A weekly swing is a prerequisite for an intermediate cycle top but not a guarantee of one. At 22 weeks into an intermediate term cycle the odds are very high that this swing is going to signal the top.

OIH didn’t quite make it back to my target entry level today even though the Bollinger band crash trade did close profitable for anyone who took that trade on the long side. I now have a different strategy for adding in the rest of my OIH position. Often as the market starts to roll over into a daily or half cycle low it will retest the 10 day moving average before continuing down.

I will use a tag of the 10 DMA tomorrow as my entry.

Of course if it doesn’t manage to rally back to that level I will be wishing I had just used the Bollinger band trade as my signal to enter. If that’s the case I will have to chase or just leave the trade as is.

Before I forget, we have a coil forming in the BKX.

Since we are in the latter half of this daily cycle and quickly approaching the early part of the timing band for a low I’m assuming the break is going to be sharply lower when it comes. How many think Ben is going to freak out if the banking stocks start to spike down? Want to take a guess at what his response is going to be?

Dollar:

The dollar marginally closed back below 76 this afternoon. If we can get another close below that level tomorrow I expect the dollar bears will feel safe wading back into the water.

I doubt this counter trend bounce is going to be over in 6 days though. I suspect there are still piranhas in the water waiting for unsuspecting bears. I really doubt this is going to roll over until the dollar has rallied far enough to convince everyone that another round of deflation is in our future.

Oil:

A while back I pointed out the coil forming on the weekly chart of oil. I also did a short post on the blog if you missed the daily update (I have no idea off the top of my head what date it is).

Well so far things are proceeding as expected. Oil has started to break sharply lower out of the coil and back below the 2oo week moving average.

The only bad thing about this pattern is the projected huge move higher once this initial move bottoms and oil reverses. I shudder to think what $100 to $150 oil is going to do to the global economy that will still be dealing with a global recession. By May or June I expect the world will begin the process of rolling over into what will be at the least a double dip recession and possibly the beginnings of a depression. All thanks to the actions of a few central bankers misguided attempts to save the banks.

Historically, extremely depressed economic conditions almost always spawn wars. This is probably the ultimate end result of Greenspan and Bernanke’s meddling in the financial markets.

Gold:

Things may get complicated in the gold market soon. For one gold is already stretched beyond the duration of most daily cycles. So there are two options. Either gold is going to put in a cycle bottom soon and bounce briefly before rolling over into one more short cycle down.

or we are going to see a very stretched cycle like we did earlier this year.

I think I’m more in the camp of a short term bottom soon followed by a brief rally.

A strong bounce now would convince every gold bug that the bottom is in and they would all rush to jump back on the bull or continue holding if they got stuck at the recent top. That would be just the recipe to produce some very negative sentiment if gold quickly rolls over again dashing everyone’s hopes for a quick bottom. If there’s one thing that almost always holds true, it’s that intermediate cycle bottoms don’t occur until almost everyone is scared silly. I don’t think anyone is scared yet.

Short term indicators are still neutral.

Gary

www.garyscommonsense.blogspot.com

Investing in the financial markets can involve considerable risk. Past performance is not necessarily an indication of future performance. The information included in The Smart Money Tracker and The SMT subscribers daily updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system. Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. G.D.S L.L.C., nor Gary Savage, do not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. GDS L.L.C., Gary Savage, will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter. From time to time, GDS L.L.C., Gary Savage, may hold positions in securities mentioned, but are under no obligation to hold such position