Clockwork Orange

It’s Primary {3} and we need a new label for those wave counts – so let’s give a warm (and long overdue) welcome to Clockwork Orange. The bearish scenario the bears have been patiently waiting to see for almost a year now. And one that Wall Street has its unique way of welcoming:

That’s right, the bears are back – like it or not. There will be a lot of pain – there will be blood – and there will be a lots of ass kicking mixed with generous helpings of bitch slapping. My advice to the bulls: Wear a cup – this will get ugly. To celebrate this occasion the Evil Lair has now officially been set into extra evil mode – which is one step below the max setting of turbo evil. Expect the worst – and if you’re a stainless steel rat – expect to profit.

Let me celebrate the occasion by sharing this little gem that’s starting to make the rounds:

This is right out of the Book Of The Dead [Markets] – on the left you see the 1987 crash which was preceded by a fractal pattern. One that is repeating itself right now. I sent it to Chris Carolan a few days ago and he came back with the little (but most important) tidbit about the Lunar Eclipse – again the timing is spot on. Mmmmhhh.. I wonder how it all ends this time – anyone buying the dip? 😉

Yes, Soylent Green is dead – we could see a little bounce here near term but medium term I think this market is going to fall off the plate. That is based on the level of bearish sentiment I see out there – and remember large scale drops happen in oversold conditions. Quite frankly I think we are heading into a perfect storm – bring a sweater.

That’s what I’m seeing on the Dow medium term. By the time Minor 3 of Intermediate (1) concludes I expect the Dow to trade in the 8000 range. That is probably when we’ll cover and wait for instructions – of course it’ll all depend on the wave pattern and I will keep everyone in the loop (no bi-monthly vacation for this blog host – ahem…).

Here is something I don’t see anyone talking about. Look at where medium/long term yields are at right now – the 10-year (TNX) is basically where it was at the end of Primary {1} in March of 2009. The 30-year (TYX) is trading slight above but is sinking quickly. What does that tell you about the medium term risk assessment of bond traders? And we have not even dropped yet! Admittedly I am not a bond trader, so if someone with a clue can chime in on this subject I would appreciate it.



Feuer Frei!

I don’t think anyone expected such a sharp drop during this lazy World Cup quarters pre July Fourth week. And maybe that’s exactly why it’s happening – remember that the market is always out to hurt most participants and I’d call that a textbook curve ball that should be added to the bears hall of fame. I know what you are thinking: Is it over for Soylent Green? Where do we go next? Attempts at providing (reasonably sounding intelligent) answers below. But first, let me do the honors:

Rammstein time! :-)

The bulls are clinging to their 1040.78 May low by a thin thread – as I’m typing this we have been holding 26 cents above. So yes – as long as we stay above this mark we could still theoretically see some form of Soylent Green – it’s not impossible.

But is it realistic? NYSE A/D ratio is currently at a 0.09 reading – that’s a D/A ratio of 11.04! Pretty nasty and I’m not sure how much longer they bulls will be able to hold their position. Plus look at that early morning gap – which is very typical for a third wave. Pappa Prechter calls this the ‘point of recognition’ and it would very much fit into the premise of my Minor 3 of (1) count.

The AUD/JPY seems to be correlating with equities better than the EUR/JPY as of late. And the former is basically reaching terminal velocity at this point. Yes, there will be a bounce at some point but how much will it benefit equities? Also note that equities are actually lagging the AUD/JPY – which has descended a lot lower.

Here’s the view on the EUR/JPY – seems a bit stronger than the AUD/JPY and maybe equities will trace this one if it manages to push above the 20% mark – thus far equities are leading it down. Maybe I should just average between those two pairs… unfortunately it seems tough to do in either Prophet or TOS charts (it’s that slash that’s screwing it up).

A breach of 1040.78 may not happen today but at this point it seems that the bears are on a winning streak. Triple bottoms do form – but even if it does – how far will the bulls be able to push this thing up until we find ourselves right down here again? But the 45 year old virgins (i.e. the bears) need to finally close the deal and that means thrashing that 26 cents cock block preventing a free fall into SPX 980 minimum.

3:25pm EDT: Soylent Green is officially dead as we just breached the 1040.78 low on the SPX. Short term we may bounce here soon but the technical damage is done.

Closing Bell: The bulls for some reason stepped in to push the close by a few ticks – won’t do them any good. Soylent Orange is our prime scenario as of now.



Tuesday Road Map

As it’s a pretty quiet World-Cup-Quarters-Pre-Fourth-of-July week I’ll keep this one quick and simple. Before we get to the chart here’s a latest clip from Karl ‘No Slave To Fashion’ Denninger:

Geezzzz – makes you feel all warm and fuzzy inside….
Updated wave count and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.

We painted a little triangle today which suggested that we resolve to the downside. However, since it’s summer and there was little participation I don’t want to give the pattern too much meaning. To me it simply felt like range bound trading and whatever it is could be part of a more complex sideways Minor 2 correction. Frankly, I usually don’t count on Minuette or smaller degree and prefer to be focused on the medium term picture.

NYSE A/D ratio closed at 0.87 today (that’s a slightly bearish D/A of 1.15) – yes, a bit bearish but not heavily so – nothing that would make me strap on my helmet and a parachute. Both scenarios are still in play and we eagerly wait for equities to finally pick a &@$#*& direction. My Spidey sense tells me that the bears should be kicking ass and taking numbers right now, and not seeing an acceleration here, or a quick Minor {ii} spike, tells me that this thing could draaaaaaag out for a good part of the summer, as suggested via some incarnation of Soylent Green. Remember that this scenario does not have to play out as a simple second zigzag – we could get some kind of sideways corrective pattern and there are 11 to pick from. Maybe now may be a good time to swap my Decembers for March – I’ll probably make up my mind tomorrow.

Before I run – Tooncez just pointed me toward a chart I posted on Mary 31st:

And when did we turn? On 6/21 😉

Quite frankly, nobody is more surprised about this as yours truly. I really don’t think I’m that good – probably sheer coincidence. And let’s not forget that the fat lady hasn’t sung yet as we have not breached this year’s low. Until that happens it’s possible we keep gyrating around and drive the bears crazy all the way through 8/18. I hope that won’t happen but we can’t have wishful thinking drive our trading.

Of course – IF 1040.78 gets taken out and 6/21 turns out to be the high of Minor 2 then we have a nice template for anticipating the bottom of Minor 3.

Until any of this happens – keep it clean, and stay frosty!



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