The overnight drop could be seen as CD leg of a KZ ABCD right to the lower ML of our upsloping set:

Followed by a snappy little drop as the new high is hit and the pit session gets ready to close.

Keeping in mind that the KT methodology does no predicting, it's just not a part of what it does, nor is it necessary for trading, I still want to make a few 'pronouncements' for the New Year. I do this for fun, because everyone out there seems to do it. These are personal Jim 'pronouncements', and have zero to do with the methodology. Recall I said I thought the ES really wanted to get to 1330, preferably by year end. Maybe it still wants that 1330, but they did absolutely zero with the ES into the year end, except perhaps grind it slightly higher. They seem solely focused on the comms right now. So, I had an idea, and it didn't come to pass. Many things I look out for don't happen. Many, it seems, do.

So, for 2011, here's a few things I am expecting. I think crude will go over $200. I think pump gas will go over $5, more likely $6 per gallon. I think gold will go substantially over $2,000. I think it will be the year of the commodities. This will likely cause Bern-psycho to do a lot more QE. I suspect the stock market will rise rapidly, but, priced in gold or adjusted for realistic middle class inflation, will be down substantially. For example, priced in gold, the S&P is down 15% (or was it 18%?) on the year. Rising price, less buying power, as I said before.

Keep in mind, the top 10% of the wealthy own 98.5% of all stocks, bonds, nonresidential real estate, and so on. Who benefits from a rising stock market? The insiders have been selling in huge, huge disproportionate quantities non-stop since the Mar '09 low (why is that?), and retail has been selling for 33 straight weeks (to pay bills) since the flash crash. They finally just showed a net inflow week. Is retail about to get sucked back in for the final crush of their remaining 'wealth'?

I don't think this system can last much longer, but it may be 2012 or 2013 before it gives way. Or they may just keep printing and the middle class suffers more and more but the system doesn't collapse for awhile. Here's the problem with the idea that the Fed may print and print and print, and it just keeps going. The problem with the problem is, there's a way around it, perhaps (or, perhaps not...). When you read this it will blow your mind.

What the average person doesn't know is that the Fed is only a 1% rise from here away from being totally insolvent. The losses on what they hold will completely wipe them out if rates rise 1% from here. This is something the market could demand literally overnight (look how fast long rates went up 1% recently, and that was with no bad news at all), if the vigilantes tire of this game. Imagine the Fed insolvent, just like the big banks. The 'problem with the problem' is that if they were insolvent, wouldn't they just deny it, like all the big banks??? Read on.

Understand, the big banks hide that they are insolvent because the Fed reliquifies them. Who will reliquify the Fed if they are insolvent? They can't print more to reliquify themselves, that's not possible. No one else is near big enough to inject say $10 trillion. All our 'money' (it's not 'money' at all) is Federal Reserve Notes. If the Fed is insolvent, what is the value of our money? You guessed it, zero. We live day to day with all our money, what we worked our entire lives for, hanging on the hope that rates don't go up 1%, or all our money goes to zero.

Is anyone getting this? Is it possible that pump gas could be $10/gallon, oil at $300/barrel, gold at $2000 or $3000/oz, and rates not rise 1%? I don't see it. And if the economy does recover like everyone wants, and they say that it already is, rates would rise. No strong economy has ever had super-low rates. It doesn't make sense. So, if the Fed says they want the economy to get strong, that would push them into insolvency. So, they can't possibly want the economy to get better, or they are doomed.

If you think they will offload all their assets on their balance sheet as the economy strengthens, to reduce all that exposure and risk, well, they can't, because if they sell MBS and treasuries the prices will drop and rates will rise. The more they sell the faster rates rise. They can't sell fast enough to save themselves. And the selling they would do would cause other holders to panic and sell, worsening the problem. We live with this every day, and the buying power of our life savings depends on this game.

This game was only designed to help the super-rich off load things and get positioned for the ultimate collapse, in my opinion. But they sell it as something to save the average man. And in the meantime they feed the average man food stamps and over two years of unemployment, so they keep going, while the 'final solution' is put into place. This may all seem overly dramatic, but when the middle class is finally totally eradicated, please think back to what I said, before it all unfolded...

Happy New Year!

Look at that ES finish!!! Drops like on rock on volume, they come right in for it, and they gun it up on massive volume to take out the key downtrendling TL, the HOD, the GLOBEX high, yesterday's high, and the previous GLOBEX session, all in one shot, to close it on the high tick! And they do all that with a total range for the day, including GLOBEX, of just 8.25 points!