4th wave not offering much comfort [GE] [$TNX.X]

In the backlink I showed in its chart (below) how the large expanding wedge had broken lower support.



The recovery bounce is a bit scary.

But not for shorts.  Scary for longs.  Here's why.  Look at the upper chart.  It collapsed down to $19.40 on the 24th.  Then the plunge protection team sprung into action to avoid a repeat of 2008.  Do you really think they have the stones now that support is broken, now that you can see the expanding falling wedge upper rail was respected?   No folks.  They are scared this time.  And they should be.  The longs have leveraged up in order to jack prices up this high and that means there are nothing but sellers in our future.  We are just at the top of the waterfall shown above but this time I expect it to play out at a faster clip.

Look where the rally stalled folks.  It broke down that lower rail with gusto but it cannot get back up into the channel.  Seriously, if they could get back up into that channel then I would believe that the longs still have stroke.  But they won't because they can't.

And why can't they?  Because they did not earn these shares, they bought them on credit.  The margin calls are going to beat them senseless and I mean in a historical way.  In this backlink to $TNX, I thought that wave 2 was complete.


Turns out it needed one more hard spike down in order to finish C of 2.  So right now it is in 1 of 3 up and nobody really sees it.  After all, rates are still down on the year, right?  Should be no problem racking up even more margin debt to stop the collapse of markets, right?  The only problem with this is that the wave count indicates interest rates are in a bull market and the market is not going to like having to pay suddenly higher interest rates (3rd waves tend to move quickly so as to surprise the sleeping).  When these rates rise, the smart ones will deleverage into it and the dumb ones will get margin calls and be forced to sell soon as well.




So if that lower rail on GE now holds as resistance, and it is my primary model that this will be the case, when wave 4 completes we should get another stroke to a lower low in wave 5.

With only 3 waves down, which is all we really have so far, the herd still has some hope that this is just another flash crash and then we are back to the races.  But once wave 4 completes and 5 hits a lower low then real panic will be setting in. 

Winston Churchill is reported to have said that, "You can always count on Americans to do the right thing - after they've tried everything else."  Gold is the right thing. "Gold is money and everything else is credit" according to Mr. J.P. Morgan.   We'll, investors have tried to do the right thing.  They were told that gold was stupid and so they should buy commodities.  Well, those are in the toilet, a veritable 2nd great depression.  Then they were told to risk up into stocks.  After all, your money could work for you, right? So they bought stocks. 

But now stocks are looking scary and people in the herd are whispering amongst themselves that maybe the stock market is not really a store of value.  Maybe it's like those crazy bloggers always said.  Maybe its a Ponzi scheme whose energy source is debt (AKA a debt Ponzi).  And now interest rates are rising so maybe that means inflation.

Inflation at a time of falling stocks???  What else is there to run into?  Where can I get safe from all this?   That's when I think we start seeing a move into gold: when all other places to hide have been upended.  If my TNX model is correct we are going to see some major fireworks in all financial markets in the next 2 months.