Today can be called a "Gap and Crap" day. The market gaps up in the morning, it fills the gap, and closes below the previous day's close. This action is considered extremely Bearish.
I'll post my favorite count as of today's close. This is the combination pattern I have expected. It has just burned more time than I was projecting. Very few bulls have shown up in this sideways pattern. Any move over 1135 and I am wrong. The last little section of "E" tomorrow is hard to determine. I know anything below 1105 is a hard sell. We could easily fail over night, at the open, midday, or even at the close.
I'll post my favorite count as of today's close. This is the combination pattern I have expected. It has just burned more time than I was projecting. Very few bulls have shown up in this sideways pattern. Any move over 1135 and I am wrong. The last little section of "E" tomorrow is hard to determine. I know anything below 1105 is a hard sell. We could easily fail over night, at the open, midday, or even at the close.
The count matches my expectations and my favorite indicators.
The S&P futures are currently having a near impossible time taking back their 1.5 year trendline. aka Big Red
The 800 pound Gorilla in the room is the FX market. Aka Fiat Currency trading. The swings in the world's currencies right now are astronomical. This last weekends news included China unpegging their Yaun to the US Dollar, short covering on the Euro at an all time high, and the Swiss deciding that it was no longer going to peg the Franc to the Euro. (Basically the swiss have been trying to back stop the Euro and just took on the biggest FX loss in history) Just remember that the rise in the stock market and commodities the last year are mostly due to inflation hedging, aka falling US Dollar.
I borrowed a graph from http://www.zerohedge.com/ This graph is the weekly change in Currency Contracts. This shows an uprecendented number of short coverings last week on the Euro. Basically the Euro put in new lows, Goldman Sachs put a 1.13 target on the EUR/USD, and short covering came in and lifted it to ~1.25 in just under a week. Quite an impressive short squeeze.
To me this looks very familar to an engineering phenomena called "Underdamped Harmonic Oscillations." Aka each cycle adds more energy to the system than the last cycle. I think you are most likely to notice this phenomena with wind, and associated with earthquake periods of building swaying. Below is a simple equation showing how it looks.
Most are more familiar with the end result...........................
One thing is certain, as you increase the energy into this system, the greater chance it has in breaking. I don't know how many oscillations the EUR/USD currency pair can handle, I have no clue of the final price locations, and I have no clue in the final direction. What I do know is that this is not a healthy pattern in nature and it can't be maintained. Every swing must add considerable energy. In this case, more money must be added on each swing to produce stability/equilibrium.
Attached you will find this similar pattern I found in early 2009 in the S&P. I recognized it immediately. I also added some fibonacci numbers. These showed how beautifuly elegant the market was moving. Most people wouldnt believe that we are pre-disposed to react predictably. Most people would not believe we are subject to such primal fear and greed cycles.
I must admit, I had a pre-concieved notion in what the effects were of undamped harmonic oscillation. While my principles were correct, my direction was wrong. ;)
And yet in spite of this "prediction", which is actually just some profit taking from the recent upswing, the DOW is up 520 points since its 2010 low, which is good for a 5.2% return.
ReplyDeleteBetter than that, while it is down a tick since the first of the year, the 12 month return is OUTSTANDING! Since 6-24-2009, the DOW is up a full 2128 points which gives PROFESSIONALLY MANAGED money a return of 25.6%.
If this is a bear market, sign me up for more!