[DJIA] update

Here is the appropriate backlink.  Below is the model from that post.




I'm rejiggering my whole model to indicate that the first wave down (blue 1) was a leading diagonal and that we are now working on blue 2.  Wave 1 can often pierce major support without being able to hold the move.  Then the market backs up with wave to to get a running start on the breakdown with wave 3.  If this model is correct then we begin to see some UVXY fireworks this week.



Mish is watching the thing that matters which is the spread between bonds of every type and treasuries.  When the spreads are low, fear is low.  Junk debt is treated as if it had the same safety as treasury debt.  When fear is growing you can observe it by watching the money sneak out the back door of the riskier debt.  Another way to observe this is via the JNK ETF.  When its value goes down it shows that complacency is waning.

Mish writes, "The Fed has to be freaking out if it really intends to hike into this."

I concur with that analysis.  Yellen is between a rock and a hard place.  If she doesn't hike then people will be asking why are rates going up anyway.  If she does hike and then the economy crashes then she will be blamed for it even though it was bound to happen anyway at some point and she didn't really have control over it anyhow.

But once you make the admission that the fed really doesn't control all of the things that it allowed you to believe were under its control, only a fool would stay leveraged long in the debt Ponzi.  That's when the shorts will move in en masse.  That's when the trouble begins.