Since “Charts are for Idiots”…War is good!

Sorry I didn’t give this out sooner–but it’s not too late!

Guess what? The market is loving the Military Industrial Complex. The next $100 roll will L-3 Communications Holdings, Inc. [[lll]] Currently 91, going to $100, probably higher…

The Fly is not really human because he comes from the future where there are alien/human hybrids. He travels to his rocket ship by way of a space elevator. He is special. The rest of us, dare I say, are only human, especially me.

That said, I wish to first point out a great read from another blogger here at IBC, Chart Addict:

http://ibankcoin.com/chart_addict/2010/02/19/is-technical-analysis-for-idiots/

This story highlights the ongoing battle between technical and fundamental analysis. For years, nobody respected the charts because investors invested. Fundamentals mattered to investors. But that was a long time ago. Now, everyone is a trader, looking to catch the next move, up or down. For that, fundamentals matter little. Support, resistance, supply and demand is what matters–at least over the near term. That is the essence of what a chart is supposed to tell you.

I know about this battle because I helped bring it to the forefront. After the dot com crash, I started a service called “Hybrid Investors” that used both disciplines, merging technical and fundamental analysis, along with other factors, to make informed and low-risk trading and investing descisions. I have since taken my methods to a new service, createcapital.com.

Now, everyone uses the “hybrid” method of analysis. They say that you must use both to be successful in anything past the very near term. And they’re right. Charts are not for idiots, unless you don’t know how to decipher them. So learn!

Yesterday, the FED, in a surprise move, raised the discount rate. They did say since last year that the free money would end March 1st. So they are keeping their word for a change. The FED has been supporting and making a market in everything. They have been acting as the de-facto “specialist” for the capital markets. That cannot last. The handoff between nursing on the teet of the Treasury and standing on its own two feet is the next big risk for the markets. We’ve already had a 9% or so temper tantrum from Wall Street once the political pressure got too hot. The majority of the free money has to end. And so it shall–eventually.

Everyone feared this day. Yet the market opened down and is now up–without the wildness and volatility you may have been expecting. Yesterday I suggested a dip and then a rip. that is exactly what is happening regardless of the news. I would have been happy to get a pullback, but it is not ready to happen at this moment. There will be one soon, so be ready.

We are on our way to SPX 1120 and will get there shortly. Then I will determine if we should lighten up or not. Right now I expect to follow the discipline, but I remain flexible to adapting to the changing market condition and so should you.

Ahhh…The long feared handoff; from a marketplace fed and supported by the FED acting as specialist, to a market that must “find its own funds”. Scary!

The timing of this announcement was certainly a surprise. But Bernanke and other FED heads told us this was coming. The latest comments came yesterday from Plosser–a non-voting member. The end date of FED MBS buying has been widely reported to be March 1st. That free money, trading shitty MBS’s for cash to put into the stock market has ended. (Don’t worry though, banks can still borrow at 1/2% and lend back to the Treasury for now almost 4% for a 10 year note).

Futures are down, about 50 Dow points at of 5:30pm and I bet we open lower anywhere between 50-100 points, and then finish the day up that much.

Gentlemans bet? Wanna bet a sandwich? A nice hot slice of pizza perhaps?

The SPX is sitting right at 1100. It is the midpoint between the markets high and the correction low. A perfect 50% retracement, all made since last week. If the bounceback rally were weak, it may have only bounced to make back about 1/3rd of the loss before going on to make a new range low. Instead, the major indices are overbought and pushing on resistance while bearishness abounds.

I’m not remaining near-term bullish simply becasue market participants are getting bearish. Rather, I believe we need to define the upper portion of our new trading range. Sure, we’re running a flag formation that some may perceive as bearish, but it could also be interpreted as a new and pretty near-term uptrend. Ahh, but there’s that overbought again.

As you know, markets love to ramp when they’re overbought if the path of least resistance is higher. And vice versa. So expect some time to pass–maybe only a few days–of no progress or a pullback to 1080 or so to work off the overbought before moving up and over the 1105 area of resistance. Our target remains the 1120 area.

Maybe we should just forget everything we know about technicals and fundamentals and just do exactly the opposite of what the dollar is doing…Simple, huh? More later…

I am proud to be giving away valuable content to Le Fly’s loving followers. But the majority of my universe, the stock ideas and parameters, as well as the market commentary is found on my site, http://createcapital.com

In addition, you can see all of the pretty charts that will show you exactly what I am seeing. It is worth the price of admission, so visit and give my free trial a spin.

Who knows, maybe I’ll even offer a special subscription to the Fly’s followers in the upcoming weeks and months. They’ll be plenty to come on the CreateCoin blog site, but for now, come and visit for the real deal…

Shameless, I know…