One of the buzzwords that you will be hearing in the near future on all of the financial networks will be Quantitative Easing. In the late 1990's and early 2000s the Bank of Japan cut rates to near 0 and flooded the banks with excess liquidity to stave off a deflationary event. A lot of people believe that this is the only course of action that is left for the US Federal Reserve. Ben Bernanke's most famous article, which can be found here:

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.h...

There are times as a trader when it is simply better to sit and do nothing rather than risk capital and try to impose your will on the market. Right now is one of those times. We need to be patient and let the market tell us what it wants to do. We have been in a wedge formation for a number of weeks now and whatever way the market breaks out of the wedge should create an intermediate term move that will be tradable.

Tuesday's 890 point up move is causing a lot of traders to wonder if the ever elusive bottom is finally at hand! My answer to them is a resounding maybe. There are a lot of different things that have to happen before some sort of short term bottom can be officially declared in the indices.

Everyone seems to be asking the same questions these days! Has the market bottomed? Do we need to retest the lows, and if so what happens if we break through them? These are excellent questions to which no one knows the answer. What we can do is look at past bottoms and see if we can obtain a visual picture of what a bottom looks like.

Below is a chart of the 2002-2003 bottom in the S and P. Notice how the market did retest the lows below 80 and then rallied before making a slightly higher low in the beginning of 2003.The market then rallied until 2007.

There are a few sentiment indicators that are pointing to at least a short term bottom in the market very soon. The first indicator is the VIX which is sometimes used an indicator of fear in the marketplace. On 10-6 the VIX hit an intraday high in the mid 50's. That is an extreme level of fear and often will produce a tradeable bottom. (See chart below)

One of the main reasons that investors give their hard earned capital to Hedge Funds to invest for them is that these "wizards of Wall Street" are supposedly smarter and more savvy than other more traditional methods of beating the street. The cost of doing business with the "smartest buys in the room" is usually a 2% annual fee and a 20% commission on whatever profits they make for your account.

As discussed in last week’s Traders Corner it looks like we have
started a Wave 3 correction with the Dow having a 500 and 400 point down day in the same week. As any Elliot Waver worth his salt will tell you Wave 3's are
particularly nasty. However, there is something very sinister lurking out there which in my opinion is not getting the press that it deserves. Please see the link
below:

http://www.ther.com/pdfs/Press%20Release%202008_0916.pdf?scp=2&sq=eric%2...

The people that know me well (and even some who hardly know me at all)
know that I tend to have a pretty strong opinion on most things. So when I was searching for a topic for this week’s Traders’ Corner and couldn't come up with anything I surprised even myself!

Unfortunately, the reason I couldn't come up with a topic is there are so many things happening in the markets right now that its tough to get a grasp on it all!

Summer is usually a time of sideways consolidation, and sometimes correction for the precious metals markets. It looks as though this summer is no exception. Gold has been correcting since it hit $990 an ounce in mid July. When will it be safe to test the waters again in the precious metals arena you may ask?

When you are a full time trader like I am, your close friends and family can be used as a contrary indicator at potential turning points in the market. I have been looking at least for short term bounce in the indexes by the end of this week. I was looking for the VIX to spike into the low 30's and the S and P to drop into the 1210-1215 range. This happened this morning. Coupling that with 2 phone calls from people who asked me about "Financial Armageddon" makes me think that a short term bottom is indeed forthcoming.