Today was an event market with Egypt holding the stage. Fears of Suez Canal closing, fall of government into radical hands, etc. The DJI declined to within 10 points of critical support. Gold rallied $20 and the dollar rallied as the fears penetrated these markets. What happens if nothing happens over the weekend? As in any news market when the news stops beating the drum then the markets revert to the mean. Egypt followed Lebanon and Tunisia into the band of hungry, desperate third world countries hit hard by spiralling food prices. Corn and Wheat have doubled in the past 6 months and governments with subsidy programs are hard pressed to keep the poor fed. With high unemployment to begin with the flood of fiat dollars has decimated the third world. It's hard for Americans to understand the impact of higher food prices on the third world. Food there accounts for a much higher proportion of personal income, even of those lucky enough to find steady employment. This is reflected in their national income as well. Unintended consequences of Fed policy. Not my fault. Who could have known that I would radicalize 30 governments in the third world and alienate the U.S. from them on fundamental beliefs? While the Muslim Brotherhood is not violent against the west it is no lover of them either. No fence-mending would bridge the philosophical chasm starting with the firm belief that Allah is destined to rule the planet.
EWI is praising this as the first stroke of the mega-bear. I1 says otherwise. The DJI never hit 11,793 so I'm holding 4% SSO over the weekend. Overnight session holds less predictive power than the day session. However, If the YM futures (the mini-DJ) fall below 11,718 then I'll look to short them to offset the SSO. They closed at 11,762.
If this happens and the DJI trades below 11,790 on Monday this will be the first period of the DJI trading within a bearish envelope since early July. I think holding the SSO on the importance of this level is justified with a rising I1.
The dollar traded up on the Egyptian chaos. I count 5 up from this morning's low and this 5 could be either a higher-degree 3 or C. In the rally the dollar index crossed it's first hourly M/A which normally would have caused me to buy and hold. In a news market I would prefer to see what happens on the expected pullback and see if Egypt calms down. Mubarek will form a new government Saturday. If he increases food subsidies these moves may be enough to appease the majority. Bellies first, minds a distant second. I hold 2% EUO. A pullback of the dollar index to 78.06 will be a buying opportunity.
Thanks for the info. As a former EWI STU subscriber, I am very interested to see if your invention proves to be more accurate than their "pure" counting method.
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