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World Stock Markets 2010


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hey guys i have made some analysis on the dow:

http://seekingalpha.com/instablog/481054-k...13-dow-shredded

 

Ker, have you seen EWI's / Yelnick's three scenarios?

 

He says that EWI puts the highest probability on a "June swoon", an almost immediate drop.

 

/see: http://yelnick.typepad.com/yelnick/2010/05...a-wildcard.html

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In addition to keeping an eye on stocks this week. I have just noticed that Gold has made a 62% retracement of its falls from the mid-May all time high to the 21st May 1166 low. The falls looked impulsive to me, so worth keeping an eye out for at least another leg down to below 1166 (spot is currently 1213). Silver likewise sports the same pattern and retraced exactly 50% of its falls, so worth being alert here too for another leg down.

 

The other one i like the look of is the USCan dollar, looking for the US to strengthen against its Canadian counterpart soon. It is currently 1.05, and as long as it doesnt go below about 1.03 then higher prices should lie ahead.

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Ker, have you seen EWI's / Yelnick's three scenarios?

uff, so many cases, and all so well counted, can really put in doubt your own ideas.

i don't know.

 

He says that EWI puts the highest probability on a "June swoon", an almost immediate drop.

 

/see: http://yelnick.typepad.com/yelnick/2010/05...a-wildcard.html

 

there are 2 things that warn me about Pretcher.

1. His top was 10000 (or was it 10500? don't remember exactly) on the DOW. The DOW went to 11200 , thats at least 700 points of difference from what Pretcher said and that is not to ignore. Recall, NOT to ignore.

2. I heard him recently on TV and he sayd he has lots of years on the market place and "he knew" that the markets are going to crash. I know he is a veeeery good in what he does, but i see him too confident.

 

So i think right now everybody knows we are in a bear market, and that makes us (bears) the biggest crowd. If this is true, markets will be hard to break quickly, so a yearly trading range will kill enough weak bears before real profits come in.

 

Now, since i am very devoted follower of my channels, my channel said that in december we got over the posibility of next crash, and at this time crashing is less probable. (1 point in favor of a trading range, i.e long term correction)

 

Another technical detail is that you don't just break above 9500 or 10000 on the DOW and crash again, that was a strong support level on the yearly basis. I don't know what is Pretcher publishing right now on EWI, i am not a subscriber, but he must check this detail, it is not something to ignore. This is why I am more inclined to think that we are going to hold above 8450 on the DOW this year. You know how it happens, for example, the DOW goes to 8450, bears will say "this is it! short more!" and after that you have about 2 weeks of flat trading, then markets rebound and bears have the uptrend go to where they shorted for the first time and they end up closing the first position and have a losing one they sold at the bottom. This is how (i think) the market will shake out many weak bears, or even some professionals.

 

So my strategy right now is to trade the dailies within the weeklies (trade short term within medium term). And be quick in exiting shorts when markets are not moving. Corrections are very difficult to trade, so, to make money it is better to lower the position size, but extend the stoploss. This way you aren't going to be stopped out much and make some money. Or, if you don't want to miss the crash (the real impuslive wave Pretcher predicts, when you have week after week, month after month of strong downside), you have to put the short as it is right now (considering that the absolute possible top on the DOW is at around 11800), and wait 4 years. In 4 years we certainly will have these markets crashed.

 

This is what i think.

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http://www.investorschronicle.co.uk/Column...tock-watch-.jsp

 

Shock and Awe

 

It is also a crisis that is far from over. It will only end when the most highly indebted countries default on their debts and the inevitable haircut to loans is taken by the banks and investors that have funded the debt splurge by these nations.

 

And make no mistake, sovereign defaults will happen even after the EU/IMF €750bn bail out to highly indebted Eurozone countries. For instance, even by the IMF’s reckoning the debt to GDP ratio in Greece will soar from 120 per cent to 150 per cent within four years as the country funds its fiscal deficit of €8bn and makes payments of around €3.4bn on its debt mountain every three months. To make matters worse, Greece has some sizeable short-dated debt that needs rolling over, including €8.1bn that was repaid from the bailout fund two weeks ago and a further €8.8bn maturing next March. In other words, Greece is on course to burn its way through the whole €110bn of EU/IMF funding before the end of next year. The country’s finances are beyond the point of no return. It is not alone, either: the monumental tasks facing the other weakest countries in the Eurozone - Portugal, Italy and Spain (which had its credit rating downgraded by Fitch last week) - should not be underestimated.

 

Watch the US money stock

 

It may have escaped the attention of investors, who have understandably been fully occupied with the ongoing Eurozone crisis, but the next shoe to drop could make an almighty splash on the other side of the pond as the US economic recovery is showing some disturbing signs. Core inflation in the US is now running at the lowest level for over four decades and, in the past three months M3, a measure of the money stock, has been contracting at an annualised rate of over 9 per cent – the sharpest decline since The Great Depression. This is important, as a slowdown in M3 gave an early warning signal in the summer of 2008 of the ensuing crisis that engulfed markets.

 

Bullish investors buying into the equity market rally off last week’s lows will be hoping that the US money supply is contracting simply because investors have been drawing down cash to buy assets. If not, there is a real risk that deflation could become the buzz word in the coming months. Investors should tread very carefully in these markets.

 

 

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Larry Williams released his take on the markets few days ago:

http://www.ireallytrade.com/TVStation/LarryTV.html

 

what i find intersting, is that his WillGo indicator doesn't shows a top and Larry kind of surprised about it. This is why i think we are not yet ready for a crash.

 

also, check this chart of the real value of the DOW:

http://stockcharts.com/h-sc/ui?s=$IND...id=p27660049524

this is the correct chart we have to use. Because if the value of USD goes a lot higher, the DOW could make another high on nominal price, but still be below the 200 MA line we see on the chart.

Actually it is a prefect way to fool a lot of people. A lot of chartists may call a new bull market if we do a new nominal high, but a lower low on the real value chart

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Well Dow has hit my target (and, I believe, the 200 day MA 10330) and triggered my short position (for the second time).

 

Sandy J update also looking at 10330 as resistance, however, if breached significantly, it could be short term bullish.

 

http://www.londonstockexchange.com/private...urningpoint.htm

That was quick. 200 day MA crossed, and my stops hit :(

Ah well, time to wait for next resistance.

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  • 2 weeks later...

Newsletter issued by Mish's people

not much of note in this one, promotes a hedged strategy

http://www.sitkapacific.com/files/Sitka_Pa...ient_Letter.pdf

 

With all that is currently going on in the markets, from the debt troubles in Europe to the market failure behind the recent 1000 point drop in the Dow Industrials, it may seem odd to have lengthy discussions in recent letters about long-term trends in gold and stocks. However, just like in 2007, the past 6 months have been the time to have these long-term discussions, so that investors are not caught flat-footed when thetrends change.

 

Although stocks, commodities, and gold have risen over the past year, we are currently positioned

defensively in anticipation of a pullback. We have been anticipating this pullback for some time, and until recently the markets have continued modestly higher. However, because each advance has been technically weaker than the last, the risks have only risen as the markets moved higher.

 

There is a wide range of potential paths the markets could take over the next two years, and in the coming months we’ll discuss those in more detail. For now, it does in fact appear that the trend in the stock market has turned down. The market action in the next six months will tell us a lot about the nature of this rally from the low in March 2009; specifically, whether it is part of a new larger trend higher that will last several years, or whether it is a technical rebound from the 2008 crash that will ultimately be given back.

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A bit of an ad hoc update

 

1 JULY 2010 FSN

 

Lowry Research issued a short term sell report 22/6/2010 - SO IS REPORTED ON FSN 1 WEEK LATE NOT SURE HOW HELPFUL THAT IS !!

 

Buy pressure down 25 from 244 to 219

Sell pressure up 27 from 695 to 722

bearish sentiment bordering on extreme - head and shoulder tops and death cross threatened on

 

50/200 day moving averages

BUT do suggest might be close to an imortant low

 

selling pressure intense 3x 90% down days - not sure I understand the 90% down days bit ?

 

 

+ ECRI reading -7.7 (negative - -10 = a recession warning!)

Rig count +5 = 1557

==============================================

5/6/2010

JOBS + 431000 /EXPECTED 530000

CENSUS WORKERS MADE UP 411000

PRIVATE SECTOR JOBS 43000 - EXPECTED 139000

 

 

Lowry Research

BUY +11 = 232

SELL 731 -7 = 724 1/4

SHORT TERM BUY ISSUED 28/5

 

FRI CLOSE

DOW -323 = 9931

S&P = -38 = 1065

NASDAQ = -84 = 2219

DOWN APROX 3% - LOST LAST 2 WEEKS OF GAINS

 

ANALYSTS EARNING EST'S BEING ?D FOR 2ND HALF OF YEAR GIVEN JOBS FIG'S.

 

==============================================

 

29/5/2010

 

DWO - 122 = 10136

S&P = -13.5 = 1089

NASDAY = -21 = 2257

NO Lowry Research

 

BEARISH EXTREME / SUPPORT HELD

95% OF MARKETS MAINTAINING 200 DAY MOVING AVERAGE

==============================================

 

FSN 22/5

 

Lowry Research

LOSSES FAST N FURIOUS BUT NOT OUT OF LINE GIVEN ADVANCE IN MARCH SIMILAR TO 1971/1997/1999

PEAK APRIL +80%

CORRECTIONS FEATURING 10% OR MORE DECLINES SINCE 1960'S

NOT SURE WHEN WILL END BUT MOST LIKELY FOLLOWED BY STRONG RALLY & RISING VOLUME

 

RIG COUNT + 12 = 1518

GLOBAL OIL INVENTORES +1.08M - HIGHEST SINCE 1990

 

*** EDIT NOTE THIS WAS 20/3/2010 FSN ***

FSN (am a little behind in my listening this week - gave some excellent KWN interviews priority instead)

 

Lowry's

 

6 point drop in buying pressure from 214 to 208

3 point rise in selling pressure 655 to 658

 

They see a short term shallow sell. Also a muttering about moving from large to small caps.

 

Rig count = 1427 up 20.

 

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gone a bit quiet on this thread so will throw this in - dated 8/6/2010 - Brit style dates in case our US pals are wondering ! see link for charts and comments which are interesting

 

http://www.tradersnarrative.com/lowry-rese...ction-4203.html

 

Ever since switching sides (rather late) to the bullish camp, Lowry Research has stuck with the thesis that while it will be interrupted with short term volatility, the primary trend is up. This was the case the last time we checked in with Richard Dickson in March, when he was expecting a correction due to the overextended nature of the market. And it was also the case in late April when they shrugged at the negative seasonality that was imminent with May’s arrival: Lowry Research’s Take On “Sell in May and Go Away”

 

So not surprisingly, now that we have a correction (boy, do we ever!) Lowry is sticking with their oft repeated position. But they aren’t being adamantly tenacious for the sake of not changing their minds. Their conviction is based on the same technical indicators, proprietary and ordinary, that has guided their clients for decades.

 

A few days ago Bloomberg’s Pimm Fox sat down with Richard Dickson, Senior Market Strategist at Lowry Research, to chat about the technical aspects of this market. They covered into other topics but the main thrust of their exchange was whether the recent market weakness represents the start a new bear market or is merely a correction within a bull market.

 

You can listen to the interview at the bottom or peruse a the following quick notes I took from the interview (and don’t miss the accompanying chart after the jump!):

 

“This (market weakness) is still within the parameters of a correction.”

Since 1940’s each bull market has one major correction

In general they retrace 10-12% with the worst a 16% decline

As of today (May 24th) the market has fallen 12%

As of yesterday’s close the S&P 500 was down 14%

So based on that, we are still within the definition of a bull market correction

Beyond that, Lowry has had no indication of a major top

None of the measures like market advance/decline lines, new high/lows, buying power/selling pressure, Lowry’s Average Power Rating index, etc. that Lowry relies on as indications of an impending major market top are saying otherwise

The question is, is this time different?

So far we’ve seen a normal correction, which may have a little bit more to go

Also consider that we had a torrid rally from March 2009 to April 2010

Going back to the 1940’s the average gain in a bull market for such a time period is 36% (median 33%)

In contrast to that historical behavior, this time we had a 71% rally or double!

So if we overshot on the upside, it is natural to expect the market to overshoot during its correction

Still in a primary uptrend for stocks

 

Naturally, during the decline we’ve had an increase in Selling Pressure and a drop in Buying Power

But even so, BP is well above its February lows and SP is below the peaks at the same low

Meanwhile, the stock market indexes themselves are clearly testing the same support area

Since neither the BP nor SP have new low/new high both are still trending

And based on this, the main demand/supply balance is pointing to a continuing uptrend

Even so, don’t expect a “V” bottom, we could see the market work lower in the short term

Generally, it takes time to repair the damage done by such a retracement

The market put off a major correction for so long that it became a violent one

It has been an intense sell-off but we’ve seen these before without them becoming bear markets

If you go back to the 1940’s, there’s never more than one ~10% correction

And after each one of those was followed by higher prices

The changing face of the market as retailers exit and HFT dominate trading

Environment is different but every time it is a little bit different but not enough to say “it is different this time”

Click to see larger chart in a new tab:

 

Source: Lowry Research

 

Richard Dickson of Lowry Research:

Press play and let it buffer, then jump ahead to the 24 minute mark to listen to the complete interview of Pimm Fox with Richard Dickson of Lowry Research (Please note this was recorded on May 24th

 

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HMM 8/2009 article - missed the bounce after the March apparently - maybe I shouldnt bother ???

 

http://www.tradersnarrative.com/lowry-rese...ignal-2832.html

 

Since the start of the spring rally in March and into July, Lowry Research continued to recommend to its customers that the market would inevitably retest the lows and even see new ones. In June, Paul Desmond declared the impressive rally so far to be merely a bear market reaction and not a bull market. Then as early as mid-July Lowry was continuing to call for lower stock market prices (even lower than March 2009).

 

Lowry arrived at this conclusion by looking at their proprietary demand and supply metrics: Buying Power and Selling Pressure Index. And not through the by now well known Lowry 90%/90% metric. If you’ve been keeping track of these 90/90 extreme breadth days, defined by Lowry as a trading day where 90% of the volume flows to the stocks trading up/down and 90% of the securities traded finish higher/lower, then you know that what was once a rarefied event has suddenly become commonplace.

 

Whether the preponderance of extreme breadth days was because of the historic volatility we’ve seen recently or if perhaps it was due to the sudden spike in high frequency trading is of little importance. The only thing that matters is that as suddenly more and more people started learning about Paul Desmond’s research into the role of extreme breadth in creating the conditions for new bull markets, the game changed. And that is the inherent and tricky nature of the stock market of course. If you dare think you have it figured out, you are in for a big lesson.

 

In any case, now, Lowry Research, the oldest and most respected technical analysis firm on Wall Street, is reversing its position and issuing an intermediate trend buy signal.

 

To find out why they reversed and what the buy signal means, read on:

 

The signal occurred as of last Tuesday August 4th’s close. To trigger the intermediate buy signal, on that day, the Selling Pressure Index fell by 32 points from its most recent peak (on July 8th 2009 at 889). In simple terms this means that selling has exhausted itself and therefore, we now have a safer environment for an uptrend to establish itself. Starting in late July, Lowry noted that volume started to expand to the upside, something that was not happening in the early stages of the spring rally.

 

Volume Expansion

Lowry is blaming the lack of expansion in volume off March lows as the culprit for skewing their proprietary indicators of demand and supply. Typically the script that Lowry expects to see for important bottoms is for Buying Power expand as Selling Pressure declines. But we did not see that this time around because of a generalized contraction in volume. If this expansion in volume continues, then this intermediate term rally could continue in coming weeks and months ahead.

 

Sentiment

As we reviewed in Friday’s sentiment overview, we are seeing a lot of unmistakable signs of complacency. From the low put call ratio to the high levels of insider selling to the various sentiment surveys such as Investors Intelligence and AAII with 50% bulls. It is clear that more and more investors and traders are jumping on the bandwagon and not hedging against a decline.

 

Buy, Buy, Buy! errr… no

A Lowry intermediate buy signal does not mean that you rush out and buy the market. Lowry is suggesting to clients to watch how the market reacts to short term overbought indications from breadth and sentiment. If a correction takes place with low volume and with a modest increase in the Selling Pressure Index, then we have a good entry indeed. As well, August’s seasonality will deliver a tough month for the market. So although we have an intermediate term uptrend signal, we could be in for short term weakness.

 

Breadth

According to the advance decline lines, this has been a very broad based rally. Throughout this market rally, when we see short term declines the advance decline or breadth indicators remain strong. This hints that we are seeing selective selling rather than generalized liquidation and is another indication that this rally has room to run.

 

Since late July, Lowry’s Buying Power and Selling Pressure indices are acting as they would typically in an intermediate uptrend. The volume is now more in line with what it should have been happening off the March low. Lowry believes that deleveraging resulted in diminished volume which in turn skewed their most trusted indicators.

 

In economic news, things are getting less worse - and the market moves up on that kind of news. So that is a tell also.

 

Sectors and Capitalization

Lowry is cautious on technology due to recent weakness- especially in the Computer sub-index, which is causing under-performance for the Nasdaq. There is strength in Basic Materials, Energy, cyclical stocks as well as the financial sector, which is showing relative strength.

 

During the initial phase of the March rally, the small caps outperformed. Now it is the mid-caps (S&P 400) who are outperforming the S&P 500 - particularly through the most recent rally off July’s low. So as this move has matured, money has come out of smaller capitalization stocks and flowed into larger capitalization ones.

 

Buying Power Index

Also interesting is that taken by itself, the Buying Power Index (BPI) reached a low both in March 2009 and July 2009 which it hadn’t seen since September 1942. The absolute lowest BPI reading came from February 1933. Usually when Lowry’s Buying Power Index reaches an extreme low, that is by itself a very good indicator of an upcoming massive rally.

 

But while initially the Buying Power Index lifted off the March lows along with the market, it came back down again. This is probably why Lowry is still not ready to relinquish the bearish camp just yet. You see, since Lowry began collecting market data going back more than 75 years, no new bull market has ever given up all its initial gains in Buying Power as this recent rally has.

 

To clarify, Lowry tracks the relative position of both demand and supply metrics and does not go by either one alone. But nevertheless, it is interesting to look at the BPI in a vacuum like this.

 

The above covers everything and more but if you like, you can listen to the Bloomberg radio podcast below:

 

see link

http://www.tradersnarrative.com/lowry-rese...ignal-2832.html

 

+ see link for comments at end also for info

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Loads of viewpoints to consider at present.

 

Does appear lots of bearish talk, yet many must have been caught by this bounce (which was right off a fib line from the 2007 high to the 2009 low interestingly, even though I'm not sure that fits with EW analysis?)

 

Sandy J warned of a possible bounce up to Dow ~10100 and the 20 day MA this week (even though I know Dr B doesn’t like/use this measure).

 

It has hit today, and I have gone short (S&P). My stops are just above the 50% retrace of the recent falls, but not much so should be a low risk bet. If the 50% gets smashed, I'll jump back in at 62%.

 

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from Dr Bubb's diary - have been feeling this for a little while - ever since the bull ran out of steam (or should that be grass) a couple months back....

 

Yes we are in an interesting situation almost a kind of no mans land sandwiched between the bull and bear scenarios. I hope for John Mauldins "muddle through" kind of outcome.

 

Still I am reminded of George Soros's theory of reflexivity - the part that suggests that actions of the participants affects the end result. In this case it could be that the markets will lead and the economy will follow, ie if markets decide end of recession then the markets are capable of providing capital and financing to firms. If markets decide the opposite..... then it probably will force a recession - or more QE? "The markets have a way of getting what they want" or words to that effect.

 

Maybe this is a sad admission but if you read the market commentary on a daily/regular basis and watch how prices change it does give one something of the feel that you would need to be a trader

 

 

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Know what you mean, as a true contrarian, I am now considering going long :rolleyes:

 

Actually, if I were the PPT, I would consider now a perfect time to bump up the market.

 

good time for short today. the dow can go to 9000 from here until august.

it is hard to trade trading ranges like right now. either you use long stop to adjust for high volatility and lower your expectations, or use a tight stop and risk losing to Goldman Saches' computers. Market is not likely to be in a strong trend for many months yet. There are too many bears, we need to shake them out.

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hmm, everyone is bearish.

 

that makes me nervous! :blink:

 

Not the only one, i've resisted going short though high in cash, it's almost like everyone is willing markets down, but they don't want to budge yet.

 

 

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Been short S&P since ~1070, nearly hit my stops out of hours, just for once it just missed.

 

Thankfully though, my RDSB have gone up almost as much as I have been down on my shorts, so sold my RDSB today at 1738p.

 

Short with no hedge now, bring on the falls!

 

 

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Fantastic!

 

Now in profit (with a large proportion locked in).

 

Was starting to get nervous, but when DD looked like he was going to throw the towel in, it really was a case of the last bear...

 

Question is, if this really is the 3rd of a 3rd, how low does it go before the printing presses start to roll again?

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Was starting to get nervous, but when DD looked like he was going to throw the towel in, it really was a case of the last bear...

 

Question is, if this really is the 3rd of a 3rd, how low does it go before the printing presses start to roll again?

 

Nah, i am still bearish dont worry. If the markets rise much above the highs of last week then i will temporarily stand aside waiting for a new entry point to re-short. This is different to throwing in the towel.

 

Long term i am looking for much lower prices, taking out the lows of March 2009. Wave 1 started in autumn 2007 in the main US markets (European indices made their highs in early summer that year) and ended in March 2009, for a roughly 18 month decline. Wave 2 then lasted until April 2010? Wave three is usually longer than wave 1, so if it started in late April i would expect it to last at least until autumn 2011 and probably longer and then wave 4 say another year to at least autumn 2012 with the fifth and final wave lasting into 2013/4. This seems to be a minimum; as i said above, wave 1 is usually somewhat shorter than wave 3, and wave 4 could also last longer than wave 2 so this bear market could easily drag on for another 5 years or so. I do not see Prechters 2016 bottom as far fetched. This would mean a 15 year bear market for some markets (when measured from the all time highs as the FTSE topped in December 1999).

 

Governments may well try further open market operations at some point, but i really do not see it having anything other than a very temporary boost to investor sentiment at best which might produce the odd sharp rally on the way down. We were always going to get a bounce in the spring of 2009 as wave 1 down had ended so dont give too much credit to QE. Just look at Japan. QE there in the early part of the new millenium didn't prove to be a silver bullet. Creating credit only works where banks want to lend and people want to borrow. I see neither of these as likely in the next phase of this depression. In fact, the opposite should be true as unemployment rises and people try to repair their balance sheets combined with banks reigning in their lending even further.

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So my strategy right now is to trade the dailies within the weeklies (trade short term within medium term). And be quick in exiting shorts when markets are not moving. Corrections are very difficult to trade, so, to make money it is better to lower the position size, but extend the stoploss. This way you aren't going to be stopped out much and make some money.

 

 

this is what i was talking about. lots of bears stopped out and market isn't falling. this downtrend is likely to go until september (but now with more inclination to trend with not so wide trading ranges) and then guess what? we will go up, and there will be no crash at all this year.

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this is what i was talking about. lots of bears stopped out and market isn't falling. this downtrend is likely to go until september (but now with more inclination to trend with not so wide trading ranges) and then guess what? we will go up, and there will be no crash at all this year.

Possibly.

 

If there are falls for a month or two then QE2 becomes inevitable (sometime in the next 6 months) and even though it wont have the exactly the same effect as before, I think that will send the markets back up.

 

Rumours from BoE members of more QE are already circulating.

 

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