Sunday, April 24, 2011

Comments and outlook for week of 04-25

IMO the market cycles have changed as the 33TD cycle has faded and the 22TD cycle has emerged.  We will have more data to make a determination by the end of April.

It is going to be an interesting week as on 04-27 the FED chairman is hosting a show and tell media event.  Now The Bernank and the FED seem to have painted themselves into a corner.  If they continue the easy money policy and QE to try and stimulate jobs they run the risk of igniting run away inflation.  With high gas prices (and food prices) Joe Sixpack and Emma BoxWine are turning negative  very quickly (70% say we are on the wrong track according to recent polls) and will not be doing a lot of shopping for anything that is not a necessity.

So the FED easy money policy is pushing on a rope and is destroying the value of the dollar causing commodity and food prices to spike.    With Joe and Emma not spending we risk an economy that is barely growing or even contracting.  So with the economy stalled and prices increasing we end up with stagflation.  Many of the research firms are already starting to cut their projections for growth in the second half of the year.

So the FED can't cut rates (they are at 0) to boost the economy.  Easy money (more QE) increases the risk of inflation and stagflation. And the possibility of tightening and higher interest rates are remote. The FED is painted into a corner with no good options IMO.   So what can The Bernank say that will provide fuel for the market?  Nothing that I see.  I see no upside from this FED media event (but I see a lot of downside).  We will see.

So what are the cycles saying?  We should have an up week next week, and top the 1st or 2nd trading day of May (I would not be surprised if the top is early if the reaction to The Bernank is negative enough).

Take a look:

At this time it appears the market should open higher Monday.  I think there is a reasonable chance we test (and possibly set new) highs.  If we do that it should be followed by a pullback in the afternoon.  Take a look:

GL traders.  Do your own analysis.  Be careful - we are entering a high risk period IMO.

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