Saturday, January 31, 2015

[SLV] update

At first blush the SLV chart looks like the recent pullback busted the model.  It looks a lot like an a-b-c right now but a good count exists and I suspect that as more bullish waves play out we will see more of a motive looking count form.

There are three most interesting features of this chart.  First, the recent pullback came to the level of the prior 4th as shown by the pink rectangle.  Second, the recent pullback did not fall into the range of wave 1 up even though it fell into the range of red b.  Those who don't know how to count an expanded flat correction will be fooled by this.  Had wave 4 gone below the green line by just one penny, the model would be bust.  Third, silver is only working on wave 5 of 1 while the miners appear to be working on wave 3.  This timing divergence is something to keep an eye on.  It could turn out that the wave which just finished was actually 1 of C (EWI thinks all of what is happening right now in M+M is a huge multimonth sucker's bounce which will go well under the recent lows after this big a-b-c is printed).

This cannot go below $16 for any period of time at all without busting this model.  Look for an AM pullback as shown and then an upward reversal.

Note: the previous post I did on SLV was some time ago and you can read it here.  As you can see, my call back then on wave 1 up seems to have been correct and then we got a doozy of a pullback to form wave 2.

Friday, January 30, 2015

[JNJ] update

At the time that the backlinked post was written, I had not yet fully formulated my W3/WC theory and so I was counting these rising wedges as 5ths not 3rds.  So I called the top at about $107.  For a time it looked as though my model was correct but in early September the model fell apart as the bounce turned into more than an a-b-c.  Because the entry point was picked using EW rules, anyone following this model would have lost zero dollars and in fact would have made about 2% gain by stopping out when the methodology demanded it. 

The subsequent correction turned out to be an expanded flat into red C/blue 4.  Then we got 5 clearly motive waves up and some choppy shit coming partially back down, potentially with a triangle right in the middle of it all.  Very soon it will have to pick one path or the other and with several major names like this showing the potential to put in a 3rd, 4th and 5th up, I wonder greatly if the conventional wisdom crash model is correct.  If it is, we need to see a rapid decline begin to happen most riki-tick in the likes of MSFT and JNJ.  MSFT needs to break the lower support rail with gusto and JNJ needs to invalidate the current, really corrective looking, really a-b-c looking wave with a sudden trap door opening event.  I am in no way sure that this is going to happen and JNJ is not going to stay elevated if the DJIA and $COMPX are going down.  JNJ is a bellwether, the smart trader will care about what it does even if he is not trading it directly.

[MSFT] update

From the backlink we get the prior model below.  It clearly expected a big gap down into wave 3 as shown by the red rectangle.

The actual chart is shown below with Andrew's pitchfork overlaid on it.  You can see that the chart decided not to go directly into the 3rd wave down, instead it extended the the wave 3 count by inserting a perfectly legal green wave in there and so it was a 3rd of 3rd of 3rd and thus the gap was even larger than I originally modeled for the 3rd of 3rd scenario.  This is a situation where the longer you wait to let the pressure blow off, the more sudden and dramatic it is going to be.  Microsoft is officially in a bear market right now, having plummeted 20% from its highs already.  While I do expect a counter trend rally here, the shares should turn back down within a week if this model is correct.  In the case, the lower rail will be taken out while the rest of green 5 plays out (which is still part of blue 3).  That lower rail will need the power of a 3rd to break down. 

The big picture is below with current model in blue and threat model in red and pink. The red/pink model adjusts the count so that the recent high was not the 5th of 5 but rather only the 5th of 3.  Indeed, a case for W3 could be made into pink 3 although it has a slightly strange shape compared to what I have been seeing for verified W3s of late.

Either way I think MSFT finds support at the lower rail so if you are short the shares based on my EW models then, it's likely time to lock in profits here and then we wait to see if the coming bounce is a small a-b-c per the blue model or a fast and furious 5th as per the red model.  Either of these outcomes would be totally legal under the EW rules so the key is to look for triggers.  If we get a small a-b-c and then a break below the rail then a rapid share price collapse will be, by far, the best odds outcome.  Otherwise the real start of the crash will be delayed to Q3, perhaps to align with the 2015 Shemitah.

[GE] update

In the backlink to GE I provided this chart:

Reality happened to match my model almost exactly.  Just pure luck I guess.

Again. (FBO SCE)

In any case, the model is at crunch time.  It will either do something very similar to the red model below or we have to suspect something is very wrong.  This is a very critical time because I am modeling this as a 3rd of 3.  As in Fred Flinstone's feet have been doing the yabba-dabba-dabba underneath his little stone wheeled car without it really moving and the next thing that MUST happen for this model to be valid is a rapid "DOO!".  It will not work for this to meander upward at this point to do something, for example, like breaking out that top orange rail and I would put every short play I have, especially near term options that I have on Intel on IMMEDIATE liquidation watch.  I'm not saying that this could not happen only to have the shares turn downward hard soon thereafter.  But I am saying that it would be very, very unusual to the degree of making me strongly consider liquidating my near term options because folks, as GE goes so goes the entire stock market.

 I think the odds are still on the short side for the reason shown below.  I have a valid W3 and then a value 4th wave HT and then a valid 5th wave too.  In addition, the chart has already moved below red 4 and that makes it very difficult for me to see how this could be a simple retracement that leads to a higher high.

Still, red 5 did not go to a higher high than W3 and I really wish it had done so because if it had the case for that being a large HT would be much stronger still.  But we don't have to wonder and we don't have to worry.  We simply have to WATCH CAREFULLY!.  The trigger is clear, ignore it at your peril should it get tripped.

Again, if it looks like the longs are going to win the day for one higher high to Avi's target of S+P 2300 then let them have it!  JNUG is a PERFECTLY fine play!   As a rule I prefer to be long than short IFF the wave count allows for it and the JNUG count certainly does.

[S+P500] threat model.

I won't backlink to anything because this model is a tangent, a threat model for now but the more charts I look at, the more I'm trusting W3 over anything else.  The conventional wisdom count is still that we are ready to collapse into a 3rd wave down but I wonder if it turns out to be C of 4 as shown below.  For now the expectation is the same:  S+P really should head down quite hard to the 1920-1950 range.  If the conventional count is right then it will blow right through this level but if the W3 based threat model shown below is right then wave blue 4 will find support there and one more time the longs will hand the shorts their assess on a silver plate.  Just when everyone is getting super leveraged short and greedy, that's when this model would reverse.

So if you are playing UVXY and TVIX then please take heed here and take profits once you see 5 waves down.  Then just sit and watch for the bounce followed by the lower low that would invalidate this threat model.   Either that, or watch from the sideslines as TVIX and UVXY plummet into the tank once more to allow you to buy them on the cheap again after the real 5th is put in.  Again, in the mean time there is JNUG and the oil patch to play so don't shed a tear for UVXY and TVIX if this threat model plays out.

And don't say you weren't warned clearly of the possibility of this well in advance!  Do what it takes to preserve your precious capital!  Value keeping what you already have more than hoping to make something for nothing in this gambling casino we call the markets and you will never go far wrong.

[GDXJ] update

The GDXJ model is working exceedingly well right now as you can see by comparing backlink to actual.  If it continues to be so generous then we should expect a pretty good pull back Monday AM as shown but then an intraday reversal to much higher highs.  Better still, I expect it to continue being generous like this because the wave count, as I have mentioned in these pages on many occasions, becomes much clearer during 3rds and Cs and the current count says that 1 of 3 just finished (or nearly so) today.

I will likely be playing only JNUG on Monday simply because the time to mos def play a stock is when you have a large 3rd of something (3rd of 1?  3rd of 3rd?) setup like this.  I'm guessing that red 3 should be good for 25+% in JNUG, perhaps even 30%.  And if you are careful about waiting for the waves to play out then you don't even sit through the uncomfortable pull back to $27 (or the equivalent in JNUG) before watching the chart take off big time.  A balsy player would even swing short on JDST for that quick several percent during the wave 2 pullback.

As usual, trust in the wave principle but be wary of believing that this count is the only valid count.  Trust but verify!  Use stops as you go, figuring them out it pretty trivial in this case folks.  If you use these precautions then the time for you to use margin, if ever you would be so bold, would be during red 3.  I am going to max out with whatever TDAmeritrade will allow and then use very tight stops for the margin portion of the bet and slightly looser stops for the cash-bought position.

Blog [readership] update [PVIEW]


Most people probably think they have no interest in knowing how my readership is doing but I think there are two valuable reasons to follow it.

First, it shows the herd is turning.  I have been writing this blog for 5 years now and have been writing emails to family and friends on these same matters for 3 years before that when I warned of the coming 2007 crash a couple of months before it began.  It's only now that my writings are getting any attention at all even if it is still negligible in the big picture of what really popular blogs are doing in terms of numbers.  The can do in one or two days what has taken me years to achieve.  But I like the shape of my readership curve - it's going exponential now.  As one person likes what they see, they tell another person who tells another, and so on.  This is no mean feat given the two main things that I write about which are the state of the debt Ponzi and Elliott waves, both of which are viewed as "extreme" views by the herd.

IMO people don't read what they don't already agree with.  That exponential curve is telling me that more and more people are in agreement with my views.  It thus serves as a sort of mood barometer for me.  There is value in that.  It will help me see things coming when others have no clue.  It is essentially a simplistic form of big data.

Perhaps more interesting to most people is the second point which is that I claim to be able to derive an Elliott wave count from this graph which should help me predict the ebb and floe of readership, and thus of the mood.  In my previous readership update I provided a wave count at the 100k lifetime hits number (again, a pittance compared to popular blogs).  I recently surpassed 150k hits so it seems a good time for an update which you see below.  I had to stretch the vertical scale so that the side by side comparison would be easier to see.
If wave counts work for web page hits then it should provide additional evidence to my claimed observations regarding the broad applicability of this scientific principle known as the Elliott wave principle.   It will be very interesting to see how the waves play out in this matter and I will be sure to update in a couple of months but just look at that right hand chart.  5 up, 3 back, like clockwork.  This is not random folks and furthermore in this case there is no feedback mechanism for the herd to be looking at.  There is no trading computer that is causing it by algorithm.  If this can be shown to be reliable (and I am confident that it will be), it becomes strong evidence for my claims that EW is built into the fabric of how things work.  It is not a learned behavior or a reaction to circumstances because I am the only one who can see my readership stats in real time.  The readers are just behaving normally and their intrinsic behavior is thus revealed.  This kind of insight is beyond powerful folks because I have seen that EW applies to everything that I have ever seen in chart form, not just stocks and financial stuff.

For the record, the current 3rd wave could legally extend far higher than shown but I'm assuming that red 3 is not actually a new 1st wave that will extend the 3rd of 3rd into 5 subwaves of its own.  I thus picked a shortish wave size for 5 of 3 so that it would clearly not be longer than the 3rd of 3 as that would violate the EW principle by making that 3rd wave the shortest of the motive sequence.

[DJIA] update including current threat model

The volatility is incredible these days with 200+ DJIA days becoming common.  The market is in a state of turmoil.  It still has low interest rates which enables it to keep up high levels of margin debt but big names like MSFT are rolling over and that is never a good thing.  Thus the herd is nervous, like a bunch of stallions running around in the corral in an agitated and confused state.  We have no panic yet folks, just agitation and confusion.  The panic will arrive and when it does it will hit with shock and awe but we have not seen any of it yet.

The model from the backlink is still fully intact despite all of the whipsaw moves we have been getting.  Here is the current model:
I might turn out to be sorry for this but I sold out near the end of the day to lock in the nice profit based on my suspicion that Monday AM will start off green and then have an intraday reversal.  The buy the dippers need to get beaten up like this a few times before they will give up.  You can't blame them, buy the dip has been working since early 2009 and here it is early 2015.  But all good things must end and I model this bull market as being there already.  What we need is that big 500 point DOWn day to confirm the new trend.

The wave count supporting this Monday AM reversal theory is shown below. In short, I model that it will be W3 which means a small AM bounce which could have an outsized effect on UVXY before DJIA reverses back down again to a lower low as shown.

Now, below is the current threat model.  Notice how I moved the labels around so that the low of the 29th is now counted as e of [4].  Yes this count is still in play.  Yes I have seen this movie before many times.  Fortunately you will know quickly if this threat is real and that will be the crossing of the chart back up into the interior of the HT again.  To back test it with a little kiss and then move quickly down would be one thing, very bearish.  But to move back up above the lower rail, well, all I can tell you is that I will be selling UVXY first and asking questions later.  I can always buy back in if it subsequently breaks down below again.

Again, this is not what I think is going to happen but the herd can do it and in no way violate the EW rules.  In fact, it would give a chance for a higher high 5th wave which is more in line with the guidelines than what we have right now in terms of that 5th that barely broke above the top rail.  The purpose of these threat models is so that you are not blind sided and have to think in real time - which of course is where the market uses your greed and fear against you very effectively.  But the market loses its ability to do so if you can see it coming in advance and set triggers and create strategies designed to capitalize on it IF it occurs.

Anyone who tells you they know for sure what will happen tomorrow is a liar.  There are only odds and not certainties.  Other scenarios can play out, an infinite number of them in fact.  But EW allows us to treat all of them as noise except for two or maybe 3 models which are by far the most likely to occur.  Of course with a model to go by you know exactly when the current model has gone bust and you then look around for another model.

[USO] update - is the bottom really in?

I have been on bottoming watch for USO since about $20.  After having correctly called the 2014 top very closely, my first serious attempt to call the exact bottom was at $19.50.  Of course, that model failed quickly which is exactly the intent of every EW model: to either be correct in which case you let your profits run or to be wrong and to get stopped out quickly.  I made 2 or maybe even 3 other attempted bottoming calls on USO, each of those were also debunked quickly.  This is not failure, it is normal and it is expected when you are trying to get the lowest possible buy in price.  Failure is calling a bottom and then just blindly buying based on gut feel and then when the trade goes against you then you just lose your ass because you had no scientific reason to buy which left you no scientifically defined stop out point.  The ability to play only those poker hands that have a high odds of winning and to rapidly fold those that you chose to play but which began to go against you while keeping most of your bet is how my EW trading system is far and away better than any other I have used over a couple decades of trading.  This system puts the odds of winning squarely in your favor if only you will have the discipline to follow the basic rules of:
  1. Never enter a position unless you have an EW count that says a reversal of the prior trend is going to happen immediately.
  2. As soon as you enter the trade, enter the stop which must be executed if you get a lower lower than the last low which your model believed to be a bottom (or the top if you are shorting).
  3. Expect to lose a few for small money while winning big when you do win.
  4. Avoid buying or selling on gut feel, advice you heard from some stock salesman on CNBC, or based on the unknown and unknowable fantasy called "fundamentals" by those seeing to unload their essentially worthless shares on you.
  5. Understand that the Elliott wave principle is in fact science, not gut feel or magic (although it might sometimes seem like magic if you look at some of my calls in 2014...).  This is the science of herd tracking with the herd in question being the human race.
OK, now for the update. Please refer to the model in the backlink and you will see that the chart has performed almost exactly as modeled.  And so the question posed by the prior model is now in our faces: was the recent bottom really 5th of 5 of 5 or just 1 of 5 of 5

The answer is that I don't know for sure but the evidence so far points to it being the bottom (5 of 5 of 5).  First off, I can count it as such in the zoomed out chart as shown below.  Importantly, wave 5 is now the same size as wave 1 in this model (shown by the blue verticals).  Also, we have triangles and wedges in the expected locations (4ths and 3rds respectively).

So far the bounce is ambiguous in terms of USO itself.  The oil patch players like CJES are a bit more clear in their counts.  But in both cases, we only see a-b-c to the level of the prior 4th so far.  I strongly suspect that the red path will be followed below.  This could perform as shown below but it could also pull back into a deep vee wave 2 to form an inclining double bottom so DON'T CHASE.  Wait for the a-b-c pullback and then you will be able to confidently buy in with low risk to your capital by setting tight stops just below your entry point.

Crunch time for [CJES]

I began taking swipes at a CJES bottom yesterday in the low $9 range based on possibly having completed 5 waves down per this model.  Seems like I was on the right track because now it is trading at $10.47.  But was it a real bottom or is there more to go before the real bottom?  That is the question and the EW chart is about to respond to it.

Do not chase.  Wait for the pull back.  If it doesn't come then it doesn't come but odds are that it will come, perhaps as shown below.

The pullback will be wave 2.  2nd waves that occur after long trends tend to be deep vee.  Go by the 5-3-5 pullback count, and nothing else.  The 50 fib would be a nice retracement the 61.8 or higher is also common on a deep vee 2.

Thursday, January 29, 2015

[DJIA] update: wave 3 down could begin very soon.

Here is the backlink.  As you can see from the lower (60 minute) chart there as compared to the current snapshot below, the general shape of the DJIA played out within reasonable expectations.  It broke down the lower rail of the HT on E of 4 and then put in one final wave up to break the top rail (which is the minimum usual requirement) before turning down.

Since the peak, we see 5 clear and perfect waves down with wave 3 taking out the lower rail.  Then the back test on wave 4, again very typical. Then a final 5 wave movement down before a bounce to about the level of the prior 4th.

Zooming in, I count today's big rally as WC 2.  In other words a 2nd wave which was formed by a wedge and thus a C or a 3.  In this case, a C.  If this model is correct, and I suspect that it is, the selling should begin at the open tomorrow and then get worse over the next week.  Once WC breaks out the top rail and then back into the channel, that is usually a strong indicator that the count is correct.  IF it breaks the lower rail tomorrow very early in the trade, so much more so.

If this is really going to break down into a 3rd wave starting tomorrow then I would stick with UVXY early on.  It is the only thing that is pretty much guaranteed to go up if the DJIA goes into collapse mode and the short term gains could be substantial in percentage terms.  We could see a 30+ percent move in one day if the DJIA does a 500 point break down.

Having said that, if this does not begin to sell off right form the open, get cautious with your shorts quickly because WC is very unlikely to break back out that top rail.  Thus, if it does it is likely forming something else that would be far less bearish than an AM breakdown of the lower red rail. If that breaks down I will be into UVXY on max margin but with tight stops.  Again, I don't often use margin but if I suspect a big 3rd wave might be in play then it begins to make sense because they move quickly and the wave count is generally easier to read than 1st and 5ths.

[TRX] update

In the backlink I mentioned that I thought TRX was bottoming and that it would play catch up during the coming 3rd/C wave up in GDXJ.

Since then, GDXJ has given up 50% of the gains it made since mid December.  This is normal, usual, and expected.  But while that massive give-back was occurring, TRX barely gave up anything.  I've seen this movie before.  The red model is just a bit too steep but not very much.  I pretty much expect a mirror of the left side to appear on the right.  This has "quick double" written all over it IMO.

The logic is this: TRX got completely whacked during the sell off.  Longs bailed and shorts jumped on it hoping it would BK before they had to cover.  But in the 3rd wave up of the juniors we are likely going to see animal spirits come out of hiding and demonically possess the juniors.  That's just what 3rds do.  When that happens, TRX is going to get rediscovered as a cheap junior.  It might eventually BK for all I know, but not within the next 2 weeks and that is when  I expect the shares to skyrocket as shown.  This is of course assuming I got the wave count right for GDXJ.  But I did get the count pretty close for TRX because I'm in at $.64 which is actually pretty near the bottom (so far).  When GDXJ breaks out into wave 3 I will probably double down on this.  I don't have many shares of it right now and I am convinced that it is going to catch a bid in the next 1-2 weeks for the reasons stated.

[GDXJ] update

In the backlink, check the left hand model.  The action since then has been a variation on the left hand model.  All that I labeled wave 2 now seems A of 2.  The current chart has pulled back to the 50 fib and so the red path could go off tomorrow.  Yes it looks like only 3 waves in the C of 2 wave but there is a spike down just below the 38.2 fib that I think can be counted as wave 4.  I initially didn't see it which is why I added the blue path but then I made the lines thicker and it jumped out at me from the grid.  I see this quite a bit at turning points : waves that land right on top of grids.  It's almost as if the herd is using common charting tool grids as camouflage.  Yeah I know it seems silly to me too.  But this is a representation of a living being made up of millions of individuals and so the complexity of it should not be so easily dismissed.

Bottom line: sell if it goes to a new low and then watch to see that it finds support after a 5th wave down, possibly in the 61.8% fib region.  But to be honest, that is more of a pull back than I expect at this point. The 50 fib would be just right if the herd would leave it at that.

[$COMPX] update

As commented on by reader Steven B, yes, the suggested model for $COMPX provided here did not pan out.  This market just doesn't want to die.  Tough thing, this predicting the future in near real time business.  Of course, if it were easy or you could always win then everyone would be able to do it.

At the same time, I used this model like everyone else and I scored several grand on today's trading session simply by getting stopped out properly on UVXY and then looking for another target of opportunity which I found in the form of a massive B wave on JNUG.  In my situation I have time in the AM to do this before work; not everyone has that.  So those folks cannot quickly change strategy like I can.  But at the very least, people should not be losing much money when the trade takes another path than the model.  If this is not the case then re-evaluate your stops!

For example, I took no less than two intelligent, EW swipes at trying to catch the exact bottom on CJES.  I got stopped out for one penny one time and for several cents the other.  I then just moved on.  Getting stopped out is part and parcel of this game and I think my strategy plays well into the coming huge increase in volatility that all of the pundits are expecting.  Yes you get stopped out more but when the trade goes your way the cash piles up quickly as well.

Below is tomorrow's working model for $COMPX.  In summary, the model suggests that today's action formed a so call Flat Correction.  Flats are frustrating on two fronts: they tend to retrace quite a ways up and they end with 5 waves going in the countertrend direction.  When many EWers see 5 waves going in the wrong direction and they assume that is the direction of the trend.  This is not true with flats or with expanded flats which have a 3-3-5 structure.

The play is simple for tomorrow.  If the chart goes higher than pink 3 then just lay off UVXY until you see 5 full waves up.  Keep in mind the characteristic movement of flats which is copied from the EWI link given above: "Flat corrections usually retrace less of preceding impulse waves than do zigzags. They participate in periods involving a strong larger trend and thus virtually always precede or follow extensions. The more powerful the underlying trend, the briefer the flat tends to be. Within impulses, fourth waves frequently sport flats, while second waves do so less commonly.".

So it is possible that the C wave of the flat was already put in today and that the selling starts tomorrow.  Of it could be as shown where the red rising wedge was w3 of 3 (not annotated above), then a pullback to the lower rail of the wedge for 4 of 3 and then the final thrust to 5 of 3 which I designated pink 3. Given the shape of this chart, I bought a large position of UVXY at the close and am holding it overnight.  The reasoning here is that it looks like a 4th wave triangle or a declining double top.  If the latter then $COMPX will open up red tomorrow as wave 3 plays out.  It could even gap down hard.  But if it has one more wave up then it would probably be a triangle giving me plenty of time to bail out when I see it break out to the upside.

I still believe that one day soon the DJIA will lose 500 or more points in a day and that will be the start of real fear.  If this does not go my way then I will be looking intently at JNUG since its pattern is already established.

[CJES] trading alert

Stopped out for 1 penny loss, back in @ 9.28, stops at 9.24 (1 penny below the recent low).  Looking for current wave to be a deep vee 2nd which results in inclining double bottom.  If stopped out again I will focus back on JNUG which seems likely putting in W3 today.

[CJES] trading alert

Big buy of CJES @9.31, stops @ 9.30

Wednesday, January 28, 2015

[USO] update

I continue to model that we are near a serious bottom for the oil patch.   Tuesday's sell off was just one more step there.  It is when we get down to the nitty gritty like this that the count gets more difficult.  5ths of 5 have always been a challenge for me.  The WTI count looks very close to a bottom whereas USO, below, might be 5 of 5 of [5] or just 1 of 5 of [5].  I would like to see all of [5] be as long as wave [1] was and this was what drove me to model a $14-$15 bottoming price in USO in this post.

I am not changing that USO count yet.  The 38.2 fib would be 17.30.  Note that I overdrew the red a-b-c so that it goes into the region of blue 1.  If that happens, the count is bust so it must fall short of that orange horizontal.

It is possible that the oil services companies bottom before the actual commodity does (bullish divergence).   So keep an eye on WTI and CJES because these are how I would play the oil bounce.  RUSL is more loosely coupled to oil than these two pure plays so RUSL might have to wait for the commodity to bottom before it finds a bottom.  Nobody really knows so the count is all we have to go on.

[$COMPX] update

While we have first confirmation of HT breakdown, nothing is confirmed yet.  So we need a model, a straw man if you will to work with so that as the real wave roll in we either recognize them in our model or we get unexpected real time behavior and it leads us to be cautious.

And so I offer my current model on $COMPX.  The main feature here is that we are in the middle of the 3rd wave right now which I model as having begun at the top of the pink rectangle and will likely continue until the bottom of it so that pink 3 (a 3rd of 3rd) will have spanned the entire channel in one fell swoop.

A move back above the bottom of pink 1 breaks this model and means an immediate rethink is required. Additionally, any move back above red 1 should be treated with suspicion right here because this model says we are in 3rd of 3rd of 3rd and there should be no time for any fooling around under these circumstances.

[RSX]/[RUSL] update

I'm beginning to wonder greatly if I got the count on RSX/RUSL wrong.  The jury is still out on this but I do not like the fact that of late RSX has created what looks very much like it could turn into a 4th wave HT.  A break below the lower orange rail would be a clear sell signal.  It will probably out itself very soon, perhaps even as soon as tomorrow.

If it goes down then the resulting wave might just be 3 of 5 and not the full 5 down off of blue 4.  Still the bounce should be very trade-able a-b-c, good for a move back up to red 4 ish.  If RSX tanked to $10 then rebounded to the level of the prior 4th @ $15 that would be a 50% score and of course RUSL would be higher, over 100%.  Just be careful that you don't go down with the ship!   Don your life vest and jump overboard the second that support is broken if you want to survive this and to have all your cash for when the chart actually does support a bigger move up.  I myself would not touch RSX until it puts in a higher high than what I have marked as red 4.  If you already have a position that you don't want to leave then feel free to hang until until the top and bottom rail of the HT break down but after that you have to sell.

A word to the wise: it is easy to fall in love with an idea, a dream, a perception.  We humans are particularly adept at deluding ourselves.  There is one basic rule of trading IMO and it is don't lose money (or at least make the minimization of losses your priority over all else).  These stock charts are nothing more than wave continuum with different frequencies and amplitudes and wave structures.  Forget about the underlying asset if you can (I know, it's difficult) because it tends to lead you to buying into a "fundamentals story" which might be entertaining but whose veracity is unknown and unknowable.  So I myself tell these stories sometimes but it is always for the purpose of financial entertainment.  The charts, and the charts alone, are my only real market timing tool.

Banking index [BKX] suggests shorts be cautious near term

I seem to remember having mentioned the BKX index (ticker in TDAmeritrade is $BKX.X) in my blog before but could not find a direct post on it.  In nay case the current chart is below.  From a high level the left chart might appear to be a 1-2-3-4 with 5 down in progress but that cannot be the case because blue 4 has overlapped blue 1.  So that count is busted.

On the right are two other alternate counts.  One uses the red numbering and the other uses pink.

The final count that I see as possible is below.  The two short term bullish counts upper right get the nod if BKX goes up just $1 from current levels.  If the lower count is right he market must gap down pretty hard soon in order to nullify the a-b-c look that it has right now.
The important part of all this is that I don't think that the broader markets will break down unless being led down by the banks.  After all, my overarching thesis that the US is running a global debt Ponzi centers around the moneychangers and their special ability to create credit from thin air. 

At the same time, look at AAPL shares today.  They posted the most profitable quarter in the history of any company in the stock market and they get a lousy 6 percent bump for their success and, so far at least, not even to a higher high. 

Yes, they could still extend their 5th of 5 wave perhaps even all the way up to $140 and I don't see how $COMPX goes down if AAPL is going up.  So now is the time to be vigilant and to keep reasonable stops.  Also, a mix of bets on the miners and the drillers along with UVXY could add a margin of safety for gamblers following my wave counts.

More amazing EW predictions come true: [GREK]

For the first time ever, in early April 2014 I posted on an ETF ticker GREK which tracks of the value of Greek debt.  At the time of that first post, it was all sunshine and roses in the news. Mario "Lying bastard" Draghi had just assured that Greek debt was safe, blah blah blah.  Because of all the lies, Greek debt was trading back down at interest rates similar to that of supposedly safe German debt.  In the top chart of that post I counted wave 2, a deep vee 2nd wave to be nearly complete.  The bottom two charts were dedicated to the wave count in GREK which trades inversely to Greek interest rates.

As an understanding of the EW principle and yes, luck, would have it, I nailed the exact top in that post and then I followed up on it a month later in this post.  Even though a powerful double bottom looked to have been put in, the wave count was telling me that the unwind hadn't even really begun yet.  Yes, SCE, the chart and only the chart was behind this model.  The "fundamentals" at that time were strongly against another Greek "panic" (AKA return to sanity regarding the solvency of PIIGS). After all, the supposedly potent director, Draghi, assured us that all was well.

Fast forward to today and have a gander at what happened since.  It is, in a word, fugly.  GREK will collapse below the prior 2008 low before this is over and then Spain and Italy will follow and then, I think to everyone's amazement, France and then German will swirl the toilet bowl as well.

But of course, nothing goes straight up or straight down and GREK counts like it is getting very near a panic bottom of wave 3 down. In fact, today's collapse could be part or all of the tip of W3.

I expect a significant bounce, either red or blue, to begin soon and most likely within the blue circle.  Of course, right now the fundamentals scream "stay away from Greek debt".  And so here is yet another lesson on my long standing views that fundamentals are bullshit because the true fundamentals are unknown and unknowable to mankind.  Whether or not you are willing to acknowledge the facts says a lot about you.  The facts are that, based on wave count alone, I modeled this last move down with some pretty incredible accuracy not only on the timing of the pullback but also of the severity of it.  This is not luck people.  This is why I stopped referring to EW as "Elliott wave theory" and began referring to it as "The Elliott wave principle" quite some time ago.  You just cannot produce this kind of accurate forecast any other way in my experience.

Of course, the count could have turned out to be wrong as well!  But the key is that I would have known very quickly and would have exited the trade (had I been trading this at all).  You do not get this luxury with so called fundamentals!  Fundamentalists tell you "just hang in there a bit longer and be patient".  Good EWers will do nothing of the kind!  We will only get in on a good setup and we will get back out just as quickly if the model breaks and the breaks are very clear when using the EW principle.  There is no room for subjective analysis once you have stated your wave count.  That particular count will be right or it will be wrong and you will know pretty quickly which it will be.

Meet Greece's new liar in chief: "Greece will not default"

A laughable article today quotes Greece's new leader as saying that the country won't default on its debts.  What he really means is "not until we have milked the rest of the EU for all the up front concessions and goodies possible".  Greece will default because, as I have been writing for a long time, its debt is unpayable, just like the US debt is unpayable.

Tsipras makes his intentions clear in that article: "We won't get into a mutually destructive clash but we will not continue a policy of subjection".  This is nothing but the current spin on the old saying which I have seen attributed to J. Paul Getty which is that "If you owe the bank $100 that's your problem.  If you owe the bank $100 million that's the bank's problem.".  Tsipras is simply notifying the German and French dominated EU banking system that the Greek debt problem is a shared problem and there will have to be shared responsibility for it.  Greece racked up the debt but someone lent it the money to do so after all.

Of course, the only thing that the Germans and French can do is either stop asking for repayments or lend more money so that Greece can use it to make payments while increasing the debt size.  Either way it will turn out to be a default.  I absolutely guarantee that because math, history and logic will not allow otherwise.  All of the stuff that Greeks borrowed money to buy is now old and ratty.  It is no longer new and shiny.  So the threat of repossession is not very serious anymore and the more stalling that is done, the more ratty the collateral becomes and the less serious the threat of repossession becomes.  Tsipras is just buying time and trying to soak the EU for more bail out money in order to fund his program.  Germany et. al. should just tell him to pay up or shut up but then Greece will just default and dumb asses the world over will blame them for mishandling the deal when in fact there is no deal.  Either Greece gets more free stuff or it will default because the Greek people are tired of doing without in order to make payments on past extravagances.

Interestingly, Tsipras seems to have serious political skills.  Per Mish's article, it seems that he has realized that as a member of the EU Greece has absolute veto powers over continued sanctions of Russia!  the first thing he is doing upon taking over the PM spot is to piss on the whole idea of sanctions!  So we are now talking about the tail wagging the dog because Tsipras has found serious leverage there.  Of course, the EU could move forward to change these rules but it would take a long time and it would also show the smaller players that the equal voice they were promised in order to get them to sign on in the first place really meant "equal until it no longer serves the needs of the EU oligarchs Germany and France".

Bottom line: Greece will default in one way or another because the Greek people have elected the only guy who ran on that implication.  You cannot make a deadbeat sovereign pay unless you go invade them and even then you only end up with pennies on the dollar as the insiders squirrel all the real money (gold and silver) out the back door as soon as tanks cross the border.  Additionally, you take the risk that someone like Russia will then step up to Greece's aid (I would not be surprised if Russia funded Tsipras' campaign...) and promised to defend the poor nation against out of control capitalists, blah blah blah.

The oil patch is at another reasonable EW entry point. [CJES]

Based on the wave count, and the wave count alone (SCE), I modeled that we might see one more move down in the oil patch (meaning oil and oil services).  CJES is one of many, many that fall into that group.  I picked it at random because you have to start somewhere.

Here is the backlink.  Please review the model chart therein and compare to the zoom in action of today.  My primary count is blue but the red model could also play out.  I don't think it is worth trying to grub every last cent out of it considering that I expect it to double over the coming months.  But it would be particularly satisfying to see the red model play out just because the waves would be clearer.  I picked the blue model as top model at this point because close zoom in shows a valid count to be present AND green 5 is now pretty close to the size of green 1.

If you are the very patient kind of gambler, just wait for CJES to break back up above $11.  That is the first confirmation that the reversal is happening.  At that point, just use tight stops.  You really cannot lose money like this if you follow the basic rules:
  • don't enter a position without a valid EW reason for doing so.
  • don't stay in a position if the count invalidates your EW count.
If you stick to these simple rules it will keep your herding instinct in check folks.  I think you are now reading pretty much the only EW site on the web that breaks it down into such human terms which are so clearly actionable.  These are the things that, in hindsight, I needed to hear when I was learning EW and said in the way that would have made sense to me before I "got it".

Response to reader question regarding correlation of outside events to market moves.

Reader "L" wrote,"You have been saying for some time that we should expect a significant correction in the markets, Dow, S&P... and at the same time a rise in rates. What bothers me is that historically rates and stocks move together, at least on daily time scales, no so true over decades, why would it be different this time?".

This is an important question which I have addressed indirectly many times in this blog based on the teachings of Bob Prechter and socionomics.  I'm not just parroting what he is saying blindly.  I have questioned his logic over and over again in real life and I believe that he is essentially correct even though I don't really like how he explains it.  While his explanations in debunking what he calls the exogenous effect theory are correct and based on data (Prechter is above all a statistician and a historian) he then just says "and so forget about those things, use EW instead".

This is a particularly unappealing approach to teaching because it leaves an unfilled hole in our brain, one that screams to be filled with some kind of answer, some kind of logic.

So first, I will present Prechter's views and then I will add my own opinion to try to fill the resulting gaps.  Interestingly, Prechter just did a video on the subject for the State of the Global Markets 2015 Online Conference but it was a limited time resource for subscribers only.  In it Prechter used historical data to completely debunk many common correlations between stock market moves and exogenous events like:
  • interest rate moves
  • inflation/disinflation
  • terrorism
  • etc.
I cannot explain this to people in words because people have already been conditioned, brain washed, indoctrinated, what ever you want to call it into a certain belief system that the herd has endorsed as its own.  A careful study of the human herd will show over and over again that the herd often believes things that are not true despite all the evidence in the world against it.  This is why declaring that the Earth is round instead of flat, that Earth revolves around the sun and not the other way around were prisonable events in their time.  The herd had its mind made up and would not be confused with the facts.  Again, why do you think we got liars and con men like Clinton, Bush and Obama instead of visionary smart guys like Ross Perot and Ron Paul?  Same reason.

The only way to really explain things to those who can hear (as in "are open minded enough to let logic and data override their herding instincts", which is a very small percentage of the population, sadly), is with data.  Prechter's recent vid was loaded with charts and data showing how there is no reliable relationship between exogenous events and market moves.

I have a slightly different take.  There is a reliable relationship but you have to be omniscient like God in order to perceive it.

We have all heard about rogue waves in the ocean.  There are usually a small number of them rolling around out there at any time.  They occur even if there is no Earthquake, underwater landslide, volcano eruption or asteroid splash to account for them.  They occur due to the randomness of waves and how waves add and subtract from each other in a completely mathematical way but in a way that is so complex that we are not smart or observant enough to have any chance of predicting them.  In other words, it would take someone with Godlike powers of not only observation (omniscience) but also of processing capability (omnipotence) in order to do this and humans do not meet these requirements.

In fact exogenous events DO account for rogue waves but there are so many of them interacting in so many ways and to so many degrees per way that it is a fool's errand to try to predict them and I think that the markets work in the same way.  This is a more detailed way of explaining the so called butterfly effect which of course itself is just a partial explanation since it makes it sound like the butterfly wings cause weather events in and of themselves when the reality is that they can combine just right with other things to form the behavior.  In other words, they are a catalyst, and perhaps one of many, not root cause in and of itself.  To say that interest rates do not effect stocks at all makes no sense. 

The problem is, however, saying how and to what degree it will effect them and this is where THE DATA shows that the correlation is so unrepeatable that it essentially appears to be random to our unGodlike sensory input and processing power.  Again, the data is truth despite the "world is flat" herd beliefs that herd members are so sure they "know" about.  If honesty is taken into account, they never did any real research of their own, they don't know anything about it at all and they simply repeated the current herd think as if it were fact.  Hearsay is a basic element of herding. We all do this, it is part of our built in wiring and even those who are aware of it must fight it every day in order to see clearly.  It is that ingrained into us.  It is in our DNA.

Take today's Fed announcement as an example.  Despite L's comment that "historically rates and stocks move together, at least on daily time scales" (which is already busted based on stocks up since 2009 while interest rates have been, on average, falling with no daily correlation that I have ever been able to discern),  the markets have in general been loving all of the low interest rates.  The traders loaded up on cheap margin sending stocks to ridiculous highs.  Now Yellen says today "no change" and the markets sold off.  Note, markets did not move all that far today; the real underlying sentiment was felt by UVXY which closed up 18%!   Why did this happen?  I thought low rates were good for the markets?  The interest rates went down even more today!  Also, low interest rates are supposed to mean more money printing yet the miners pulled back hard as well.  Correlation is bust.

The key here is to avoid the word "believe".  When you say believe in conjunction with trading you are saying "gut feeling".  If on the other hand you say "the data shows" and then provide said data then you are no longer in the land of beliefs (or make believe) but rather rooted to facts.  Facts are the anchor that holds you fast while the tide would like to wash you out to sea.  I'm sorry I cannot share the recent EWI vid because it had so many good historical charts and so much good data but here is a shorter vid that only very quickly touches on the subject with one quick chart flashed on the screen for a very short period of time.  You might be able to find more if you look.

As for my view that rising rates will fuel the crash THIS TIME, I base this BELIEF completely on the fact that margin debt is at an all time high THIS TIME.  When rates are low, the service on margin debt is possible.  More debt enables more profits.  And so that is what happens.  More profits means more reinvestment and the cycle is self reinforcing.  While stocks can begin down before the interest rates begin to rise (thus proving that the direct cause-effect is not there), once stocks are headed down a rise in interest rates is LIKELY to accelerate the sell off to the downside IMVHO simply because margin debt service goes up with interest rates.

Having said that, these are just beliefs and I don't do any real market timing using them. There could be some other incoming wave that I am not smart enough to see.  Some wave whose net interaction is to keep interest rates low while the market sells off.  The main reason I see rates going up is its current wave count for interest rates.  The main reason I see the broader markets ready to sell off is wave count for stocks.  The interaction between the two is not reliably knowable according to the data presented by Prechter.

So the bottom line is that the only evaluation that we humans have any chance of success with is to look at the individual waves associated with the asset we are looking at and not spend too much effort trying to make relationships between waves.  Like fundamentals, the wave interactions are, at the end of the day, unknown and unknowable by mortal man.

First confirmation in the expected [$COMPX] breakdown arrives.

Backlink.  Current chart is below.  This is why I have been talking about loading up with UVXY on max margin (which of course I did/am).  I normally don't use margin at all but this is a good setup that has been telegraphing for some time now so I deemed the risk/reward with using margin to be deeply in my favor this time.

For the record, we only have first confirmation.  This could turn out to be a large a-b-c to mid channel and then bust right back out the top rail.  The key at this point is to move the stops up to red 1.  If red 3 is really playing out right now.  It has now hit a lower low than red 1.  If this model is correct then it will bottom and put in red 4.  Since red 2 was a deep vee, red 4 could be a bit sideways but it CANNOT go back up into the region of red 1 without breaking the model.  So set stops 1 penny into red 1 and just let it play out.  Again, the goal of this is not to say that the market must follow my model.  The goal is for me to know when the model I have selected is either likely right or wrong.  Those who pooh-pooh this kind of TA suffer from a lack of understanding of this basic idea.   In their ignorance they believe that chartists believe we can absolutely predict the future.  That is of course, impossible and I say that as pretty much the only person I have seen on the web who suspected in early January that things could likely play out as they have.  This is not bragging, it's all a matter of written record as long time readers can attest.

Until this breaks below the lower rail we only have 1 breakdown confirmation.  I am not trying to waffle on the fact that I FEEL that the breakdown is upon us but only a fool trades by gut feel.  Mr. Market uses our humanity, our emotions and our herding instincts against us every time.  So the EW rules must guide all trades, period.

USE STOPS, especially if you margined to the gills on UVXY like I did.

Tuesday, January 27, 2015

Drillers very near a significant bottom. [CJES] [WTI]

Here is the backlink to CJES and here is the one for WTI.  They are both grinding out their final bottoms for the massive 5 wave selloff that began in July 2014.  When bottomed, we should see a multimonth a-b-c retracement to the level of the prior 4th.  For CJES, that should be about 80-100% gain from the bottom and about the same for WTI.  That is worst case.  Best case could be much better but let's stay conservative for now.

Smart people will not ignore that volume selling spike I pointed out during 3 of 5 in th3e WTI link.  For all I know, WTI has already bottomed even though I see a W3 in the count of CJES that I think is worth paying attention to.

A great strategy here is to cost average into a position.  If there is more down side in the likes of CJES as I model below then we are talking about only 15% kind of numbers.

[UVXY] update [IBB]

In the previous post on UVXY my primary model (scroll all the way down on that post) was that blue 5 had completed.  That suggested the likelihood of a rally and if so then the level of the prior 4th would be a good initial target.  Today the DJIA gapped down hard but the peak % gain on UVXY was lower than expected and right now in the extended trade it is only up 4.4% on the day.  There are many possibilities as to what comes next.  It could be that these waves are the early stages of big wave 3 up.  But it could also be working on E of 4.

The model below shows what I mean.  If the peak of mid December was black 1 then we should be due for a 3 wave retracement into black 2.  In fact, we got something like that into late December but then the rise into mid January was 3, not 5 waves.

So I believe that we could be seeing a so called expanded flat play out here and 2nd waves are a good candidate for this because they are so full of whipsaw and misdirection.  The count of the expanded flat is not 5-3-5 like a normal correction but 3-3-5.  If this is the case then we are currently working on 4 of red C of black 2.

If this model is correct then I would expect a bit more upside for UVXY tomorrow AM, perhaps to ~$26 before stalling and falling back down to $22-ish.  Under no circumstances should it fall below $20 or I have no idea what the count is and I don't hold a stock if I don't have a valid count to justify my position.

I'm holding a full position overnight in anticipation of a dollar pop tomorrow AM.  If it goes to $26 and then falls below $25.70 that is the sell signal with initial target of $22.   If that happens then I will be a leveraged buyer again because I would expect explosive moves upward from there. 

Of course, it might not move up at the open so my stops are set for $24.85.

Finally, we could also move up way past where E of 4 makes sense and if that is the case then let your profits run.  The initial elements of fear are entering the market now.   Mighty Microsoft gapped down and stayed down all day to close -9%.   In other words, 35-40 billion USD of fake, illusory market cap vanished back into the ether from whence it came before it was conjured into existence by the scam of debt based trading (margin dominated share ownership).   That is a big shock but it should not be a surprise.  The world economic system is literally burning down around us and so multinationals who get revenues from Euroland and other recession and depression areas are going to get hit hard.

We haven't seen fear yet folks but no doubt it is coming.  When IBB is in freefall (likely peaks within the red rectangle) then fear will be confirmed.  Not yet but soon, very soon.  Days not weeks.

Please use stops on triple leveraged ETFs folks.

Things tend to move pretty quickly in the shares I mention on this blog because I specifically picked what I write about to be volatile by nature.  Nobody can predict for certain what stocks will do tomorrow or the next day or next week or month!  And I don't mean "nobody like you and me".  I mean nobody at all. Not the best in the world.  IF they could they would all be filthy rich and own the planet.  So we know by definition that they can't.

In any case, JNUG is a good stock to think about your stops on.  In this recent post I modeled a near term bottom on JNUG.  Yes I thought I was correct and yes it turns out I was right this time but no I would not play this without using stops.  Now that we have a clear wave 1 put in, the wave must not fall below it before 5 upward waves have transpired or the model is bust.

These are easy rules to learn.  What is not easy is to practice discipline of using stops.  But trust me, they will save your bacon over and over and over again no matter what kind of market timing you practice.  I literally do not enter an order without using stops.  It is not always convenient but it is always smart.

Be smart, use stops!

Interest rates should begin moving up soon.[$TNX.X] [TMV]

The federal reserve would have us believe that it controls interest rates even though greenspan is on record many times saying that the market controls long term interest rates and that the market is much bigger than the fed in this market.  While the fed has told us interest rates will stay down for a long time, the EW chart says that a reversal is neigh.

So right now, for those looking back at this post (SCE) trying to learn what they thought they knew, there is no glimmer of higher interest rates in the US right now.  Everyone is swarming into US treasuries as they flee from weaker government debt like Russia whose debt was today downgraded to junk status.  Let me say that again so it sinks in folks: a major world power sovereign's debt is rated as junk.  What does that say about everyone's debt?  Is any of it payable?  I think not!

Sooner or later the bond market is going to start demanding higher interest rates.  The question is when.  Below is the 10 year treasury rate multiplied by 10.  You cannot buy tnx.x, it is just a tracking ticker.

However, you can buy many other ETFs including 3x ETFs like TMV which is ready to rally right along with TNX.X only much faster and much higher.  I don't know for a fact that TMV is ready to take off in a dramatic way - nobody knows the future.  But based on my wave count I would say that the odds of a significant bounce are exceedingly high at this point.

A key indicator is again found in this count: W3 is right where I would expect it to be.  Then a 3 wave move into blue 4 before the final move down, which is at or within a few dollars of bottoming (call it $2-3 potential downside, perhaps less).  If I had to make an exact call based on zooming in on this chart I would estimate that 5 of 5 of 5 will probably occur by the end of this week, next Monday latest, and that the bottom will be in the $22.50 range.  But In that count I could be off by 1 small wave, it is very difficult to be sure about the very last tiny moves.  The bottom could already be in at the current low of $25.13.

One way to play is just buy a 1/3 position here and then average down if it goes lower.  Another way would be to buy at the open tomorrow at $25.77 and then stop out at $25.25.

Again, none of this is based on fundamentals!  How can anyone speak of fundamentals when everyone in the bond community is saying that QE masks price discovery?  The fundamentals of bond prices are unknown and unknowable.  Nothing about this bottoming call has anything to do with anything except the wave count contained in the chart.  Period.

By the way, this is my first blog post on TMV ever.

Monday, January 26, 2015

The miners will soon enter a 3rd wave up and it will trigger a rally in the drillers. [WTI]

Remember this post where I informed about the volume spike in miners signaling that the 3rd of final wave was likely near done and soon the miners would bottom?  At the time JNUG had fallen to $2.19.  It's bottom, pre reverse split was $1.83.  That was a 10:1 reverse so in today's terms it would be $18.30. 

Well, for the same reasons we are nearing a bottom for drillers and the debt leveraged ones have gotten creamed while the blue chip share are near an all time high.  When the blues begin to sell off, and they will, lots of money will go searching for value, or at least anything that has gotten beaten down big time.  When all that money comes looking for a home in the oil patch we are going to see some rapid movements happen. 

Below is the chart of WTI, a driller.  Its earnings have collapsed and it is using debt to pay out a 7+% divvy even though it only has 17mn cash holding down over a billion in debt.  Talk about leverage! None of that matters though.  Look at the volume spike on 3 of 5, same as the miners.  The drillers are about to catch a big bid folks, just like the miners are enjoying right now.

Krugman suffers from head up ass disease.

Keynesian Klown Paul Krugman says that Europe's  economy was "wrecked in the name of responsibility".   No matter how big bubbles get inflated, the Keynesians always say "just keep on blowing" and "irresponsible to stop blowing".  Well, where I come from they teach that if you are in a ditch that keeps getting deeper and deeper then put down the freaking shovel.

And who is really to blame for all the problems?  Well, of course, it's those dirty shorts!  Krugman tells us that Mario (The Dragon) Draghi put in "heroic efforts to provide liquidity to nations facing speculative attack almost surely saved the euro from collapse..

First off Krugman, you elitist sell out traitor, how can printing up money be considered in any way "heroic".  That's like calling the con man "heroic" for telling more lies and fooling more people into investing in his Ponzi.  Second, who is doing all this "speculative" attacking?  Oh, I get it.  It's "the shorts".  The nonexistent shorts.  Like nonexistent but omnipresent terror threat.  It's all around and if you happen to get drunk and die in a car crash then likely it was the shorts working in conjunction with the terrorists who were really responsible.


There is only one blame for the European mess and that is fake money.  Fiat currency and fractional reserve lending.  And if Draghi saved anyone from anything, he saved the uber wealthy from losing their historical wealth gap status.  I mean, please!  If this is being "saved" then just let us all fend for ourselves because the quality of life in Euroland and for many here in America is the worst it has been in decades.

Let the Ponzi collapse, let the banks collapse, let the fake money collapse and there will still be normal working people chugging away each day but with a lighter load on their backs having thrown off the elitist freeloaders.  Draghi is not saving anyone except the elite.  The working class has felt like a recession or depression in Europe for several years now.  The disease is funny money and fractional reserve banking and the huge piles of unpayable debt that these corrupt concepts not only enable but encourage.  This whole thing is like watching some sort of sick sitcom play out.

[GDXJ] update

The model from the backlink seems to be working still but it strikes me that if I use my W3 rule above all other considerations that we might only be working on 5 of 1.  This is an "out there" approach to wave counting to say the least so take it FWIW but I have provided the two opposing model counts below so that you can watch them and not just assume the current move up is the initial wave of 3 or C up.  On the left is my original count and what I would consider to be conventional. On the right is where w3 is considered first and the rest of the count revolves around it.  Both should be bullish GDXJ/JNUG for the next day or two but if the W3 scenario is correct then we will see a big a-b-c pullback to the level of the prior 4th (at least if not back to the 50 or even 61.8 fib).  That blue 2 (or perhaps it should be blue b) is something you do not want to hold JNUG through.  It would be a great place to swing short into JDST until the a-b-c is done.

Insane to play this market without using stops... [UVXY] [DJIA]

Based on almost no gains today by the broader markets, UVXY crapped out.  The trading plan was this (with inline comments):

If the markets gap down on Monday [they did not gap down (futures were nearly flat at the open) but they accelerated downward pretty quickly after the open] then I am going back into UVXY big time at the open [I did so as the DJIA hit a lower low than yesterday.  I set my stops at my buy price of $25.60].  Why?  because the odds will have shifted away from us seeing one more red wave up if the channel shown above is broken down decisively.  If that channel breaks down and is not immediately retaken by the longs then Katie bar the freaking door because a 3rd of 3rd down will be upon us and my next S+P 500 target would become 1950 before we even have a glimmer of a chance for a reasonable market bounce. [Very shortly after I bought UVXY, it reversed and broke below my buy point so I got stopped out of my entire position.  Did I mention that I love the stop market order?  It saved my bacon on RUSL today as well.  USE STOPS!]

If they don't gap down at the open on Monday then I will bail out of my weekend 1/3 position of UVXY and only get back in if we see a lower low than today's close.  If we don't gap down on Monday's open then I expect an S+P move to just shy of 2100 on the S+P.  Can anyone venture a comment as to why I pick that number (and not just "because that's what your chart indicates"!).


So I let UVXY fall into the afternoon but then I bought back into it in the extended trade at 22.38 with a 1/3 position again looking for, at the very least, a run to $26 based on this count.  I could be a little early as shown by "or 5" but I'm not heavy on it so I'll see what tomorrow brings.

The reason I ventured this smallish bet at all is not based on gut feeling but rather on the shape of the DJIA chart shown below.  If my count there is correct then last Friday's dip should not have ventured into the range of the peak seen on the 16th.  The threat of course is that my count is wrong meaning that the peak of the 22nd was really a 5th and not a 3rd.  Falling below the red line is either an indication that my count was wrong OR that a bear market is already in the process of unfolding.  You have to admit, the rally of the past couple days does not in any way look motive.

In addition, as long as the DJIA stays below the heavy blue line then the recent action could still be counted as a 4th wave to be followed by a 5th wave lower low tomorrow.  I am not saying that must happen of course because nobody knows for sure.  But I do know that if DJIA goes above the blue line even by a penny then I stop out of my small UVXY position and then sit and watch until I can re-acquire the correct count.  A fall below the red line signals that the bear is on and that my UVXY position should be added to on its first significant 3 wave correction.

If you have been paying attention then you will recognize that neither the EWI count nor my count have yet been confirmed.  If my count is right then we need to see 5 waves up off the lows of the 4th wave HT.  If EWI count is right then we need to head down immediately and smash the lower rail and never come back above it for any significant amount of time.

Because the wave structure up from the bottom is so non-motive looking (remember, my current model expects a motive 5 wave move up to form blue 5...), I am now considering an alternative count as shown below.  In short, it extends the 4th wave HT paradigm by inserting a large a-b-c in the c wave.  This is the other reason I ventured to buy into UVXY in the AH trade.   Time will tell.

Sunday, January 25, 2015

[GDXJ] likely about to enter wave 3.

Backlink.  I'm wondering if the 38.2 will even be hit.  I just realized that WC could already be formed.  If so then orange 2 is already in place or very close to being in place. A small throwunder would be a nice touch here to kiss the 38.2 but I want to reiterate that I think this is the time to buy in anticipation of wave 3 up which I expect to be a doozy.  They hated GDXJ at $20 and they will love it at $40 or more.  Once it breaks back up through the upper green rail it is a confirmed buy signal and I expect it to just go crazy.  As soon as this breaks out, JNUG is a leverage buy with tight stops (sell if it makes a lower low).  Let your profits run and cut your losses short.

Greek elections favor the "default" party; Grexit almost assurred now.

As Mish has been reporting for some time now, some day a political party in the PIIGS will run on a platform of not repaying the debt and that / those parties will win.  When it does, the chain reaction of PIIGS defaulting will have begun.

It looks like that day has arrived as Mish points out that the "we don't give a crap about the EU and its debt claims on the Greek people" party, which goes by the name of Syriza, has likely had a landslide victory.  While you might not care much about Greece, it is quite important what happens there.  Now the Greek government will be calling the shots with its creditors asking for more money, better terms, etc. lest they default.  There might be some initial caving in by Germany but at the end of the day Greece will default anyway because it owes an unpayable sum, just like the USA.

Greece will thus likely be the first to exit (AKA "Grexit") the EU.  If Greece gets away with it, why not Spain?  Why not Italy?  And so they will.  Nobody is going to pay back debt that they don't have to and it is not illegal under international law to default.  You cannot legally invade another country, for example, just because they owe you money.  With no downside and only the hope of escaping austerity and debt repayment, the smart and logical move is to default.

What I am waiting for is when Germany and France, having not only gotten defaulted on in the billions of Euros, also break off exporting stuff to the PIIGS which defaulted.  I predict this will slam these export nations and then they will have a very bad recession or more likely massive depression as the loans that were taken out to build all that excess export production capacity also fail and are defaulted on.  As I have written for many years now, France and Germany are pigs too!

Once the entire euro zone falls into the black hole of deflation, multinational US corporation like GE and Mickey D and IBM will get crushed.  The US is not an island and there will be no decoupling from the rest of the global collapse.  It will just take a bit longer to hit here because the Eye of Horus sits higher up the pyramid scheme than everyone else.

[SPWR] update

To date my SPWR models have proven to be quite spectacularly accurate.  If you are new to my blog and do not have enough charting experience to understand if and how Elliott waves work, I suggest you go research the whole chain of posts starting from where I declared that the great depression in solar was about to end.  The progression of logic is clear and unmistakeable.  There is clearly an element of chance in the outcome but no randomness in the modeling methodology.  It is a huge mistake not to be able to discern the difference between these two statements and I find that the vast majority of people who cannot accept the EW principle as fact broadly suffer from this mistake.

My latest model on SPWR called for the continuation of a major pullback.  That post contains a backlink to my topping calls on SPWR.  Today's update warns that we are at a critical point with SPWR shares according to the wave principle.  My last post had an initial decline target of the 38.2 fib.  Of course that was broken down which is not an unexpected occurrence.  The 50 fib is a common pullback target and the 61.8 is as well, although to a lesser degree in a bull market for a stock.

Based on my read of this chart, I would continue to not own it at this time.  There are things that could change this view but until they happen this stock should be avoided according to my model.  There are two threat vectors here today.  The first is the presence of what is likely W3.  The second is that the 50 fib was support but the 38.2 was resistance.  If the recent bottom was actually "the" bottom then I would have expected that 38.2 to breakout.  Until it does, avoid these shares since they don't pay any divvy and thus have an intrinsic value of zero.  A deflationary collapse could take these right back down to $4.

I view SPWR as an inflation/deflation gauge.  If inflation is on deck then electricity prices will be going way up soon and pv solar will become more attractive faster.  If electricity prices follow oil down then deflation is in control as EWI believes and the inflationists who bought up SPWR will abandon it as the entire stock market sinks.

Nobody knows in advance which will happen but triggers will begin getting tripped in the next couple of weeks and then the odds toward one way or the other will increase rapidly.  I personally believe that deflation has higher odds of continuing to play out and will continue until many US banks, big ones, declare bk or have to be taken over by government in some form or fashion.  Sovereigns must default on their debt in this process and the EU will fly apart.  Even the US will be lucky to remain 50 states by the time the deflation is done.

Having said that, only losers base their investments (gambling) on a theme or an economic theory.  There is no need to do that.  Just build the wave count and get in/out based on the EW triggers.  This is going to work until everyone gets in on the act which won't be for a long time since so few people a) understand EW and b) are any good at counting waves.  I know from years and years of experience that it is not easy to master and I (and everyone else I know and follow) still are learning and making mistakes.  The key between a good EW practitioner and a bad one is that a good one will admit mistakes early and not just stick with a theme until the count leaves him no other choice.
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