Anytime you have daily ranges in the Dow of near 3% or greater you have trouble brewing — if not already brewed. We are living the Chinese curse: may you live in interesting times. While Wall Street burns George Bush and his cronies fiddle with a plan to keep the Titanic from sinking. Unfortunately they are like the band and haven’t noticed that the stern is already underwater. Where are the lifeboats? Hard assets.

Here is GLD which is how general investors invest in the gold market. Futures offers much greater leverage and thus more risk so we only track this instrument for our reader. We have been noting for two or three weeks (prior to the meltdown, that is) that gold was throwing off buy signals. Gold has a habit of running up, then selling off severely in order to punish late buyers. Then it takes off like a rocket in order to make people chase it down the runway. Here is the chart where we observed it was all right to buy again:

A little technical analysis sometimes goes a long way. Incidentally, silver (SLV) is a buy also. The Dow is still in a downtrend and the extreme volatility presages more volatility. We expect Monday to be extremely volatile but changing the trend to up would require an enormous amount of work here –but it is possible. After all if we’re going to relive October panic all over again it’s nice to be in an uptrend.

Dow — end of week. Does anyone think the economic and psychological damage done over the past year will allow a bailout here to alter the trend? As everyone knows we were ejected from the psychics society for laughing during seances. Now we just read the chart and the chart says we are in a rally wave of a severe downtrend. A closeup look follows.

This wave pattern is almost complete. Lower low in July. Lower high in August. Lower low in September. The September low is not yet a confirmed low. In order to solidify it we need to see three days of price activity outside the range of the bottom day. The August high is a confirmed downtrend Basing Point, meaning that shorts can take that point and set a stop x% (3-5) above it as an algorithmic exit point.

Our readers love it when when we heap scorn contempt and criticism on our political and economic leaders. Consider it heaped. In China these guys would have been taken care of with a bullet behind the ear long ago. What is delightful is to see free market ideologues running around like chickens with their heads cut off as they discover that unfettered capitalism is another word for greed and fecklessness run rampant. If they are so tough why don’t they just let the free market sort it out? The idea of bailing out the perps is supremely unattractive. We sent a message to Senator Shelby (along with all the other economics and finance professors in the country) urging him not to buy distressed assets, but in the extreme to LEND against ALL the collateral the perps have and let the market sort out the weak and the strong. A better plan we suggested would be –if you have $700B, why not– to abandon them all to their fate and set up a totally new Federal bank to loan directly to businesses and individuals. Then watch with amusement as the perp banks struggle to get out of the sand pit in the dunes.

September 19 2008 Squirrel markets....

Charles Dow in his immortal piece on "Types of Markets" said, "There are famously four types of markets -- bull, bear, mule and, when the markets run up and down like a squirrel on a tree, squirrel markets."

Clearly it is the time of the squirrels. This kind of day to day brainless behavior can discombobulate even rational (our readers) investors. So a word is in order: Don't panic.

Thursday's key reversal day and the surge day on Friday may well mark the beginning of a rally. And traders should have bailed on Thursday on the key reversal day. Trend followers will observe a stop 3% above the August high.

The trend is still down, and a lower low has been made. The exact nature of this pattern is still in doubt. It is not a trading range, and still appears to be a bear market rally. While traders and the uninformed public run around like chickens with their heads cut off (chicken markets) we prefer to remain calm and make sarcastic and witty (hopefully) zoological comments. At this point it appears the government will wind up owning everything that Bank (Banc (snigger)) of America doesn't. How do you feel about George Bush owning all of America's assets? Queasy?

Well you can always go back to gold which apparently gave a buy signal this week. You will remember that last week we gave you peermission to dip a toe back into the gold market. Time for the ankle to follow. Remember nothing is guaranteed when the government is running rampant in the markets.

UUP uup goes the dollar, and the downwave was on this week. A buying opportunity developing. Two solid buy signals here -- and we think the beginning of the return to parity of the dollar.

Don't believe anything we say that begins with "we think". Analyze the chart.

September 13 2008 Hurricane Lehman hits market....

How many other boots can fall here? Well, a number when you're in a serious downtrend. The present formation -- July to present -- does not yet fall into a definable pattern. We might call it a rounding over, or just a rally upwave. Whatever it is it is not bullish.

FNM Fannie Mae before. This is where Fannie Mae should have been sold.

Just obvious, and just ignored by most stockholders. Some (see volume) got the message and ran.

And here is what happens when you ignore those sell signals.

In July of 07 Lehman Bros gave the same sort of signal. Note volume on plunge.

And, surprise, what was the result?

September 5 2008 September is the cruelest month -- especially before a despised administration is turned out of office.....

Much has been made lately of the dismal performance of stocks in September. It is certainly true this September. But our readers knew that something nasty was coming up in January of this year. Our stop at that time can be seen (tripped January 8th putting us short). The amazing thing is that it was a basing point stop that put us out, but it coincided neatly with the horizontal trend lines. This week the market fell to pieces destroying the little uptrend it had going. Next test: the July low.

If you want to be a bull jump on UUP the long dollar index ETF. You may remember that a few weeks ago we said we were going to stop commenting on the dollar. That was all the dollar needed to get going, thinking it had lulled us off guard. But it was just a ruse on our part. Gotcha.

The trend appears to have started. It looks very bullish and is buyable here. You should have bought it a few weeks ago when we identified buy signals. But -- nobody's perfect.

FXE shows the euro against the dollar. Short is the way to be. This is pretty dramatic. The euro has been overbought for eons as we have repeatedly pointed out. The pendulum is swinging back.

This is a picture of the Dow January 8. Compare it with the first panel -- a before and after. Clearly we didn't know that a bear trend was starting. but you don't have to know what is going to happen to know what to do. You know a stop is tripped and you exit -- or reverse. It is just like the dollar. We didn't know that a trend was starting, but we recognized a buy signal and took it.

There is no genius involved here. It is simple technical analysis.

August 29 2008 Bad news bulls...

Here is a ten year chart of the S&P. We are not big mechanical analysts (today -- have been -- might be again) but the picture speaks for itself. A 200 day moving average speaks volumes about the market. Support in up trends. Resistance in downtrends.

The downtrend is firmly established. Profitability for the foreseeable future will depend on careful management and careful attention to reality. We expect most managers and funds are in for a rough ride. Do we think shorting the SPY is a good thing to do? We wouldn't say no.

As for OIL we think there will be nothing but turbulence here. We would look for other issues which might have the possibility of a long trend.

This gets into the realm of forecasting (and you know how we feel about that like Nils Bohr.

We do forecast (cringe) that the metals haven't finished their bull markets and would look to buy a little silver and gold here.

UUP the dollar index ETF may be the buy of the year. Basically we are long (with some backing and filling and hedging and whining and bitching) since March. This is a very long term position and should be managed as such with wave analysis and basing points.

Remember you heard it first here.

August 22 2008 Hope springs eternal especially when the Fed makes soothing noises....

Ben makes nice with the market from Jackson Hole and the market takes off like a rocket. It is events like this which deceive the naive investor. The trend is still down. We have added the curved line to the chart (200 day moving average). We don't believe in the 200 day ma but most people do. (Actually we don't believe in anything but death and taxes.) (And our belief in death has been shaken by cryogenics.) The 200ma is actually not a bad indicator. When price is below it we're in a downtrend. When it's above it we're in an uptrend. It acts as support in an uptrend, resistance in a downtrend. We have better tools but this is not a bad one.

Might work for OIL too. We wouldn't ind being buyers here. And we would have a 4 or 5% stop on it.

Economic commonsense says that the oil market is totally overbought, but tell that to the market.

Thursday looked like a strong buy signal. Friday looked like a weak cancelation of the signal. We live in uncertain times. Eat dessert first.

The purpose of price moves like this is to get rid of non-believers and weak holders.

We would be buyers here. 4 or 5% stop.

Back in March we got excited by that big gap and run day and said it was a buy signal. Well, it was, and if you had bought and followed a basing points procedure you would be long and you would have added another unit in May.

Is this the start of payback? of revenge? or showing that upstart euro who's really boss?

Has the dollar realized that we're about to get rid of the incompetents in Washington and get some new (but less obnoxious) incompetents?

Stay tuned.

August 18 2008 Leaking oil, owning fool's silver, demonstrating prescience by writing Friday's letter on Monday....

As we remarked the industrials are nose up against resistance. A lot of it. And it is worth noting that the pattern since mid July is an uptrend -- mild, but an uptrend.

Should be. OIL is lubricating the gears for the market by falling out of the oil pan. We long ago bailed out and said the party was over and the fat lady was singing and they were turning out the lights and -- you get the idea.

But the call of the week was last week's observation that silver was screaming sell. Ignoring these signals results in bad karma and bad financials.

A NEW FORMAT AND MISSION IS COMING IN A NEW WEBSITE TO BE UNVEILED SOON. STAY TUNED.

August 8 2008 Finally something happened. But what does it mean?

As everyone knows we have a bifurcated personality. We look at this week's action with disbelief. The other shoe is still to fall on the subprime mess and credit crunch. Thousands of people will be foreclosed out of their homes and who knows how many banks are trying to escape under cover of darkness. Then there is the chart which is throwing off fireworks and saying buy me buy me. It's message is not totally convincing as it is now nose up against all the resistance from 12000 to 14000 (m/l). Intrepid traders are buying and should be. Investors have every right to be skeptical We would be light stocks or out altogether.

Silver said to sell with an undeniable signal. Gold is not quite as emphatic, but this week reinforces our analysis that the metals will be consolidating for some time. Out would not be a bad way to be--or maybe even short for the shooter.

A complete analysis of crude is not possible at this time. This downwave must end or react. We do know that for the moment the trend is down. As we have noted every wave has two parts and this downwave part has not played out. But we certainly wouldn't be long, and traders will be short and sweating every uptick.

If ever there were a clear signal the dollar screamed buy me this week. From inside our economist's hat we have been saying for months that it was time for the dollar to reverse. A couple of weeks ago we faked out the dollar by saying it was not worth weekly reporting. Once the dollar thought we weren't watching it tried to escape. But we really were watching out of the corner of our eye and it's time to buy. This will not be a smoother ride.

August 1 2008 Bark more, wag less. or, the summer of dog days.

We stopped characterizing markets as bear or bull a while back. Now we prefer to call them just trends -- bull, bear, mule -- and put them in perspective by analyzing the waves. This wave started in May, is strong, and is unfinished. The rebound which started in July is also unfinished --either up or down. We say that because no basing point pattern has been established. The May-July downwave has completed a phase at least, in the sense that the rebound has established a basing point by making three days away from the bottom. For trading purposes this means that buying here is probably not wise. Best to let the downwave demonstrate an end.

Crude Light --Ironically, the crude market, from the chart, doesn't appear to be in a runaway mode. This is contrary to media hysteria on the issue. Strange. Also there is not what you would call a real top formation. What that would seem to say is that the bull trend might resume. Now, apart from the chart, which must resolve itself, we think (shudder) that the party is over and that either a top will be put in here, or that crude will sink back to an economically feasible level. Remember: Trust the chart not economic analyses.

The Silver market, like gold often goes through long extended consolidations. At present it is in one of these phases -- what we call jokingly a mule trend. Readers should remember the period from April 06 to October 07 -- 20 months roughly -- before the previous top was taken out. This does not mean that it was 20 months before a new uptrend was established. At present we expect that a new uptrend will assert itself and when it does we will point it out. As for risk we think downside risk is limited. The main risk is of stagnation and stranded capital. We will be looking to put on some longs in gold and silver ETFs probably sometime soon.

Looking at the gold and silver charts and the crude chart we can see the difference between markets which blew off and one which took an all too expected correction.

The comments above on silver -- even to the dates -- fit gold also. As for a purchase we would try to get a better price on gold whereas silver might be ready for a toe in the water now or shortly.

July 25 2008 Dead cat bounce?

The powerful downwave starting in May saw its first attempt at a rally last week take a serious hit Thursday. Considering the force of the downwave, and considering the first rule of the market -- that the trend tends to continue -- we think this is a rally which will only be of interest to traders and scalpers who, by all means should be on the sideline, unless they are short for the long term.

GMF -- the S&P Emerging Asia ETF may still be a good short, to balance your portfolio with some international exposure.

KBE -- reflecting the perilous state of regional banks, may also be another good short, but well stopped. the trend lines were drawn months or years before the fall out of bed occurred. Investors ignore at their peril the breaking of long term trendlines. Sometimes stocks recover, sometimes they go off to visit Enron.

What a miserable shameful and distressing picture. The George Bush dollar. A story of swagger and foreign adventuring and corruption and financial mismanagement.

We frothed at the mouth when Bush prepped the country for Iraq. We were right. Putrescent politics makes for execrable economics.

But don't despair dear reader. The story is not over. On top of the near trillion $ we have poured down the rathole in Iraq are the two trillion more it's going to cost us.

This chart says that the really excellent trendline will not be broken until sometime in 2009. In the meantime we are only going to comment on the dollar by exception for the near future. If we see something brewing we'll note it. Otherwise if you don't see any note here you will know we think near term the dollar is going the way of Bush's presidency.

July 18 2008 Buy Buy Buy!!! in haste and regret at leisure....

We are bathing in serendipity at the moment. Back in April we remarked in analyzing the Dow that if the B low was the measuring point of the head and shoulders that 10836 was the predicted low for the Dow. This present bounce started at 10827. Such serendipity is often noticed at serendipity spas, like Esalen, where serene analysts bathe in serendipity tubs when not fleeing wildfires. So does this mean that the market has stopped burning? No. It just probably means that an upwave has started. Traders would be hedged against the rally. Long term bears will be yawning.

We do think (we probably should use the technical jargon here --anathink-- meaning we analyze and conclude therefrom, but it is too soon to make firm conclusions) the party is over in oil.

The silver signal was a fake out also, but we're still long term silver bulls.

Note, as we have remarked in GOOG that we are already out. More serendipity -- the breaking of the long term trendline and the coincidence of the last (noted) Basing Point clearly signaled an exit. We wouldn't short it, but being long at this point is probably stranded capital.

Here is the close up of the Basing Point and the trendline. Amazing, eh?

One wonders why there aren't more of us cranky old chartists around when it works so well.

Oh, well, as we tell our partner, a prophet is not without honor, except in his own country.

Our country is the country of the dollar. The very devalued dollar. We don't think there is much risk of breaking the lows of this pattern. But as to when the bull market starts is anybody's guess, including ours and there's not much to analyze here, except for traders.

July 11 2008 Official bear market? So this is something we didn't already know?

The point of technical analysis is to know what to do when you don't know what to do -- or, better put, since you don't know what will happen in the future you do what the chart tells you to do. Anyone who followed this chart has been out of the market or short since around the first of the year. (Note stop around 12600) At this point this chart looks like a massive head and shoulders with two heads. See the March and April letters.

SLV (and GLD) threw off buy signals. In fact while these are worth taking for the intrepid speculator both gold and silver will need to clear their old highs before the great bull market will have resumed.

Why does this chart remind us of Bear Stearns? One simple line worth billions of dollars and a demonstration of human ignorance, denial, intransigence, arrogance. How many hundreds of millions of dollars did the suckers (read blind investors) pay the
Fannie Mae CEO to make this mess?

Capitalism run amok. The theme song of the Bush administration. What me worry? Blind faith in free markets gets you the same thing that blind faith in central planning gets you. The theme of this administration has been, "Suckers, get out of the way, pigs to the trough." Well the pigs are coming home to roost. And their goose is cooked. Don't shed a tear for the CEOs and government pigeons who created this. They got theirs.

Dissynchronically enough the SPY just broke its lows. Without indulging in the dreaded activity of economic forecasting the signs are not promising here.

You can't see it here, but if you just look at long term trendlines (we'll show you that soon) it looks like 2009 for the dollar but a little consideration of the final upturn is worth trying. When foreigners start snapping up our beer factories and overvalued real estate things must be looking up. Remember the Japanese and Rockefeller Center? Don't sell them Rockefellers short. And don't sell them Yankee horse traders short.

July 5 2008 Land of the free, home of the egress....

P.T. Barnum (There's a sucker born every minute) in order to get the suckers out the gate and make way for new suckers posted a sign at the end of the midway: This way to the Egress. Filled with hope to see the feathered avian the suckers duly filed out. As Woody Allen said, hope is the thing with feathers. Was it an egress he envisioned? As they say hope dies hard. It's probably gasping for air right now because support will have to materialize in mid air to stop the fall of the Dow.

Instead of hope, how about OIL?

If you bugged out on the stocks like we said, and used some of the proceeds to buy more oil you don't need hope. You need a bigger bank account.

Or maybe you paid attention when we called your attention to DBA, tracking agricultural commodities. As we pointed out the power bars across the downslanted trendline was the completion of the Brett Favre pattern. (Triple pump, double head fake)

Another trader's signal in the dollar. The most positive development for the dollar will be the end of the dishonesty in Washington on 1/20/09. But the market feels it and is struggling to throw off 8 years of lies and economic mismanagement. Purely technically -- and purely economically the dollar is so oversold that up is the only way longterm. Of course you can get burned short term. So keep them fire extinguishers handy and keep hope alive. At this point we can stand on our heads till January.

Question: Does Obama have the guts to put an expresident in jail? Would you believe an exvice-president?

Ending the first half we want to point out how effective our analyses have been (but we're too lazy to go back and crow over them, besides we might have to eat crow in a few cases) and we haven't indulged in economic forecasting one time. Except for our weekly forecast that the dollar is going higher.

June 27 2008 deja vous all over again. We repeat here two of our past comments

April 4 2008 Never be in a hurry to do something stupid. Lee Richartz

The geese are flying back north, the chickens are coming home to roost and the traders are feeling their oats and the pundits are saying buy buy buy and the chart is saying, what me worry? --or actually that was Alfred E. Bush. The chart is saying this is all a bunch of sideways stuff. To belabor the obvious all points after 4 (.1,.2 etc) are between 3 (low) and 4. By definition a trading range with a bearish bent. Any more questions? Good.

Note "A low" and "B low". If this yearlong formation is a massive top (perhaps a double headed head and shoulders) and A low is its lower boundary then a low of 9680 is predicted. If B low is the defining point the predicted low is 10836. Remember Nils Bohr and the difficulty of forecasting. Again, it is not necessary to believe this scenario to know how to bet. The Dow is in a six month downtrend, the last 2 1/2 months of which are sideways, with lower highs in the sidetrend.

June 27 2008 The beginning of the end? The end of the beginning? The beginning of the beginning? Well, anyway you slice it this is a signal to sell short, or certainly to not be long. As you can see here the analysis we made in March has come true. Whether the head and shoulders top will fulfill all its implications is yet to be seen, but there is no doubt about what we are seeing. A landslide. Whether the start of an avalanche or not only Nils Bohr knows.

Soaring commodity prices? Yes. See DBA. Stay long.

Meanwhile the bouncing dollar. We will be buying the bottom of the range and also think that non-leveraged scale in positions can be tried in this range.