Tuesday, October 27, 2009

Intermediate top? Maybe!

So are we putting in a longer term top here or not?

Let me just say, we should be! However!

Most intermediate term declines tend to last roughly 1 1/2 to 3 months. That would take this decline down into the middle of Dec.

After Thanksgiving we are going to enter the Christmas shopping season. The Fed has willingly sacrificed the dollar in the ill advised attempt to create asset inflation to foster the illusion that the economy is mending.

I have to wonder if Ben will be willing to watch the market fade into the Christmas shopping season. My guess is he will crank up the printing presses again before that's allowed to happen.

We saw that very thing happen in July (we even had a confirmed 1-2-3 reversal). The market was rolling over on it's way down to test or break the March lows. The intermediate cycle was still very young and should have run another 4-6 weeks. Ben however decided that destroying the dollar was preferable to the continued decay in asset markets. Enter quantitative easing and an explosion of the money supply.

The intermediate cycle was aborted and the market exploded higher and has been rising ever since.

At this point shorts need to be careful. There's no telling when Ben is going to start throwing oceans of liquidity at the market again. That could very well abort another intermediate decline.