Sunday Primer

I will be fairly brief today as I’m not feeling great and need to get some more rest. On Saturday morning I decided to go out for brunch at at local French cafe on Melrose Ave – big mistake. I wound up sitting next to some skank who was coughing almost the entire time and proudly kept mentioning to her date that she had been coughing her lungs out for over a week. What a charmer! Such is life in sunny Los Angeles – we take the cake when it comes to self-absorbed and selfish people. Fortunately that sad truth is offset by the fact that our skanks are extremely hot looking – a strike on the plus side in my book 😉

As I’m paranoid by nature I however had made an immediate b-line to the drugstore in order to bulk up on a truck load of Airborne. Surely enough by early evening I started to feel very strange and during the night I sweat through two shirts as my immune system was attacking the virus and I kept waking up with cold sweat. I feel a lot better now and believe that I’ll be able to settle this battle as Mole – 1 : Swine Flu – 0. However, it’s probably best if I keep this one short and get some rest for the remainder of the day.

Alright, enough with my sob stories – let’s start with the short term wave count after which I will conclude today’s post with an update on my longer term outlook:

Orange Waldo: We completed Minor B of (X) on Friday and are now on our way to complete the C leg of this zigzag correction. Possible target is the 880-890 range, in terms of the time dimension this scenario might conclude on either June 25th or 26th which I believe might be major turning point.

Green Waldo: We most likely started Minute {c} of Minor B on Friday which should conclude around the 930 mark. The anticipated drop afterward should lead us into the 880 zone – it’s also possible that we’ll see an accelerated drop with a finale around the June 25/25 turn date.

There is a possibility that we bears are SOL again and that the Goldman boys manage to rip the tape beyond the 956 peak. Although this being a questionable scenario at this point – should it unfold we will most likely see some early warning signs based on breadth numbers and various momentum/sentiment indicators. I would also expect to see some pretty strong and expanding readings on the Zero – so, let’s keep an eye out for that. Unfortunately there is no safe way to play this – you are either already exposed to the short side or might be so around 930. If the tape starts to whip past that we’d have to endure quite some pain before we know for sure that both Waldo’s have been taken out by the Goldman Sucks Prop Desk Ninja Team. Be prepared for some head fakes by the way – the market makers will try to shake you out and as you know they don’t go about their business in a subtle fashion either 😉

I don’t often use the DJI in my forecasts as I don’t give it as much weight as the SPX or the NDX – but it’s perfectly fine for an longer term perspective on things. As of now I see three possible scenarios for the coming weeks/months:

Soylent Blue: We are about half way through Intermediate (X) of Primary {2}, which should terminate within the 8200 – 8300 region. The ensuing rally will count as Intermediate (Z) of {2} and will be the final leg of this corrective Primary wave. What follows will be more an extremely violent and scary descend that will pass the current 666.79 low and push us into the low 400s by 2010.

Soylent Orange: Almost identical with Blue – the only difference being that we’ll see a more substantial drop before we rally into (Z) of {2}. Possible target here would be the 8000 mark – remember the bulltarts love big round numbers.

Soylent Green: A.k.a. ‘The Rabid Bear Scenario’ – We concluded Primary {2} on June 11 and are now at the onset of Intermediate (1) of Primary {3}. The mere possibility of this scenario led me into buying a significant number of SPY puts last Thursday – however at this point I only give this scenario about 25% max.

A few words regarding Primary {3}: Let me remind some of the newer readers that third waves in Elliott Wave Theory (EWT) are considered the most violent of all. And once we push into Intermediate (3) of Primary {3} later this year (or early next year) it’ll make the 2008 crash look like a mere ‘mild correction’. A third of a third is a bearish trader’s wet dream – or a bulls worst nightmare. It’ll be like the salmon season of the century for us bears:

Yummie… that looks delicious! 😉

Anyway, you do NOT want to miss this one – which is why I keep pushing you all to not get sucked into putting all your focus and capital into trading the short term gyrations (which are erratic anyway). Even if you miss the Primary {2} top by weeks (whenever it happens) simply buying long term puts in a low volatility environment and holding them for the next few months will probably set you up for life. Don’t miss this one – this is a one time in a generation opportunity – I hope I made myself clear.

If you are a bear there are several was you can approach trading Primary {3} – you can get in early around the Primary {2} peak as I will most likely will try to do – or you can jump in around the peak of Intermediate (2) of Primary {3}. The advantage of former is that options will be a lot cheaper due to lower vega (i.e. a lower VIX) – the advantage of doing the latter is that we have confirmation that Primary {3} is indeed in play. Again, remember that Intermediate degree waves play out in weeks, so there won’t be a need to rush into positions. But this comes with a warning – if you happen to miss the peak of Intermediate (2) of Primary {3} you will most likely not get another chance to jump in as things will unfold very quickly and violently.

Alright, that’s all I have for today – I’ll be sure to touch on the Dollar, Gold/Silver, treasuries, etc. throughout the week in my intra-day updates.

9:00pm EDT: Alright, this is a public service announcement:

geronimo/ES has been added to the subscriber section.

Eric and I had a long talk before the weekend and both decided to lower the initial subscription fee to $199.-. It’s been a very rough market lately and this will make it easier for anyone interested in scalping the ES to give this one a shot. We might hike this fee in a few months from now – assuming of course that it’ll keep performing the way it has for the last quarter. I will not post NinjaTrader performance charts for geronimo as the entries often seem to be shifting with historical data in comparsion with live data – it’s pretty close but since it’s a scalping strategy we want it to be accurate. So, Eric will post performance stats on a weekly basis as he’s keeping track on this manually. Should be easy to export charts out of Excel as well.

Again, I would not recommend signing up for geronimo unless you are able to trade a minimum of 5 ES contracts – with most brokers this comes out to daytrade margin of roughly $25,000 (ca. $5k per contract). So, as a rule of thumb I would recommend that you keep a minimum of $50,000 in cash your account.

If you have any questions regarding geronimo please post them right here in the blog so that either Eric or I can address them. You can also email me at [admin at evilspeculator dot com], or Eric at [geronimosupport at gmail dot com].

12:00am EDT: Early rat gets the cheese – hat tip Jeff over at the Housing Time Bomb.

Now really – if you are that ugly – shouldn’t you at least be smart? That’s what I have come to expect from bubble vision: Either give me a great set of tits or at least an IQ over 120 please! I’m driving up to Berkeley right now – word has it they hand out professorships in economics on their toilet paper this week.