Have No Fear – Wave 5 of (3) Is Here!

Boy, I love the smell of crushed bulls in the morning. Today’s tape continued to take the express elevator downwards and at the closing bell managed to extract over 90 points from the SPX and 733 points from the DJI. Not bad for a day’s work. If you had any math skills extending the scope of those ten bacteria infested claws you call fingers, you would realize that this represents almost a 70% retracement of the PPT induced rally that started on Friday and ended early morning on Tuesday.

SPX most likely in wave 5 of (3).

Some of my lab experiments indicate that you vapid leeches respond well to colors, so I have taken the liberty to indicate the degrees of various subwaves in that fashion. Now, even if you are unable to follow what I’m trying to convey you can at least enjoy the aesthetics of the chart above. It also might make for a great X-Mas present for your mother-in-law – all you need is a cheap frame and an inkjet printer. As a matter of fact, if you have been ignoring the trades Berk and I have been throwing out to you, this may be all you’ll be able to afford this holiday season.

But enough of the pleasantries – let’s talk about the bottom line for your reptilian trading brains, as members of the Swedish mud wrestling team are waiting in my jacuzzi and I’m also in desperate need of a few bottles of Teutonic wheat brew. It seems that we have completed the high of wave 4 of (3) and are now proceeding downwards in minor 5 of intermediate (3). I see two main possibilities going forward: We either proceed down in merciless bull hopes crushing fashion – or we start gyrating inside that ‘yellow goo from hell zone’ which I have highlighted on the chart. EWT and traditional technicians would call that a triangle and it is a valid possibility at this stage. The former would get us to the target drop zone a bit quicker, while the latter would give us the opportunity to keep selling the rips, either in daytrading or accumulative fashion.

I’d prefer door # 1 of course, but it’s possible that the triangle scenario may actually turn out to be more profitable, in particular for the evil leeches among you who enjoy to bounce the pivots up and down. It seems quite easy as well as profitable these days as we’re becoming accustomed to seeing 400 – 700 point moves on the Dow. Some ‘extremely evil readers’ of this blog (you know who you are) have even begun to daytrade the e-mini futures, with very favorable results. Again, this is only for the big boys – I encourage the noobs among you to stick with either options or stock if you can afford them. Actually, even options are expensive as hell as of late as Mr. VIX has decided to set up basecamp at the 69.25 elevation.

Either way we wind up playing it – the end result remains the same. We should drop quite a bit more and complete intermediate wave (3) either around the psychological support area of 800, or – if those bulltarts manage to aggravate me again – decent all the way to about 720 just out of spite.

Gold stuck between a rock and a hard place.

Not much to add in regards to Gold – it’s going down to 600. Do yourself a favor and grab some puts or go short GLD or GDX – or if you’re a big spender like that super evil bear who shall remain nameless (and who happens to run an insignificant trading blog nobody ever visits) you might be interested in selling ZGZ8 futures.

The U.S. Dollar showed us a bit of consolidation today but will soon continue its ride up into the Alpine Peaks of fiat currencies. I’m looking at 85 to 88 as a target zone there.

I think I just heard an impatient call from my jacuzzi and it sure doesn’t sound like my pet goat. Got to run – Inga and Gertrud want their back rubs. Until tomorrow, my stainless steel rats! May the trading Gods have mercy on you.

Cheers!