TRUST NO ONE - SPOT THE TREND

Hello BBTL readership,

Today was another one of those highly suspicious trading sessions that smacked of possible market manipulation, by the PPT, the FED, or the cyberpunk buy-on-or-near-the-open-and-close lackeys of Wall Street, in conjunction with those that carry out and desire such manipulation for their own purposes.

The morning and early afternoon equity trading session on the NYSE and NASDAQ were clearly down for most of the day. Yet, just before 3:00 PM with about an hour to go - the market rallied sharply to close UP on the SP500.

So now what to do?

Well the best advice as always, is to trust no one and SPOT THE TREND on the charts. This also implies that you must match your personal time-frame for your desired trading or investing personality to the appropriate charts. While some invest for a four year time horizon, others prefer to trade every four days.

In short and frankly, I really do not have a great deal more to add than what I have already stated.

If you are new to this blog, go back and read some of my older posts. As I have been saying in clear terms, this exuberant and highly bullish market cycle is easily identifiable on longer-term weekly and daily charts - as very tired and near capitulation and a change in trend to down.

Consider that the SP500 market recovery after the justifiable sub-prime crash of 2008, is up about 100% and in less than two years. At minimum, we are overdue for a correction of at of least ten percent. That number of a ten percent correction could also be too conservative, and we could begin a far more formidable trend down. Even Tom De Mark - himself a known market wizard, and expert at statistical analysis has recently called for a similar change in trend - to down.

Therefore consider yourself warned not only by this blog, but also a well respected global market wizard.

In the very short term (a few days), the market will now be further tested tomorrow - at the key SP500 price level of 1292. This same price level has already been tested three times (all from below as a resistance level) in less than a week.

In essence, a failure tomorrow to break 1292, will imply a market capitulation and possibly abrupt change in trend to down is very near.

On the other hand, if those same cyber-bot manipulators as mentioned above, again manipulate the open tomorrow by yet another unexplainable opening GAP UP, it implies the SP500 could set another new marginal high and then test the key psychological level of 1300.

I close today's blog by saying again that this is not a market to trust. It is not a time for complacent or passive investing.

For traders, or those more short term focused, we still do not have an ideal entry or perfect set-up, given the sideways trend of recent days. That stated looking out shorter and medium term, I remain of the opinion that the current risk is high and the next big move or coming trend is down.

Those that are more aggressive swing traders, and whom can take on higher risks and enter trades before a trend fully emerges, should probably acknowledge and see this equity market has many sell-setups.

Spot the trend on the chart and go with it. Two chart exhibits are found below with my usual mark-up comments.

James Kelly Sr.,
Editor in Chief, BBTL Blog
www.KRTT.com
www.Facebook.com/KRTTcom
www.twitter.com/KRTTcom

Teranet Index - November 2010

JANUARY 2011

Third consecutive monthly price decline in November Canadian home prices in November were down 0.2% from the previous month, according to the Teranet-National Bank National Composite House Price Index™. This retreat followed monthly declines of 0.4% in October and 1.1% in September after a run of 16 consecutive increases. November prices were down from the previous month in four of the six metropolitan markets surveyed. Declines of 0.9% in Ottawa and 0.5% in Toronto were each the third in a row. The Calgary decline of 0.7% was the fourth in a row. Halifax prices were down 0.8%. Montreal prices were again flat from the month before. Prices in Vancouver were up 0.6%. After three consecutive months of decline in the composite index, Canadian home prices are still 4.8% above the pre-recession peak of August 2008. Teranet – National Bank National Composite House Price Index™ Contact Us For general enquiries: info@housepriceindex.ca For licenses covering all index-linked products, please contact: Simon Côté 514 879-5379 Website www.housepriceindex.ca

The November result was reflected in a further deceleration of the 12-month rise of the composite index, to 4.9%. It was the fifth consecutive month of deceleration, leaving the 12-month increase the smallest since December 2009. Market by market, the 12-month changes range quite widely: increases of 7.2% in Ottawa, 7.1% Montreal, 5.9% in Vancouver, 5.1% in Toronto and 2.7% in Halifax, with a decrease of 1.5% in Calgary. Data from the Canadian Real Estate Association show generally balanced conditions in major urban markets in December. Toronto and Vancouver could even be considered sellers' markets. Teranet – National Bank House Price Index™ The historical data of the Teranet – National Bank House Price Index™ is available at www.housepriceindex.ca. Metropolitan area Index level November % change m/m % change y/y Calgary 154.21 -0.7 % -1.5 % Halifax 127.91 -0.8 % 2.7 % Montreal 135.56 0.0 % 7.1 % Ottawa 131.07 -0.9 % 7.2 % Toronto 124.21 -0.5 % 5.1 % Vancouver 155.90 0.6 % 5.9 % National Composite 137.07 -0.2 % 4.9 % The Teranet–National Bank House Price Index™ is estimated by tracking observed or registered home prices over time using data collected from public land registries. All dwellings that have been sold at least twice are considered in the calculation of the index. This is known as the repeat sales method; a complete description of the method is given at www.housepriceindex.ca The Teranet–National Bank House Price Index™ is an independently developed representation of average home price changes in six metropolitan areas: Ottawa, Toronto, Calgary, Vancouver, Montreal and Halifax. The national composite index is the weighted average of the six metropolitan areas. The weights are based on aggregate value of dwellings as retrieved from the 2006 Statistics Canada Census. According to that census1, the aggregate value of occupied dwellings in the metropolitan areas covered by the indices was $1.168 trillion, or 53% of the Canadian aggregate value of $2.207 trillion. All indices have a base value of 100 in June 2005. For example, an index value of 130 means that home prices have increased 30% since June 2005. By: Marc Pinsonneault Senior Economist Economy & Strategy Group National Bank Financial Group Teranet - National Bank House Price Index™ thanks the author for their special collaboration on this report. 1 Value of Dwelling for the Owner-occupied Non-farm, Non-reserve Private Dwellings of Canada.

New Year But Same Story

Hello BBTL Blog readership,

A sincere Happy New Year to all.

After a two week holiday hiatus, I will return to my normal blog postings soon.

For now, let me say that my early technical and other financial analysis conclusions made after just a brief review today, continue to indicate that a very high level of bearish caution is warranted. In that regard, little is new.

Perhaps most important to reiterate, several months ago in this blog, I forecast my belief that a major market top should occur sometime in the first quarter of 2011.

That particular forecast was made using sophisticated cycle material and considerable other analysis, including Elliott Wave observations and still holds out as valid.

In the interim, I have also posted two technical charts below that are largely self-explanatory of my early 2011 analysis conclusions.

Again, best wishes to all for a healthy, happy and prosperous 2011.

James Kelly Sr.,
Editor in Chief, BBTL Blog
www.KRTT.com
www.Facebook.com/KRTTcom
www.twitter.com/KRTTcom

Psychology of a Bubble

I stumbled upon this excellent post on the Irvine Housing Blog.

I suggest reading through when you have a few moments to review some of the important markers of a bubble market, how people rationalize purchasing in a bubble, and how it always ends.

Here is a great quote and some useful visuals:

The efficient markets theory does explain the behavior of asset prices in a typical market, but when price change begins to feedback on itself, behavioral finance is the only theory that explains this phenomenon. There is often a precipitating factor causing the break with the normal pattern and releasing the tether from fundamental valuations. During the Great Housing Bubble, the primary precipitating factor was the lowering of interest rates. The precipitating factor simply acts as a catalyst to get prices moving. Once a directional bias is in place, then price-to-price feedback can take over. The perception of fundamental valuation is based solely on the expectation of future price increases, and the asset is always perceived to be undervalued. There are often brave and foolhardy attempts to justify these valuations and provide a rationalization for irrational behavior. Many witnessing the event assume the “smart money” must know something, and there is a widespread belief prices could not rise so much without a good reason. Herd mentality takes over.

Silly Last Minute Shoppers

Hello BBTL Blog readership,

Financial markets are now winding down for the traditional Christmas and New Years holidays. As a result, my blog postings will become less frequent over the next two weeks.

However, I will do my best to post a timely blog, if and when anything big happens. Further should I change my mind about the market outlook which I have made bearishly very clear, I will also post an update regarding any change.

Going back over my last posting or two, one can read that I was largely bearish. For the record, I remain so today.

In those recent blogs, I had been discussing the current bad risk to reward relationship, and also the elastic nature of financial markets to snap back as they get too far above a moving average. In that regard, absolutely nothing has changed over the last week or so, and thus, all of the risks I was previously describing still remain.

I see the lack of selling recently, as typical of highly complacent holiday period optimism. It may also be based on the Bernanke QE2 events recently (adding more liquidity), in that there has been some potential fear in large institutions that were deliberately influenced by the FED to believe that selling now - is not a good idea. After all, Bernanke is a powerful man, has expressed a the concept that he desires higher stock prices, and the PPT is well known by savvy institutions.

Yet, as it stands the SP500 Index closed just one point higher today, than the trading high of last week, thus tracing out a perfectly sideways market.

I have previously taught the valuable and important principle before on this blog, that momentum precedes price.

Like a car goes into neutral before reversing direction, financially this implies that a stalled or sideways market, especially after a several month run-up, is in huge danger sign of possible trend reversal. Moreover, the longer the sideways trend lasts, the more probable that a reversal will happen.

Does any of this ring your caution ahead - bell?

Moreover, those traders and investors on the buy side of the markets lately, are indeed very similar to the silly late or last-minute Christmas shoppers. In short, they are not smart or intelligent savvy shoppers that seek high value by tactical planning.

By now, and at the last minute before Christmas, all of the good past bargains are long gone, and the picked over products that remain are simply too expensive.

In essence, buyers who now choose expensive Christmas gifts (or last minute expensive stocks) which are being purchased very late or at the last minute are really the suckers whom are likely to be in for deep disappointment, when January comes with far cheaper prices, or at a time when better values will flourish.

In essence, planning when you buy stocks, is not a lot different than how you plan to buy Christmas gifts.

Nonetheless, some of the highly stubborn bulls will refuse to believe such practical advice and sound risk-to-reward money management talk. The bold bulls seem to be dominating the financial conversations and news media lately. There is a market maxim about bold bulls. Right now I suspect that the more practical and value driven bears are smiling to themselves, as they sell stocks to the bold bulls.

Yet frankly anyone, with a little perspective, market knowledge and hindsight could easily realize, just how shallow this overly optimistic bold bullish talk really is.

Consider that the April 2010 high in the SP500 Index was essentially the 2019 price level, implying that today's record yearly close was just 28 points higher. Here we are eight months later and just 2% higher in the SP500 Index. Does that sound like a raging bull market? Not to anyone with a few years of market experience.

Frankly, and more in speaking about the financial truth, this is a classic or textbook technical analysis double top pattern, whereby a marginal new high is set on the second or subsequent high.

Yes, the negative divergence is there screaming caution in many charts for those with intelligence or those that will notice and listen.

I have observed recently that some BBTL blog followers might be trying in explain the current financial markets using logic or select economic data. I certainly hope that you are not being brainwashed by the media spins. This jump to conclusion approach - based on the latest popular spin, is not just a bad idea - it is a very bad idea in my opinion - that will garner poor or mixed results at best - over the longer term.

I must therefore again suggest to those involved, and wanting to gain a better financial education based on the financial truth, to download and then read the free editorial on research methods on this blog, or even read a few of W.D. Gann's books.

I will say again with emphasis that the financial markets follow Science and Natural Law, rather than logic.

Speaking of Natural Law, tonight is an extremely rare full lunar eclipse that directly occurs on the winter solstice.

The last such eclipse on the winter solstice was in 1638, 372 years ago or about 4434 months.

Most of our KRTT clients have been educated in such powerful cycles and the significance, but unfortunately that is well beyond the scope of our free blog.

In conclusion, although the equity markets may drift over the low volume holiday trading sessions, make no doubt about it, I remain of the opinion that a high degree of future bearish caution is warranted.

My general advice based on what I observe is that conservative types should sell here, or at minimum use very tight protective stops.

The two graphical chart exhibits with my usual mark-up comments speak volumes about the trend truth. Again, I will do my best to update the blog as I see fit, and especially, if things or my opinion should change.

In the meantime, I would like to personally wish all of our BBTL blog readers, a safe, healthy, fun, and love filled Christmas, as well as a prosperous New Year in 2011.

I will be staying up late tonight to catch a rare glimpse of the blood red Luna eclipse and solstice event.

PS - In a future blog, if there is enough interest, I may discuss the statistical nature of financial markets when lunar and solar eclipses occur in close proximity. This is relevant now since a solar eclipse is also just 14 days away.

James Kelly Sr.,
Editor in Chief, BBTL Blog
www.KRTT.com
www.Facebook.com/KRTTcom
www.twitter.com/KRTTcom

Greater Vancouver Sales Data Update

I've compiled a graph of sales in the REBGV (Real Estate Board of Greater Vancouver) over the past 12 years.

2010 was a below-average year for sales but not significantly so. As with 2009 there was a surge in Q4 sales that helped muster some respectability to the sales levels. 2011 starts anew; as a friend from Australia recently commented, the markets in Canada and Australia are drifting into uncharted waters.

Happy New Year

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