The Bull-to-Bear ratio is 7-to-1 in favor of the Bears for this week. The Turner CrossOver Oscillator Composite of Signals (black) line continues to indicate a bottoming is in play. The Short Sell (red) line continues to show that the move toward becoming more overbought has topped, which could be a bullish sign. Although a bottoming of the current Bearish trend could be considered an opportunity for risk-on trades, caution is advised.
I believe that the global economic condition is on a knife's edge of either falling precipitously lower or managing to grasp on to solid footing and claw its way back up into prosperity. At this moment, if you were to take all of the reasons why we are at a bottom in one column... and all the reasons why we are just pausing before moving much, much lower... I do believe the bearish reasoning would significantly outweigh the bullish reasoning.
Add to this the fact that my time-cycle charts continue to point to a falling market and I can only conclude that cash is king and if you have to be in the market, be short in everything but gold... and maybe some currency plays if you are very risk tolerant.
The S&P 500 90-day Forecast...
Below is my time-cycle forecast for the S&P 500. It is forecasting a drop of another 10% by the time we get to mid-November.
You may very well say..."What's the big deal about another 10% loss in the market?" My concern is the forecast bottom in November coincides with the timing of Congressional Super Committee and its mandate to find $1.5 trillion in budget cuts. I suspect that this committee will not reach consensus. I suspect the President knows this. I suspect his 'pass-this-right-away' speech was designed to make sure that committee will fail by increasing its cost cutting mandate by 50% or else decimate the military and Welfare. This will produce untold rancor and political demagoguery that will make the August fight look tame in comparison.
This all could push the market into a tailspin and give the President the ammunition he desires to run against Congress for the 2012 election. He has now managed to build a budgetary conundrum that is literally impossible for both sides of the aisle to reach consensus on for a solution. The liberal propaganda machine (aka, the mainstream press) will have a field day and who knows... maybe it will actually work and the President will win reelection because of his nefarious scheme that puts our economic lives at stake for the sake of his political future. But... maybe I am wrong....
Maybe, the President and the liberals in Congress are looking out for our economic lives. Maybe they are right about Keynesian economics and that printing trillions more in fiat dollars is the right thing to do. Maybe we 'should' "pass it right away" without even looking at the plan. That worked for the healthcare bill. Why shouldn't it work for the 'jobs' bill.
I am deeply concerned that there is a gunfight-at-the-ok-corral coming up in November and in this version of the old Western... everyone is killed... the good guys and the bad guys.
Add to all the above the fact that Europe is teetering on financial collapse and you have to think that a mere 10% downward forecast is just a drop in the bucket. It could be orders-of-magnitude worse.
I hope I am wrong. But, in the meantime, I continue to hold mostly cash or short the market. Even gold looks weak in the near-term.
Closing Remarks on Free Stuff...
One of my friends sent me the following... I do not know the author or would provide attribution... By the way... PLEASE do not read any further if you like lots of free stuff. I do not want you mad at me.
GOVERNMENT INDUCED FREE STUFF EXPLAINED...
The folks who are getting free stuff, don't like the folks who are paying for the free stuff, because the folks who are paying for the free stuff, can no longer afford to pay for both the free stuff and their own stuff.
And, the folks who are paying for the free stuff, want the free stuff to stop. And the folks who are getting the free stuff, want even MORE free stuff on top of the free stuff they're getting already.
Now, the people who are forcing people to PAY for the free stuff, have told the people who are RECEIVING the free stuff, that the people who are PAYING for the free stuff, are being mean, prejudiced and racist because they don't want to pay for any more free stuff.
So, the people who are GETTING the free stuff, have been convinced they need to HATE the people who are PAYING for the free stuff because the people who pay for the free stuff are selfish and can afford to pay for more free stuff but don't want to.
And the people who get the free stuff are promised more free stuff if they will vote for the people who force the people who pay for the free stuff to give them even more free stuff.
In some countries and some states (especially states with big unions), the folks who get the free stuff are rioting when they think that the folks who pay for the free stuff might stop providing so much free stuff and some of the leaders of the free stuff unions are calling the folks who pay for the free stuff, SOB's, among other things.
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