October 5th, 2010
I often check in on the perma-bears at Slope of Hope where the resident guru, Tim, there was crying over his drinks about how September was such a disaster. He apologized for continually mostly seeing shorting opportunities; at one point last month he was almost 100% short. Fortunately, he was partially hedged by having some SPY but the market’s relentless ascent continued to cause major damage to his portfolio.
The message always was, “don’t despair, Slopers, this is only a temporary blip, a bear trap and the continuation of the bear market crash that will take the market down to 950 is just around the corner. I see it in my analogy to the 1930’s. Just hang in there with those shorts.”
What can I say other than that I’m not routing for them. On the contrary, the market is performing just as I had expected ever since Labor Day when I called the inverted head and shoulder. I’m ecstatic by today’s action (click on image to enlarge):
By touching the level where the two key trendlines converge, the market has now at one of the most crucial junctures it’s faced since the beginning of July. If it crosses above this convergence, it should smoothly move to 1220, my next price objective (that could be by year end). This has already happened with the larger-cap Dow Jones Industrials.
Let’s dream some more. Moving above 1220, the high of last April, would be the first time that the market was able to make a higher-high in a very long time and clears the way for an easy run to 1320.
But we’re way ahead of ourselves. The market could back off again and the congestion may continue through next week. But if we’re lucky, enough momentum is building to sustain a push through 1220 in the next week of two.