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Here is the puzzle. And here are the jig saw pieces. (Not all visible here.) A ten year orgy marked by greed, irrational exuberance, animal spirits, treachery, betrayal, theft--in short all the joys of Bosch's garden of earthly delights. Worship of Baal, Mammon and Ken Lay. Hubris and nemesis enough to occupy Sophocles--or better, Aristophanes, if not Moliere. As Mark Twain said, San Francisco is a wonderful town for a journalist--a new disaster every moment. Also the weather was interesting. 10 years of whoopee. 37 months of selling the dregs of the party to the greater fools. 15 months of bear market. 12 months of bottom (?) formation. 9 months of rally (bull market). (Don't try to make the numbers add up. There is plenty of overlap, and trying to make them add up would get you admitted to the sacred priesthood of arcane analysts.) What it all ads up to is the eternal puzzle--put this picture together and make confident predictions as to where it goes next, and then next after that. With crystal ball in hand and foot firmly lodged in mouth we start putting the pieces together.
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There are those who guesstimate (using incredibly precise calculators and the entrails of birds we don't have on hand) that the present mini bull could go to 11400. Quite possible. Our curve here traces out the minimum rally measured out from the Kilroy Bottom. (See Career Measurement Disclaimer. All our students know how intensely we dislike targets, except when target trading.) If the minimum is 10400 11400 is entirely possible given the utter fecklessness of the present investment climate. And what a short it will make!! We think the shape of this curve is pretty likely but the time frame could be highly variable, and there is one piece of the puzzle that we don't know and don't know we know, but know that we don't know (Rumsfeld speak.) That is what or when the next al Quaeda attack occurs and how severe it will be--just a little airliner shot down with a shoulder fired missile or the Golden Gate bridge brought down or a nuclear plant vaporized. In which case the curve will look like Niagara Falls. So give us some leeway here.
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Our prognostication for the S&P is similar and our remarks are similar. Reread paragraph above. When the birds go south, all the birds go south.
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Here is another scenario--Not the most beautiful graphically, unfortunately, but possibly very accurate as a scenario. The chart is unfinished--do we think it will go lower than 18? Yes. More seriously, at this very time (December 17 2003) the Qs look woefully vulnerable, as though they are in or going into a trading range. We will not know their direction till they take out the nearby highs or lows, but a retracement down here could considerably hasten the time scales envisioned above. But it strains our credulity to imagine that the present administration would not sell the Nation's soul (actually they are doing it) and mortgage our future (actually they are doing it) to be reelected. A deep psychic wound was inflicted on the Bushes when George I was pitched out of office, ruining his long term c.v.. A similar wound was inflicted when his craven policy of not taking out Saddam in the first Gulf War was repudiated by history and everyone else. George II has healed that wound. He thinks. He must be reelected to heal the other. So how can the bear market start before he is reelected?
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Holy bird entrails, Batman! Isn't anything going North? Yes, Robin. While all the robins are going south that old black magic, gold, is going North, but it may be a very slow trip. Also, some other things we'll talk about later. In the March State of the Markets Letter we recommended the purchase of gold at 350 and it has now broken 400. See State of the Markets Feb 03. Price will come back to the trend line we have indicated and at the moment we expect that the prevailing pattern of advances and retreats will continue, perhaps for years.
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Events Listing
2 1/2 DAY SEMINAR
TECHNICAL ANALYSIS OF STOCK TRENDS
Being Scheduled as of 3/03
KKKK
Kiss and Kry and Kibitz with Karnak
Tent: Thurs April 3 2003
3 to 5 pm
One Day Total Immersion Workshop
in April. Intensive and rigorous drill
in natural trading
FI498S
Golden Gate University Graduate Seminar
Building Effective Trading Systems
May to August