Timing Market Turns 08/15/2007

Timing Market Turns

We are still in cash since August 10th.

You may wonder why we haven't entered short.

First, it's expiration week in a perceived crisis for credit availability, with a week full of economic data.

Second, since the August 6th morning low we have two and a half days upward with a spike closing on August 8th (no trend). Then one down day followed by a spike down opening on the 10th that ended higher followed by two days down.

We expect an eventual retrace attempt but it is not a required action. In times like this, a patient swing trader and a cool headed investor takes an action that reflects their trading plan. We may miss a few quick trades but as we have stated for a few weeks 3-5 day swings had become shorter and more difficult to trade or cover risk for a long term portfolio.

The SPX is quite close to its overflow point at 1363. This is our structural level for the onsetting of a long term bear market. Closing below that level for more than 1 day will bring out the need to re-evaluate any structural phasing counts. It will also mean an entirely new trading structural plan, and also a revised investment devices to re-focus capital preservation for investors.
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The downward move has persisted through many intraday and daily buy signals. The Fed continues to attempt to add liquidity. We believe that it may be making matters worse for all stocks, instead of just the mortgage lenders and the bankers who fund them, and the private capital hedge funds who are leveraged on the same failing computer models that are now all converging simultaneously.

Bad lending practices usually grow bad loans, which result in additional lending to the bad borrower. Then comes the non-performing part of the story by borrowers and the resulting matrix of derivatives dissolve. That's all we are going through so far.

"Cash is king" is not a fable, it is so true at times like this.

Unpopular words, perhaps - but people want to know what is really happening.

I was scared in the 1974 drop, but not since then. Not in 1987 or 2000.

Even if this does not become a Bear market, and remains just a correction, the future finger pointing at causes will be useless. We know the cause, it's a correction.

Finger pointing is for the vain; the vain who never saw it coming and still don't understand it. Who? Politicians. They will be ready to legislate a solution to a non-existent problem in a few months.

The recent SEC removal of the uptick rule (10a-1), in place since 1934, is not the cause of this decline. This is the 4th or 5th longest bull market in history, so far!

Bull markets have corrections, then they turn upwards and get going all over again. If the uptick rule has any influence, it will make the correction far shorter but just as deep as it should be. There's nothing new under the sun or in the markets.

The simple existence of the TimerTrac service is evidence that markets go up and then they go downward. This is not 1929, but it does still look a wee bit like 1998. The Fed liquidity injections are potentially disrupting the pattern.

We have our Time Locus Points listed for this correction into October, and our "start the bear market" levels ( in previous post ). We do not believe that more than one of the indexes will reach those levels and only intraday. A closing below those levels will jeopardize our "Continuous Bull' outlook for the months ahead.

We hope they help you.

These turning point dates are objective and without bias for direction. Our comments about the Time Loci dates reflect what our models produce and how we interpret same. The dates have an abnormal accuracy.

We will update our comments here at least weekly, during this correction. Or you may join our mailing list.

W. B. Busin
W. B. Busin Group Publishing
http://www.market-timing-wbbusin.com