10/8 Weekly Commentary

Stock market Daily Technical Composite remains on a weak sell -16, above the strong sell signal threshold -22.
Silver has registered a sell signal on it's technical composite. 
Dollar index is +13, just 1 point from +14 buy signal.
The dollar did not decline as the stock market rallied this afternoon.  This tells me that the washout is complete.  Dec. DX futures above 78.25, especially on an hourly close, will cause me to increase my allocation to either futures or UUP.
I reviewed the 30-minute chart and the 2:30 30-minute close was above the threshold.  Therefore I have lowered my SDS exposure to 10% by selling 6% at 28.35 for a slight profit.  This reading may have been a transient but I have to maintain risk management rules, which state that I can only stretch to 16% short ETFs if a 30-minute sell signal is in effect.

I've been asked what makes me think that reflation will just end over a weekend, turn on a dime, as I1 says it should with today's sell signal.  My reply is that in bull markets psychology turns slowly, but in bear markets psychology turns on a dime.  How do I define a bull market?  +50% over 1.5 years or longer.  That may not be how others define it, but if you look at the record those movements contained rounded tops.  The rally from 2009 does not qualify as a bull market.  If you look at it's top it was not rounded so the psychology was not as ingrained as when most market participants have been getting rich riding the trend.  That is the primary difference in bear market rallies.  They happen too quickly to get the bulls on board long enough to get rich. 

The last I1 signal was a double-top that spanned the weekend 9/10-9/13.  Over that weekend Basel capital requirements which allowed banks to postpone increasing capital for up to 8 years.  In spite of this from the close 9/13 to 9/30 the SPX went up only .17% per day.  So, I1 did not deliver a gross negative return, but did very well in the face of that challenge.  What extraordinary event do the manipulators have in store?  I don't know, but they would be very hard pressed to pull a similar rabbit out of their hats.

Even though the 2:30 Friday SP futures reading was above the threshold that neutralized the 30-minute M/A threshold I did not cover my SP short position.   I'll be monitoring 30-minute closes Sunday evening and will exit the SP short if any exceed 1161.50.  Simple.   
A new high in Nov crude (beyond 83.20) will cause me to exit the short crude position which treated me so well Thursday night.  The wave count in crude is clear as a bell with 5-down Thursday night and 3-up today to the high.  Today's rally stopped slightly beyond the 61.8% retracement level.   If stopped out I will still exit with profit and will stand aside.
I'll hold long dollar futures position with a 77.32 stop.  If stopped out I'll re-enter long when price approaches the wave2 low of the 5-wave uptrend that began last December.  This is 76.74.