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Thursday, September 24, 2009

MEGA RALLY! Is it over?

Looking back, at SPX 666, changed into a bull, betting the market would rally. Started getting bearish at SPX 930, current SPX high is now 1080. Lets just say, it hasn't been fun stepping infront of that train. Assuming SPX 1080 is the high for the next few years, off by about 16%. Considering I expect the SPX to hit below 500, a full 50+% lower, not too bad of an error.

Not to say the market won't go higher in short order, anything is possible. But lets take a look at this mega rally we have experienced, and put some context around it. Which is more likely 15% up from here, or 20% down+?

Three charts for your amusement, first two on the S & P 500 index, the third on US Dollar valuation. Commentary continues after charts.
From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

From WebSurfinMurf's Financial Blog

NOTHING moves in a straight line, but for 6 1/2 months, the market moved for the most part straight up. The "fuel" was devaluing the US dollar through "Quantitative Easing". The fed has somewhat signaled it will not continue Quantitative Easing. Let's hope they stick to that otherwise we could face an all out US dollar collapse. This was one heck of a rally, but unfortunately its more likely the precursor to one hell of a swan dive. Good news is, if this hold true, the US dollar won't fail, and will appreciate.

Therefore the safest is US Treasuries, at this point I would go long NOTHING. If the USD breaks the lower trend line, 70 on the DX, then go gold, oil etc. But if the dollar doesn't break down and strengthens, EVERYTHING goes down.
I MAY dump all longs tomorrow, all gold miners, everything. 100% cash or short.

Good luck and keep your money safe. This depression will last 5 years, keep your savings.

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