So Long, And Thanks For All The Fibs

What can I say that hasn’t already been said in literally hundreds of comments today? Don’t you love it when an evil plan finally comes to fruition? We megalomaniacs simply don’t get enough credit for our work. Let’s not get complacent however, this is only a first step in the right direction. We have a lot of work to do before we’re done milking this bear:

As you already know we now find ourselves at a diagonal support shelf that needs to be breached before our ride into the abyss continues. I would be very surprised if we didn’t get a bounce tomorrow, but if the green scenario holds true we should not breach the February 9 peak at 874.84. I don’t expect this to happen but especially as a trader you never say never – in particular after the past 12 months of tape.

However, what you should be watching tomorrow are the Fibonacci zones I have taken the liberty to highlight on the chart above. If we push up in the SPX during NYSE hours I see a minimum of 835. As a matter of fact –  as I’m typing the ES is trading at 828, although it did touch 832 an hour ago (where I shorted it for some quick profits – teeeeheeee).

Short of any ugly surprise tomorrow (e.g. mark-to-fantasy rule) that might throw equities into reverse gear I expect our drop to continue throughout the week, to be climaxed (ooooh oooooh baaaby) by a breach of the November 21st low of 741.02. A rough target for intermediate wave (5) would be the 650 – 700 zone. I plan to firm up on that as this wave unfolds. So, don’t cut your legs off rats – I know many of you have taken profits here but I have been very clear on where I think we’ll find ourselves by the time primary {1} of cycle wave c has concluded – and it’s quite a bit away from where we are right now. IMHO, today was just the overture.

Breadth in the SPX today was horrendous – declining issues were leading advancing 54:1. In the NDX I counted a ratio of negative 23:1. Accordingly the extreme reading in the CPC we have been pondering about have reversed quite a bit, but there is plenty of upside remaining. By the time we reach our target zone for this wave I expect the CPC to reach the area (highlighted above) we have come to appreciate several times during minor wave 3 of (3) – aaah, the good old days…

Also worth noting again is the spread between the 30-Year T-Bond yield and Moody’s BAA Corporate Yield which I mentioned last Sunday. Remember, at our last reading it had expanded to -4.57 and I’m happy to report that this trend has continued as it has reached -4.67 as of February 6th. Unfortunately that is the latest reading I can get online – but I should probably inquire with IQFeed if they have a live signal for the Moody feed. Following this spread has served us well in the past few months and although no indicator is fool proof (and I should know because I qualify), as long as these readings continue to expand or at least remain at these levels more medium term downside potential remains likely.

Gold remains to be a pain the ass and I don’t even want to post a chart – damn thing hasn’t breached any of my critical resistance lines but has turned into a major theta burner. Next time I skip those damn GLD puts and just sell/buy ZG futures.

The Yen received my memo and immediately embarked on an upwards trajectory, pushing it back inside the 2.0 BB. Such a nice currency – and it did help immensely with today’s drop in equities. Let’s hope that this trend continues – calling all currency traders!!!

The Dollar has stagnated a bit but remains on course for further upside.

Crude just doesn’t catch a break lately – it has tried to bounce higher but its 50-day MA appears to be the line in the sand. Worthwhile watching as we probably should initiate short positions next time we see a touch of that line. I do however think we should see a bounce here at some point.

Weak crude means an expanding crack spread and I think I’m seeing an extended fifth wave here, something that’s common in commodities. So, if we finally do see crude breach its 50-day MA and perhaps push towards the upper boundary of it’s 2.0 BB I would have no compunction about shorting the heck out of refiners. Our day will come but let’s not step in front of a moving bus.

That’s all I got for you rats tonight – Mrs. Evil is waiting with the trough – chow time!

Cheers!