Weekend Update…

So here I sit on Sunday afternoon wondering what to write on this weekend post? It seems (or at least feels) like I keep writing the same thing every weekend. "The market is way overbought and should sell off ASAP!" I said that last week, and the week before that, and etc, etc...

I feel like the boy who cried WOLF... for the hundredth time! Well, I'm going to cry Wolf one more time, as this FAT Bloated PIG of a market needs to shed some weight ASAP, before he explodes violently!

I don't have a lot of charts to show you, as it seems that "Overbought" can remain overbought for unknown time periods, so I'll just show you this chart of the Put/Call Ratio (courtesy of the chart pattern trader).

The percentage of Bears is now at a record low of 17.4%... which means that 82.6% of the people are now Bullish on the market. That's an insane number folks! And you and I both know by now that the market doesn't reward the side of the "majority", but instead it takes their money from them. When, of course is the question we all want answered?

If I could answer that question accurately I be filthy rich by now... so of course I have to guess at it, just like everyone else. Currently we are only a little over 10 points away from the magical Fibonacci retracement level of 61.8%, coming in around the 1228 spx level.

You know that everyone and their brother knows the significance of that level, and that in of it's self should tell you that the market isn't going to just go there, stop and wait for people to short it, and then reverse allowing the average retail trader to make money from it. It's never that easy my friends.

That simply means that we must either fall short of that level, or bust on higher past it. Since we have already been given our final upside target of 118.16 DIA, which should be around 1270-1280 SPX (guessing here), we have to calculate the odds of another parabolic move straight up from the current level to that all time yearly high.

I don't know what the odds are, but I simply can't wrap my head around the idea that the market could get through all the huge resistance overhead, without a pull back first. That would probably make the bullish percentage in the low 90's by then. I don't know if it's ever got that high before a pull back?

Logic (but again, the market isn't logical) tells me that they will take the money from those bulls way before going that high, just like they did the bears... on this insane rally up. Plus, they will actually need the bears to be heavily short, so they can use them as fuel to rally higher. Without the ability to squeeze the bears, and with no bulls left buying, they must rely solely on the PPT money... and I just don't think that will be enough to overcome the negative news being constantly released, and the huge overhead resistance.

Of course I've said that before, and been wrong before, so why is this time any different? I don't know? I only know that the odds of a correction first, before going up to the final top for the year, is even higher this coming week, versus last week. Odds, numbers, and percentages are really all you can trade on now, as the typical TA charts don't correctly tell you when the market is going to turn.

Obviously, the super computer algorithms are much smarter then the average trader, as they combine all the data in a fashion that isn't predictable by humans. I'm sure there is a reason behind the madness of it all, but I don't know what it is?

However, there is little doubt in my mind that it's all politically motivated, and of course "Financially Motivated"... meaning that they are trying to time events around key political issues, like the health care bill, and now the bank reform bill. And let's not forgot that the elections are this fall, which tells me that any correction we get will be short lived, as they need to rally the market into the elections.

After the elections are over... well, does the old saying "Katie bar the door" paint a good picture for you? Or maybe "Timberrrrrr"? I'm sure you get the picture by now. Once all the new and old Democrats and Republicans get re-elected, there isn't any reason to hold the market up until the Presidential election in 2012.

The market could fall hard all of 2011, and then rally in 2012 for Obama to look good just before he tries to get re-elected again.  Of course none of this helps out our short term trading accounts, as forecasting the next weeks' move is much harder then the next year or two.

But, who ever said picking a top or bottom was easy? Could it happen next week? Possibly? I hope so, as I'm really tired of the never ending bull rampage. It's quite sicken to see so much deception and manipulation in the market.

I do know that is coming soon, as the insiders are moving to a short position, as explained in this article by ZeroHedge. A 10% (or more?) correction is planned, as these guys are the "Smart Money". I'm hanging tight, with my short position (even though it's underwater now), as still see a sell off before OPX in May.

I leave you with this chart from Cobra's blog...

Red

Author: Red