The End Is Near!

In typical megalomaniac fashion I fully appreciate the value of a good entry (in life as well as in trading), thus I thought it best to burst back onto the scene with an announcement of bearish news – and that of course in my inimical personal style:

Here is me spreading the bear gospel right on Wall Street – maybe I should have worn pants instead of that glue-on beard that day as the NYPD did not care much about my eatable strawberry flavor underwear. Fortunately I had a local bail bondsman on speed dial. BTW, does someone happen to know how to remove superglue from skin?

Just before I left for my mini vacation (by European standards) my charts were pointing towards 1080 or 1100 as the top candidates for completion of Primary {2} of Cycle wave c. In the past week since I scaled back my participation on the blog not much has really changed regarding that original assessment. On Wednesday we indeed touched 1080.15 – okay, so I was off by 15 cents – please accept my deepest apologies for the slip up – I won’t let it happen again.

As you can see on the chart above we’ve got two main scenarios:

Soylent Blue: Primary {2} ended last Wednesday and we are in the first throws of Primary {3}. The initial small leg down looks very motive and that’s encouraging. But a bounce could come any day/minute – so be mentally prepared for more pain and thus for Soylent Orange. However if we keep dropping here the bears need to first conquer Hamburger Hill (noted on the chart) and finally 978.51 before we can more confidently declare Primary {2} as behind us. Short term we might bounce a little here before we continue downward.

Soylent Orange: We completed (or are near completion of) Minute {iv} of Minor C of Intermediate (Y) of Primary {2} – yes, I haven’t lost my touch during my vacation 😉 Which means we should bounce here and push towards 1100. Be advised that we’ve got a cluster of various fibs between 1090 and 1100 (marked on the chart) – so a turn could occur somewhere in between there. If we breach wave {i} of Minor C at 1039.47 this scenario should be toast and more downside (hence Soylent Blue) would be expected. Unless of course the count is completely different and I would have to back-paddle sometime next week.

Now the big question on everyone’s mind right now is whether or not the top is in or if the bulltards will make a final push towards 1100. Frankly – currently the odds are 50/50 on this one. When I look at various sentiment indicators it’s clear that we have more than satisfied the main criteria for an anticipated turning point of a Primary degree bear market rally – which is that bullish optimism should rival or even exceed that of the previous bull market peak. That of course happened over a week ago – right at the 38.2% time cycle turning point I had projected.

However, as intrepid (and often impatient) bears we are often faced with an inherent dilemma – we underestimate how long market sentiment (i.e. the investing/trading public) takes to catch up with reality. A many bears have been crushed by unwavered exuberance and public consent that a new bull market was in the making. Sometimes it takes weeks and often it takes months – eventually the tape swings our way as it must but at that moment many weak hands have given up or even gone as far as to drink the Kool-Aid and switch over to the bullish camp. I have seen some of that happen right here on Evil Speculator throughout the past two weeks – and although I do feel for the poor souls who will later have to concede having missed one of the shorting opportunities of a lifetime, it is just the moment I have been waiting for. When I saw even the staunchest bears around me throw in the towel, that’s when I added even more short candidates to my increasingly delta negative trading account.

During my absence I have seen the most complicated perspectives being posted in various comments (not by my girls) and frankly some of it was way too complex and esoteric for my simple mind. I personally prefer simplicity and this is probably one of the few times you see me plaster a moving average on a chart. However, the 88 week MA seems to have meaning for the Dow, and perhaps it was coincidence that we turned right there – or perhaps it was not. Fact is that I did not trade against that one – I prefer my good ole’ weekly stochastic – which I never tire to tell anyone who bothers to listen has rarely let me down.

And what is it telling us right now? If you listen carefully and concentrate really hard you can hear it whisper: “Not so fast, buster – don’t have confirmation yet!” Either it’s that or I need to increase my medication. And completely right it is – every Intermediate and Primary degree turn in the tape has been accompanied by a breach through the 75% mark on the slow 5,3 stochastic. Unless that happens we are on very thin ice, rats – so, let’s not go crazy here okay?

Dow theory aficionados are closely looking at the bearish non-confirmation in the trannies right now, which incidentally also happened right at the 88 week MA. First we got a doji and then a fast drop, ahead of the SPX or the INDU – imagine that…

This chart is a bit more complicated but it’s worthwhile digging through it. EWI mentioned the fact that Shanghai Composite has been leading U.S. equities in their latest Financial Forecast. So, I decided to compare the two time cycles and ran into some interesting observations. Not only does the DJSH lead the SPX for example – but it does it based on various Spiral Calendar time cycles – if you want to learn more about what that means click here for a quick intro. Or take a look at this post in which I used the SC to predict the June 25 turn date. I give and I give and I give… Anway, I also created a new SC category, so you can get to all pertinent postings.

In any case – it seems to me that unfortunately the exact time cycle seems to vary – but as it seems to loosely follow SC time cycles it’s worthwhile projecting those turn dates forward, as I have done on the chart above. The 51 day F4 cycle is where our current 1080.15 top was touched and if that one gets blown out of the water then I’m looking at various future SC cycle dates which are marked on the chart.

The old buck has thus far held the 76 mark (barely – it breached it once but bounced back). We all know the implications of this by now – a strengthening Dollar means weakening equities. Whether or not the Feds will let that happen is another issue but I refuse to trade the news or the machinations of the Ministry for Coporate Welfare. I do anticipate some of their actions (e.g. POMO auctions) for my short term trading but long term I need to stick with my charts. Either way the buck needs to hold the 76 line otherwise SPX 1100 or perhaps SPX 1200 is in the cards. Inversely I anticipate the Euro to start weakening and drop significantly in the next few weeks/months – so if you sit on a lot of Euros now might be a good time to bulk up on some greenbacks.

That’s all I have time for this evening – have a lot more chores on my plate before tomorrow morning. See you on the other side, rats – right now the futures look promising 😉

Cheers,

Mole

P.S.: If you wonder about my new avatar you might want to take a look at my late Friday post. Yes, there is method to my madness and the ‘smiley’ is not as friendly as you might think. If you’re lazy (98% of you rats – LOL) then just google ‘Ghost In The Shell Laughing Man’ and you will be enlightened. Excellent fodder for you anime fans btw – which I am myself I must admit.