

Nice post. FWIW, you can find Martin Armstrong's stuff on Scribd.com. His work is top notch, although his cycle dates don't often coincide with his market dates. I think he's still looking for a "flush out" before we can call it a bottom. He's a little "off" after being away for so long, but is always thought provoking.

[trading diary]

absolutely no reason to publish your trading diary...

it is INCREDIBLE..how much the Sentiment has CHanged..

i DO NOT enjoy being on same TRADE as NEELY...because he has been LOSER calling for CRASH while MISSING so much of UPSIDE

but now TERA BAAP is convinced that we will BREAK the march low

too many BULLS on this TRAIN... and i want to ride alone

DG please tell your BOY-FREIND mr NEELY to go LONG, therefore i would have 100% COnfidence in my SHORT positions

I SOLD my BULK GS shares bought in high 60's for 95 pts profit..now i am shorting GS XOM , gold and oil futures as well as SPX

HINT..look at SPX chart from 9/24/01 to 7/24/02 .. that is what CAPITULATION looks like..

TERA BAAP

Posted by: anon_aka_TERA BAAP | Monday, July 20, 2009 at 06:15 PM

SPX made new high and closed red for Wednesday. I repositioned to the other side of the trade.Posted by: barood | Wednesday, July 22, 2009 at 06:54 PM

[Sherman McCoy]

Uh, Miss BAAP,

IS that a stale post? Have you looked at the market lately? You sure must have a high pain threshold. Does your mom know you're surfing the 'net without parental supervision?

FWIW checkout 5 nearly complete intraday waves down on TLT. Somebody knows something and they're not telling...

[NK]

Are we going to close down today? up 30?

[Forkoholic Serge]

Virginia Jim ,turn off your log scale
I'm the Forkman here ;-)
Wave 4 theory is dying fast
if this rally won't stop soon I'll label it as an ABC

[Sherman McCoy]

Feels so good to be long, why fight the tape?

[Wavist]

5 of 5 done finished SELL SELL SELL

[Jim]

Who's going to sell? They are on vacation. But, will bulls take profits?

[Sherman McCoy]

Jim-

Take profits? trend followers are PUSHING their positions. There is a rogue wave of money coming into the market. All the algorithms are on "BUY". Put in your boogie board and go with it. We have gaps to fill, and the day is young. Have you seen fertilizer stocks today? In orbit!

[Jim]

Sherman

Spend some time with your loved ones. No body will miss you here.

[Sherman McCoy]

oops sorry, didn't mean to hit nerve. just multi-tasking in between profit taking. Isn't everybody making money on this elevator ride?

["Look ma! No hands"]

Please disregard the ego-driven, immature nitwits who are still out to impress Mom with the "Look ma! No hands" spiel from their tricycle-riding days.

[Ed]

Sherman

There are a lot of people I can envy. But your cheap ass is not one of them.

Save your ass before it runs out.

[MT]

Coming months first important top S&P 1170/1230 zone.

[Mike McQuaid]

SPX, DJI, NDX, $TRAN all motoring higher out of the bull flag originating at the March reversal. So we're seeing wave 3 off the March reversal and the market is on the way to much higher levels with corrections along the way.
XLF is a bit of a laggard on this pattern affording a second tier of picks in this rally.
The market telegraphed all this action starting in early April.

[Mike McQuaid]

EEM had a Nov '08 reversal. June '09 high and low fib extended makes for a near term target of 37.76.

[Mike McQuaid]

Thanks for the bringing up the Broadening Formation.
McDonalds, MCD weekly, is the current poster child and poised to offer the bear signal.

[S]

Nasdaq- last 5 min was impressive. Maybe we do not have to wait until September.

[Mamma Boom Boom]

----Health Care Reform------

Some of you may be interested in what's going on here. I know I am! Showing below is a letter that I sent to our local newspaper to run in the editorial. You are welcome to cut and paste from it and do the same thing in your town. And, you could forward it to all public policy associations that you know of. We need to head this off. Here it is:
-----------------------------

What's Good For The Goose

This letter is in response to ******** article *******? In the past two weeks, the health-care debate has intensified in Washington. There is a lot of talk about controling costs, sacrifices, rationing, denying health care, increasing co-pay, imposing surtaxes, fines, slowing the growth of spending, quality of care, retaining present coverage, faceless bureaucrats, and lifestyle choices. But beneath the surface, it's about reducing the budget deficit. And not surprisingly, many astute analysts have concluded that, if any of the present plans are enacted, within a few years everyone will suffer from reduced coverage, especially those on Medicare or Medicaid. I find this unacceptable. In my opinion, if the government can find trillions of dollars to give to Wall Street Banksters, then they can find the money to increase, not decrease, coverage for the American people. This public policy of Reverse Robin Hood , stealing from the poor and giving to the rich, must not be tolerated any longer. We the voters must speak out, and do it now. Here are the email addresses for our representatives: ******** Write to them. Remember our battle cry: "No Reverse Robin Hood".

[Say NO to Obamacare]

Before any version of Obamacare is enacted, we should demand that it will also apply to all Federal employees and all members of Congress. After all, if our elected officials think national health care is good enough for us why would it not be good enough for them?

[yelnick]

On healthcare, ironies abound. If Ted Kennedy had been under the ObamaCare which Teddy has been pushing for years, he probably would be dead by now, since he falls within that elderly risk profile where, as Obama said, giving a painkiller may be more warranted than giving medical care.

Supporters of it are delusional if they think they can increase coverage, subsidize care, and lower overall spending. To try to make his case, Obama has gone off the deep end. He claimed $2.3T of "savings" which no one knows where he came up with that number; and yet his budget has added $7.1T to the deficit over ten years, even assuming he can find his $2.3T savings. He also is breaking the final few campaign promises left, such as not raising taxes on the rich beyond repealing the Bush tax cuts.

Once it became clear in the past 24 hours that ObamaCare would be stillborn, this market got more fuel for the Final Surge.

[Dog Whisperer]

Fed govt has no business getting involved in health care. But that's academic. 10th amendment has been trashed for a good long time.

We am f-cked.

[da bear]

i have heard that obama once had a job writing copy for a financial newsletter on wal-street.

makes sense. lol

THIS STOCK WILL MAKE YOU MILLIONS!
THIS HEALTH CARE PLAN WILL SAVE US BILLIONS!

same thing.

da bear

[Virginia Jim]

Let’s evaluate the H&S bottom in light of the recently failed H&S top. There are frenzied bull penguin’s jumping off the berg right now just like there were bear penguins that jumped two weeks ago. If the inverse H&S fails, they will be crushed worse than those bear penguins (RIP).

My conclusion upfront is - It’s clearly in the bulls’ court. The pattern has a real problem.
The fathers of TA, Edwards/Magee (Technical Analysis of Stock Trends) wrote the book so to speak on H&S. They forgot (before they passed) more about H&S than Art Cashun or 99.9% of contemporary ‘quant’ or pattern traders have ever learned. So here’s my humble stab at what they might have said about the growing frenzy over the inverse H&S which has an unconfirmed neckline break. The following chart is the focus:

http://www.screencast.com/users/Virginia_Jim/folders/Jing/media/d0f8a270-1f34-441a-9846-f800c6830640

I’ve sectioned the H&S into defined phases to evaluate volume pattern. Each phase agrees with E&M description of the volume pattern that should be present except for the right side of the head.

Pg 81 “The essential difference between Top and Bottom patterns, you can see, lies in their volume charts. Activity in H&S Bottom Formation begins usually to show uptrend characteristics at the start of the head and **always** to a detectable degree on the rally from the head.”

You’ll see on the chart, volume DECREASED notably after the head (see 4). Oops. That’s a big oops. That’s diametrically opposite to what E&M said “always” occurs in a successful pattern. Here’s some more support in E&M.

Pg 81 “Wall Street has an old say which expresses it: ‘It takes buying to put stocks up, but they can fall of their own weight.’ Thus, WE TRUST, and regard as conclusive any price break (by a decisive margin) down through the neckline of a H&S Top even though it occurs on light turnover, but **WE DO NOT TRUST a breakout from a H&S Bottom unless it is definitely attended by high volume.**

As clarification, a neckline break is confirmed as a “decisive break” only when the neckline is penetrated by 3% of the price (per E&M although Jesse Livermore had a lot to say about trendline breaks and support/resistance). Hence, the recent H&S top broke the neckline but not by 3%. That H&S was never confirmed, much to the bear penguin’s chagrin.

As for this inverse H&S, the volume pattern indicates IT IS NOT A TRUE H&S BOTTOM PATTERN in the classic definition. If your analyst (which might be YOU) thinks it is, then you’ve got to consider whether they’ve evolved to a level of expertness that trumps the life’s work of the masters, E&M.

Okay, say you accept the epistemic superiority of your analyst vis a vis E&M, then you still need a 3% neckline break. Recent experience the supposed failed (I say unconfirmed) H&S Top indicates the 3% rule is hardly a frivolous criterion. That’s prima facie.

Good luck, Jim

[Glenn Loser Neely]

What a rally!!!
Where are all the "Neely" followers?

I warned you guys...he is just a freaking loser!....
Even a broken clock gives the correct time twice a day!!!

I wonder if he is still bearish??

[?]

Glenn Loser Neely,

What happens if the clock is an electronic one with digits? Then it is never correct!

[gambler]

I prefer to use the Spider SPY to track S&P 500 since the S&P 500 open and close prices are usually suspect. The key level that I am watching is the 38.2% retracement of the move from the dividend adjusted high of 151.06 to the dividend adjusted low of 66.25. That level is 98.65. The high yesterday was 98.08. SPY needs to close above 98.65, then open above it, and trade a tick higher for me to begin focusing on the 50% retracement level.

[DG]

GLN,

There's a whole bunch of Neely followers at the new blog I set up for subscribers.

Yes, Neely was wrong about the June top being the absolute high. But, as much as forecasting and getting forecasts right is a good thing, what matters to a trader's P&L is trading the forecast, entering and exiting trades and risk management. Contrary to what you may think or believe, Neely's trading recommendations since the June top call have been profitable. Does it suck to see his forecast be wrong? Sure, but the profits traders have made from his trades in just the past month on one ES contract would pay for the service for two years. The bottom line is the bottom line.

[Wave Theory]

According to Neowave SPX is in wave 4 from 2007.

Here is the chart, the bear market is NOT over...this rally is ONLY wave 4.

http://3.bp.blogspot.com/_79cfp3aq254/SeoXR5kPWxI/AAAAAAAABRE/JcWNbowwelY/s1600-h/Picture+2.png

[Wave Theory]

Here's the most bearish scenario.

Decline back to the 1994 lows to complete wave A.

http://www.marketoracle.co.uk/images/2008/dow-jones-forecast-dec08_image001.gif

[DG]

Actually, I've disagreed with a few of Neely's conclusions just over the past week. I give an honest assessment and try to hold him to his own rules. Since you've never posted anything of substance on this blog, why would I let you pollute mine?

The rest of your post is just pure ignorance and rudeness.

[James]

Yelnick,

Can you find a better way for people to attach charts on your blog?

Maybe that will improve quality of postings. More than half of them are waste of time to read.

[Freddy M]

Incorrect, James. Only 43.5% are a waste to read. Perhaps if you attach a chart you can refute my conclusions. Hugs,

[yelnick]

James, typepad gives two options: allow limited html (which I have on), and turn url's into links. I cannot do both. And they do not let charts get put in (risk of malicious code I suppose).

I can turn on links, which makes it easy to click and see a chart. DG likes the other way since he uses html to create italics to respond to other comments. He could instead (for example) surround what he italicizes with ** and similar to distinguish it.

What say you? Which way is better?

[DG]

yelnick,

I'm fine either way. I would love to see some people's charts more easily.

[yelnick]

DG, I turned on links plus I think kept limited html active