[IBM] update

I think the markets are at a precarious state.  They are overbought not because of the PE, etc. but because of the widespread use of debt (AKA margin debt) used to purchase them.   They are where they are due to misplaced faith in the omniscience and omnipotence of the Wizard of Oz, AKA the federal reserve.  People actually trust these con men and in fact believe that they control the economy not just of the US but of the world. 

History will show those who believe this to be seriously misguided Marks and Patsies, intelligent though I'm sure most of them probably are.  There is, at the end of the day, a wide chasm between intellectual ability and wisdom.  One is good with numbers and languages and letters and is quick on his feet in a debate.  The other understands the nature of man.  Few possess both traits.  Those with wisdom will fare much better in the next decade then those who rely on intelligence alone.  During the crash I expect many things to work exactly the opposite as most intelligent people expect them to.

IBM is now poised to be an important windsock in what I think is likely to happen.  There are two major EW counts out there for the broader markets.  One of them says that the current wave in progress is a 3rd wave up.  The proponents of this count acknowledge that there will be a big pullback, a bear market, when this 3rd is done but it will not be the all out collapse which Bob Prechter has been writing about since the turn of the century.  Avi Gilburt is probably the loudest EW opponent to Prechter.  He believes S+P 2300 is where wave 3 will end and then the reversal will be a normal 4th wave pullback, perhaps to S+P 1800, before powering upward again.

Both of these talented people have track records which are publicly perceived to vary from "absolutely fantastic" to "aw shit, missed it completely".  Such is the nature of EW.  When people slam them for being wrong it is because the public wants the luxury of thinking in absolutes.  It is much easier to see the world in terms of either being right or wrong; don't bother the herd with the notion of "odds" and "triggers" and "alternate realities unfolding"!  Thus, the public hears the public statement from the pundit and assumes that it is cast in concrete from a crystal ball which reads the future.  I have gone way out of my way to educate my readers that EW do not work like that because our universe does not work like that!  Even physics, it turns out, are based on probabilities because nothing exists in a vacuum and exogenous events do affect the perception of a given event relative to a 3rd party external observer but in a way that is only predictable by one with infinite visibility into all things (i.e. omniscience) and infinite ability to process it all down to infinitely small resolution (omnipotence).  The double slit experiment is an interesting example of this in physics. 

The public thus doesn't don't recognize that these guys understand their mistakes pretty quickly because they know what their count model was supposed to do and when it doesn't then you have to assume your count was wrong.  Of course, that kind of system does not work well with TV!  You get onto the tube, state your position and then you go away.  Either you got lucky that the count went your way and you are labeled as someone with a crystal ball, a visionary seer who is henceforth to be trusted in all things until the next big miss.  You specifically do not get to come on TV two weeks after your prediction and state "well, the herd turned against me there, I was wrong".   The herd wants certainty and so these guys stand up and express certainty.  Otherwise you don't get on TV.  The herd doesn't know (or care) that negating a model is in and of itself highly informational.  In fact, model failure is essential to the scientific method.

In any case, merely running an unknown blog means I get to be a bit more nimble than the very public guys.  Here is the backlink to IBM in which I expressed some concern that the count might be corrective.  I'm here today to re-state that I'm not 100% sure which way it will go because I refuse to read anything into the wave count that is not there.  However, I can say two things.
1) I do have a longer term wave count that, if it is correct, fully supports a collapse of IBM shares down to $50.
2) We are near a shit or get off the pot moment for the next wave movement and that next movement will likely determine whether IBM is next headed to $50 or $200.

Below is the high level chart.  Everything about is is very clear except perhaps the recent top.  You can see how I counted it but there is an alternate count that also works which is that red 5 is really only 3 of 5, that the recent pullback is 4 of 5 and that 5 of 5 will be a short stroke 5th wave about the size of red 1.  In other words, a move back up to $200 before doing the big a-b-c to $50.  There is no avoiding the big pullback at some point although it doesn't have to go all the way back to the level of the prior 4th; it could be a 38.2 or a 50 fib pullback too.

Right now my primary count is shown in red.

As you can see from the chart below, the shares broke down through the 38.2 fib on the 3rd (or C) wave and are now dancing on the lower parallel rail.  This is not an accident.  Importantly, the shares initially broke down the 38.2 fib, then broke back out above it but ultimately could not hold it.  So then they broke it down again but did not have the weakness to go all the way down to the 50 fib so they again are right now testing the 38.2 from below.  The red or blue paths are still possible at this point.

But this time the test is weaker, not likely to break through to the degree that it did before.  Stocks are either rising or falling.  They generally don't stagnate because nobody makes any commission on trades that don't happen and nobody is going to be trading a flat stock.  So if this cannot break back up soon then the selling is going to pick up until buyers step in and the red path will be taken.  But if the shares can get a shot in the arm right now then it could very easily kick off another round of buying as shown by the blue path.  Again, my primary model leans very heavily red and a break below the lower rail, especially if done with gusto, will signal that the next big wave down has begun.  If IBM begins to fall per the red model then rest assured it will have company (like the entire stock market).  IBM began selling off first because of global exposure and it will likely be one of the first to bottom.

Zooming in again we see the likely path that I am modeling for the next wave down.  If this wave happens as modeled then the lower parallel will get destroyed as technical support.  Red 4 would actually represent the back test of it from below and should be a very trade-able bounce.  Red 5 would then be the A wave of the big expected 3 wave decline.  Then a big ass rally into 2016 followed by a C wave wipe out in 2017.  Which just happens to align with my Illuminati crash indicator.  Despite many emails from me (which they ignore), the bug remains in place because I think they want it there.  It is way too big an error to be a simple mistake.

Time will tell if this model turns out to be correct or not and I will update it from time to time as I see something interesting happening.