John Magee Market Letters

A MAJOR LETTER ON THE DOLLAR IS AT

http://www.edwards-magee.com/nf07/letter.pdf

February 9 2007 The other markets--buy signs everywhere.

Friday was a little strange on the face of it in the S&P. Sometimes it's difficult to tell if people are spooking or it's just the traders jumping on the short term trend. At any rate it was expected. Five days of very compressed range will invariably be following by some fireworks in volatility. The pattern follows along with previous waves in the market, short sharp and then a downdraft. But this bull will not be discouraged, so far.

Meanwhile buy signals are all over the place in other issues. SLV silver gave its first signal in January and is looking at the December high. We expect it to meet some temporary resistance there. The long term stop is back there under 120. Sorry it's so expensive, but that's life.

The DJU has given a number of signals. If you buy it now plan on a reaction, on which you could add to a scale in position.

Strong signal in GLD. Investors in gold will do well over the long term.

People talk about a Goldilocks market. they should be talking about an Alice in Wonderland market to go with the science fiction fantasy delivered to the Congress as a budget. Budgets like the latest are made for short term enrichment of thieves and scoundrels (plenty of those in Washington). When the music stops the slow witted will find there are no chairs to sit on -- and may not be for years.

Stay tuned. We're cooking up a whole post of cheap cynicism laced with vitriol.

February 4 2007 No new news. All old news.

Which is to say that this little bull keeps bulling along, so why not look at some other charts? A few weeks ago we conjectured that a corner of some sort had been turned. Evidently it wasn't turned in stocks, as this trend continues intact, and really without even any signs of deterioration. Then almost independently the dollar is bouncing off the bottom (as we speculated it might) and the metals are in big consolidation patterns, some of quite large ranges.

The CRB made a picture perfect island reversal and sent all sentient beings a buy signal with the breakaway gap. Not a lot is meant until it clears the recent high of December, but it is a straw in the wind.

Gold bounced off a resistance line and continued its sideways trend. Pictures us blue in the face saying that gold is an investment for the general investor, and a wonderful speculation (along with the silver) for the speculator.

The ups and downs are intended to line the pockets of the pros and frustrate amateurs. Mature readers of this letter will frustrate the pros by sitting on SLV and GLD.

We remarked on the volume climax in OIL and expected higher oil prices. We think OIL is good part of any portfolio. Purchases should be staged in in tranches -- maybe three to five. Strong movement above the long term trendline would warrant a second tranche.

In December we published the dollar index letter which said it was time to get ready to buy the dollar. Good timing. The dollar has rallied and now is in the process of consolidating. It could be a reversal of course. Even if it is a reversal the outcome is pretty certain -- stronger dollar over the long run.

January 26 2007 Hunt for the killers....

The most important thing that happened this week was that Howard Hunt died. There is every reason to think that Hunt was involved in the assassination of John Kennedy. The NY Times completely ignored the question in its obituary. Wikipedia is a little more informative. Being amateur conspiracists we think he was in on the kill. These things occupy our minds when there is time to kill and we get bored with saying the same thing week after week: trend intact, and alive and strong and as yet no sign of the sharp reversal we think is inevitable. We think it remains intact because the public (i.e. the pundits, analysts, advisors, hedge funds etc.) expect it to fall apart. As a minor pundit (minor minor?) that's what we think too. As chart analysts we think that long is the way to be. It's really tedious when your gut tells you one thing and the charts tell you another. Chart rules.

January 19 2007 Life is short, Art is dead...

The most important thing that happened this week was that Art Buchwald died. Our favorite thing he said was "I'm not a Democrat or a Republican. I'm against whoever is in power." He shoulda stuck around to satirize this market. Because like it or not it gets farther and farther out on a limb. And it is also a real bull market, against all belief and against Richard Russell and everyone else who thinks.

But, then, why shouldn't it be an Alice in Wonderland market? We have an Alice in unreality government and an Alice in fantasy economy and a president in iraqiland. Hey. We never thought we'd miss Reagan and Nixon. And Harding. And Hoover. And Coolidge. And Taft. Come to think of it, these guys are in a great historical karass.

John Magee labored at great length in The General Semantics of Wall Street to convince us not to worry about the why of things, but about the what and how. Early American zen masters. So man is an animal which needs to know why, even when the why is invented. It's the economy stupid! Anytime you pump $500B (that they admit to) into a war you done got economic stimulus. Open the money floodgates, Let the super rich off the tax hook, PARTY!

Bernanke dropped the first boot the other day when he pointed out the mastadon in the hearing room: It's social security and medicare stupid.

So eat drink and be merry and stay long while lightening up. We don't see any signs at the moment saying slippery road ahead. Except that ironically the Democrats could upset the bandwagon by trying to reestablish fiscal responsibility in Washington. No good deed goes unpunished.

The charts speak for themselves. Bulls in the indexes, cows in the corn (or at least in the CRB which is sideways-- a mule by any other name).

The silver and gold are sideways and the dollar is bouncing off the bottom.

Is the end of the world as we know it still at hand? Not while this party is going on. It's been postponed for the moment.

And that whistle you hear coming down the tracks? Ignore it. Means nothing.

January 12 2007 Never one to throw iraqs at wasp nests...

But always willing to climb out on a limb and paint ourselves into a corner. Which is what the bulls have on this market. A corner. We suspect however that there is no exit from this corner, and that success is not just around the corner, not here nor in Iraq. Which is our long way of explaining what this hot air balloon is filled with: namely hot money financing the war in Iraq is lifting this balloon. Wait. Is there any metaphor we haven't mixed? If so please send an application to our publisher who will do with it what he does with all our other pleas, exhortations, brilliant ideas, plaints, etc. Fertilize the ocean with it, evidently. What we were trying to say when we wandered into the labyrinth of metaphor was that with hot money in a hot air balloon you just have to stay on board the balloon until it bursts. Well, we'll try to anticipate it, as our recommended strategy has done over the past several months -- lighten up but don't jump off. If we think we see the avalanche starting during the week we will post an email to the group list: http:groups.google.com/group/johnmageeta/about

Here we are moving back to take a stereoscopic view of the markets. (There's nothing that can be said about the microscopic view -- it just keeps on keeping on.) From the yellow notes you can see the important trendlines which are so far away from the present price they might as well be in Iraq.

Among other considerations being long (even while lightening up) is probably the thing to do right now, considering that everyone in the country is expecting a vicious correction (Motley Fools, 25%). When everybody is expecting something, no matter how smart they are, they have become the public, and the public is on balance wrong about 85% of the time. Dividing 85% by pi we get .... the pi in your eye ratio, which says copper the public's bet. So you think we drank too much at New Years? No, looking at these charts gives us vertigo.

The near term trend lines are so steep that they have no practical use. And there has been no downwave on which to base a new trendline. You can, of course always set a money management stop -- say 5 -7 % under the market. We have been racking our brains (what's left of them after New Years) about crashes -- studying some of the great crashes of our experience -- looking for the clue. At the moment we think that a trigger for a crash might be sudden sharp long down days on steadily expanding volume. More on this later. Our letter on the dollar remarked a few weeks ago that the dollar was approaching long (really long) term support. No sooner were the letters out of our computer than the worm turned and started eating shorts alive. We don't think it's the end of the bottom, but it may be the beginning of the.... Is anyone still listening?

Didn't the oil speculators hear about the new war in Iran? You would think from this chart that oil was headed for new lows, and, as Damon Runyon and Napoleon said, that's the way to bet. But remember, it's a slippery issue. We wouldn't want to be long OIL as we said earlier. In fact you could be short -- but remember this is a riverboat gambler's game. Of course, King George just tried to go all in on Iraq.

Stranger and stranger. Look for our new editorial policy of abusing Democrats. Coming soon.

January 5 2007 Is this the beginning of the end? Or the end of the beginning? Or the beginning of the .....

Well, whatever. No doubt it's the beginning of the year. The main doubts are about that volume the last day of the year. It is a little too exaggerated to be just year end tax selling. Once again we would be scaling out. Clearly some kind of corner is being turned, or some kind of tipping point is being tipped.

Richard Russell also thinks this is a weird market and is due to be corrected -- violently we think.

Keynes is in order here: A game of Old Maid is being played and the card is being passed from hand to hand. Woe to the investor holding it when the music ends.

A close up of the year end action. Four especially squirrely days. When Motorola can be taken down 8-9% in a day the market is sending you a message, just as the sea sends you a message in the Bermuda Triangle. If we saw down days accelerate on volume next week we would increase our selling. The second low of November is a crucial benchmark.

As we previously remarked copper looked to be in a descending triangle (Bermuda as it turned out). For copper this means lower prices and for our readers who took the hint to the wise of being short the metals for trading purposes it's party time. For the economy (US and world) it is an ominous sign.

The center of the universe is the U.S. dollar, and it's dead -- only no one has officially told it yet.'
— Peter Grandich, Grandich Letter

Oops. What is that I see before me, the handle towards my hand? A live dollar? At the very least the dollar making a bottom.

Metals, oil, commodities in a downdraft, dollar biting shorts, stocks looking nervous and toppy. As the Chinese say, may you live in interesting times.

See above for link to 15 year analysis of the dollar.

December 22 2006 Ho Ho Ho Santa Analyst is flying the coop until New Years -- unless the Grinch strikes the market, in which case we'll send you a Xmas card toot sweet -- so last letter of the year

As can be seen there are still some trend lines to break in the NDX, and the wedge (or whatever) formed here on this excursion out on to the plank is not definitively broken. But the two volume lines Dec 15 and 18 are ominous (i.e., lighten up). Such volume peaks often mark the end of the wave.

Some sort of turning point seems to have been reached. The CRB broke. Silver broke. Both either still shorts, or for very long term holders a watching time for a wave low to be made, assuming always that it does not take out a previous crucial low in a decisive way.

The horizontal lines under this month's lows, penetrated by 3% would send longs scurrying for cover and reward short term shorts.

A strange end to a strange year. Jack Schannep at thedowtheory.com correctly points out the divergence between the industrials and the transportations. Worth listening to.

The Dow is placed here so that the reader may compare it directly to last week's chart.

Bull trap anyone? The failure to follow through on the breakout nullifies the signal. Bad signals have been the hallmark of these markets.

So the game we thought was still on last week may have been a very short one. The only drawback we see to scaling out here is that some phantom profits may be foregone. If this thing falls out of bed those will be very quickly forgotten.

December 15 2006 Stranger and stranger in paradise...

If we were going to be lightening up longs on this minor runaway bull we would be selling less each time, but we would be selling some. Friday the Dow broke out of whatever it was -- consolidation, attempt to form a double top (so much for prognostication) -- on heavy volume which means the game is still on. As you well know the book says you don't liquidate your longs until the trend is proved to have changed (thereby giving away the top). Our tactic of scaling out on strength sometimes results in capturing greater profits, sometimes not. For certain, it reduces risk, and we consider risk to be at a high at this time. We would not be surprised to see half this advance taken back in a week, which could be painful. So even giving up some profits here may be worth it to take some risk off the table. Worth noting that the NDX and the XMI didn't mimic the Dow, so, as usual, signs are mixed.

Not mixed however in the metals and dollar. Dollar on a tear, tears in the metals. You will remember that we previously noted that the precious metals were in a down wave, and the dollar recovering off the bottom.

Speculators will be long the $ and short the metals.

At the moment we remain with our previous comment on the DX -- shooters are already long. As they are in the metals.

We will be looking to buy the metals and sell the dollar before long.

Readers interested in learning our exact advice can contact us to subscribe to the real time service.

December 8 2006 So, is it, or ain't it or what is it?

Wedge or not, the action in the major indices looks toppy, as we have indicated with the horizontal lines across the last several months. Technically the last low was lower than the previous wave low. By a hair, but by a hair. Interestingly the high in the Dow has not been taken out after the November low, which we thought might have been the signal. Now we think the signal might be a firm break of the horizontal line.

At any rate our tactics (maybe it's a strategy -- sometimes it's hard to tell them apart) of maintaining longs while looking for shorts and lightning up as these highs are reached is working.

The XMI is showing the same toppy action as the Dow. The comforting thing about this is the clearly defined horizontal line. Would we be out of all longs on a confirmed break? We would certainly be looking at the individual charts and seeing how they related to this broad market action.

While ordinarily not fans of covered calls we could certainly see it as a possibly profitable tactic here.

In gold traders would have exited on the gap. Trendfollowers would be looking at the wave low in November. Very long term holders of GLD will be yawning.

Basically we think the markets are backing and filling here, as indicated by the CRB. A head feint to the upside in May. A downside fake in September. Whether November's breakout is a feint or not is yet to be seen. Anyway, you can't be long after the island reversal at the top in November.

A 15 year look at the dollar index is found at

DOLLAR INDEX LINK

December 1 2006 Wedge Issues

Interesting formation. What looks like a trading range, and might be a top finished off with a hanging wedge. Mere lucubrations of a deranged technician. Pay no attention. To the lucubrations. Pay close attention to the wedge. At the moment we are watching to see if the pronounced break down from the top is indeed the signal or if it is another false move. A close above the November high would nullify the break, a close below the recent low might be the beginning of the avalanche. Take it one day at a time, with holidays off. Several different lines defining the wedge seem to make sense, and significantly the hard break was across the line.

If you want to see something dramatic compare this chart with last week's chart of the dollar index. Quite outside the profit potential of the move the implications for the market and the economy may be dark indeed.

Readers, except for new readers, know that we never harp on these opportunities correctly identified. Nor do we go back and crow over past brilliant observations. (Caw caw. Except for buy the dollar at .82 and sell it at 1.30 Euros.) We point out the situation and depend on mature readers to act on it.

We have been saying for some time that the markets were swaying on the edge of tipping point. And saying that gold (and oil) would rise again. We pointed out the little Kilroy (H&S) bottom in the gold, the breakout over the fenceline and the pullback (throwback to you E&M purists) to the fenceline.

A word to the wise is sufficient.

As we were saying (caw caw) we do not crow over our successes, but we will point out that in spite of being bears our advice, BASED ON READING THE CHARTS, has been profitable over the past year. Stay with longs until they have broken trendlines and lighten up at the top and look for some shorts. The shorts thing will soon pay off (already has in the dollar).

A MAJOR LETTER ON THE DOLLAR IS AT http://www.edwards-magee.com/nf07/letter.pdf
	February 9 2007 The other markets--buy signs everywhere. Friday was a little strange on the face of it in the S&P. Sometimes it's difficult to tell if people are spooking or it's just the traders jumping on the short term trend. At any rate it was expected. Five days of very compressed range will invariably be following by some fireworks in volatility. The pattern follows along with previous waves in the market, short sharp and then a downdraft. But this bull will not be discouraged, so far. Meanwhile buy signals are all over the place in other issues. SLV silver gave its first signal in January and is looking at the December high. We expect it to meet some temporary resistance there. The long term stop is back there under 120. Sorry it's so expensive, but that's life. The DJU has given a number of signals. If you buy it now plan on a reaction, on which you could add to a scale in position. Strong signal in GLD. Investors in gold will do well over the long term. People talk about a Goldilocks market. they should be talking about an Alice in Wonderland market to go with the science fiction fantasy delivered to the Congress as a budget. Budgets like the latest are made for short term enrichment of thieves and scoundrels (plenty of those in Washington). When the music stops the slow witted will find there are no chairs to sit on -- and may not be for years. Stay tuned. We're cooking up a whole post of cheap cynicism laced with vitriol.
	February 4 2007 No new news. All old news. Which is to say that this little bull keeps bulling along, so why not look at some other charts? A few weeks ago we conjectured that a corner of some sort had been turned. Evidently it wasn't turned in stocks, as this trend continues intact, and really without even any signs of deterioration. Then almost independently the dollar is bouncing off the bottom (as we speculated it might) and the metals are in big consolidation patterns, some of quite large ranges. The CRB made a picture perfect island reversal and sent all sentient beings a buy signal with the breakaway gap. Not a lot is meant until it clears the recent high of December, but it is a straw in the wind. Gold bounced off a resistance line and continued its sideways trend. Pictures us blue in the face saying that gold is an investment for the general investor, and a wonderful speculation (along with the silver) for the speculator. The ups and downs are intended to line the pockets of the pros and frustrate amateurs. Mature readers of this letter will frustrate the pros by sitting on SLV and GLD. We remarked on the volume climax in OIL and expected higher oil prices. We think OIL is good part of any portfolio. Purchases should be staged in in tranches -- maybe three to five. Strong movement above the long term trendline would warrant a second tranche. In December we published the dollar index letter which said it was time to get ready to buy the dollar. Good timing. The dollar has rallied and now is in the process of consolidating. It could be a reversal of course. Even if it is a reversal the outcome is pretty certain -- stronger dollar over the long run.
	January 26 2007 Hunt for the killers.... The most important thing that happened this week was that Howard Hunt died. There is every reason to think that Hunt was involved in the assassination of John Kennedy. The NY Times completely ignored the question in its obituary. Wikipedia is a little more informative. Being amateur conspiracists we think he was in on the kill. These things occupy our minds when there is time to kill and we get bored with saying the same thing week after week: trend intact, and alive and strong and as yet no sign of the sharp reversal we think is inevitable. We think it remains intact because the public (i.e. the pundits, analysts, advisors, hedge funds etc.) expect it to fall apart. As a minor pundit (minor minor?) that's what we think too. As chart analysts we think that long is the way to be. It's really tedious when your gut tells you one thing and the charts tell you another. Chart rules.
	January 19 2007 Life is short, Art is dead... The most important thing that happened this week was that Art Buchwald died. Our favorite thing he said was "I'm not a Democrat or a Republican. I'm against whoever is in power." He shoulda stuck around to satirize this market. Because like it or not it gets farther and farther out on a limb. And it is also a real bull market, against all belief and against Richard Russell and everyone else who thinks. But, then, why shouldn't it be an Alice in Wonderland market? We have an Alice in unreality government and an Alice in fantasy economy and a president in iraqiland. Hey. We never thought we'd miss Reagan and Nixon. And Harding. And Hoover. And Coolidge. And Taft. Come to think of it, these guys are in a great historical karass. John Magee labored at great length in The General Semantics of Wall Street to convince us not to worry about the why of things, but about the what and how. Early American zen masters. So man is an animal which needs to know why, even when the why is invented. It's the economy stupid! Anytime you pump $500B (that they admit to) into a war you done got economic stimulus. Open the money floodgates, Let the super rich off the tax hook, PARTY! Bernanke dropped the first boot the other day when he pointed out the mastadon in the hearing room: It's social security and medicare stupid. So eat drink and be merry and stay long while lightening up. We don't see any signs at the moment saying slippery road ahead. Except that ironically the Democrats could upset the bandwagon by trying to reestablish fiscal responsibility in Washington. No good deed goes unpunished. The charts speak for themselves. Bulls in the indexes, cows in the corn (or at least in the CRB which is sideways-- a mule by any other name). The silver and gold are sideways and the dollar is bouncing off the bottom. Is the end of the world as we know it still at hand? Not while this party is going on. It's been postponed for the moment. And that whistle you hear coming down the tracks? Ignore it. Means nothing.
	January 12 2007 Never one to throw iraqs at wasp nests... But always willing to climb out on a limb and paint ourselves into a corner. Which is what the bulls have on this market. A corner. We suspect however that there is no exit from this corner, and that success is not just around the corner, not here nor in Iraq. Which is our long way of explaining what this hot air balloon is filled with: namely hot money financing the war in Iraq is lifting this balloon. Wait. Is there any metaphor we haven't mixed? If so please send an application to our publisher who will do with it what he does with all our other pleas, exhortations, brilliant ideas, plaints, etc. Fertilize the ocean with it, evidently. What we were trying to say when we wandered into the labyrinth of metaphor was that with hot money in a hot air balloon you just have to stay on board the balloon until it bursts. Well, we'll try to anticipate it, as our recommended strategy has done over the past several months -- lighten up but don't jump off. If we think we see the avalanche starting during the week we will post an email to the group list: http:groups.google.com/group/johnmageeta/about Here we are moving back to take a stereoscopic view of the markets. (There's nothing that can be said about the microscopic view -- it just keeps on keeping on.) From the yellow notes you can see the important trendlines which are so far away from the present price they might as well be in Iraq. Among other considerations being long (even while lightening up) is probably the thing to do right now, considering that everyone in the country is expecting a vicious correction (Motley Fools, 25%). When everybody is expecting something, no matter how smart they are, they have become the public, and the public is on balance wrong about 85% of the time. Dividing 85% by pi we get .... the pi in your eye ratio, which says copper the public's bet. So you think we drank too much at New Years? No, looking at these charts gives us vertigo. The near term trend lines are so steep that they have no practical use. And there has been no downwave on which to base a new trendline. You can, of course always set a money management stop -- say 5 -7 % under the market. We have been racking our brains (what's left of them after New Years) about crashes -- studying some of the great crashes of our experience -- looking for the clue. At the moment we think that a trigger for a crash might be sudden sharp long down days on steadily expanding volume. More on this later. Our letter on the dollar remarked a few weeks ago that the dollar was approaching long (really long) term support. No sooner were the letters out of our computer than the worm turned and started eating shorts alive. We don't think it's the end of the bottom, but it may be the beginning of the.... Is anyone still listening? Didn't the oil speculators hear about the new war in Iran? You would think from this chart that oil was headed for new lows, and, as Damon Runyon and Napoleon said, that's the way to bet. But remember, it's a slippery issue. We wouldn't want to be long OIL as we said earlier. In fact you could be short -- but remember this is a riverboat gambler's game. Of course, King George just tried to go all in on Iraq. Stranger and stranger. Look for our new editorial policy of abusing Democrats. Coming soon.
	January 5 2007 Is this the beginning of the end? Or the end of the beginning? Or the beginning of the ..... Well, whatever. No doubt it's the beginning of the year. The main doubts are about that volume the last day of the year. It is a little too exaggerated to be just year end tax selling. Once again we would be scaling out. Clearly some kind of corner is being turned, or some kind of tipping point is being tipped. Richard Russell also thinks this is a weird market and is due to be corrected -- violently we think. Keynes is in order here: A game of Old Maid is being played and the card is being passed from hand to hand. Woe to the investor holding it when the music ends. A close up of the year end action. Four especially squirrely days. When Motorola can be taken down 8-9% in a day the market is sending you a message, just as the sea sends you a message in the Bermuda Triangle. If we saw down days accelerate on volume next week we would increase our selling. The second low of November is a crucial benchmark. As we previously remarked copper looked to be in a descending triangle (Bermuda as it turned out). For copper this means lower prices and for our readers who took the hint to the wise of being short the metals for trading purposes it's party time. For the economy (US and world) it is an ominous sign. The center of the universe is the U.S. dollar, and it's dead -- only no one has officially told it yet.' — Peter Grandich, Grandich Letter Oops. What is that I see before me, the handle towards my hand? A live dollar? At the very least the dollar making a bottom. Metals, oil, commodities in a downdraft, dollar biting shorts, stocks looking nervous and toppy. As the Chinese say, may you live in interesting times. See above for link to 15 year analysis of the dollar.
	December 22 2006 Ho Ho Ho Santa Analyst is flying the coop until New Years -- unless the Grinch strikes the market, in which case we'll send you a Xmas card toot sweet -- so last letter of the year As can be seen there are still some trend lines to break in the NDX, and the wedge (or whatever) formed here on this excursion out on to the plank is not definitively broken. But the two volume lines Dec 15 and 18 are ominous (i.e., lighten up). Such volume peaks often mark the end of the wave. Some sort of turning point seems to have been reached. The CRB broke. Silver broke. Both either still shorts, or for very long term holders a watching time for a wave low to be made, assuming always that it does not take out a previous crucial low in a decisive way. The horizontal lines under this month's lows, penetrated by 3% would send longs scurrying for cover and reward short term shorts. A strange end to a strange year. Jack Schannep at thedowtheory.com correctly points out the divergence between the industrials and the transportations. Worth listening to. The Dow is placed here so that the reader may compare it directly to last week's chart. Bull trap anyone? The failure to follow through on the breakout nullifies the signal. Bad signals have been the hallmark of these markets. So the game we thought was still on last week may have been a very short one. The only drawback we see to scaling out here is that some phantom profits may be foregone. If this thing falls out of bed those will be very quickly forgotten.
	December 15 2006 Stranger and stranger in paradise... If we were going to be lightening up longs on this minor runaway bull we would be selling less each time, but we would be selling some. Friday the Dow broke out of whatever it was -- consolidation, attempt to form a double top (so much for prognostication) -- on heavy volume which means the game is still on. As you well know the book says you don't liquidate your longs until the trend is proved to have changed (thereby giving away the top). Our tactic of scaling out on strength sometimes results in capturing greater profits, sometimes not. For certain, it reduces risk, and we consider risk to be at a high at this time. We would not be surprised to see half this advance taken back in a week, which could be painful. So even giving up some profits here may be worth it to take some risk off the table. Worth noting that the NDX and the XMI didn't mimic the Dow, so, as usual, signs are mixed. Not mixed however in the metals and dollar. Dollar on a tear, tears in the metals. You will remember that we previously noted that the precious metals were in a down wave, and the dollar recovering off the bottom. Speculators will be long the $ and short the metals. At the moment we remain with our previous comment on the DX -- shooters are already long. As they are in the metals. We will be looking to buy the metals and sell the dollar before long. Readers interested in learning our exact advice can contact us to subscribe to the real time service.
	December 8 2006 So, is it, or ain't it or what is it? Wedge or not, the action in the major indices looks toppy, as we have indicated with the horizontal lines across the last several months. Technically the last low was lower than the previous wave low. By a hair, but by a hair. Interestingly the high in the Dow has not been taken out after the November low, which we thought might have been the signal. Now we think the signal might be a firm break of the horizontal line. At any rate our tactics (maybe it's a strategy -- sometimes it's hard to tell them apart) of maintaining longs while looking for shorts and lightning up as these highs are reached is working. The XMI is showing the same toppy action as the Dow. The comforting thing about this is the clearly defined horizontal line. Would we be out of all longs on a confirmed break? We would certainly be looking at the individual charts and seeing how they related to this broad market action. While ordinarily not fans of covered calls we could certainly see it as a possibly profitable tactic here. In gold traders would have exited on the gap. Trendfollowers would be looking at the wave low in November. Very long term holders of GLD will be yawning. Basically we think the markets are backing and filling here, as indicated by the CRB. A head feint to the upside in May. A downside fake in September. Whether November's breakout is a feint or not is yet to be seen. Anyway, you can't be long after the island reversal at the top in November. A 15 year look at the dollar index is found at DOLLAR INDEX LINK
	December 1 2006 Wedge Issues Interesting formation. What looks like a trading range, and might be a top finished off with a hanging wedge. Mere lucubrations of a deranged technician. Pay no attention. To the lucubrations. Pay close attention to the wedge. At the moment we are watching to see if the pronounced break down from the top is indeed the signal or if it is another false move. A close above the November high would nullify the break, a close below the recent low might be the beginning of the avalanche. Take it one day at a time, with holidays off. Several different lines defining the wedge seem to make sense, and significantly the hard break was across the line. If you want to see something dramatic compare this chart with last week's chart of the dollar index. Quite outside the profit potential of the move the implications for the market and the economy may be dark indeed. Readers, except for new readers, know that we never harp on these opportunities correctly identified. Nor do we go back and crow over past brilliant observations. (Caw caw. Except for buy the dollar at .82 and sell it at 1.30 Euros.) We point out the situation and depend on mature readers to act on it. We have been saying for some time that the markets were swaying on the edge of tipping point. And saying that gold (and oil) would rise again. We pointed out the little Kilroy (H&S) bottom in the gold, the breakout over the fenceline and the pullback (throwback to you E&M purists) to the fenceline. A word to the wise is sufficient. As we were saying (caw caw) we do not crow over our successes, but we will point out that in spite of being bears our advice, BASED ON READING THE CHARTS, has been profitable over the past year. Stay with longs until they have broken trendlines and lighten up at the top and look for some shorts. The shorts thing will soon pay off (already has in the dollar).