The market is now trying to decide whether the recent move down in the DJIA is terminal or just the pause that refreshes. In terms of UVXY, I count 5 waves up into black 1. This could also be just 3 waves up given where the gap was but the size of the pullback suggests that it was more than that. Either that or the move up was an a-b-c which is now ready to break down to lower lows (meaning that the Dec rally continues). Again, the market is figuring it out and I will not be emotionally predisposed one way or the other. I will continue using EW defined entry points and EW defined stops. At some point the markets will peak and there I will be with all my trading account intact despite having bet against the general trend of the market for some time now.
So the play is simply here. Long UVXY unless it falls below $20 in which case it would be more than 5 waves down and more than just a gap fill and unable to hold psych support of $20. This is far from preordained IMO because the $COMPX actually went solidly positive. But the DJIA is still 75 points in the red as of this post and so that would appear to be bearish divergence. A lower low on the DJIA than 17630 will tell us that the bear is finally awakening from hibernation.
3 comments:
Cap'n,
Who did all the buying this afternoon? Is this "market" really only a rigged casino? Can EW accurately model if the fed is injecting cash through buying equities, or whatever form of criminal activity is taking place?
Have you read "The Creature from Jekyll Island"?
Remember the "worst case scenario" at the end of the book. Griffin talks about a massive market "crash" which would be followed by markets that would never, ever, be allowed to fall....
I wonder if that's where we are.
Steven B.
Cap'n,
My prior comment stems from your opening sentence, "The market is now trying to decide..."
What if the market isn't allowed to decide?!?
Steven B.
Hi Steven B.
First, yes I read Jekyll. And yes, I believe that the US federal reserve could be buying stocks outright or maybe just doing it in a leveraged way using futures or derivatives. Or it could be acting through an anonymizing "agent" like GS, JPM or the other usual suspects.
In fact, other central banks just admit to it. Maybe it's in fact criminal and maybe it's just immoral and unfair. None of this matters at all.
You are still laboring under the false idea that the federal reserve is God. It in fact is not. It sends the messages that it is all powerful and all seeing but if this were true then we would never even have a recession, would we? The fed is the wizard of oz. This is what Frank L. Baum was trying to hint at in the Wizard of Oz. The yellow brick road is obviously a reference to gold and in the original version the ruby slippers were silver slippers.
I recently posted a link to Greenspan's statements a few years ago where he outright admitted that the market is far bigger than all the resources of not only the US federal reserve but of all central banks combined. The fed is a big player but if you combine the other market players, they add up to a much fatter stack.
Steven, your impatience tells me that the great correction is near! You are reacting to your herding instinct. You are under the impression that trees can grow to reach the sky, that the federal reserve actually has the power to implement "markets that would never, ever, be allowed to fall....".
If I know one thing, I know that this is not possible. The fed simply is not big enough. If they print endless money to do it, inflation will cause a pitchfork revolution. The nation is already in a state of affairs as I have never seen in my 5+ decades on this planet.
I do believe that the fundamentals are unknown and unknowable but also that the wave count takes into account ALL market participants, including the fed and anyone else who is rigging the game. Keep in mind that rigging works until it doesn't and then it stops working Madoff Quick.
No Ponzi can go on forever Steven B. Griffin was wrong about that. Absolutely wrong. Do you think Japan hasn't thought of all the things our fed thinks of? If so, then how did their stock market collapse and stay collapsed for a few dozen years? Do you think they like or welcome low share prices?
No sir. The credit deflation that took place overwhelmed their central bank even though they were the #2 economy in the world!
It's not going to be different this time. The leverage employed requires and demands a giant unwind as soon as interest rates threaten the ability of the participants to carry the debt.
One more thing: don't think the fed didn't notice the rapid demise of the liberal senate. Greenspan tells us clearly that the fed is NOT independent. So a more conservative congress is going to force the fed to be more conservative. The fed is not just as free to so what it wants as many people believe.
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