FAZ action yesterday suggests markets have peaked for now.

In this post I commented that the FAZ chart was ripe for reversal.  Just after that, the reversal did indeed occur as you can see from the chart below.  Forget for a second that FAZ is the triple inverse financial ETF.  I track it because its charts provide clarity where others can be questionable or even puzzling.   If FAZ breaks out, the entire market is going to break down.  The banks will not just break down in a vacuum.

What we have here is a pretty clear ending diagonal with 5 perfect rail bumps and a perfectly sized throw under on the 5th wave.  After breaking back up into the channel (first confirmation), it back-tested the new resistance turned support line (RTS) from above and, so far at least, it has held.

Still this is just 1st confirmation.  Second confirmation would be a break of the upper rail.  Third confirmation might not happen but it's always very nice when it does because it allows more players to jump in with more money.  3rd confirmation would be a back test of the upper rail from above (Prechter' kiss goodbye).

If this breaks out, then the next resistance is the early February high.  I do not think it will be able to break out of that yet.  I think the recent waves of the past 2 months count as A-B-C movements, not 1-2-3-4-5.  Thus, this is probably the internals of some multi-month ending diagonal.  If that is true then waves 1/5, 2/5 and 3/5 of that structure have completed.  4/5 will not hit a higher high and I expect it to have a clear A-B-C like wave 2 (these waves tend to alternate in that regard).  It will most likely stop about 15-30 degrees below that peak.  So perhaps that will be about $23.50.  Anything that is above 24.50 starts to make the ending diagonal model wither very rapidly.

I think it will be timed so that the 5th wave, which should result in a lowest low to date, bottoms at the end of April.   That would be a perfect setup for walk away in May.

There are other models that also fit and so this is a good time to be extra careful.  After the new bear market for stock begins you will not have to worry about trading in and out for awhile.  The past 5 years of bull market will all likely be given back and then some as the huge gaping maw of the expanding triangles of the Dow and the S+P head back down to throw under the channel, thus ruining the boomer's dreams for retirement because that is all they ever were: dreams.  Most people cannot believe me when I tell them these things.  Few will remember after the fact that I warned them in advance.  Oh well, you can't help everyone.  It's just too bad that math and history and logic will not be put off forever.