6/8 Daily Commentary

The difference between the economy and the markets is primarily timeframe.  The economy expands and contracts based on intermediate and long-term sentiment amongst business decision makers.  The stock market rises and falls based on short-term and intermediate-term sentiment amongst investors, who may or may not be involved in the real economy decisions.  I1 measures investor sentiment but when a long trend emerges it also reflects economic sentiment. 
I1 is in an intermediate-term decline within a longer-term decline.  The intermediate term bottoms second quarter 2012.  The next short-term bottom occurs mid-August. Longer-term the market and the economy should remain under pressure until 2015 as I1 maintains relatively low levels from this point forward.  In other words, the recent peak in I1 represents the greatest level of investment and economic confidence within this long cycle.

Those of you who have followed my posts over the past 15 months probably realize that the addition of the short-term timing component as a separate chart is a relatively new phenomenon.  The addition lets me communicate the basis for many of my short-term trades.  This series has stayed above 10.5 this week and will only fall below 10.5 starting Friday.  Therefore I am looking to increase shorts again tomorrow, but only on strength:

The daily technical composite registered a minor buy signal today by hitting +16 for the first time since last August.  Waterfall declines take the composite past +24 and panics to +32.  I can't expect anything but normal action which is a snap-back rally.  If we do not experience a strong rally tomorrow then I'll be convinced that a waterfall is in progress.

I bought ZSL, short silver ETF, when silver rallied to it's 90-minute M/A.  It is flirting with the 90-minute again but at a lower level.  My stop is a 90-minute close more than .7% above the blue line M/A.

The dollar index sentiment gauge does not rally until the end of June.  However, I have stepped into short Euro early based on wave count.  I'll post charts tomorrow.