Phoenix Rising

Soylent Green died today – welcome to Son Of Soylent Green. The June 3rd high 1106.57 was breached by a whopping 24 cents after which the tape made an instant reversal. Quite obviously today’s gyrations have market participants scratching their heads – bears and bulls alike. I try to make sense of it all and offer two high probability scenarios.

The Bearish Case

At this point only counts make the most sense – one is a flat and one is a flat. So, what’s the big idea?

And there you have it – if we truly topped today then we painted a regular bearish flat (page 46, fig. 1-31 in our bible), which would not be atypical in the context of a Primary {3} correction. The flat pattern is still valid if we push beyond today’s high of 1105.91 however I would expect it to reverse around the previously mentioned 1130 mark, which coincidentally would be the 138.2% level. Anything beyond that and I would start considering that something else is in the works.

The reason I feel rather strong about the flat pattern is the way it has been unfolding. The fact that we stopped a bit over a handle above the 1040.78 low last Tuesday and today we painted a pretty bearish candle and reversed a few pennies after breaching the June 3rd high. That type of whipsaw is flat pattern behavior, engineered to confuse and in the end harm the greatest number of market participants. I reckon that a bunch of stops were blown out right after breaching that high today, and I was pretty stunned when we turned right there.

If you are a Zero subscriber I also recommend you look at the daily Zero, which painted a pretty interesting signal for the day 😉

The Bullish Case

Yes, it could all be a nasty OPX week ruse, and it’s possible we push above 1130 and beyond – we cannot discount that possibility. Especially as we closed with an NYSE A/D ratio of 1.58 – reasonably bullish – go figure! There is also a chance that we may trace out something more complex – a double or a three – which is EWT lingo for a combination of several sideways/corrective patterns (i.e a double zig-zag, or a flat and a triangle, or a flat plus a zigzag plus a triangle) – for examples go to page 53 in the blue book.

A possible thorn in the eyes of the bears is the EUR/JPY, which gave up a lot of momentum today without painting much downside. That is actually one of the more concerning charts I’m looking at right now and in combination with that slightly bullish A/D ratio may point towards a bear trap tomorrow or later this week.

I think it’s reasonable to keep an eye on the 1130 level I have been highlighting for a week now. After that I see the 1175 mark as most important as it’s the 4th wave of Minor 1 down (according to Son Of Soylent Green). I wish I could be more clear and just say ‘we are going down, folks’ – but we remain stuck in a pretty nasty sideways trading range that still has the chance to resolve either way. I can only offer the best supporting wave counts at this very stage, beyond that we have to look at complementing evidence, some of which I have produced over the weekend. And which is why I am also still giving the short term bullish case time to unfold.

Bottom Line

The wave pattern screams bearish – but various other charts and momentum indicators I’m looking make me less confident. Will the Euro simply keep dropping and if not, will equities ignore it? Doubtful on both counts right now. Which is why I have a hard time correlating my count with some of the other stuff I’m seeing. So, we need to give this pattern the time it needs to resolve and I am sure that by this Friday we have a bit more information. I know it sucks – but if you’re a bear learn to be patient.

Public Service Announcement

My plans for this week have slightly changed – I will be present and at my trading post all day tomorrow. Wednesday I will be out and there is a slight chance that I’ll be gone on Thursday as well, but the odds for that right now are only 30%. If anything changes I will let you guys know.

Cheers,

Mole