Last night I wrote how we were very close to the exact 62percent retracement in SP500 Cash at 1,228, as it turns out 1,211 was the best we could do. Spurred on by … fill in the blank 1) China announcing it wants to curb real estate speculation 2) A higher dollar 3) Goldman Sachs in the spotlight… Who knows… fill in your own reason. In any event we broke from 1211 down to 1,181, “only” 30 handles from peak to trough.
In the Dow Cash, we never got back above the 11,238 level we briefly breached on Monday.
From Monday’s 13 month high in the Cash Dow at 11,258 down to today’s low at 10,973 We have a nice 285 point pause.
The question remains, is this a pause in the rally, or is it the start of a CORRECTION which is quite honestly long over due. With consumer confidence spiking up, Vice President Biden talking about the economy soon producing 300 to 500K jobs a month, a general giddiness on CNBC spurred on by new highs, A Newsweek cover story proclaiming “America’s Back”… It smells like a top to me.
Of course, I still think we need to go up and get 11,465 print in the Dow for the 5,000 point rally. That will seal the deal for all the folks who have been out of the market for the rally. Then, quite honestly, I am not sure where we go from there. Barring a significant correction, we will be going into the mid term elections. After that we will be in the throws of 2 years of electioneering for the next Presidential race. I shudder at the thought of 2 more years of Sunday morning shout fests between left wing wackos and right wing wackos.
Because of that, I think we are looking at a sideways choppy trade between 12000 in the Dow and 9500 for the next 2 years. There simply isn’t a driving force either way to make me get any real long term bias at this point.
Remember, however, a 10 percent correction from these levels is 1,300 points in the Dow.
After 2007-2009, that will look like a pothole in the road vs what once was considered a tank-trap.