Wednesday Road Map

Since I’ve put up an extensive post yesterday forgive me if I’m doing a Speedy Gonzales on you tonight.

I’m sure few of you were aware of Speedy’s dirty little secret. Sheeesh – another childhood icon bites the dust. First the Tooth Fairy, then Santa Claus, now Speedy? Who’s next?

Anyway, if you haven’t had a chance yet please go and check out my weekend update which is now open to everyone – quite a few goodies in there and maybe a mind bender or two as well.

The first session after the long weekend turned out to be a regular bruiser – first the bears got their share and then it was the bulls’ turn. In the end (and with some help of our friends at 33 Liberty) we put up a slightly red doji on the daily. I’m sure you wonder what’s next on the ole’ wave count, so here we go:
[amprotect=nonmember] Updated wave count and commentary below for anyone donning a secret decoder ring. The rest of you guys will have to wait until tomorrow – sorry. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
[/amprotect] [amprotect=1,9,5,2]

In a nutshell: The bears are running out of time on several levels. The Euro is on a leg up and it seems the Dollar is taking its merry time to complete its current retracement. The time cycles I’m looking at are also not conducive to entertaining an extended resting period around the 1020 mark. Some of them are based on my own spiral calendar work and there’s also the Solunar cycle Chris Carolan covers on his blog. Then there’s that 1987 fractal. If you remember – I said this on Friday:

Based on the fractal above and the situation we are now facing I believe that we need to proceed downward almost immediately. Since tomorrow is a pre-holiday trading day I am wiling to give this thing until Tuesday (NYSE is closed on Monday), but if there is any significant sign of strength tomorrow or Tuesday then we probably have to sit through a counter rally of yet unknown degree.

And here we are – what we got was a Franken-session that looked kind of bullish and also kind of bearish. Good enough for Clockwork Orange but it needs to happen right now – preferably tomorrow. There is also that diagonal that nobody else out there seems to be aware of, despite the fact that it’s outright staring us in the face. Maybe everyone was is mainly focused on that big Head & Shoulder pattern. What I’m seeing is that the bulls are fighting like hell to hold this line and so far they are succeeding.

If we breach through today’s highs then I think we’ll get Soylent Blue. And that may actually turn into something a lot more painful than what I recently proposed. The time cycles suggest that we may have to ride this thing all the way through July and into early August. Based on those early gyrations I am suggesting a possible scenario – but since there are 11 different corrective pattern in Elliott Wave Theory we could get something very different (but equally exhausting and theta burning).

The EUR/JPY, the EUR/USD, and the AUD/JPY are all overbought on a medium term basis. I think that’s really where we need to look for further clues as to which way it’ll swing for equities. Based on what I’m seeing the AUD/JPY is really where the action is in terms of a correlation/bias to equities. Which is why I’m not too worried about the Euro right now – I think that ship has sailed two weeks ago (and ZH was right).

The upside progress in the AUD/JPY was pitiful in comparison to what happened in the EUR/USD, the EUR/JPY, and the EUR/CHF. The ES has been lagging all three and is most closely aligned to the AUD/JPY. Which is why I still am holding my Dec puts and have not swapped them for March options just yet (besides getting in/out is difficult these days – too much slippage). So, let’s keep an eye on the AUD/JPY and especially look out for divergences.

Boy, that was a lot more than I thought I would post – hope it helps you navigate tomorrow’s gyrations.

Cheers,

Mole