American Express update: AXP bear market likely just started.

Here is my previous post on AXP.   Despite all the DOWphoria of the past weeks, AXP could not break out the top rail of its ending diagonal.  It kissed it no less than 3 times and got rejected each time.


Here is the zoom in showing that this final wave consists so far of an a-b-c with 5 clear waves in the C wave.  Unless AXP can break out right darned quick, that triple top is going to be its death rattle.  Remember, all of this non-happy action is happening despite the media headlines like "U.S. jobs data enthrall".  These are EXACTLY the kind of foolish statements you hear from overoptimistic herd mouthpieces near a top.  And near the bottom we will hear things like "the stock market is dead".  When you read that around mid to late 2016, start thinking about covering your shorts and flipping your bias long.  But only when you have a completed wave count down, of course, because the news means jack shit.  The wave count is everything.

Keep in mind that the weakness is not just AXP folks.  The entire financial sector was red today even though the main stream moron media didn't mention a word about it.

Does this kind of action in the financials look like a strong bull market to you?  Remember the old saying "the banks will bring us back" referring to banks being the first to rally at the beginning of a new credit cycle?  Well folks we are at the end of a historically significant credit cycle, the collapse of which will bankrupt many banks, probably even the one you have loaned your life savings to in the foolish notion that a bank deposit is something more than a loan to a leveraged gambler.  In return you get free checking and free ATM use.  Won't that be a consolation when the bank runs begin and you lose all the money you had stored in these corrupt institutions.  The banks (AKA financials) lead us back when the credit is on the rise but they also get hit the first and the worst when the credit is collapsing.  Banks are in fact nonproductive elements of the economy - a necessary evil if you will.  This makes them marginal players in a real economy.  Only in an economy where fake money is being used can they rise to the lofty heights of importance and wealth that we see today.  All of that and I mean all of it will collapse in the next 5-10 years (if that long).

If you want to know my impression of all the red numbers you see above, scroll all the way down in this post.  'Nuff said.

Bearish nonconfirmation of the Dow and NAS rallies seen in "Peak Exxon" model.

Check out the wave count model from my "peak Exxon" post which you can find here.  Below is the current chart that you can compare it to.  Looks like a) Elliott waves are real  b) my wave count was correct this time (they aren't always of course).

More importantly, the markets have been rallying these past few days with the NASDAQ just flying with reckless abandon.  So why is Exxon sell off?  Yep, they are quietly trying to get out the back door while everyone is distracted.  Remember, not everyone is a small fish like me.  When you are a hedge fund with hundreds of millions or several billions of dollars in the game, you cannot easily get in and get out without changing the share price.

I see the selling off of this thing as bearish nonconfirmation of the NASporia and DOWporia.  In a real bull market, XOM would not get left behind like this. 

At this point I think wave 1 down is now complete and we are working on wave 2.  I suspect that it will make it back up to the level of the prior 4th but from a wave count perspective, 5 tiny waves have bounced upward off of that red "b" and that is all that is required.  The shares have only bounced to the 23.6% fib, something that is actually pretty rare.  Generally the bounce is 38.2 or better.  If this begins to fall from here then look out below because it strongly suggests that a big gap down will occur in the 3rd wave. 

A big 3rd wave down could drop the shares to $95 or lower. That by itself would be bad enough but the real danger with that move is shown below.  The reason I got the count for the original post is that the following post is my high level model.  XOM is tracing out an expanded flat and is now in the monster C wave of it.  It is very, very late in the C of 5 of black C with all odds indicating that black C is now in the books.  If wave 1 of the new bear market is in place and wave 2 is also done or finishes early next week (NLT Tues but could be finished already) then a wave 3 will bring it back into the channel and that should be the sell signal for a lot of trading computers.

If XOM begins plummeting like that ("that" meaning like all the other crap social media stocks whose ending diagonal breakdowns have already put their shares into freefall), the world will notice.  It is one thing if useless Twitter goes into the dumper but nobody thinks XOM is useless or its shares worthless.  If XOM begins to head south like that, it will be with a lot of company.

TVIX update

Well when it comes to TVIX, paranoia and looking at every angle I could think of has paid off. I posted several possible next moves for TVIX when it had support at $3 but the message was clear: use stops and get out below $3 to let it settle out.  Why?  Because they could take it down to a very typical bottoming price for these leveraged ETF of the "mid to low $2 range".  So give yourself a hand if you had the patience and discipline to get stopped out and to wait until the chart would fully reveal itself if in fact you did.

That is why I posted the possibility for an ending diagonal here.  Since then it dropped 30 cents down to $2.70 before having a small bounce and it is looking very ending diagonal-ish.  I think the odds have to stay with the ending diagonal model for now.  So if you see that orange line go down in 5 waves, especially if it does a nice throw under, jump on this baby hard because this is going to be a very significant bottom for TVIX.  Buy low, sell high and all that. 

Folks, they HATE the VIX these days.  Who needs stock insurance anymore?  That is old fashioned thinking, something for wimps and wussies.  We don't need no stinking insurance because THE FED is in complete control of EVERYTHING!  That's right, baby.  We have entered a new pinnacle of pathologically permanent prosperity, people!!  Yep, they hate it at $2.70 but I bet you anything they will love it at $20, $30, $40 and higher. That's just the way this game plays folks.  Have no doubt, this will be a 20+ bagger.  This is an options play.  It is highly leveraged and we are at historical (hysterical) highs of complacency.  This will not end well and TVIX will skyrocket during the carnage.

Having said that, I cannot be sure whether what I labeled as pink 3 at the bottom there is really the 3rd or the 5th.  It just looks too obvious that it will be an ending diagonal.  The obvious doesn't often happen, especially at the major turns.  The market has to be tricky or everyone will get rich and that is an impossibility when the whole thing is a zero sum game.  So, don't require it to break down one more time and throw under.  Instead, if it breaks back out the top rail then use that as a major support/resistance line.  Above it you want to own TVIX.  Below it you want to be skittish and timid and to side step these punches.  The lower it goes without you in it, the more shares you will eventually end up with during the skyrocket portion of the cycle.

Metals and miners update

I got stopped out of JDST for a small profit near the open today and then waited for the double bottom to count out, got back in @ $12.12 again in double the size because I think gold is ready to pull back into a B wave.  Fortunately, JDST recovered almost all of its losses into the close and so this time I got paid literally coming and going.  Here is the GLD model that I think is likely in effect.

Looking at the close up, the usual culprits for pull back are the 38.2, the 50 and the 61.8% fib.   Maybe I will get lucky on this one and see a big 61.8% pullback.  That open gap is begging to be filled.

As usual, playing GLD is sleepy.  JDST is where the action is.  I think that something as big as the B wave in GLD should either get JDST up to $15 to fill the gap below (minimum) or more likely $18 which is the level of the prior 4th.  Just the 38.2% fib bounce would be $18.74.  So 50% in just a week or two of holding is a worthwhile bet.  Of course, I already have my stops in at $11.99.  There is some chance that today's move was an a-b-c back to the top of a down-sloping channel so if we don't break out to a higher high quickly when trading starts next week then $12.90 I will probably tighten my stops and take some profit.  But if it does his that lower rail again and hold it then I will add even more to the kitty for the coming bounce. 

Whatever you do, don't get euphoric about GLD during the C of E of $ wave because if it plays out as expected a lower low will occur, perhaps to even as low as the prior 4th wave ($650-$700) before turning back upwards in a meteoric rise to $3000.  Interest rates are now on the rise and lots of people will see that as an attractive investment relative to gold.  They have been taught that their money will work for them (a physical impossibility of course, only people can work) and old ideas die hard. 

One day all of the paper assets will collapse and the only thing worth something will be hard assets.  But until people finally realize that the dollar is worth zero, the dollar price of gold will fluctuate and probably with higher volatility than usual.  I have referred to what is happening as "supernova economy" for many years in emails to family and as far back as this 2011 post in my blog.  Near the end of its life, the star which is going supernova begins to contract and expand violently just before it explodes.  This is why I used the term - I expected and continue to expect increasing volatility in everything - the economy, politics, social mood, you name it.  Greenspan called it "turbulence".  Yeah I bet a supernova can be thought of as turbulent.

Minor miner update.

Here is my prior metals and miners update.  

My current model for the Jr miners is shown in the GDXJ chart below.  Per the prior post, I have been looking to change it but it has not given me the sign yet and so it remains as below.  That declining double top is dancing right around the resistance line which is a bit unusual.  This implies that, while the herd knows it exists, it might not be very strong resistance or support.  And this implies that this triangle model will turn out not to be correct.  But until it tips its hand, I stick with it.

I see three likely possibilities modeled in red, pink, and blue below.  The blue model says that we just finished an "e" wave throwover of a horizontal triangle.  If this is the case, expect a big down draft for the miners as wave 5 plays out.  Wave 5 down will be a very exciting event for me because then it means a big bull market to the level of the prior 4th in which JNUG will produce incredible returns. 

The pink model says that wave B is forming as a horizontal triangle.  See more detail on that in the zoom in at the bottom of this post.  The red wave says that the first wave coming down from "e" was a of B, the subsequent declining double top was b of B and now we should expect a pull back to the level of the prior 4th wave as c of B plays out.

There is one common denominator to all of these models: the next move should be down.  

Here is the zoom in detail mentioned above pertaining to the red and the pink models.  Again, at the very least we should see a trip to the bottom of the channel:

 

Given the high likelihood of a downward move coming in the juniors, I opened a position in JDST today at $12.25.  Stops are in at $12.28 so that I can't even lose the cost of the trade if this reverses on my (down gaps excluded of course).

Price targets for pink and red path.  Given my stops in place its very unlikely that I will lose money on this trade and much more likely that it's just a matter of how much I will make.

GE Update

In my prior GE post I was modeling another wave down that would break the lower rail of the ending diagonal.   As you can see from the current chart below, it happened.  Most people would be happy about this but I do not like that triangular looking think in the middle of the blue circle.  It could mean that this is just a 3 wave retracement and not the start of the bear market like I am hoping it is.

Zooming in to get a better look, that is a very clear set of waves, but is it 1-2-3 or a-b-c?  I'll tell you this: if this thing goes above $26.50 then I going to become very, very worried about my short term shorting calls for the DJIA and S+P.  If it goes below 26.15 then the pressure is off.  But I will say for the record, that triangle right there JUST SUX.  We should know in the next couple days.

 

NFLX sporting a declining double top

The NFLX chart is good proof that people have no idea what to value stocks at.  But I think this is going to end up to be a declining double top.  This is a shorts DELIGHT with very easy strategy:  Short the crap out of it here at $440.60 and set your stop for $461.  Why?  Because the model says this is wave 2 and if that is right then the next wave down will be a monster.  But since models are just models, not certainties, not crystal balls, you always have to mitigate your risk when playing them.  EW is not a license to win. It's just a way of making smarter bets and getting better odds.

Getting stopped out for a $20 loss on shares going for $440 is less than 1/2% risk of loss and many tens of percent profit opportunity.  This is a bet that anyone can intelligently make: your mom, your college kid, anyone.  I didn't promise that it will work out but I do promise that you risk little to gain a lot and that is what smart gambling is all about.

By the way, if this is not wave 2 then it is something larger and I would question many many of my current assumptions if NFLX is poised to go higher.  NFLX above $461 would be a smart warning for any short seller to pay attention to IMO.