Clearly the wave count shows that the ending diagonal was not the end of the bull in terms of EW count although the jury is still out as to whether it will be the actual chart peak for at least some of the major indices. I have been suspecting that the "5th wave in progress scenario" could turn out to be the case for some time now and there are abundant warnings on this blog to that effect, all of which began with discussions of my proprietary "wedges=3rds or Cs" indicator. Still, that does not mean Dow 25000 IMO. This market will very likely peak within a week or two. We have to expect volatility at the major turns.
Because of this volatility, gut feeling is of little use during the big turns. If you go by gut you get screwed over and over again to the point where it will feel like the market is singling you out personally for punishment. If you are a trader, I know you know the feeling. This is your herding instinct controlling you and you have to fight it if you want to win. You have to use chart data, not gut feel, as your guide. You have to form models and then let the market either confirm them or piss all over them. You have to be willing to get stopped out for small amounts so that that you can re-enter the trade confidently at lower prices when the chart tells you an opportunity is available. Getting stopped out for small money is not a bad thing; it is an intrinsic part of my EW based trading system.
One key model I am looking at right now is the GE model. As mentioned in several prior posts like this one, I saw a 4th wave triangle forming on GE and wondered if that meant that the DJIA ending diagonal into Sept 19th was really a 5th or a 3rd. I can now safely say it was a 3rd and that the drop into Oct was a 4th and we are now working on a 5th. There is no "6th" folks... Once the 5th plays out we can with high confidence expect to see panic enter these fragile, margin pumped markets. In case you didn't see it, even Greenspan is out telling people that QE failed to ignite the real economy and that he doesn't think it's possible to unwind the stimulus without causing "turmoil" in the markets. Greenspan might be early in his call but unlikely to be wrong. After all, he was the architect of the con. He is clearly out there trying to protect his legacy by telling people the truth now that the damage is already done.
The 5th will either be completely finished today or today's action will just complete 1 of 5. I do not claim to know which it will be! But I do know that it is going to have to "out" itself soon. Right now, GE is kissing the upper channel of its 4th wave triangle. This exactly matches the model at the bottom of the link above. I reproduced that chart below and added the purple arrow so that there is no doubt that I am referring to the "5?" at the top green rail.
A break above the top rail tells us that 3 of 5 has likely begun. Failure to break out suggests that it was a short stroke 5th. Beware holding TVIX over the weekend if we don't get our answer because it could gap up on Monday as part of the 3rd of 5. If the DJIA closes at a new high (thus killing the Dow Theory nonconfirmation which could lead to a Dow Theory confirmed sell signal then I think we must expect that 3 of 5 is about to unfold as being the most likely outcome.
Odds, people. Never certainties, only odds!
Conversely, a break below the lower rail of the 4th wave triangle tells us that wave 5 is over. I suspect we will have to wait until next week to get our answer. The market will likely want the weekend to think about it. The smart money does not hold over the weekend if the DJIA closes at a higher high than the Sept. 19th peak.
Either way, I expect the markets to peak soon. The loss of fed support in the form of QE has been announced but not implemented until October is over.
So what's it going to be, market: The blue pill or the red pill?
No comments:
Post a Comment