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What a market. Even the most experienced traders that I know are having a difficult time getting a handle on what is happening. Wednesdays market action caught a lot of folk napping. Mondays 216 point drop in the Dow Industrials convinced many that finally the much anticipated market correction had arrived. The slight uptick on Tuesday was a classic VIX buy signal but it turned out to be a trap. Those traders who shorted the market on the 26th were pulverized by the bullish 175 Dow point move on the 27th. What can we make of such whiplash moves? For me, regardless of the economy, the movement of the market is understandable when you assess it through the paradigm of Dow Theory. The market is powering forward because technically it is very strong. This strength was first indicated by the 128 point breakout in the Dow Transports on the second of January. Prior to this the Dow 20 had traded within a trading line for nearly a year. It was perfectly clear to Dow Theory aficionados that the momentum and the direction of any breakout from this range line would be highly significant. The 307 point follow through move on the Dow Industrials on the same day as the Trannies breakout confirmed the trend. With Dow Theory a trend once in place continues until both indices confirm otherwise. Nothing has happened in the last few days to alter this January bull move. Thus the correct trading strategy at the moment is to go long on pullbacks not short potential tops. Dow Industrials: Daily
VIX: Daily
office or management structure. Yet it has managed to achieve the largest vote of any party in the third largest economy in Europe. In essence, the victory of Mr. Grillo is a protest vote against the main parties who have allowed Germany dictate an economic policy that saves the banking elite but grants the youth of Europe a life sentence of unemployment. This youth have called the European Central Banks bluff. It remains to be seen what the next move will be from Frankfurt. Yes it can reiterate Chancellor Merkels plea for continued austerity but to continue to go down this avenue could be social suicide for Europe as a whole. The 64,000 Euro question is can the ECB save the European Union and the Euro? I dont think so. To achieve both would only be possible through the total disregard for the democratic process. Europe went disastrously down the path of negating democracy once before and may try do so again. I hope not. I pray that finally past financial policy errors will be recognized and that a new attempt will soon be made by the Council of Ministers to remake the European Union in its original vision. This vision understood Europe to be a society not just an economy. What Europe needs more than ever are true statesmen or women with the courage to speak the truth and act with conviction. Europe is crying out for politicians of the caliber of Konrad Adenaur or Charles De Gaulle. These former premiers of post-war Germany and France respectively rebuilt their shattered countries through determination, leadership, bravery and integrity. The paths they lead their countries through were tough and arduous but Europeans followed because they were communicated to with honesty and intelligence. This is not happening today. With all due respect to the hardworking Angela Merkel, she is not in Adenaurs or De Gaulles league. Dr. Merkel insists that the whole of southern Europe and Ireland succumb to crippling austerity. However, she has allowed her people forget that the rebirth of a new post-war German nation was only possible because a supportive American Congress forgave German war debt reparations and invested, through the Marshal Plan, nearly 1 trillion dollars (in comparable current GDP terms) into German and European recovery. Thus I fervently hope that the German people choose a new leader in the upcoming national elections. Should they decide otherwise, it will mean Europe could be heading for another half-decade of illogical austerity, social stagnation, media obfuscation and political chaos, Italian style.
Charts: Courtesy of SharpCharts.Com Christopher M. Quigley 1st. March 2013 Wealthbuilder Trade Trigger www.wealthbuilder.ie