Disney update

The model from my previous Disney post was, as is sometimes the case, off by 1 wave.  It can be very hard to discern 3rd wave tops from 5th wave tops.  The Disney chart is instructive in a couple of ways:

• The Disney top showed how people scramble into the shares in a panic, afraid that the training is leaving without them.  As they scramble out onto the tracks in order to try to get into the back door of the train, the train stops and backs over them.  The lesson: Don't chase!
• When trying to figure out if the current wave is a 3rd or a 5th, look for 3 waves down which do not then bounce to form a higher high.  That triangle in the middle should have been a bigger clue to me than I took it for.
• Here you have a good example of an expanding triangle in the 5th wave position, AKA expanding wedge AKA wizard's sleeve.  According to sites like this one, it is not uncommon to see these in the 5th wave position as part of a trend reversal.
• The internal waves are "3"s until the 5th wave is done.  Then the next wave downward is a "5".  That is clearly what is shown below.

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The move from that 5th wave peak down into wave 1 down was shockingly quick.  That was just wave 1.  I suspect wave 3 will be even worse.  Few people would expect that rapid of a reversal. 

So, with this in mind and knowing how this works, you might recall me having posted the long term chart of the DJIA and the S+P 500 (they look identical).  Both are clearly expanding wedges. The DIS chart shows just how this formation tends to resolve itself.  Nobody, and I mean nobody in the main stream, be they bull or bear, thinks that a 60-90% bear market is possible.  The biggest bears out there are calling for a 30% move and the normal average stock analyst is saying perhaps 10% is what to expect before, of course, the next wave up of permanent free prosperity for all gamblers in the market.  All I can say us that this is why history tends to repeat.  Everyone thinks its different this time and they have plenty of good-sounding reasons but they are in fact just the same old self-delusional drivel that we hear at every market peak (and at every market dip as well.

The chart pattern is our friend because we have a clear price target: the bottom rail and probably a throw under.  It should happen in 5 very readable waves just like the DIS chart did.  Don't be tempted to think the bear market is over until you see those 5 waves down.  The coming bear will lure people in over and over and over again as they catch the falling knife.  About the only time worth going long will be after wave 1 down occurs because usually there is a sharp 2nd wave back up.  But if you go long trying to catch that bounce you have to be light on your feet.  Look at the little slivers the DIS chart left us for flipping long.  The DJIA chart will not move that quickly but you always have to be skittish when trading against the established trend.