Markets "game on" for another week as Hindenburg Omen and other strange cautionary signs mount

Just because we're extra alert for strange signs doesn't mean these aren't strange times! The stock market has struggled mightily as the Dow dropped a Fibonacci 144 yesterday, after it rose that amount in one day last week, and has bounced like a pogo stick - or bungee cord - for weeks now, without managing a new high. Breadth indicators sounded a Hindenburg Omen a couple days ago that's making the buzz among market analysts (and discussed in articles I referenced at my UBTNB3 blog, see links at right). That's one sign that something bearish is looming. Today the S&P 500 index ($SPX) tested and got support from the area around 1060/1065, starting what should be a rally into August 26 or 31. Some may even see a basis for upward into Labor Day with the new month-new money syndrome that isn't uncommon. Before we discuss it more, check out a very curious phenomenon that was picked up and re-tweeted by MrTopStep (at the CME):

mrtopstep RT @Eubiquitous 8/20/10 SPY (LONG) $106.75 & (SHORT) TLT (30YR) $106.75 got to the same price..COULD BE THE BEST CONVERGE TRADE YOU"VE SEEN

Eerie ... and an awesome trade, worked great for a profitable afternoon and hopefully to last a few more days for a short swing! Who woulda thunk it, the same number 106.75 being the perfect short for TLT as it hit a (bullish) head & shoulders target there, while that number marked where the SPY stood as ETF for the SPX marking a low in that 1060/1065 vicinity!

But let's get real. We've got so many reasons to expect the bear market to resume after August 26 or 31 that we mustn't get wedded to long positions now. Just swing, then sell equities into strength next week and maybe some trading days afterward. Then it's down through probably October. While Treasuries and TLT will be in a bull market for a while longer after the temporary pullback. Terry Laundry even projects Treasury bonds won't peak for another 10 or 12 months - so maybe we won't get the next big low in stocks until then, we'll see!

For a pullback in TLT, if it gets under $103 then it could settle down to test chart support as low as $96 to $98 before swinging back up again. As for the stock market, I'm not expecting above the 200-day moving average but if it gets frothy then we could even see up to 1130+. People may start talking about a bullish head & shoulders pattern but don't buy into that idea. Our Year 2010 plan based on the Presidential Cycle, and Raymond Merriman's projections, and T Theory (Tm of Terry Laundry), and possibly the Fibonacci-Benner cycle, has expected a very significant high in August and we're not going to walk away from that concept. Besides, there's a mid-term election coming up in November - if that isn't enough to spook the markets into October, then people are too far outta touch!