Current status of the Fed sponsored rally.

So where are we? The Global markets are beginning to wake up to the fact that there is no easy way out of the mess we are in. The Dutch Government resigned a week ago and Spain and Italy are becoming the next "Greece's".  France scrubbed Sarkozy and the Middle East is boiling over. Greece could blow up over the weekend and yet the Wall Street news has been centered on what a great earnings season we had. (Even though guidance going forward is weak)

The week of May 7th  saw another attempt  by the market to try and break out of its trading range of 1360 to 1420. Friday a valiant attempt was made early and then fizzled in the late afternoon. The three (3) line break chart to the left shows we are still headed towards 1340 and we may see a break of that area early next week. It remains the  line in the sand for the SP500. If the 1340 is breached to the downside in a meaningful way, we have a ways to go before we see the next support level at 1250 or so. Watch for news from Greece Sunday.

Just to try and paint a picture of where we are likely headed, please look at the chart at the right. A picture might help get your mind around the idea that the markets tend to move in long cycles and the verbiage the Talking Heads on TV use to explain  the markets nuances is nothing but hyperbole and a general  waste of breath . Here's the Kondratieff wave that covers a 55-60 year cycle. The markets are designed to forget the past so that they continue to repeat the failures of their predecessors. Note the timing for the next bottom is approximately  2013.

Below is an update of our forecast model for the first half of 2012. The SPX500 remains on track for the moment and if we are correct, it is beginning a third wave down which could be very swift. Keep a copy handy and check it at least weekly. The index ended the week at 1353.

One of the problems this market presents us is where do you put your money if you want to stay the course. The following charts will give you an idea of the problem of trying to find a safe haven.





Here's a chart for Copper and it continues to want to find lower lows. Copper is known as "Dr. Copper" as it is a key metal used everywhere thus a good forecaster of the future. When its rising the markets are healthy. The opposite is also true.

Now look at Gold. It's riding on a very long term trend line that if broken could send gold much lower. Gold will be an excellent place to place a bet or two but likely it will take some more time to unwind before it starts to move higher.

How about hiding in Technology. The QQQ's (NDX-100) is the proxy for the tech stocks but although it is holding up a little better than the senior indexes it to is beginning to lose momentum. Look for the 60 area for a bounce if the weakness continues.







One last chart to take a look at. The VIX index (volatility) measures fear or complacency on the part of investors. If the VIX is rising it reflects growing fear and if it is falling it says the investors are getting complacent. When the index reaches an extreme we should look for a change in direction. Right now the index is finally starting to rise, which is a bearish signal, and it will need to break out above the 20 level to confirm the move lower is under way. It closed Friday at 19.89. A move lower is just a head fake if the index doesn't rise.

It's boring but CASH is still king in this environment.