If I Were a Supercomputer

To repeat the obvious, the market is going up. Every point up is an additional dollar in your retirement account. That's our position with our Club.

Now, if I were a supercomputer employed by Goldman Sachs, where would I set my sell programs? It is a rule of thumb that institutions sell into strength, so we know that they are selling behind the scenes. As long as we are gaining, we don't care.

But we have to recognize that supercomputers are being programmed as I type.

So, if I were a supercomputer, where would I set my sell programs?

Here are some thoughts:

1. The move down from 1227 (November 5 high) to 1173 (November 16 low) is 54 points on the S&P 500 Index. Remember that under Elliott Wave theory, up waves have five parts (Wave 1, Wave 2, Wave 3, Wave 4, Wave 5). The move up since November 30 was Wave 1. It was impulsive. It caught everyone by surprise. That is the nature of the beast. Wave 3 is where the real money is made. That's why I told Barbara on December 1 after the close that it was time to buy. If the upcoming Wave 3 up equals the length of Wave 1, then 1221 plus 54 = 1275. I would expect the S&P 500 Index to reach 1275 at a minimum in Wave 3.

2. I would not set my supercomputer at 1275 to sell. Why? Because that would just be the end of Wave 3. Remember that there are Waves 4 and 5 after Wave 3.

3. The final wave, wave 5 higher, should come in after wave 3. Wave 5 should crest higher than wave 3 @ 1275. But where? Look for a natural resistance level. Look for a place where the market has topped out in the past.

4. Fear and Greed come together at the very top of Wave 5. The buying and selling reaches a climax. Remember how psychological round numbers matter? 1290 is a round number above 1275. But I wouldn't set my supercomputer at a round number if I were an institution. I would set it a tad lower to fake out the last people to the party.

5. So, given market conditions @ 12:40 p.m. on Friday, December 3, 2010 and assuming I had the job of programming a sell order for a major institution like Goldman Sachs, I would set my sell order @ 1289, one point below the psychological round number of 1290. 1289.

We'll see what happens.

Enjoy the ride. The market is going up as I type. We in the Thrift Savings Investment Club are making money.

Love out to you, Barbara!

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