Thursday market update: a must read for all regular readers

For those that are beginning to feel like we are in one of the Stallone "Rocky" movies, you are in good company.  By that I mean trading monster blows with the longs on a daily basis: DJIA swings of 200-300 points and TVIX swings of 15%, etc.  This is how the end game plays.  Fortunately, we are Rocky, the underdog and the longs are everyone else who always ended up losing to the guy who just wouldn't fucking quit!

There is a battle within the herd leadership.  Some want to go north but others, who have been laid back and quiet until now, are asserting their influence.  The bulls are now tired, tired, tired.   As an outsider, it might look easy for "the man" to keep pumping this Ponzi but they are working their asses off to do it and now all of their helpful infrastructure is falling apart.  Even the IMF is pointing the finger at the fed regarding the eventual unwind of all those crap assets that it took upon its balance sheet to prop up this massive, and I mean historically significant, debt based asset pump. 

Anyone who knows how this works knows that what the fed did over the past 5 years was TEMPORARY.  It was supposed to be unwound into economic strength like an economic shock absorber.  But there is no real economic strength.  How can there be when the workforce is shrinking?  The only true producer of real new economic value is human labor!  The pump didn't produce any economic value, it only produced wildly stretched asset prices.  That is why braying asses like Ichan want Apple to spend its cash hoard propping up the shares which he would like us to believe should be double the current price.  And the bozo has the balls to say this right after Samsung warned of 60% drop in profits?  Yeah, right.  Tim Cook listen, I know you read this blog all the time (cough cough): conserve cash, ride the storm out, let your shares take a beating and then buy up assets for pennies on the dollar in 18-24 months.  But whatever you do, ignore Ichan's self serving advice.  He is talking up his book, literally.  If you listen to him then you do not deserve to be CEO and Steve Jobs will be sitting up in his grave cursing the day you were born.

The fed is screwed.  They got a 1 day DJIA pop out of their "low interest rates will continue" happy-happy joy-joy speech.  Meanwhile, the IMF completely contradicted them saying that unwinding the position will produce higher rates whether or not the fed wants them to.  Higher interest rates mean higher margin debt payments for the already too-leveraged longs.  This math only ends up one way!  The market knows this which is why it is putting in lower highs and lower lows.

Folks, it's only easy during wave 3!  It has not been easy for them all year.  They have pumped and spewed their lies and used up all of their influence and paid their bribes and caused massive global civil unrest (just as I predicted would happen years ago).  What have they got to show for it??  The DJIA started this year at 16600!  Now it is only 16663!  63 points for a whole year of busting their asses and going into ever deeper debt??   63 points for a whole year of liberal work only to have true conservatives (not RINOs like most GOP) gain ground in almost every way?

Anyone who understands what is going on here KNOWS this is not easy and it is not sustainable.  I don't want to come off as cocky but I do want my crew to understand what is going on in the mind of their captain.  Captain says: "This bitch is going down, and soon.".

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Before I get to the charts I want to make a request of all of you, of everyone who feels like this blog is worth reading.  I have worked tirelessly and taken no compensation for it for years.  No ads.  Not even free registration.  I hope my readers are mainly of the libertarian bent who believe, as I do, that there is no free lunch.  I hope you do not believe in "something for nothing".  And so I have a simple request.  It is quick, it is free, it is painless.  Simply announce your presence on my decks using your first name (only) and location on the planet by creating a comment to this post.  

That's it.  That's all I ask.  I don't think it is too much to expect!

If you don't want to use your real name, I don't care but I would appreciate if you provide your real location at least to the state level if you are in the US and to the country and either province, state or city level everyone else.  If you make up a name, please use the same "handle" if you ever decide to comment going forward.  Know that your comments are welcome and never censored.  
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OK, enough of the high level stuff and on to the charts.  First off, yesterday's high could not be taken out.  Additionally, there was no sideways action.  These were the triggers I warned readers to look for which would be risk factors regarding another trip to the top of the ending diagonal channel.  They did not happen and so I did not step to the sidelines. 

It is my view that today's sell off resulted in a lower high and a lower low for the DJIA and that is bad technical news for the bulls.  Many in the bullish camp now think it is their turn to throw the next punch and are probably expecting a move back to the top of the new, falling channel as shown below.  I am not expecting the red path but rather the blue.  I think the markets gap down from the open and put in a scary showing.  If they don't gap down then I will stop out of TVIX above DJIA 16745.

Zooming in one today' action, I count 5 clear waves down and then a retracement to the prior 4th and then the start of tomorrow's wave down.  These are nested waves and I think tomorrow's open will be a 3rd of 3rd of 3rd which is almost guaranteed to gap down and crap out.

Anything higher than red 2 means I got the count wrong which is why this is the stop of the day.  Again, anything except a sizable gap down at the open will put me on high alert.  But if we gap down, just let it run tomorrow because it will likely turn into a Freaky Frightful Friday.  While far less likely, we cannot rule out the possibility of even something akin to a "black Friday". Nobody can be sure about what transpires day to day but I do know that the amount of leverage in use by the longs would support such an event were some significant bad news be released overnight (some kind of significant default, etc.).  

 
I also want to point out that all of this recent volatility so far has been low volume (see chart below).  There has been NO panic so far; the TVIX fun hasn't even begun yet.  I suspect that that could change dramatically as early as tomorrow.  Perhaps 10/10 will be our 500+ point sell off which I have warned many times would be real evidence of panic in progress. 

Please internalize this volume picture, crew.  This is the wind pressing against our sails.  For a long time we have been forced to tack against it.  It required a lot of hard work, moving the sails, constant diligence in watching every gust of wind for fear of being blown backwards.  But the weather vane is shifting and very soon it blows at our backs.  Instead of being hyper-paranoid each day we will soon be skipping forward with hardly a care.  There will be some rocks to avoid in our path so we dare not get too complacent but, having survived and made headway into some of the sailing worst conditions for us that have ever been seen by man or beast, our time is at hand.  When you see that red volume spike, hold onto the lifeline and enjoy the ride.