S+P 500 topping chart update

The major indices are growing noticeably weaker and it looks to me that January is going to be a down month.  Yes, it is still very early to make this call but below is the model that supports it.  In general, I think the ending diagonal that I pointed out a couple months ago is still playing out.  I think that we are just in a massive throw over which has peaked.  Each wave of the 1-2-3-4-5 diagonal that began back in August should be made up of waves with a 5-3-5 pattern.  That includes the 5th wave which started back in Oct of 2013.  I think the 5th wave of the diagonal had 5 waves up into an A wave, 3 waves down into B and just finished 3 of 5 of C.  If this is actually the correct model then I expect a pull back into wave 4 (perhaps not nearly as far as shown below; that that is probably the limit for wave 4) and then a bounce back up into the 5th and final wave which I think will fail to reach a new high (failed 5th).

IFF this is correct, we will get first confirmation when the waves break below the upper support of the ending diagonal at the blue circle.  It would not surprise me to see owl ears formed by this movement as shown in the model above, but the main artifact to look for here in terms of confirmation will be the break back down into the ending diagonal's channel.  Once that happens the technical traders should be moving for the door at an accelerating rate. 


Bernanke might have only tapered $10 billion per month but the market is forward looking and perhaps the market sees that liberalism and crony capitalism are peaking.  The multiple fines that have been slapped on JP Morgan of late seem to indicate that the government is no longer letting them keep all of their ill-begotten profits.  These fines used to be called "the cost of doing business".  Usually the CEOs "don't explain and don't complain". With a nod and a wink everyone walks away richer except the mark which is the patsy citizen.  The company pays a fine without admitting any wrongdoing and then goes on back on its merry way doing "God's work".  Nobody is charged with crimes, nobody loses their job, nobody goes to jail.  It's one nice neat little ball of organized crime and widespread corruption.

But if I am right about the peak credit, peak Ponzi, peak liberalism thesis then all of these things should be changing.  The first to change is the attack on corporate profits.  Government now just keep laying fine after fine on JPMorgan, with another $2 billion announced today and boy, the government seems to just be getting warmed up. Instead of "don't complain, don't explain", the company is starting to squeal like a stuck pig. Jamie Demon (OK, it's "Dimon"), is saying "hey we need to get this behind us so we can do our jobs" (close paraphrase for not wanting to post anything from that SOB which is actually a direct quote.).  If you read between the lines, the CxOs working at banks are starting to worry that government will go after them individually and legally out of need to sacrifice someone at the feet of an increasingly pissed and vocal conservative population.  Of course, with each hatchet stroke that goes into the back of a fat pig banker, the people ooooh and aaaaah in delight.  Justice, they think, is being served.  Of course it is only half correct.  When one criminal goes after another criminal to steal his money, is that really justice?  If so then perverted justice to be sure.

What I think is happening right now is that the powers that be in the government did not want to upset the apple cart before any more than it already was.  Now they reckon that things have stabilized enough to go after the con men banksters without making things worse in the economy.  Of course, the government is disingenuous here as always.  It knew what was going on the whole damned time but the music was playing and the Ponzi was rolling so nobody wanted to pull the Ponzi punch bowl away during the peak of the the party.  But the credit Ponzi party is now ending and so government, which is doing nothing more than reading the herd correctly, is about to take a turn for the conservative.  2014 is going to be an absolute wipe out for the liberals.  The tide is rapidly turning.