And the way gold is acting in here, I believe we may see gold prices moving down further and the S&P500 along with the FX (euro currency) moving higher.

In regards to the intra-day trades, we may see a burst of buying in the S&P around the 2:30pm key time. I think we could see price push up to the 1080 area, which if that does occur that would be bullish in my opinion and could set up the market for the relief rally I have been talking about (in the S&P/Equities).

Today’s action is certainly encouraging, and the market is certainly OS. A relief rally is highly likely here.

Notice the dollar doing exactly like we would expect, moving lower, while the gold moves lower too (unusual, but it is what we expected). Also, the FX is moving higher along with other currencies such as the SF, which may also experience a relief rally following the breakout on the upside there.

I am working the long side of the S&P (ES) in here, short side in Gold, and long side of various individual stocks.

This action is very constructive for the market here, and indicates we may indeed be carving out a bottom here. I would look to buy the S&P (ES as well as SSO) now on pull-backs, and you could also look to sell short gold via a higher risk entry on an IMPA sell (an early entry). In the S&P I am looking for a relief rally only at this point. In the Gold I am looking for a potential reversal and decline to the 200dma.

In the case of the FX, we are bouncing higher with stocks higher, and the FX has been the only market recently OS on both the daily and weekly detrended analysis and its an IMPA triggered buy selection as well (excellent conditions here for the higher risk “early bird” buy). This is a rare event and one worth noting (now and in the future, as it is a very useful tool).

I never thought it was due to that either. In fact, I mentioned this in my reports as well. In my opinion this was a ridiculous explanation. The fact is, we can’t find any one single event to pin the cause on (the so called smoking gun). But there is always a “cause and effect” relationship. So what was the cause?

As I was saying my recent reports, computers and computer programs do exactly as programmed, and that’s all they do. In this case, these same systems that we all rely on were in my opinion the main culprit (cause) of last week’s sudden sell off (into a black hole as I have used as an analogy). The black hole itself occurred due to multiple and unusual economic sensitive events.

The electronic systems and computers did not steer the market around the black hole however, rather they steered directly into the heart of the back hole!

And that’s why the markets sold off as they did.

Computers and computer programs can not think or reason like a real person, and sometimes you need a real person that can reason through an unusual event or condition. I believe this is the main thing we will learn from this. That is, you can not always depend on computers (electronic exchanges and electronic trading programs). Sometimes a person or persons with knowledge and understanding is needed. Just like in airplanes. Autopilot can’t do everything. If something extremely unusual occurs, the pilot will have to take over and manually fly the aircraft.