us market- time for big drop

US MARKETS - time for a BIG DROP

The stock market "has a mind of its own." Except in the very short
term, it is unaffected by outside influences. Since early March
2009, just over a year ago, it has been on an upward course which which is a countertrend bull
rally within a larger bear market that began in October 2007.
The remarkable part is the size and duration of the rally. During
the past year, there were several times when we thought that it was
probably over, and that the bear market had resumed, only to see
prices continue higher. This may be another of those times. For
technical reasons, the Dow Industrials average is at a point right
now at which prices could top and reverse. There are other
technical reasons why it could go higher first.
The trouble with chasing the last few tens, or hundreds, of Dow
points this close to the end of a countertrend rally is that a
modest price advance which may have occurred over a period of days
or weeks could be destroyed in a flash. It is risky business to
dare a countertrend rally with new money near the end of the
countertrend's life span. If you do choose to dare the market,
understand that you are playing with fire and that you may get
burned. If you are already in the market on the Long side, by all
means enjoy the ride, but make sure that you have an automatic
escape hatch in place to prevent you from getting hurt.
A market such as this is a Great Seducer. It is a carnival barker,
proclaiming the delights which await the ticket buyer. For
investors who are impatient to recover past losses, or whose money
may be burning a hole in their pockets, the temptation to get
aboard may be difficult or even impossible to resist. And once
"in," it may be even more difficult to exit when the market turns
down.

We had said earlier that this market is being held up by helium,
which of course is a very light gas, but it is inert and harmless.
The reference to helium is inaccurate. It is more proper to say
that this market is being held up by hydrogen, which is even
lighter, but it is highly flammable. When it burns or explodes,
there is nothing left but destruction and water vapor. You do not
want your invested money to turn into debris and water vapor.

There is nothing wrong with running now to the safety of Cash. You
may miss some relatively minor gain, but your money will be there
and waiting to seize upon the almost infinitely greater coming
op.tunity on the downside. When the tide turns, which it surely

Re: US MARKETS - time for a BIG DROP

If the Dow should surpass its High of last Tuesday, the downmove
which began last Friday would be delayed a bit; but wouldn't
matter, because "the fix is in."
.,.,.
The Dow Industrials Index has lost 10% of its value since the Great
Rally ended on April 26 and the Bear returned. The Dow will lose
at least another 10% in the downmove which began last Friday. It
is headed for 8800 and lower; and that will be just a pit stop on a
very long trip Down. This is a very powerful bear market that
will be with us for years.
.,.,.
All of the "fundamental reasons why" the stock market "must" rise
don't count for a thing. It's going to go down, regardless. It's
impervious to outside influence. It lives in another world.
Literally!
.,.,,
We have been expecting a rally in Gold, but what we have seen so
far is weak. Perhaps this is all the "rally" that we are going to
get. In any case, Gold turned down on Friday and closed $15 lower.
We are satisfied that its all-time High on June 21 is a very
long-lasting High, and that Gold's operative underlying trend is
Down.
.,.,.
"The bloom is off the rose" in Gold. Almost everyone who bought
Gold since the High of June 21 is already under water. The
likelihood of achieving the "plus side" for that investment is very remote. Waystops for Gold are 1169, then 1157, 1126, and 1046
Silver is in much the same situation as Gold. Its recent rally was
stronger than that of Gold, but it turned down quite strongly on
Friday. We think that Silver's underlying operative trend is Down.
A major pit stop on the way down will be about 14.76

Yesterday, two Japanese Candlestick
Reversal Warning Patterns arose in the
30-minute chart of the Dow Industrials.
The first one is a "High Wave Doji,"
which arose during the first 30 minutes
of trading. It shows a "spike high,"
seemingly a "blowoff," a final explosion
of buying. It arose, of course, at the
top end of a long price advance, which is
one of the requirements for a Doji to be
considered important.

"Doji" simply means that the Opening Price
and the Closing Price during a particular
time period are the same, or
very nearly so. This particular example
is special because the Opening Price
and the Closing Price were IDENTICAL.
This is rare. In the context in which this
pattern arose, it is a very bearish warning.

Furthermore, on the same day, a few hours
later, a Japanese Candlestick "Bearish
Engulfing" pattern arose, in which the
"Real Body" of a tall black candle completely
engulfed the "Real Bodies" of the seven
price bars which preceded it. As the name
of the pattern implies, it is bearish.

The stock market is attended now by
feelings of extreme optimism. The general
consensus is that the stock market has
nowhere to go but Up. Sentiment in
that regard is wildly tilted in one direction.

I think the crowd is wrong. I think that the
herd is blindly running toward a cliff. I think
that the stock market is setting up for a disastrous
decline. The Candlestick patterns that we see
in the Dow yesterday are a potent warning
that the general consensus is wrong, which it
usually is - when opinion is strongly bent in one
direction in matters which are related to the
stock market. "Let the good times roll"
may very well be a recipe for disaster. The
remaining upside potential, if any, is extremely limited.

Think for yourself, and make up your
own mind. Don't be asleep. Now is
not the time to be sleeping, or complacent,
or feeling comfortable.

Yesterday was quadruple witching day....All Derivative & Options Expiry

SG