10/21 Daily Commentary

It's reality vs. Ben.  U.S. credibility with the world's central bankers and their governments is falling like a stone.  Geithner either is the most duplicitous speaker to greet them or is dumb as a rock.  Every statement that he makes is in direct contradiction to the evidence.  Now he says that the U.S. is not bringing down the dollar.
Ben has prodded them into "quantitative easing" and encouraged stimulus along with Geithner which have gotten many of them into tight spots.  Between the lies and the poor judgement it's amazing that they allow either of them the privilege of speech.
Within the markets it's again reality vs. Ben.  He is goading markets higher with his speech and buying Treasuries,  but the markets are refusing the cattle prod.  Soon the markets will recognize him as an academic incompetent and Geithner as a forked toungue.  Meanwhile if you're a bear you are fighting the Fed.  10 years ago this was a prescription for disaster but we are in a brave new world, where markets are slowly taking control of politicians, not the other way around.
DJI 5-minute, 370-unit EMA is at 11,097 with a break occurring at 10,952.  Since this is so close I scaled back my ETFs to 6%. 
Overlap occurred on the rally from today's lows with this morning's decline from the highs.  I do not require precision in EW.  In the old days charts and EW worked with a fair degree of precision.  Now the markets are not as crisp.  However, there was some overlap in all the indices so it can't be ignored.  The test will come tonight.  If SP futures can decline by more than a point below their late afternoon high it will confirm that the rally was a 3 and therefore the odds increase of a 5 down.  The high was 1174.25.
However DJ and SP futures are forming possible rectangles.  If they continue forming they are a classic wave 4 pattern.
 
The SPX rally yesterday produced what appears to be a 5 up, so a 5 up from here would be a bad sign.


The dollar index rallied hard off of this morning's low.  If the stock market rallies tonight this will cause a pullback.  DX futures below 77.40 would change the picture back to uncertain.  The index failed to break it's key M/A by a 90-minute close .45 points below.  However it's rally is riding the underside of this M/A.

I exited the short crude position pending a return to 82.  I hold 2% SCO the short crude ETFs.
I still hold short silver futures, which I believe are in a 3rd of 3rd to the downside:

Just for the record, for the benefit of detractors, I have made great money with short silver, short crude, and long DX trades.  I1 has stopped the stock market in it's tracks, but has allowed the commodity sector to deflate.