Market Analysis & Forecast

May 19, 2009 Market Analysis and Forecast

Bearish Churning Markets at Pivots
FOMC min on Wed, 5/20/2009

Markets consolidated the 3% gains which we have seen yesterday. We had very light trading volumes again as we have seen during the last several trading days.

* Markets are trading at pivotal resistances as VIX/VXN are manipulated to break to downside, however, as noted, small investors and sideline money participation often signals tops and bottoms. Evidently, markets are luring in sideline money. However, we are seeing very low trading volumes -- already summer trading session.
* Traders are gone to beach for Memorial Holiday.

* With the low VIX/VXN hype and holding up markets, we are continuing to see market manipulation as we already have seen 30-40% rally along with over 100% rallied stocks.
* The market condition is extremely misrepresenting real economic condition just same as what we have seen during the last decade.
* For short term trading, don't be fooled into buying markets as our economy is not nearly similar as that of 2002 or 2003 - a note on the GDP misrepresentation as example.

DOW daily
* DOW 8474.85
* DOW rallied back near down trend resistance and pulled back closing with a falling hammer formation.
* Even though the formation is a bearish formation signaling a likely reversal; however, based on the recent market actions and sentiment, it is better to be cautious and look for a confirmation for a break from a lower price channel shown on the DOW daily chart.
*At this point, being in cash is safer as markets already rallied 30% from the low. If you have not exited markets, it was worth to stay in the markets. Evidently, there are still saideline money.
* Markets are continuing to show negative divergences.

SPX 60min EW speculation (ST wave B or IT wave 5)

* Close at 908.13 as markets are trading near at IT pivotal resistances.

* Case 1: Markets completed ST wave A and ST wave B (SPX 800 +/-) is in progress. As shown on the SPX 60min chart.

* Case 2: Markets have completed IT wave 4 and are in progress of IT wave 5.

* Reasons for markets are still holding up: many traders are looking at the same traditional technical analysis, therefore, markets are fading the obviously informed technical readings as we have seen trend-ride price actions.

* SPX 930.17 and SPY 93.22 on 5/8/2009 is likely the top of the impulse wave which started on 3/6/2009 at SPX 666.79.
* SPY rallied 25.73 points, 38.25% in 62 days.

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