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Tuesday, April 27, 2010
Long Term Outlook
I find it tragicomic when media and public come up with various alibis, news and events as the reason for every market action.
So the markets are now selling off on Greece? Really? Greece was imploding for months and it became a problem right now?
For weeks, we were told that all the Greece investments and bonds JP Morgan and other investment banks had were fully hedged. All of a sudden, financials got brutalized "Greek Style".
How about Goldman S., little mighty delusional mouse thinking himself as God. Right after SEC charged GS with fraud, S&P500 plunged some 25-30 points just to make new marginal highs a few days later.
What I am trying to say is, the markets are controlled by trends, nothing else. Trends are the directional structures in which the money funnels through. Everything is product of them, from cycles to sentiment to volume....
Remember, despite multiple government stimulus and interventions, S&P500 had plunged for months in 2009, and the one and the only reason S&P500 stopped at 666 on March 6 2009, is the fact that one of the life time channels we had been following since late 2007 had been tested around 670. It was the first test which was going to produce an intermediate to long term bounce for sure.
Following is the summarized version of my LT outlook I posted in xSetups on April 6.
SPX quarterly lifetime
I can not publicly get into details as to why the test was so reliable and what future implications it has but I am going to show you a part of the another structure that is actually the one and the only reason the markets are getting hammered right here.
SPX quarterly lifetime
If the market is contained by this trend line right here, which I strongly believe it will because the markets have undergone a fundamental trend shift after the crash, then the future implications will make 2008 look like a little itch. Did you notice that the crash of 2008 was caused by the break of this trend?
SPX daily close-up
There are constructing elements of these trends, patterns and channels. Inflection points are produced using these underlying objects. For the above case, SPX has a long term target of 420 in late 2012