10/29 0700:  There was a 2% retracement during the last 15 hours (healthy), and now the stock futures are positive, and gold as well.  Ideally, the easing of the Libor rates continue.  Grains and oil are working higher, helping the reflation theme.  It will take into next week before the standard MT3MM1 rules can replace the gap/island rules. 
So far, ok.  

10/28  0700:  The selling over the last 5 days is drying up.      
The irony of the last eight weeks is that the TAO 2 has  just now  nudged into absolute positive (optimistic) numbers, and stays positive through mid-Nov.  Sometimes the TAO 2 works like that.  somc continues to be on the Buy side.  Asia and Europe have rebounded with buy spikes, and somc will do the same.  It is still probable that we will see a 20-30%+ rebound.
The FED has already done its work. 

10/27  0700: Over the weekend and into tomorrow there are significant astro aspects that favor the Bulls.  Two months I thought that these aspects would facilitate the exhaustion segment of the expected Jul-Oct rally.  Now it may trigger the first sustained (two week+) Bear market rally.  Since Sep none has lasted longer than two days.  The primary risk is now for the sellers, not the buyers. 
    Tues/Wed the FED's FOMC meeting is almost a non-event.  The work of the Central Banks behind the scenes is more important.  So far their actions have not had any noticeable reflation effect.  gld will remain, in somc's view, the key indicator to watch for the emergence of reflation.
    somc asserts than both Buffet's (long term value investing) and Greenspan's (laissez-faire, the companies can manage risk and general welfare without regulation) strategies have run their courses unless one is an Excellent stock picker.
    Protectionism will become a major problem, as countries are forced to fend for themselves.  Global markets, therefore, are likely to oscillate; some will trend trend higher, others lower.  Like companies, some countries will succeed and others fail.

10/24   0700:  The bubble bursting deflationary pressures have been too big, so far, to be contained.  As an optimist, I have maintained hope that the world would have one more round of reflation/inflation.  The damage being done by the deflationary flood now in progress is enormous, and not easily repaired, if reparable at all.  The severe recession (depression) that somc looked for by 2011 is happening now, unless it is stopped.  The Central Banks have tried and failed, so far.  Greed became manic, contagious and all-pervasive.  And that happens in ending all classic manias.  

10/23  0700:  somc macroeconomic perspective. Buy and hold ended in the 1990's as a successful investment strategy.  In mid-1997 the spx first hit 900.  Then the Tech bubble gave way to a bust. Given a 3% inflation rate, that price is now 1210--just to break even, meaning that the spx's effective purchasing power has declined 30+% in the last 10 years.  The 2000 to 2002 sharp decline was the initial phase of a generational Bear Market.  The 2003 to 2007 rally was a Bear market speculative/leveraging/bubble rally.  The 2007 to and/or through 2011 is likely to carry global stocks lower than they are right now, in a serious global recession. The simultaneous losses in the housing, commodity and leveraging markets has moved the effect of the imminent demographic decline to the present time.  Multi-trillions of paper assests have vanished, never to return.  That effect is just now beginning to be felt. 

10/21   0600:  Earnings season has almost been forgotten--some hits and some misses, even with the significantly lowered expectations.  Most important at the moment is the Libor rate.  It has been easing over the last week, and that is critical.  The Libor controls the rate of over 300 trillion dollars of underfunded or unfunded debt throughout the world (dwarfing the US and Central Banks bailout funds).  The Libor rate at present is a direct measure of trust vs fear between banks and clients, and its easing signals more trust and is favorable for the Bear market rally we are experiencing. 
     somc's longer term outlook has forecast global deflation entrenched by 2011, with local scarcity and currency devaluations pressuring prices in individual countries (possible local hyperinflation--the yin and the yang at extremes can flip, like dry ice feeling hot to the touch).  The demographics of the leading nations of the world are decidedly deflationary; the US, Europe, Japan, Russia, and a few years later even China, are aging.  Their peak purchasing/spending power is now, and not to be seen again for many years.  Increasingly there will be two classes: the working poor versus those with an abundance of assets.  somc maintains that the Central banks can reflate one more time.  If they are successful it will not create a boom, just prevent a bust, for awhile--it will buy time.... somc will comment more on this later in another section.
    When the first stimulus package was introduced, somc wrote that it would have no immediate noticeable effect.  The same applies to the second, if/when it is passed.  They both add debt, without fundamental impact.  And what is even a few trillion versus 300 trillion...

10/5   0900:  While volatility has short-term trading potential, it wreaks havoc in somc's attempt to establish a longer term position.  The oldest TAO model forecast a weak Sep and rising Oct for the stock market.  That gives me pause for thought. 
It may be too late to prevent a worldwide recession/depression.  The way solvency will likely be restored to the world's credit markets is through continued and expanded nationalization & socialization of previously private companies. Blame abounds.  This is the first time in history when global economics are so intertwined and so massive that no workable solution is available.  The bailout from the US will not be enough.  Europe is in disarray.  Asia, being export dependent, is in severe contraction.  Across the globe, implosion is the first word that comes to mind.  Panics are panics.  Sometimes the hole in the ship is too big to contain, and it sinks...

10/3   0650:  After over-performance in Sep & Q3, the recent days, although painful, are normal.  Before somc transitions into a more eco-friendly site, it will complete the current sequence of trades.  While a "crash" may occur, it is not likely.  Most of the models still favor the long side.  The jobs report comes out soon, and somc will use the futures reaction as a key for this am.  There was significant buying near and on the close yesterday, especially as buy imbalances developed in GE--hence the exit at the end of trading 10/2.  The somc  bias, although grossly incorrect over the last month, is still bullish.

10/2  0615:  Phase one of the bailout completed...or is it "rescue with fescue"...Futures are slightly negative; if today treads water and goes nowhere, it is technically healthy, even into and through Friday.  No change likely until past 1000 today.  As in Manias, Panics, and Crashes by Charles Kindleberger, in this crisis, there must be a lender of last resort, and the US Government is the only agency in the whole world at the moment that can fill that role--pleasant or not pleasant doesn't matter.  "Tiptoe through the Tulips (manias)" as Tiny Tim sang many years ago...

10/1  0715:  The collapse of credit worldwide over the last few days and weeks has been amazing.  Even Bank of America is refusing to lend to McDonalds--one of the healthiest franchises in the world.  Their best java is combined with some bitterroot this am.  The legislation before the US Congress now has many of the token awards that tend to be granted in US election years.  Everett Dirksen's phrase on Congressional spending has been left in the dust; now it's, "One hundred billion here, and one hundred billion there, and pretty soon you're talking about some real money..."
   The buy gap is almost set up; the last task is choosing a low risk entry point.  Futures are lower, and that is a positive for entry, and the gap rules.

9/30   1310:  So far the buy gap is setting up.  At current levels is the initial overhead resistance.  In 1999 the repeal of the 1933 Glass-Steagall Act was effected, and we are now living through the consequences of unfettered greed.  What was once perceived as a financial straight-jacket (regulation) is now becoming a lifeboat.  McCain yesterday proclaimed in his statement before the vote that his actions had helped assure its passage...reminds me of "Dewey Defeats Truman"...  

9/29  0730:  Nouriel Roubini represents my current market views closely--essentially negative on the bailout and the economy going into 2009. 

9/27   1400:  After a month of trying, it finally happened--the conversion of the trading models in to the MT3MM1.  For the last month, mainly the hourly models had been used; nothing else seemed to last long.  Until the end of October, somc can leverage long, because that is favored by the TAO 3.  The TAO 3 is similar to, yet more accurate than the TAO 2, which is published freely on this site.  
    The MT3MM1 model uses 3 arithmetic moving averages, variable relative to volatility.  It also incorporates a momentum factor, and, when applicable, a Local High/Local Low (LHLL) factor.  When the LHLL held long midday on Friday, the MT3MM1 converted to being Bullish, and the leveraged buys were given.  If and as this rally extends, the MA's can expand to the 16dama (16 day arithmetic moving average) from its current 4dama basis.  The momentum factor is derived from exponential ma's.  These are all mathematically combined into one function, that is either rising or falling, and either within normal parameters or toward extremes.  It is transitioning from an oversold extreme into normal Bullishness.
        The world financial crisis brings to mind the old Chinese curse: "May you be born in interesting times."...  Or a variation on an old Taoist aphorism:  "Trading is easy--just flow like water."...

9/26  0730: A  possible conversion of last week's buy gap is no more.  Most of the rallies since July have had distinct bear market characteristics: sharp & quick & transient.
The TAO 2 conintues to be a hindrance during this period of time.  somc has attempted to be very careful, since it is a difficult trading period, and almost impossible investing time.  September, true to form, is now, like the past, the worst month for stock prices...sooner or later, a bailout (remember when, just a few months ago when somc and a few others were willing to use the word freely, and Bernacke/Paulson/Bush weren't) will happen.  Who goes under in the meantime is anybody's guess...

9/25  0700:  Last weeks gap buys still can be validated--they haven't been yet.  If the current futures activity (higher stocks), then validation of the MT3MM1 buys might occur today.  

9/24   0730:  The newer version of an old musical group is being formed: the BG'S, only its now the B'GS--Buffett, Goldman Sachs...so it's going.  There are great values out there for investors who still have cash left.  No change in positions from yesterday's 1300 buy; better values were available by the end of the trading day.  In futures, everything I watch (20+ commodities) is higher, except the USD--normalization.  Bonds retreated to support on 9/22-23.  For stocks, gold, agricultures, metals, etc., reflation out of the current crisis is likely.  The TAO 2 has had a period of non-correlation for over a month now.  The odds favor it re-synchronizing with stocks, and maybe the long, long anticipated 10-20% stock rally materializing before the US elections.  As was written in April--Obama/Biden are elected.


9/220 730: Matt Blackman's tradesystemguru.com, sign up for free, and look at this week's newsletter, that features the quotes from Jim Grant and Jim Chanos on the recent historic interventions.

9/21   0900:    The next two weeks are viewed as treacherous--easier to lose money than earn it.  Ideally, the markets trend higher, and the MT3MM1 models, that are right now bullish on the gap rules, convert into daily data parameters.  It's been a long, hard wait, but so far worth it.  I was long on the Friday preceding Black Monday in 1987, and did not have the trading experience to reverse short after the market proceded to break lower through the gap low opening prices.  It took me at least 10 years to digest that trading experience.  It was very helpful in navigating the waters last week.  Primarily, somc expects great choppiness=few low risk opportunities.  My primary objective prior to posting any and every given trade is to assess risk, and a predetermined exit point.  Over time, that discipline tends to result in the statisitics posted on the right, especially the Power Ratio.  Losses are ok, as long as they are controlled small losses.  Frequent larger gains offset less frequent smaller losses.  At the end of every year, somc deducts 10% from the trading results to compensate for slippage.  This was done at the end of 2006 & 2007 and will also be done on 12/31/08.  In the end, risk management and discipline are THE two critical factors.  Many "systems" work; few traders are effective over time at implementing them.  

9/19  0900: Longer term: It is certain the US cannot fund its current liabilities with current USDs.  It is very likely that the US will pay its debts.  Therefore, the US will pay its debts with less valued USDs=continued devaluation of the USD.  Critical during this process is where to hold funds that will appreciate relative to the USD decline.  My initial instinct is Canada.
So far today,...a relief rally.

9/19  0620:  Sometimes patience and persistence are important.  For the global equity markets, yin in its extreme (fear/panic/desparation), turned into yang (courage/action/confidence), and the long expected rally has begun to materialize.  The buy gap rules referred to over the last few days still are in effect, with a daily confirmation expected today.  The liquidity being poured into the markets is unprecedented, and eventually will lead to an acceleration of global inflation, and a depreciation of the USD (the increased debt load from bailouts, among other factors).  Jim Grant, yesterday on Bloomberg (with the other Jim), both agreed with the statement, "The US has practised Capitalism on the way up, and Socialism on the way down--a dangerous combination.  The scandal being foisted on the US and global markets by the financial heads, earning 7 and 8 figures, of the top firms is of the first order..."
I agree.  However, trading does continue, and the current somc positions are being helped by the overnight futures activity...there is likely much further to go, with gld likely to be replaced with oil, or something similar.

9/18  1400: Although it would have been better to leverage early, the risk was too high.  At around 1200 cdt, huge buying began, with gaps up almost across the board.  When iyt and efa held for an hour, somc began looking to buy...and  V bottoms show no mercy, and they take a bit of courage.  Enjoy.
1350: iyt held both July and last weeks lows...
also, efa (global large corp.s) very strong today
1105: far too much risk...close, not quite...
0950: declines today likely used to leverage,  the current positions are Sectors 1 & 2 vs 3
0900: possible that ewc and/or iyt reverse/change

9/18  0730:  The daily gap model (buy gap) is still valid.  The intraday models had too much risk to hold late in the day, however, if you held long, the mornings open will be higher, with a high probability of a positive close today.  The risk favors the long side.  The daily gap favors the long side.   The  VIX is distinctly Bullish.  And the TAO 2 favors buying (...I've said that for a month now...sooner or later...).  The SEC and Cox are tightening the loose nuts on the leaky ship.  Expect buy signals this am, (maybe selling gld) with the intention of holding more than a few days. 

One another note:  a technical clue--when the vix is high, shorter time frame technical studies are used; when the vix is very low, even weekly data becomes dominant.  Although a global depression with the next four years is inevitable, the somc assessment is that it is not yet.  As somc wrote more than a year ago, the 4-yr Presidential cycle is extinct, overwhelmed by demographics and debt, and exacerbated by global scarcity.

9/17   0720:  The gap rules for the daily data MT2MM1 are specific and happened to be met yesterday.  It only happens a few times a year in the ETF's that somc tracks.  There is considerable leeway today, yet these trades need to convert into dialy trades within a trading week to remain valid.  Nationalization/socailization trend continues in the US--now with AIG.  Russia's markets are frozen, while at the same time they want to camp out  over the Arctic.  The general market risk (vix) is still high.  US Net foreign purchases in July were almost negative.  The FED chose a middle road.  Futures are negative, and normalizing after yesterday's spike.  We are living during unprecedented financial times. 

9/16  1230: If there is a sell-off in stocks following the Fed decision, it can go down to the 1179 level for the spx and still be valid.  With that in mind, the trading can be quick following the announcement...

9/16   0600:  September remains true to historical cycles form, lower stock prices. 

9/15   1700:  A critical local low was broken during the trading day, and that began the sell parameters.   On the political front, maybe there is some comfort in today's McCain statement: "We have a strong economy..."; and what planet is that on, Mr. McCain?...

9/15   0730:  Today probably marks the beginning of the end for all investment banks.  The mortgage and credit meltdown to they engineered has come to collapse upon them. Merrill-Lynch is now B of A, Lehman no longer exists, and the Treasury Dept. and FED have now said "no more" to bailouts. (at least for awhile--a lender of last resort is needed in this crisis, and both the FED and ECB are it).  The weekend events were also serious for the global markets.  Many are in the middle of their own panic.  As for market psychology, the TAO 2 is currently contrary to the market's action.  The Quick TAO 2 is bullish; the Slow TAO is Bearish, and has been since last October.  Going into the open somc holds its long positions, probably looking for an exit.  The RISK has been, still is, and will remain high. 

9/12   0720:  The astro, as I wrote yesterday, which was positive on 9/11, is now negative for today.

9/9  1430:  The scary part is not the volatility of the last few days.  It is Bears Stearns, then Fannie and Freddie, maybe now Lehman, increasing global defaults, and it all hints of unstopped global Deflation.  Not even gld is enjoying any bounce.  The current global recession is ongoing.  The central bank interventions in the world have helped to slow it down, not stop it.  I expected global deflation to become dominate in 2010-11.  The first taste is coming now.  Expect more global/FED interventions soon.  Remember, we have US Great Depression expert=Helicopter Ben as the Pilot of the largest central bank in the world...even scarier...

9/8   0750:  The nationalization of Fannie/Freddie is almost complete now.  The futures like it--up 2+%.  It will add several thousand dollars to every US citizen's national debt's percentage.  So, it is, once again, a policy of "enjoy now, pay later" (later and larger)...but no matter.  First Bear Stearns, now F/F, what next? 

9/3   1930:   There remains a 6+ week window of opportunity for higher global stock prices prior to the expected inevitable re-flation.....SOMC is still looking for a 10+% rally from current levels in the  major indices. 

8/29   0730:  My main concern during these last two weeks is the underperformance of the markets relative to the TAO 2.  The technicals, although gradually working into more positive levels, can turn on a moment's notice now.  The VIX can easily rally to more fearful levels, overwhelming the TAO 2, and precipitating more selling to new lows.

8/27   0740:  Durables were favorable, as is Gustav currently.  The three days prior to a US holiday still tend to be positive.  I am going to add the cycles page that used to be a part of the old newsletter, as I met with a publicist yesterday who suggested that it would be helpful, and that he missed it.  Meanwhile, after the Durable Goods numbers, the futures are strengthening. 

8/25   0730:  The last few of the lingering negative aspects affecting the TAO 2 move on this week.  The hurricane forming in the Caribbean is likely to be a major one, affecting  insurance companies, possibly oil/gas, and minor, if not insignificant, for the general markets of the world.   Obama/Biden will be elected.

8/22   0800:  Yesterday may have been the last day of the extended retest of the July lows.  Europe and Asia were weaker than the US, making new lower lows.  The US confronted its bank/real estate/debt problems more quickly.  The difficulties are not nearly over, and will be extended well into 2009.

8/20  0720:  The risk is high; however, if the markets can sustain the higher open (successfully test the unchanged level), then the risk will be reduced.  The rising 12/16's are still intact, except for the nyse and foreign markets, hence the risk.  

8/18   0750:   Hurricane Fay will likely be a Neptune/Node Flood event, post-eclipse. The TAO 2  is rising. 

8/11   1100:  My work with David Cochrane is moving ahead rapidly, and will become the primary focus of SOMC until further noted.  Trading is now reduced to secondary or tertiary status (the nya is holding above 8460, for now--positive for the Bulls).  The programming and publishing the TAO 2 is on track to be finished this fall, advancing this project into the mathematical and scientific realms.

8/5   0745:  The planetary aspects do not accelerate optimism until past the middle of this month.  The exits are cautionary; risk has increased; SOMC still expects higher market prices into October.

7/30   0800:  As the TAO's move higher, bullish news tends to occur more frequently, and negative news tends to be ignored.  Optimism returns, gradually.  Two weeks ago, the first rally was a thrust, but premature.  Now, the longer MACD's have a rising double-bottom, across Sector 1 & 2 ETF's, and this has higher probabilities.  gld and tip move opposite, usually.  

7/29   1130: The Aug 1 eclipse carries few major risks.

7/25     0630:  The TAO's are still in fearful zones (below zero), yet trending optimistically (rising).

7/16/08   0650:  Over a year ago I wrote about the institution of the unlimited short-selling rule, and its negative impact during the next Bear market.  We're here, now.  And yesterday they eliminated it on Fannie and Freddie.

7/14/08  0800:   SOMC has been looking for a "bone" to be thrown to the markets in July for over three months now.  Over the weekend, it happened.  Both Bernacke and Paulson more or less "guaranteed" Fannie and Freddie. SOMC will likely be in bullish mode sometime today.  I expect a rapid ascent into October, with a 50/50+ probability of seeing positive returns for the year in the major global indices. All three TAO's are bottoming now.  The glass will shift from half-empty to half-full rapidly.  Pessimism will transform into optimism. Today is just the beginning.   Statistically, this is the general time frame to look to buy.  Futures look favorable for the SOMC positions.