Sunday, February 08, 2009

We're in a Puetz eclipse crash window...

Bookmark and Share
The DJIA was up sharply Friday and investors seem reassured that a solid bottom is in place at the 8000 mark.

I'm doubtful, however.

First off, as indicated by the put-to-call ratio, the level of optimism has risen sharply even while stocks are at very depressed levels:

This suggests a short-term top is likely at-hand.

Meanwhile, according to the most apparent Elliott Wave count, we should be turning into a third wave of an intermediate-degree fifth wave down. This indicates a sharp drop to new lows should be near.

Lastly, there is a lunar eclipse tomorrow morning so we are in the midst of a 'Puetz eclipse crash window' similar to last September when a major autumn panic got underway on Wall Street. Steve Puetz discovered that major stock market crashes tend to begin around the time of full moons up to six weeks before or after solar eclipses, especially if the full moon involves a lunar eclipse like tomorrow morning.

Once the panic starts, Puetz notes, it generally lasts from two to four weeks. The tendency has been for the markets to peak a few days ahead of the full moon, move flat to slightly lower --waiting for the full moon to pass. Then on the day of the full moon or slightly after, the brunt of the crash hits the marketplace."

While this may all prove relevant here, it's also possible that a significant bottom is already in place. Notably, the Dow Transports reached a new low in January while the Dow Industrials and Dow Utilities did not.

Such a non-confirmation sets the stage for a possible Dow Theory buy signal should the Industrials and Transports climb above their most recent significant peaks at 9000 and 3700, respectively.

One should also note that, seasonally, panics most often occur in the fall and sometimes the spring. Clearly this was the case last autumn. Typically autumn panic lows are very significant, and this has thus far proven to be the case from 2008. For the DJIA to break to new low ground in the near-term would require a very potent wave of fear and pessimism, although there are historical ingredients for this at the current juncture.

Fundamentally, the global financial system and economy are still collapsing. This week there's likely to be a lot of political friction because the government's $800+ billion stimulus plan is going to be voted on in the Senate and the new Treasury Secretary, Tim Geithner, is apparently going to ask for an additional $1 trillion for the increasingly notorious TARP bank bailout program. Politically, this might not be possible because of the poor implementation of the initial $700 billion and popular resentment over how Wall Street executives spent billions of dollars on executive bonuses and other lavish items while on the government dole.

And on that note...

The Tarp Song by Bill Zucker

I Want My Bailout Money by Michael Adams

No comments:

Related Posts with Thumbnails