Everything
I learned about Fibonacci clusters, I learned from
Bernie Mitchell. Bernie was kind enough to provide this
commentary to subscribers of
www.thetradingdoctor.com.
Thanks, Bernie from Doctor Janice!
. . . . .
Bernie Mitchell's Fibonacci Impulse Commentary
IT’S STILL NOT “THE BIG ONE” - - BUT IT’S
COMING!!
July 28, 2007
Despite what appeared to be panic selling last
week, with the General Market (OEX) correcting
5.7 percent
from the high (720.26)
earlier, it’s likely the majority of the damage has been done, -
- for now.
We had projected a correction in the three (3)
to five (5)
percent range that now turned out to be conservative.
Unless some truly bad news emerges, relating to
extraordinary losses within the financial sector, the market
should hold near Friday’s low, or at somewhat lower levels.
We’re looking at
Fibonacci Cluster Support (675.71),
or a worst case scenario
665.72, basis
the OEX.
Some research done by the
Bespoke Investment Group
sheds some light when the market makes a new
52 week high
only to immediately selloff. The average decline in
19 instances
since 1945 is 8.9
percent. However, they point out that in the prior instances,
p/e ratios were higher, so that the initial “current decline
should be contained.”
However - - here’s where we differ - - after the
initial decline, and subsequent rally all bets are off, because
for the first time in history, it’s the unwinding of the
worldwide equity and debt bubble, simultaneously that’s taking
place.
Although we scalped some longs at
Fibonacci Cluster
Support (700.49)
and are presently lightly long at
691.41, our
bias, as our readers know, has been to play the short side with
our VDI bearish, along with the “weight of evidence” of our
other market indicators.
With the heavy liquidation last week on
extraordinary Downside Volume, it’s highly unlikely our VDI can
turn positive until the selling runs its course, which should be
many months away.
Therefore, our strategy changes to “sell and
hold”. We’ll liquidate our longs at
Fibonacci Cluster
Resistance (see chart below) and scale in shorts.
The ideal shorting levels will at the higher
Fibonacci Cluster
Resistance levels, but we’ll scale in at every level.
As an anecdotal aside, if you peruse the
Wall Street Journal
website, you’ll see an advertisement promoting the “China
Financial Markets Conference” on Nov. 18, 2007. Back in 1980,
after gold peaked at
850/oz., I happened to be in Asia, so I hopped
over to Hong Kong to attend a Gold Investment Conference. Twenty
years later (Summer of 2000) I got bullish on gold at
250. Is
History repeating? Even if the Chinese “miracle” is not ending,
(and I don’t believe it is) any ratcheting up of interest rates,
trade or currency warfare, etc., could send the Chinese stocks
market down 20-30
percent. You don’t want to be caught on the long end of an
emerging market correction.
XAU (Gold Index)
Along with the stock market correction, the XAU
corrected (finally) into
Fibonacci Cluster
Support where we scaled in longs.
Even with the selloff, gold bullion recorded a
12
week high compared to the General Market (OEX). Volume expanded
to a 21
week high, so a climax bottom is in process of forming, and a
bounce is expected next week. However, it will take several
weeks before any kind of breakout can occur. Our Call/Put ratio
registered a multi month low (bullish). But, before any
breakout, we need a bullish VDI and bullish momentum
divergences. Just not there yet.
Bernie is conducting an 8 Hour Training Session (Webinar)
on Sept. 29.
CLICK HERE FOR INFO & REGISTRATION
