Tuesday Night Quickie

I was looking at this chart for a mighty long time today – trying to imagine all the various scenarios that could play out at this point. Part of the equation is not just the wave count – various possibilities are likely here – but also investor psychology. Let’s always remember – the market is a cruel mistress and will hurt the maximum number of market participants. So, when you really don’t know where the tape might swing – often simply ask yourself: What move would screw the most amount of people? LOL 🙂

So, three scenarios are on my menu tonight – pick your favorite flavor and topping:

Orange – we are most likely already in Minute {c} of Minor Y of Intermediate (X) of Primary {2} – complicated I know – keep your cool and don’t panic. Bottomline is that we should probably drop lower and that soon – possible target 840ish, but considering that we are looking with a large H&S here we could go all the way to 800.

Blue – a.k.a. Orange’s evil little sister – per the ‘screw most market participants rule’: We rally into 900 to 906 – maybe even 912ish – thus building one more mini right shoulder, similar to what we did on the left shoulder. Followed of course by a final drop – similar targets which I haven’t made completely clear on my chart.

Green – a.k.a. the rabid bear scenario – we are in Minute {3} of Minor 1 of Intermediate (1) of Primary {3}. We should really accelerate here and drop to 800 minimum – it should be quick and ugly (for the bulls). The implication here of course is that {2} is over. And again – there is really no way of knowing whether or not this is playing out just yet – we need to see more tape – I know it sucks…

I’m still in cash right now – the horror the horror – and have beat myself up a little. However, it’s really not that big of a deal. In either of these scenarios we’ll get a 2nd (more reliable and safe) chance to load up for the big bad drop:

• Orange/Blue – supposedly will get us to the 1000 mark on the SPX – load up close to that mark.
• Green – if you’re not short here wait for Intermediate (2) of {3} – which could actually bounce back quite a bit. VIX won’t be as juicy as here but premiums will still be reasonably cheap.

The Dollar’s rise has not helped equities today and I was actually a bit surprised about this move – but maybe I shouldn’t have been as the pattern has been more than erratic as of late. As I have stated – this does not look like a bottoming pattern to me – might be – but looks unlikely. Chances are we still in a 4th wave here and will descend into 5 before we bounce. Which would benefit equities at least in terms of a bullish bias – as you know I am not a correlation trader.

In any case – the expectation of a final drop in the ole’ buck is what keeps Mr. Blue on the table – it would actually make a lot of sense and fit together quite nicely. The bottom of the Dollar wave would then be the completion of the right shoulder in the H&S we see in on the SPX.

Finally, since the Sunday update we have seen a continued steep drop in average volume. We are most definitely dealing with a deflating bear market rally. However, as I’ve mentioned today to Annamall – that does not mean that the bulltarts can’t whip this thing higher towards the end of the summer and make a final attempt at their coveted 10,000 Dow Club membership. We shall see – until we know more I think it’s probably safe to assume that Primary {3} is in play and load up when we think that Intermediate (2) of {3} is rolling over. No worries – I’ll be around throughout the summer to analyze every wiggle in this big mess.

That’s all I got for tonight – time for my transformation – it’s a blood moon!!! Woooooooohhhhoooooo!!!!

Actually – for the record – we are NOT having an eclipse tonight – just a full moon (which is my excuse to go out to hunt young innocent virgins – over 21 – yeah yeah – try to find one in L.A.). But we are supposed to get some lunar eclipses plus a solar eclipse soon – someone posted something about it a few days ago, please repost if you see this.

Cheers,

Mole