Thursday, March 26, 2015

[GREK] update

The news is all full of talk of Greece running out of money right now.  At least, that is, to a higher degree than what has become the new normal for Greece...  There are many articles like this one saying that Greece runs out of money on April 20th.  Others like this one from Mish talk about Athens raiding public health funds and other funds that are earmarked for particular purposes.  While there is no doubt that an end game will arrive, and there is no doubt that sovereign debt will eventually get defaulted on, the real question is when.

Right now by reading the news one would think it was imminent.  I mean, even a date - April 20th - is being tossed about all over the place.  Thus, Greek debt sounds like the very last place one would ever invest.

But the chart is telling me something different.  Check out the model from the backlink which is reproduced below.  It suggested that a short term bottom was in (w3) and thus the need for some kind of corrective retracement followed by another final wave that would be the same size as wave 1.  Assuming minimal retracement into wave red 4, the model below was indicated with the bounce potentially occurring anywhere within the blue circle.  After already haven fallen from $26 down to the $10 region I didn't feel too badly using such a wide range.

Below is the actual chart since then..  As expected, w3 did form a bottom and then bounced to the 38.2 fib of wave 3.  There is a chance that the small 5 waves down that are forming now is actually going to be a failed 5th because this would be the length of wave 1 down in the model above.  It could also be 1 of 5 which is why I drew in 5 waves down.  Would not touch this unless the most bearish scenario shown in red below pans out - there are too many other things to play.  But I am constantly challenging my own EW skills by picking obvious losers and betting (usually on paper) against the news and against the fundamentals just for sport.  I also do it as a proof point that news and fundamentals don't drive the share price, herding behavior does and EW helps us track herding movements. 

Zooming way out, we can see that this is very nearly 5 waves down and there is a chance that the recent dip off of green 4 is actually a failed 5th.  Otherwise, the likely bottoming spots are labeled 5' and 5''.  We should know in  a day or two if 5' or 5'' is getting the nod.   But no matter where it bottoms I expect a move back up to around $14.40 which is the level of the prior 4th.

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