What we saw yesterday was a classic set of flat lining around the magic numbers of 000's. The market hovered 7900 to near 8000 until almost 1.30 p.m. This allowed a number of our day traders to trade the February 400C for good profits, several times, on each reaction and move between support and resistance lines. In recent days we've seen more and more higher lows as the day ends, and repeated struggles around 8000.
Each time the market has not dropped to quite the 7700 bottom, meaning this test of November lows could still occur, or we are seeing higher lows. Flat lining is always a sign of strong action to follow. It is a build up period of fear.
We saw it end yesterday in late afternoon trading, holding above the magic 0000', 8000 and hitting highs at resistance lines at 8150.
Follow through today is key to see how much upside can occur before resistance lines block progress.
Shorts may begin to be readying covering their positions. It's a new month, and institutional buyers should be anteing up.
January's finished their weakest January on record, and the Dow's worst in 113 years. The 31% overall decline over the five months was the sharpest since the five months ended December 1937.
Historically stock's performances in January often foretold performance for the year. Gold remains a steady gainer. Oil is at all time lows. These are real facts. Most of our other facts in the U.S. right now are really just conjecture.
It appears the banks have little real money left, and when given money hoard it as they will otherwise be insolvent, or they buy fancy airplanes. What Obama inherits appears to my educated mind as "no one is in charge and the inmates have gone control of the asylum in Washington." We appear often at the end of banking as we know it, having violated so many principles and created opportunities for fraud.
We can see it even in OEX Options. Bernie Madoff used this tool to tell his traders it's where he made the money on his "good pick" stocks, but he never actually traded. But at the same time you can see 100 lot contracts move in popular same month options that build the price up for a short term, and these are sellers of OEX Options, only to be ready on the put side shift, even though the market itself did not shift, only the view of the buying trader for the OEX.
Floydian Soapbox: Now three Democrats have been slammed for not paying their fair share of taxes. They should be slammed. But it asks a key question: how many people cheat?
As a consultant for over 30 years to private businesses I've found few that did not advantage their books to control their taxes, and you've certainly seen it in recent disclosures. Are the tax laws so complex they are either not understood, or understood so well that fraud becomes common?
Is it time for a flat tax?
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