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DOW : The Great Dow Highs of Summer 2007


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Go with what your system tells you to go with, dont base your trading on my syphilis induced mumblings. But bear in mind that if this spike underway at the moment has legs and goes beyond the 1160 area then the moment of reckoning may have been delayed for a bit, so the risk is quite low if your trading size is not excessive - the S&P is currently out of hours at 1127.

 

If you take 1220 as the top and 1045 as the bottom 1132 is the 50% Fib retracement, and 1153 the next, hence plumbing for something in between.

 

Out of hours S&P is currently 1132.

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We got the pop up at the open (it hit 1131, the 50% retracement) that i was dearly hoping for and so added to me shorts. It then swiftly reversed in what so far looks like an impulsive move. There is no confirmation yet that the bounce that started on the 25th May has topped, but so far so good.

 

To help ascertain whether the top is in it is worth keeping in mind that this should be a third wave down and so an explosive one. If we do not soon really get motoring to the downside then be alert to this just being a correction and hence with another upleg to come to a bit above 1131 before the real fun begins.

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There is a Bradley turn date coming up at the end of the week (26th) and maybe it will hold up till then, but it could equally prove to be just a short term turn coinciding with a mini wave 2 to correct falls this week if they occur.

 

It looks increasingly like the wave 2 top is in and the 26th turn date is coinciding with a mini wave ii up. The S&P and Dow made their lows on Friday, with the S&P losing a nice 60 points last week, bottoming at 1068. Since then the markets have risen marginally and look like they have further to go to complete a correction of these falls. Likely targets are in the 1090 to 1100 area, with the 62% retracement around the 1110 area. We appear to be in a bearish flag pattern since the late May lows and once this flag is busted to the downside the market should really let go in a big way.

 

A case can be made for a bigger bounce from here, to the 1150 area (e.g, month, qtr and half end so window dressing time, July 4th holiday, lots of bearishness around etc etc) and the fact that the markets have not broken their late May lows means this is possible, but i dont think it is worth betting on. Given this should be a third wave down, surprises should be on the downside. The markets have been behaving well, in that they have fallen hard since the April 26th high, produced a nice ABC correction from late May to mid-June that fits a bear flag pattern nicely and retraced 50% of the falls before then falling again nicely last week. So, if the market meanders higher over the next few days to the target area mentioned above i shall be shorting up.

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It looks increasingly like the wave 2 top is in and the 26th turn date is coinciding with a mini wave ii up. The S&P and Dow made their lows on Friday, with the S&P losing a nice 60 points last week, bottoming at 1068. Since then the markets have risen marginally and look like they have further to go to complete a correction of these falls. Likely targets are in the 1090 to 1100 area, with the 62% retracement around the 1110 area. We appear to be in a bearish flag pattern since the late May lows and once this flag is busted to the downside the market should really let go in a big way.

 

A case can be made for a bigger bounce from here, to the 1150 area (e.g, month, qtr and half end so window dressing time, July 4th holiday, lots of bearishness around etc etc) and the fact that the markets have not broken their late May lows means this is possible, but i dont think it is worth betting on. Given this should be a third wave down, surprises should be on the downside. The markets have been behaving well, in that they have fallen hard since the April 26th high, produced a nice ABC correction from late May to mid-June that fits a bear flag pattern nicely and retraced 50% of the falls before then falling again nicely last week. So, if the market meanders higher over the next few days to the target area mentioned above i shall be shorting up.

 

mini update: Looks like the lows of late last week will be taken out today, if they are then it suggests the sideways move since Friday has been a 4th wave triangle (as a see yelnick has posted as a possible, though he doesnt go on to say what this means). I think it should mean that the chances of the wave 2 top being in are increased and that after a sharp thrust down to new lows we will see a sharp rally probably later today. The targets mentioned above are still operative as long as the new low is more of a marginal one. This fits in better with a rallly over the next week too and the qtr end, July 4th etc. Just sold my last put in anticipation.

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  • 2 weeks later...

The kick off to this wave 3 down went on longer than i anticipated (9 days) and i annoyingly got out too early, though with nice profits nonetheless. But, i am justifiably annoyed with myself for not letting my profits run, especially at this stage of a bear market. Hopefully a lesson learnt, but i fear not.

 

The much anticipated Wave II bounce seems to have been confirmed with this strong rise at the open. Plus, the MSCI World Index has made a nice break with its down trend of the last two weeks and also appears to be in a wave II correction.

 

Initial targets on the S&P are:

 

0.38 0.50 0.62

1056.6 1071.1 1085.3

 

And the previous 4th wave extreme (a common magnet) appears to be 1048.08. There is also a gap at 1074.57 which may get filled.

 

So it should retrace anywhere between 1048 and 1085. A big range annoyingly. But, what should come next, wave III down of Wave 3, should make it worth getting on board at some point soon even if prematurely. If the bounce lasts as long as the falls (9 days in the case of the S&P) it would mean it would continue into the middle of next week. I expect further rises from here (currently 1044) but might start nibbling later just so i have some exposure in case it starts falling sooner than i would ideally like.

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The kick off to this wave 3 down went on longer than i anticipated (9 days) and i annoyingly got out too early, though with nice profits nonetheless. But, i am justifiably annoyed with myself for not letting my profits run, especially at this stage of a bear market. Hopefully a lesson learnt, but i fear not.

 

The much anticipated Wave II bounce seems to have been confirmed with this strong rise at the open. Plus, the MSCI World Index has made a nice break with its down trend of the last two weeks and also appears to be in a wave II correction.

 

Initial targets on the S&P are:

 

0.38 0.50 0.62

1056.6 1071.1 1085.3

 

And the previous 4th wave extreme (a common magnet) appears to be 1048.08. There is also a gap at 1074.57 which may get filled.

 

So it should retrace anywhere between 1048 and 1085. A big range annoyingly. But, what should come next, wave III down of Wave 3, should make it worth getting on board at some point soon even if prematurely. If the bounce lasts as long as the falls (9 days in the case of the S&P) it would mean it would continue into the middle of next week. I expect further rises from here (currently 1044) but might start nibbling later just so i have some exposure in case it starts falling sooner than i would ideally like.

 

So far, so good. The market continued higher after i posted this yesterday, taking out the previos 4th wave, then the 38% and then after today's 'good' job numbers it has spurted higher still (out of hours) and the S&P is now around 1067, just 4 points shy of the 50% retrace (in about 50% of the time) and 7 points from closing the 28th June gap. That it has got here in superquick time too reminds me of some of the rallies during the 'worst' phases of the 2008 crash when you got v sharp rallies and the sharpest were normally shortlived. So, beware of reversals at any time.

 

Oh, and the FTSE has just hit 5123.5, its 62% retracement is at 5124.

 

WASHINGTON (MarketWatch) -- The number of people filing first-time claims for unemployment benefits fell 21,000 in the latest week to a still-high 454,000, according to data released Thursday by the Labor Department. Jobless claims have bounced up and down over the past six months, but they have shown no overall improvement, Economists surveyed by MarketWatch had expected initial claims to fall to 458,000. The four-week average of initial claims - a better gauge of employment trends than the volatile weekly number - fell by 1,250 to 466,000.
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So far, so good. The market continued higher after i posted this yesterday, taking out the previos 4th wave, then the 38% and then after today's 'good' job numbers it has spurted higher still (out of hours) and the S&P is now around 1067, just 4 points shy of the 50% retrace (in about 50% of the time) and 7 points from closing the 28th June gap. That it has got here in superquick time too reminds me of some of the rallies during the 'worst' phases of the 2008 crash when you got v sharp rallies and the sharpest were normally shortlived. So, beware of reversals at any time.

 

S&P gap filled as of two minutes ago. If it continues up from here then the last obvious target left is the 62% retracement at 1085. I have started going short and shorted copper last night, and the euro this morning when it went above 1.27 and hit the downsloping trendline connecting the highs of the last 6 months.

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..That it has got here in superquick time too reminds me of some of the rallies during the 'worst' phases of the 2008 crash when you got v sharp rallies and the sharpest were normally shortlived. So, beware of reversals at any time.

 

Oh, and the FTSE has just hit 5123.5, its 62% retracement is at 5124.

Good point about the super-quick rally

I turned my position around in the last two days from Long to Short

 

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This has been a very frustrating corrective bounce, if indeed that is what it is. It having blown through all the normal retracements, listed above, with the S&P closing at 1096 last night. The Dow has been even stronger and is only about 250 points off its mid-June high. Wave 2s should not retrace more than 99% of wave 1s at the most extreme. I have lost a load of money on this move, playing it badly, and also got stopped out of my copper and euro trades for flat trades (which in hindsight was a blessing for the latter as it has power higher to 1.29 now).

 

I have just sat back aand looked at the charts afresh, but it is still not that clear what is going on. The market have basically moved sideways over the last 3 days in what looks like a mini corrective pattern, suggesting a small further rise to come to a new bounce high. If the markets rise a little from here, say the S&P takes out its high of 1099 made a few days ago by a few points then ok, but it should then fall hard next week, very hard. If instead it carries on rising (above say the 1110 area) then it really will have to be stand aside time for me. Lots of other markets are in a similar pattern, gold, oil, the dollar etc, which should be resolved soon. E.g, it looks like the euro is gunning for that 1.30 level which Prechter mentioned a few weeks back when it was below 1.2 as a likely target, and has nearly got there, 1.294 currently.

 

If these markets resolve themselves in the way i would like, they top (or bottom in the case of the dollar) today or early next week, then we would be in a wave 3 down of a wave 3 and so there should be absolutely no room for confusion. The down move will likely last some weeks or even months to play out fully, but should be reminiscent of the autumn of 2008, i.e a crash like move. Anything other than this should be a warning of something else going on.

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If these markets resolve themselves in the way i would like, they top (or bottom in the case of the dollar) today or early next week, then we would be in a wave 3 down of a wave 3 and so there should be absolutely no room for confusion. The down move will likely last some weeks or even months to play out fully, but should be reminiscent of the autumn of 2008, i.e a crash like move. Anything other than this should be a warning of something else going on.

 

Great post, my feelings exactly, I have stayed short for many weeks, and will throw in the towel at S&P 1131. Will reload short somewhere above.

 

The monthly charts are still short, so can I keep cool and be patient? I hope so.

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This has been a very frustrating corrective bounce...

 

I have just sat back aand looked at the charts afresh, but it is still not that clear what is going on. The market have basically moved sideways over the last 3 days in what looks like a mini corrective pattern, suggesting a small further rise to come to a new bounce high....

In hindsight, it looks like a classic Hanging Man, just like Oct.6th, 1987.

And you know what followed that!

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Was starting to get nervous, but when DD looked like he was going to throw the towel in, it really was a case of the last bear...

 

Question is, if this really is the 3rd of a 3rd, how low does it go before the printing presses start to roll again?

 

Nah, i am still bearish dont worry. If the markets rise much above the highs of last week then i will temporarily stand aside waiting for a new entry point to re-short. This is different to throwing in the towel.

 

Long term i am looking for much lower prices, taking out the lows of March 2009. Wave 1 started in autumn 2007 in the main US markets (European indices made their highs in early summer that year) and ended in March 2009, for a roughly 18 month decline. Wave 2 then lasted until April 2010? Wave three is usually longer than wave 1, so if it started in late April i would expect it to last at least until autumn 2011 and probably longer and then wave 4 say another year to at least autumn 2012 with the fifth and final wave lasting into 2013/4. This seems to be a minimum; as i said above, wave 1 is usually somewhat shorter than wave 3, and wave 4 could also last longer than wave 2 so this bear market could easily drag on for another 5 years or so. I do not see Prechters 2016 bottom as far fetched. This would mean a 15 year bear market for some markets (when measured from the all time highs as the FTSE topped in December 1999).

 

Governments may well try further open market operations at some point, but i really do not see it having anything other than a very temporary boost to investor sentiment at best which might produce the odd sharp rally on the way down. We were always going to get a bounce in the spring of 2009 as wave 1 down had ended so dont give too much credit to QE. Just look at Japan. QE there in the early part of the new millenium didn't prove to be a silver bullet. Creating credit only works where banks want to lend and people want to borrow. I see neither of these as likely in the next phase of this depression. In fact, the opposite should be true as unemployment rises and people try to repair their balance sheets combined with banks reigning in their lending even further.

 

Finally, the falls i am looking for over the next few months should not be the worst part of the 3rd wave down, that will be the 3rd of a 3rd of a 3rd. Thats when people will stand up and say oh shit, this is truly awful.

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Hmmm.

 

What about the argument that wave 1 went from 2000 to 2002, wave 2 from 2002 to 2007, wave 3 from July/Oct 2007 to March 2009, wave 4 from March 2009 to April 2010 , and wave 5 ... we're in it now?

 

That cant work with EW as it breaks one of the rules, which is that wave 2 cannot exceed the top of wave 1. The major US markets and the Dax all made new all time highs in 2007.

 

But, it could be that the falls from 2002 to 2002 were an 'A' wave, the bounce to 2007 a 'B' wave and now we are in wave 'C'. But this does not change things that much either if you think this bear market has not ended as the C wave should also break down into a 5 wave move which would suggest waves 3, 4 and 5 are still to come. The bullish interpretation would be to argue that wave C ended in its entirety in March 2009 and now we are in a new bull market which will carry the markets and economy to new highs over the coming years.

 

This bullish case seems weak to me given that the problems that caused this big downturn in the first place have not yet been addressed - too much debt, too much greed, too much missallocation of resources from poor investments in crap, too many imbalances between countries (just look at Germany versus the PIGS) etc etc. Whilst i do not trade on fundamentals, i use them as a longer term guide and to my mind they suggest overwhelmingly that this depression aint over. Further, current leading term indicators suggest a double dip (though I would personally argue this is all one big downturn) is on the cards in the next 6 months.

 

As for whether this bear market started in 2007 or 2000 doesn't really matter if you think we are still in it. That is, it doesnt really matter right now if you think we are soon to start/are in the 3rd wave down of the C wave of longer term falls that started in 2000 or are in the 3rd wave down of something that only started in 2007. Either way, we should have some years of new lows, economic contraction and stagnation ahead.

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Markets obviously fell into today's low from last week's high and then bounced for most of today, with the S&P retracing 62% of these falls and the Dow a bit over 50%. If the top was made last week then markets should turn back down very soon with the biggest weakness since the flash crash.

 

The pattern has not been overly convincing these past couple of weeks and so i am fearful something else might be going on, but will stick with it for now. Maybe the bank stress tests in Europe (due out after the European close Friday i think) will prove to be a trigger for massive weakness. If the market is in the mood to fall then it will likely interpret any outcome negatively, i.e if the tests show everything is rosy then markets may fall because everyone will know the tests are a sham as some of the banks surely cant be in good shape, if they are not good news then the markets will likely fall too.

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That cant work with EW as it breaks one of the rules, which is that wave 2 cannot exceed the top of wave 1. The major US markets and the Dax all made new all time highs in 2007.

 

But, it could be that the falls from 2002 to 2002 were an 'A' wave, the bounce to 2007 a 'B' wave and now we are in wave 'C'. But this does not change things that much either if you think this bear market has not ended as the C wave should also break down into a 5 wave move which would suggest waves 3, 4 and 5 are still to come. The bullish interpretation would be to argue that wave C ended in its entirety in March 2009 and now we are in a new bull market which will carry the markets and economy to new highs over the coming years.

 

This bullish case seems weak to me given that the problems that caused this big downturn in the first place have not yet been addressed - too much debt, too much greed, too much missallocation of resources from poor investments in crap, too many imbalances between countries (just look at Germany versus the PIGS) etc etc. Whilst i do not trade on fundamentals, i use them as a longer term guide and to my mind they suggest overwhelmingly that this depression aint over. Further, current leading term indicators suggest a double dip (though I would personally argue this is all one big downturn) is on the cards in the next 6 months.

 

As for whether this bear market started in 2007 or 2000 doesn't really matter if you think we are still in it. That is, it doesnt really matter right now if you think we are soon to start/are in the 3rd wave down of the C wave of longer term falls that started in 2000 or are in the 3rd wave down of something that only started in 2007. Either way, we should have some years of new lows, economic contraction and stagnation ahead.

Cheers geeza

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Let the games begin. The market has become like a coiled spring over recent weeks and doesnt have much room left IMHO to chop around without making a decisive move. My bet is down. The dollar should rise as stocks fall. I am short stocks and short the euro at 1.3 and today i got back into copper on the short side after its big move up today.

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Let the games begin. The market has become like a coiled spring over recent weeks and doesnt have much room left IMHO to chop around without making a decisive move. My bet is down. The dollar should rise as stocks fall. I am short stocks and short the euro at 1.3 and today i got back into copper on the short side after its big move up today.

I am with you (although not short copper), sitting short with fingers crossed.

 

It also looks like FTSE may be topping here: 5250/75

 

zzzzm.gif

 

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I have been wrong. Instead of falling sharply the last few weeks as I expected, markets have continued higher. I am sitting on big losses and now wait for another entry.

 

The period we are in right now reminds me of the summer of 2007. At that time, markets peaked in June/July time from memory and then fell sharply as the banking crisis started. However, something weird then happened. Despite the writing on the wall being very clear, US markets climbed back to new all time highs during the autumn, but we all know what happened thereafter. There was a denial amongst investors and this seems to have made a reappearance over the last few weeks. To my mind, a big slowdown at best (with contracting GDP being the more likely) is baked in, but a few investors are determined to party a bit longer until it is no longer deniable. This madness can continue for weeks, but i think August will welcome back the bear. Time will tell.

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Fingers crossed that a bigger slide begins this week

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  • 2 weeks later...

I have gone back in on the short side on this rise today, especially in the last hour as the highs of last week got taken out which i was waiting for. I can for the first time in a couple of weeks count what could be a completed pattern. S&P just made a new multi-week high 1129 and the Dow of 10719. We may get a very volatile day tomorrow with the Fed meeting, but it seems to be a much anticipated meeting if CNBC/Bloomberg is anything to go by and if 2008 is any kind of guide then even good news may mean stocks fall sharply afterwards. It was bailouts etc in 2008 which got faded and so maybe it will be qual easing or similar this time.

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I have gone back in on the short side on this rise today, especially in the last hour as the highs of last week got taken out which i was waiting for. I can for the first time in a couple of weeks count what could be a completed pattern. S&P just made a new multi-week high 1129 and the Dow of 10719. We may get a very volatile day tomorrow with the Fed meeting, but it seems to be a much anticipated meeting if CNBC/Bloomberg is anything to go by and if 2008 is any kind of guide then even good news may mean stocks fall sharply afterwards. It was bailouts etc in 2008 which got faded and so maybe it will be qual easing or similar this time.

 

So far so good. I called this top within minutes (the highs i mention above have not been taken out and the Dow just closed at 10378 and the S&P at 1089), but accept that only goes part way to making up for my premature calls of a few weeks back.

 

If the wave 2 top is in then whilst the falls of the last 48 hours have been sharp they should just be the prelude to relentless weakness over the coming days and weeks, a near term quick bounce notwithstanding. If we get anything but this very doomladen scenario then alarm bells should ring and i will scale back my shorts. In the absence of that i am determined to stay short this time and add to them on bounces rather than scale back with every sharp turn lower.

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I have gone back in on the short side on this rise today,

especially in the last hour as the highs of last week got taken out which i was waiting for. ...

Very nice timing indeed, DD !

How far, and how fast do you see this dropping?

 

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Very nice timing indeed, DD !

How far, and how fast do you see this dropping?

 

Thanks

 

No time now to give a full answer, but if this is a 3rd wave then it should move considerably further in price distance than the first wave which included the flash crash. Plus, bear in mind that waves 1 and 4 should not overlap so that means a lot further to go to ensure any wave 4 bounce does not hit the price levels of the last couple of months. This should be fast too and opportunities to get on board might be limited.

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I may move the Blog-Journals to another section.

Please comment / here: http://www.greenenergyinvestors.com/index....showtopic=10777

 

If you don't want the move, and a majority with Blogs also do not want it,

I will very happily leave things as is.

 

The idea was to make it easier to get to the Blog-Journals, and to increase visibility

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