[DJIA] selloff picking up steam

Last Friday, the DJIA tipped it's nose down and pushed the throttles forward.   As reported in the backlink, by the end of the day 530 fake points of Ponzi value were just "called" back into the ether of margin from whence they originally came.  Usually after a big sell off the indices become very oversold on the typical technical analysis metrics such as RSI, etc.  When the herd was in risk on mode, each of these oversold conditions were nothing but buying opportunities.  But this time the Elliott Wave principle warns us it will be different.  5 big waves up have concluded and so even the least terrible outcome will be S+P 1800 (the Avi Gilburt model).  The most terrible outcome is far, far worse (the EWI model).  Because this major wave has completed, even with the markets terribly oversold on a short term basis, the Dow futures are down 431 points at current read.





In conjunction with the completion of this large motive wave, the DJIA's 500+ point single day decline signaled something important folks and that is panic.  Panic doesn't just come and go.  Panic is when fear crosses a certain line.  You can be afraid without panicking.  In fear mode you can still think.  But in panic mode your automatic reflexes and your subconscious are running the show.  You think stampeding cattle are thinking?  No.  They are acting.  And this is why it's good to have defined triggers like "500 points DOWn in a single day means that panic has set in".

You are likely reading one of the very few blogs which well in advance so clearly defined this trigger - something concrete to BOLO for as the signal of onset of market panic.  More importantly you may well be reading the only blog on the planet that suggested at 7am central last Friday (well before pre trading had any action) that Friday could likely be the day it would appear.  This suggestion was based on nothing more than the Elliott wave count (3rd wave down).  Again, it's all in the backlink above.  Take your time and read the logic because it is not offered from an emotional perspective but rather from the viewpoint of an Elliott wave model which is fairly mechanical in interpretation.  Importantly, most of the credit has to go to RN Elliott who discovered the Elliott wave principle.  I'm just a practitioner of his discovery.

Folks, if my model is correct, it is going to get a lot worse from here.  DJIA is currently 16464 with another gap down apparently in store for the markets tomorrow if the futures are to be believed.  If you are not a trader then cash is king.  If you want to trade the decline then UVXY is a good bet and FAZ is good as well.  The banks should get creamed in this deal. 

 

The key to success for most people here is to not chase the peaks in these ETFs but rather to buy an EW-defined dip in these volatile ETFs and then set stops.  As long as your stop is not taken out, don't try to trade the minor waves because they just happen too fast.  There will come clearly defined points where it will pay to get to the sidelines and they could occur much faster on the way down than when markets were rising.  But for the most part until S+P gets to 1800 I think most people should just buy the dip and hold these ETFs.  They will be volatile but on average they will be strongly up and intelligently placed stops will save you on the downside.

At this point I would normally offer a model but the huge drop in futures is telling me to just take a step back to get my bearings and take a deep breath.  After all, I already have a nice amount of puts in GE, JNJ, MCD ,INTC, and newly added some LUV "hate" (puts).  The GE were bought several quarters ago and have been showing zero value for a long time now.  I was just not expecting the ending diagonal top to take so long to play out and that kind of jagged action eats the heart out of the time value of puts.  But they came to life again on Friday and if Monday is another big down day then they could well be on their way to greenness before their January expiration.

Also, as mentioned here in the bulleted section I bought a position of JDST into Friday's close because resistance was hit in GLD and because I think we have one more big wave down before the real bottom for GLD is in.  For the record, what do people think would happen if the markets just friggin tanked into September?   Would Janet still be talking about raising the rates?  Yeah, right.  And get blamed for crashing the markets even more than they already had?

The bottom for gold will likely be when the federal reserve effectively admits that it has lost control of this situation.  Once that happens there is no taking it back.   I don't claim to know what that will look like but it won't likely be pretty.  What cannot end well will not, in fact, end well.  It's a global debt Ponzi in the collapse phase.  How can it possibly end well?