Last week, we experienced an extremely oversold market that led to a classic capitulation as our global financial system shook to its core. This was telegraphed by very high “new lows” readings, high “down-volume to up-volume ratio” readings, and also very high VXO and VXN readings (based on our Sigma Channels patterns). Sunday marks the Fall Equinox. As I have written every year, within +/- 2 days, Fall Equinox often marks a key reversal for the markets—in this case, mostly likely to the upside.
Comrade Paulson (who was just awarded his second Order of Lenin Medal for his Thursday Night Massacre of Net Short Hedge Funds) and Uncle Ben timed the US Government's $700+ Billion taxpayer (read: poor) bailout of our investment banks (read: super rich) extremely well—just hours ahead of expirations of September Equity Index Futures and European-style Equity Index Options. (Seriously, I consider this a brilliant move that truly did save the integrity of our equity and credit markets and, perhaps, Capitalism as well, from a meltdown).
For the next two weeks, we suggest that you stay the course and keep your longs in tact. We expect a "local" peak around Oct 2nd / 3rd and a "local" trough by Election time (Nov 4th).