Wednesday, February 23, 2011

Wait for the Retrace?

Too many people have been waiting for the stock market to correct. Maybe waiting for a retrace/rebound is in order.

The global stock markets' big dump yesterday has long-frustrated Bears salivating. Everyone knows the market has traded up for months on thin volume and heavy intervention by the Federal Reserve, so it makes a certain sense to expect the markets to cascade downward once the charade ends.

Everybody also knows the tradewinds that have filling the markets' sails--record profits, impressive gains in overseas revenues, the expectation that China alone would fuel a commodities boom for decades to come, to name but a few--have all suddenly ceased, and in the stillness, a storm--oil over $100/barrel--is gathering ominously on the horizon.

But too many hedge fund managers and other traders have been waiting for a big dump to make their year, which means the big dump is suddenly less likely. We might also anticipate that the Powers That Be aren't going to let their pride and joy, a manipulated market, roll over and expire just because Libya imploded and oil is heading over $100/barrel.

One possibility is a quick recovery after a few days of uncertainty and a retrace back up, ideally to a double-top. That's what we're looking at on the 10-year chart of the Nasdaq: a big fat double-top screaming "look out below." This is really a beauty to behold: technically, it doesn't get any better than this.

It would be handy if the U.S. dollar confirmed the change in trend by breaking out of its trading range to the upside. Nobody knows what will transpire, but it's something to look for.

As always, these are just the ramblings of an amateur observer, and do not constitute advice nor are they intended as advice--please read the HUGE GIANT BIG FAT DISCLAIMER below for more.

When this market does break down--and it will--then the fireworks may begin. Alternatively, it could just torture everyone with stutter-steps and false breakdowns for a few more weeks or even months. We'll just have to wait and see.

I intended to focus on social media this week but events call for a quick change-up; more on social media next week.

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