August 28, 2011 (Critical Week Coming Up)

It was heartening to see the big up day on Friday. Overall, I still think we've reached a bottom of sorts and are starting a nice move up, one that could last as much as a year. But I could easily be wrong. Either way, whether we go marching upward for a while or if we suddenly turn down, I do think the crash is coming. I say that for two reasons. One is the giant head and shoulders pattern from 2000 to the present which probably representats the mother of all tops. Second is how high we got on the positive side this past April, up to 7.25 times the money on the positive side versus the money on the negative side, when we had never gotten above 3.00 before this year. So I'm very, very curious how this coming week will go.

Things are still plenty negative in the S&P 500 numbers. The numbers at the end of this past week were:

Wednesday: 66.39/163.04

Thursday: 68.90/165.10

Friday: 69.44/164.85

So KJ is out of the market, and the rest are not budging from their positions, which are very negative. This is potentially very good.

My longer-term indicator, the Nasdaq 100 numbers, are above 2.00, but obviously nothing like the positive numbers we were seeing earlier in the year. The Nasdaq numbers since last Friday, when we had the lowest number of the year (dividing the positive number by the negative number equals):

Friday, August 19: 1.39 (lowest number of the year, coming right on the low for the year)

Monday, August 22: 1.45

Tuesday, August 23: 2.53

Wednesday, August 24: 2.53

Thursday, August 25: 2.22

Friday, August 26: 2.36

So overall, things are looking good for a continuation of the move up we have started. People are still going crazy over gold, all the radio talk shows are talking gloom and doom, etc. My only concern here is that I've learned that a pattern trumps my volume numbers. And it's possible that what I'm seeing as a three peaks pattern so far this year in the markets, which is the early part of the three peaks and domed house pattern, is actually a head and shoulders pattern, marking a final high of some sort. We'll see what happens.

I started my blog back up around a month ago talking about how I blamed the Fed for letting the volume numbers get so high by its "quantitative easing" program by basically spending trillions of dollars that we don't really have in buying back U.S. Treasurys, where that money made its way to the stock market and induced false confidence. There are other reasons to despise the Fed. I recommend that you go to You Tube and check out a fascinating video about the Fed called "Quantitative Easing Explained." It's a cartoon. I learned a lot from it. Now I hate the Fed even more, along with Goldman Sachs. Check it out.

Rob