The Plot Thickens

The breach of 1,106.42 on the SPX this morning is something I hoped would not happen:

This event shifts things around a little bit. The immediate downside scenario has lost a lot of credibility. It’s possible we are completing a Minuette (b) wave but the prior wave looks like a textbook (a)-(b)-(c), so let’s not kid ourselves. Chances now are we push into 1,127 at which point the bears better put up a fight – if not we might be talking Soylent Green. Not before reeling in a few more bears of course – just to squeeze them a few handles after (how many bear traps have we been enduring now since March 2009?).

On Wednesday I said this:

“….This would be followed by Minor B, the first half of which would look
to the bears like the onset of Minor 3 to the downside. Which would be
tantamount to a bear trap clusterfuck of death star like proportions. Not
a pretty picture.”

Trading is pretty easy actually – just imagine the scenario that will hurt most market participants and it’s almost guaranteed to play out. At least since the prop desk monkeys at Goldman Sucks are running the show that is. Which in itself was the genesis of Geronimo – but that’s a different story.

I wanted to visualize the full extent of the drop in the Euro for you rats. We’re roughly talking a 50% retracement since the late November highs. That’s quite a drop in one quarter. Compare that with the tiny correction we have seen in equities and you wonder – who’s right? Currency traders or whoever is continously putting an emergency floor underneath the tape the second buying volume is drying up?

Seems to me that we are destined to revisit that red diagonal trend line which should now pose as resistance. This also roughly correlates with the target zone for gmak’s Gartley count. If we don’t reverse there I am afraid it’s green all the way. Monday will be an important day for both the bears and the bulls.

If you’re holding long term puts – do you yourself a favor and don’t even look at them. Yes, that’s right – Mr. VIX has dropped below 20 yet once more. It seems to be slowly riding down that lower border of its 2.0 Bollinger – exactly what I was warning about a week ago.

Damn – I hate to be right sometimes…

Cheers,

Mole