DJIA update

While TVIX got slammed today, the bulls cannot credit the DJIA with the kill.  It was all "risk on" in the $COMPX (something that will likely "risk off" just as quickly) with the DJIA looking very tentative indeed.  Perhaps it has that effect on the conservative sectors of the market when they see one its biggest, strongest bulls take a beating like IBM did today.  Of course, the wave count expected this as you can see that it was due for a 3rd of 3rd of 3rd.

Now, it's easy enough to write "of course" this or "of course" that after the fact.  People do it all the time, especially those who are trying to trick people into something (or at least argue a point from a stronger position than is deserved to hold by the author).  

But that is not what I am doing as long time readers of this blog might recall because I called IBM out by name back on May 28th before there was even a public whiff of any top in the markets and certainly no weakness in IBM.  I specifically avoided looking at its "fundamentals" because I know they are not leading indicators of share price.  The wave count, however, is.  I wanted something in writing that, read in the future looking back, would provide credible evidence to those who think wave counting is hoodoo voodoo instead of just being the basic understanding of the movement of herds which is in fact what they are.

Well, it's still too early to crow about this too much.  Yes it was a strong wave down but it could just as easily been 3rd of C as 3rd of 5 of intermediate 1.  In other words, just a normal correction, healthy for the markets even, and then back to the races.  Of course I don't believe that for a second but the data can fill in the true story over the coming months.

In any case below is my model of the DJIA.  In short, I think it finished a 4th wave and so if this model is correct we should see selling begin to take hold very near the opening if not right out of the gate.  Of course it could also rally to the 61.8 fib but that is not my primary count.  But it needs to smash through, not linger at, the 38.2 fib on the way back down in order to avoid building a 4th wave triangle where it is that could serve as a base for a move to the 61.8. 

Of course, a move up above the sold red line means the whole wave count is bust.  Never say never, trust but verify and use stops unless you have just decided to risk "N" dollars in a buy and hold strategy.  I can't do that with the bet size I am using, not until 5 waves down transpire into wave 1 down and then a-b-c into wave 2 back up.  During wave 3 down I will likely just buy and hold for the wave 3 ride unless I just get an obvious setup.  But my goal is to reduce trading frequency dramatically during wave 3 down.

I do like the fact that the declining double top which the DJIA printed today is using that falling blue trend line as resistance.  The market seems to think it is meaningful and thus so do I.

By the way, this Forbes article came out a couple days after I called IBM's shares out.  You rarely see this kind of truth in print when the credit is rising. It is only during the decline phase that straight talk emerges that shows you that the con men running the show know and knew exactly what they are doing as the fleece the unwary investor.  Sam Palisano is clearly such a con man and everything he did was done to pump up the share price so that he could get a big fat golden parachute at the expense of investors. 

I'm telling you, crazy as it sounds right now, before it is over most people will rue the day they ever put their life savings into paper assets like this.  It is a total, total scam.  People I talk to think I am crazy for cashing out of the 401k system and putting it into gold and silver coins, especially for not selling everything at the peak and even more especially since I emailed family and friends telling them it was a peak.  All I know is that when it all comes down I will have real money while the paper version burns.  If deflation knocks down the price of gold to $700 as the current model suggests, I will be buying gold hand over fist at that price because I know what must come next: massive if not hyperinflation.  But again, 1 day at a time, shall we?