For the past 25 days the market has been like a blind rat in a maze. It would explore a path and then run nose up against a wall of contrarians enjoying the volatility. Today, as we look at the Old Faithful chart prices are forming a power bar across the downtrend line — looking like the zeta wave of the a-b-g-z pattern. We are lifting our hedge and going naked long. (We have a towel handy in case it gets uncomfortable.) Trend following readers should be enjoying the resumption of the trend — no guarantees of course.
And the joys of the debt ceiling battle and Syrian adventures are still to come, though we think that the market has been in the process of discounting these. To repeat our semi-educated forecast: brief and nasty bumpiness followed by clearing weather and resumption of the trend.