A few weeks past, we told you that there were no more sellers. We called the turn. Last week, we suggested that there were no more buyers. It appears that we were right on the calls. Now, what do we "C"?
Sideways
The market is showing a convoluted chart. It is a consolidated pattern except there are two ranges. A range within a range if that is clearer. You can understand the price pattern if you observe two sectors, the chips and oil. Why, you ask?
Because chips led the market up and presently, oil is showing its value and impact. The SMH chart reveals the consolidation picture. The top is 250 and the bottom is 215. Oil's picture shows the strangeness in charting and in relationship to the market, a dichotomy. The daily chart says oil is in a downtrend. The weekly chart says oil is still in an uptrend. There you have it.
Our Decision
We based it on two indicators. The first is volume. The market always has higher volume on down days than on up days. Last Friday was option expiration day and the volume was strong. The second is a basic rule. A weekly chart is a more powerful tool than a daily chart. When you combine these two aspects, the market is looking to touch its first bottom range within the two price ranges.
Other Factors
The chief one at present is King Dollar. It reversed again. It could touch its high. A strong dollar causes inflation around the world. It acts like a rate increase to the global community. They need to purchase dollars to do transactions in commodities. The stronger dollar makes their currency buy less. Inflation is an unseen tax. It hurts consumers everywhere. There is one dangerous backlash with a strong dollar. It does give reprieve to American consumers, but jealosy and anger in foreign nations. The BRIC nations will use the opportunity to call for the end of the dollar as the world's reserve currency. With our unpayable debt, if this ever happened, the US would be a third world nation. The BRIC's are Brazil, Russia, India and China. Dear Reader, that is a lot of the world's population. At present, the market is overlooking this danger. The IMF is not. It already has a new world reserve currency ready to roll. When big money addresses all these and other concerns, you can easily see the market will be range bound until the next Fed meeting.
Down the Road - Winter-time
The biggest problem will be in Europe. They should have realized their dependence on Russian oil years ago. It is water under the bridge. They should have begun infrastucture for LNG years ago. It too, is water under bridge. Russia wants payment for their commodity in rubles. They should placate the commies, but they should begin to address the oil/energy question. This winter that quesstion will lead to an answer. The real answer is to begin to use their Western allies and create a new energy flow to keep people warm and factories humming. In the meantime, they should throw out this thought to the idiot warmongers in Moscow. When your country has a food famine problem, and you know that you will get one, don't look to us when your nation is starving. I can see a day when the Red Chinese Communist betray Russia just like Nazi Germany. When that time comes and they want to be our friend again, let them stew before we throw them a life-perservor. Peace.
