$COMPX update

In this post I gave the signs to look for if $COMPX was really going to break down as modeled and in this one I suggested that it was playing out as modeled.  I wrote, "Bottom line: a break down below that top blue line and then the bottom orange line likely means a big sell off is in order."

Well, both of the signs happened.  In fact, the wave broke down below the lower blue trend line that has been in place since April.  I think wave red 1 down is finished or nearly so.  This is trey bad for longs and so I expect them to throw the kitchen sink at it in order to try to keep the Ponzi going a bit longer.  The result should be a bounce something like the red line into red 2. 

Doing this would accomplish several things:

• Take out stops from still - skittish shorts.
• Convince the dumb money to buy the dip.
• Kiss the orange lower rail from below before heading back down
• Move back up to the level of the prior 4th
• Peek down below the lower blue line during wave 1 but then come back into that massive blue channel for wave 2 and then crash down below the lower rail FOR GOOD during red 3.  It took the power of a 3rd wave (3 of 1) to take out the lower orange rail and it will likely take a 3rd wave to take out the lower blue rail.

All of these things would be like a left-right-left-uppercut to the foolish longs who have been talking about stocks being a permanent source of easy "automatic pilot" wealth due to printing by the fed. I say again: the market is much bigger than the fed and the fed is going to step aside when millions of scared wildebeests come charging at them at once.  One or two, ten or twenty, 50 or 100 and the fed would stand its ground like the bold lions at Kruger.  But not when it is 1000, 100000, 1,000,000.  The fed is as fearful of the kicking feet and stomping hooves of the herd as anyone else once the herd begins to show momentum instead of being shooed around by fed speak. 

We ain't seen bad yet folks but it is mos def coming.  But first we have to get past this initial apparent confusion associated with a major reversal from bull market to bear.