Time For A Hail Mary

The tempestuous toils of the tape in the past four months have taken their toll and both camps are looking toward a final resolution. My blogger friend Yelnick sent me an article today suggesting that the recent gyrations may point towards clandestine accumulation instead of distribution. Prechter and friends remain convinced that a drop into the abyss is near, a position largely based on remaining committed to the Primary {3} wave count as well as various sentiment measures taken over the past year which despite little progress to the upside have remained clearly bullish.

Personally, I deem this to be quite a natural state of affairs as bulls will always outnumber the grizzlies during sideways tape – after all this is basic human psychology. The majority of investors or traders have a natural disposition towards being bullish and as such the entire game is framed around that cognitive bias (see CNBC or financial print media for ample evidence). Bearish sentiment usually only prevails once it’s too late, meaning after a big correction has already taken its course. So, quoting bullish sentiment measures of the past year as evidence pointing toward a looming Primary degree correction may to some suggest a bit of bearish bias – the very affliction EWI often has been accused of. In EWI’s defense I must however point out that quoting irrelevant sentiment measures does not mean the P3 scenario is out over the long term – but it could mean that their time table may have been a bit too optimistic (or should I say pessimistic).

When it comes to sentiment measures I for one never look in the rear mirror – the here and now is really what counts in my world. And my three sources [1, 2, 3] suggests that there really is no clear prevailing opinion – when the tape pushes up retail traders support the bullish case by about 40% and the bears fall toward 30% – when the tape drops the numbers roughly swap against each other. Nobody really has an opinion anymore, most either just want out or are waiting for a decisive breach to make a move.

The charts are telling a slightly different story. As the wave count is mired in wave 2 subdivision hell it is currently of little use to us. On that one you can count me into the wait and see camp. But as so often during times of increasing entropy and chaos, I have been reducing the amount of charts I follow instead of adding more. Simplicity begets clarity. Fortunately what remains after much triage are two very simple charts which seem to be quite clear and those are the ones I will present tonight.

And both tell the same story, I’m afraid – which is that the bears will need a Hail Mary pass to win the battle for the fourth quarter. Should there be yet another fumble and an opportunity near a major support line wasted the consequences will be painful and expensive.
[amprotect=nonmember] Charts 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.
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Let’s forget about waves for a little while and focus on simple support lines as well as traditional technical patterns. What I’m seeing is sort of a double triangle situation mixed with the potential an inverted Head & Shoulder pattern. The chart should be pretty self explanatory: If we escape the current diagonal resistance line the odds for the bears taking the Lombardi trophy diminishes rapidly. Now, this can happen in three scenarios:

Green points right up – meaning the bulls make a move now and walk away with the trophy and the cheer leaders.

Purple and Orange suggest that the two GTC fractals on the daily Zero and the NYSE A/D ratio will be observed – thus leading to either SPX 1080 or 1060. The former would then bounce toward 1100 and breach the diagonal there, the latter doing the same at 1090.

Red is the only bearish contender and let’s hope Jessica Simpson is not in the audience when Tony Romo is delivering the pass beyond the 1060 mark and hopefully into the end zone at SPX 1000.

But do me a favor right now. Take a deep breather, close your eyes for a minute and try to forget everything you know: Forget your own book – forget the mysery of the past few weeks/months. Forget what you want to happen – forget what you heard on bubblevision – and forget the opinion piece you read this afternoon. Just look at this chart and then tell me who owns the odds here.

I see three opportunities for the bulls to take the game and I only see one for the bears. What I also see is that it will happen very soon – most likely this month. And it should be soon as I personally welcomed you all to ‘crash season’ a bit over a month ago. So, the timing is right – the setup is there in the form of second wave sub divisions and a supportive wave count. But what remains are obvious hurdles that need to be overcome and time is running out as there are only five minutes left on the clock.

And then there is my old faithful – the channel chart which has been spot on since I presented it. If you look at the tape from a pure support/resistance level perspective the bulls have one more quarter to go, while the bears have three. Only a sudden drop will be able to overcome those three support lines in the little time I believe remains before we head into seasonally bullish tape. And then there are the November elections, but that’s a different story I leave for you conspiracy theorists.
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Public Service Announcement:

As most of you know already – I am heading to Korea tomorrow evening. Before I embark on my long journey I may have some time tomorrow to post a chart or two but won’t be able to produce anything in depth. Also, please be aware that I will be out of sync with the NYSE session due to the time differences – the best opportunity for me to comment will be an hour or two after the closing bell when it’s early morning in Seoul. I may however not always have a chance to do so, maybe my schedule keeps me too busy or Internet access may be spotty. Thus you may have to wait another day until I get a chance to post a quick update or comment cleaner. Again, I am scheduled to return on September 15th and expect to be jet lagged but back in action on the 16th.

The Zero and Geronimo will continue to run on their own during my absence. Let’s hope that we don’t have Murphy’s Law kick me in the teeth again the second I leave town like last time when I went to Houston. I do however have someone present who can be directed via phone, so even if disaster strikes I’m pretty confident that it can be resolved within a 24 hour period.

I will respond to subscriber requests but please be patient as it may take me a day to get back to you – remember I’m 13 hours ahead of EDT. Obviously the subscription module runs itself, so please keep supporting the blog even during my absence.

That’s it – I see you all next week. If not and I disappear somewhere over the Pacific – well, it’s been fun 😉

Cheers,

Mole