Friday, September 14, 2012

Extended 5th Wave

Bulls followed through today in making an even higher high and in turn extending the 5th wave, which is in line with my earlier prediction for an extended 5th wave. But I think this is really it for this bull leg and now we should head down to Fibonacci retracement area and test the trend average. And like I said yesterday, if we get a successful test then higher we go. Which, I wouldn't be so surprised considering the implication of QE3 on the economy.

And again, I'll use my personal situation to illustrate how QE stimulates the economy. I currently have a mortgage with a 4.15% rate, which at the time when I got it was historically low. With this QE round, mortgage rates might go down to the low 3% or even high 2%, which is almost absurd considering the long term CPI is about 3% and likely to go higher after the QE is done. So let's say I get lucky (along with million of other homeowners in this country) and I refinance to get 1% off my current rate. That 1% equates to about $4000 a year or about $335 per month in my pocket. That's money that I will probably end up spending on goods and services along with millions of others that will ultimately stimulate the economy. So anybody who thinks this QE doesn't do much, is simply wrong IMO. This is similar to the Bush administration plan of sending every household a check for couple of hundred dollars back in 2007 but every single month! So if you are looking to refinance or simply have debt with a variable rate, we will have more money to spend thanks to Ben Bernanke.. so now going back to the market, how could something like this be correctly be priced into the stock market? it's impossible to know at this time but the direction is definitely UP. That's why the crash predictions are making a lot less sense now days.. even Robert Prechter from EWI threw in the bear towel, apparently he gave up his cataclysmic theory that the market was going to crash 95% (which has always sounded absurd to me) after shorting the market on leverage from around summer 2009.

So the 12 year sideways move might be over and we might be witnessing a new multi-year bullish wave. Time will tell but I'll post the chart on my next update for a likely count.

Have a great weekend!

Long Term Portfolio: 100% Long
Short Term Trading Strategy: Hedged with VXX @8.98 as of 09/13

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