It's Precisely WhenYour Charts Don't Make Any Sense....

That's what I've noticed about big reversals, nothing makes sense vs. my chart. Everyone is bullish and my chart is bearish or the other way around and you just can't justify it; that' when I've seen the most significant turns in the market. And single discrepancy, without fail could not be explained at the time; only days, weeks, or months later.

The market is LARGELY about sentiment and creating sentiment. Fundamentals compared to sentiment, it's not even a comparison worth making. In addition, as I have shown you, even by our simple call for the September run, Wall Street controls the swings in the market and they control the sentiment. Look at last Friday's rally, the “Tepper Rally”. Last night I said the timing and the medium in which his comments were made, were NOT coincidence.

Today we had John Paulson making the case for stocks and ironically after my afternoon post on gold, it turns out that apparently 80% of his assets are in some form of gold denomination. Who's it going to be tomorrow? Friday Tepper, Monday Paulson, you see a pattern emerging here? These guys are out there telling you how to become rich like them because.....?

And by the way, here's a 3C chart of GLD and exactly why I WILL NOT buy into this gold frenzy. I wonder how much of Paulson's assets are in gold denominated assets today?

Speaking of patterns, how about these patterns?

Two nearly identical Head and Shoulders tops

Note the custom indicator I made for you that cummulates volume so you can see the volume trend more clearly. What's happening on these tops? What's the difference between these tops, 1 of which already broke and the perceived H&S top many were fooled by in Q2 2009? It's right there on the chart in the volume. One of the many problems with Technical Analysis is everyone's search for the “Easy indicator” , the “Holy Grail” and they forget the second most important indicator you could ever put on a chart.... volume. The volume on the last two tops, unlike the volume of the perceived H&S Q2 2009 top, confirms the H&S patterns, Q2 2009's volume DID NOT confirm, but people see the price pattern which was random and call it a top. It's pure laziness.  The chart above shows volume is shallow on the rallies and increases on the declines. A Head and Shoulders top or bottom is not just a price pattern, VOLUME MUST CONFIRM and we have confirmation now, just like we did on the 2007 top.

Here 3C is showing immense distribution into the top. This is a leading negative divergence and it's worse then the 2007 top.

While we're on the topic of patterns, there have been a lot of patterns emerging lately. I told you last week about the disproportionate number of insider sales vs. buys. Last week there was $1.4 million dollars of shares bought in 7 companies. Compare that to the $441 million dollars of insider sales in 91 companies; a ration of 290 shares sold for every 1 bought. The week before there were only $332 million in shares sold, but the ratio of sales to buys was 650:1 ! This week Bloomberg reports that we had a total dollar volume of insider sales of $417,595,727.00 in insider sales compared to insider buying in 3 companies totaling $295,921.00-just over a quarter of a million dollars vs over $417 MILLION dollars in sales. The ratio this week, 1400:1 ! How's that for a trend?

Above is ORCL's 3C chart for the week-the red trendline (not the arrow) shows the average price the shares wee sold.

Contrast that with this week's biggest buyer, DELL. Dell bought 16,090 shares @ an average of $12.42 for a total of $199,917 they other two together totaled $96,004 vs. $417,595,727 of insider selling!

Granted, there are a lot of reasons insiders sell, but there's one reason they DO NOT SELL, they do not sell because they think their stock is going significantly higher!

Some other trends... Cash in Mutual Funds in 2000, the year of the Tech crash was 4%, at the top of the last bull market in 2007, 3.5% and right now, 3.4% and that number is expected to be less when the official new report comes out in a few days. We're already at a RECORD LOW.

Purchases in JUNK bonds are at a 10 year high. By the way, the record setting JUNK bond auction I mentioned several weeks back, do you remember what most of the companies did with the proceeds? They used them to pay special dividends. Of the companies mentioned in the article, I don't recall one that used the money to restructure or to do anything with the money to streamline or make the company more competitive. So what happens when all these companies have no choice but to default on the debt? If they can't even pay dividends, how will they repay the bonds? There's an implosion just ticking away as people and pension funds flee the market and chase yields.

I mentioned how sentiment moves markets, it's also used against you. In August bearish sentiment was very high as the short interest increased, and what happened? During this horrific decline this little space on the internetCNBC was talking about how, “This time it's different”, “housing prices are going to continue to rise”, “We're headed for Dow 20,000!”. Much like our now daily commentary from the likes of Tepper and Paulson. "This time it's different", the Fed and their POMO won't let the market fall and the thing of it is, it's believable, it's rational, it makes sense. Ask yourself though, what did the stimulus package due for the economy? After all they boasted about, what did it really due? It gave us ONE quarter of GDP at 5%. We need 3 consecutive quarters of 5% GDP just to bring the unemployment rate down by ONE percentage point. And ever since Q4 2009 when we hit 5% (which was revised down, another building trend of releasing better numbers and revising them down weeks or months later) we've seen GDP falling off a cliff. Unemployment is trending upward recently. They threw everything at this economy for 1 quarter of 5% GDP?

The trend right now is front running the POMO. How long do you think the market is going to let that obvious trend continue before they flip these easy money riders on their heads?

The churning we've seen in the market, I noted the other night that typically churning is a sign of a downside reversal, but guess what? In a market with few participants, certain entities are making up their own games to make money-almost out of thin air... READ THIS.

I've already commented on the Black-Box trading systems looking for obvious patterns to manipulate and we saw it what, 3-4-5 times today in one stock alone? I estimated 80% of patterns will fail, I truly feel like it's closer to 95% and then we hear about these Black-Boxes meant to due exactly that. Pay attention to the market, everything you need to know is on the chart.

This market in manipulated from every direction, you need to be paranoid about what you hear and see. Almost everything short term is a deception. Look at today's trading action breaking to new highs to steam roll the longs that bought it in an afternoon sell off. Do you still believe Tepper and Jones are out there for your good? What did I say, 80% of Jones' assets were gold denominated and he's pushing gold on CNBC....

Again, the 3C GLD chart...

It sure looks like someone is using this rally to sell off their GLD positions.

I can't connect all the dots, I doubt I'd be able to even create a flow chart that big (it would probably look like the wiring schematic for a Boeing 747), but there are some very obvious discrepancies, contradictions and counter-intuitive trends that have in the past preceded massive declines. How, Where, When? I can't answer.

The action in GLD right now looks just like the top of the oil run, the H&S top right now is proportional to the advance and looks a whole lot like the last decline which cut the market in half. I'm not a fan of Elliot Wave Theory, but Robert Pretcher has had some impressive calls and he's now calling for Dow $1,000 -no, I didn't forget a zero or misplace a comma-one thousand! Before the top in 2007 came crashing down I did a lot of analysis and made a 5 part video series, it was some time ago but I believe I had figured by the price patterns and historical tops, that we were looking at a Dow target in the $5,000 area.

None of this is making sense right now and I've found when 3C look like this and nothing seems to make sense, I'm better off ignoring everything but the chart.

I'm not going to try to reason myself into confidence. I've seen enough charts, enough breadth readings, I've heard enough from the pundits, I've seen the underlying trend so I'm going to patiently wait for what the chart is saying, not what Jones is saying, unless I have an objective reason to change my stance.

Here's some AAPL for you since it's been the market's Patron Saint of Bullishness. Take a look at the daily trend, looks a whole lot like program trading.

AAPL 1-minute chart. Red arrows are distribution, white arrows are accumulation-nearly every turn is called.

AAPL 30 min chart

Today's intraday action.

See you in the a.m.