DJIA update

Today the DJIA was weak all day while the $COMPX surged upward, as if pushed by a magical hand all the way up to almost exactly 4400.  $3999.875 is what my ticker shows.  Close enough to be spooky.  I half expected this could be the case as you can read in this prior post.  That mention of 4400 was not random as you can read in this other post.  My admittedly cryptic accompanying comment to that 4400 / 4440 call was:

• It skyrockets all the way above the top resistance line to form one final short-busting throwover that could end a 4440 or even 4444.
• If it does either of the last 2 bullets you might want to consider moving out of the USA...  I hear Belize is kinda nice.

Sorry, if you do not already know the significance of this number then I cannot tell you where I got it from because you would not believe me anyhow.  But I think it marks the peak for the NASDAQ and likely the DJIA as well.  As soon as it stretched to hit that "magick" number, the sell off began in all markets.  When it kissed 4400 and then began to fall I went back into TVIX in a big way.  Looks like $3 may turn out to be the bottom for it after all.  Time will tell on that.  Just set stops below $3 and walk away.

Having said that, most EW modelers are likely falling back to the possibility of the larger ending diagonal shown below with the count black 1-5.  If this is the correct model then expect a bounce off the lower rail and then one more thrust as shown in red.  But because of the 4400 move by the $COMPX, I think there is a very good chance that the lower support line will appear to hold, begin a bump up as if it is going to do the red path and then break down with a gap below the lower rail.  The blue path shows this possibility.

Folks, if that blue path is taken then I will go all in on this being the end of the 2009 bull market.  If this is really the case, expect a 300-500 point down day on the DJIA real soon now.  The break down should come with gusto: high volume and preferably a gap down.  We have to start seeing some real panic before this whole thing is really confirmed.

If you see this you will do well to exit all long positions IMVHO and short the weakest players out there.  Once they collapse, go after the middle strength players.  Finally, move to the big boys with the rest of the shorts who will be using their profits from the weaker players to take down even the biggest wildebeests in the herd.  Either that or just join me in TVIX which represents the lowest readings in 30 years.  Keep in mind that both Goldman and JP Morgan have publicly stated that "volatility is too low".  There is right now a great depression in volatility, one that cannot last forever.

Volatility, turbulence, market carnage, call it what you will.  It's coming.  It has to come because all these boomers are no longer buying stocks but rather trying to draw down from a system that the people bought into (and here is the scam part of it that so few understand) at valuations that were pumped up by the use of leverage by the con men running the show.  Who in their right mind thinks that Facebook is actually worth the $65 billion market cap which its bloated share price represents?   Even a market cap of $650 million is questionable for it IMO.  The fake market cap numbers will evaporate quickly as the leverage gets unwound.  Credit deflation demands it.  Revolving credit is already in a new downward trend that is going to last many years.

Total consumer credit is now reaching the end of the 5th wave of this mania.  And I do think it will be a mania as opposed to just an a-b-c retracement to the prior 4th before off to the races again.  Why?  Because defaulting on debt in the US is no longer a moral decision but rather a simply business decision for businesses and individuals.  If it is so easy to leverage up and then walk away in bankruptcy without any real repercussions (such as debtor's jail or even lifetime indebtedness) then lending will have to revert to 1950's style "glassy eyed bankers" who actually know the people they are lending to and do not loan to those they don't know and trust.

By the way, if it seems I just make some of this stuff up as a go along, please consider past posts where I quoted the same charts as shown upper left such as this one.  I did not call for an immediate down turn in the credit back then because the wave structure was wrong.  Today wave 5 on the left picture is much closer to the size of wave 1 while the internal structure of wave 5 now counts as 5 waves (or very close to it).  There is always the chance that more waves will unfold in wave purple 5 that will require me to modify the count but this credit cycle will certainly peak by the end of 2014 and the stock market is forward looking.

As usual, time will tell.