So here’s the latest update on the charts from previous posts
You can see the older posts here: http://www.stocktock.com/2009/08/28/fibs-and-ew/
Apologies for having to link old posts each time instead of having it one long post with updates, but there just isn’t a convenient way of keeping posts in the archives, while also making it a new post.
So far the 1046 chart and the 1088 chart have both been filling in rather nicely which is leading me to believe that 1046 will play a short term top/support/resistance but the ultimate may still be 1088. Either way, one thing is certain, all this action at the current top levels shows that the market is definitely headed higher than the previous highs.
Here is the 1046 chart updated:
Here is the 1088 chart updated:
Notice also that the light green descending trendline that was formed by the previous peaks is broken to the north and backtested as well, which is also a bull sign. For an explanation on how I came up with these numbers you can go to the links above that go back as far as 8/05/2009.
Current trendlines actually allow for the 1044-1046 level to hit tomorrow if it wanted, depending on which trend line becomes dominant. However, I think that the very low 1040 area trend line will create resistance first. I don’ t think it’s a bad idea to sell when that trend line hits and wait for a slight dip before buying short term long positions again.
Now 1044-1046 will play an interesting role. There are sometimes cases where this 61% fib projection ends up being passed up, and then backtested later. So there is a possibility that we could zip passed this point, only to come back to it later, before rising up to 1088 (if that is the 100% fib projection). However, because of how cleanly the fibs look going up to this 1044-1046 area, it leads me to believe that this won’t be the case, and that we’ll definitely hit it on the button.
When 1044-1046 hits, I don’t think it’s a bad idea to buy a short term put position. Now this would most likely be a daytrade or only held over 1 day at the most. You would play the certain bounce and increase stops as you go along to maximize any profits from the bounce. After that position hits, I would probably advise sitting in cash for a short period of time. The reasoning being this:
1) IF we are really headed higher to 1088, a put or short position at 1046 will not be optimal. Any short/put positions taken here should have tight stops placed
2) This COULD be the top of the 5 of 5 wave and to have a long position could prove dangerous. Wait for a 1046 solid break on the 60 minute chart before considering a re-entry of any long positions.
LONG TERM VIEW:
I’ve been talking here and there about my long term outlook on the market, and I’ve sent individual emails to some showing my thoughts on where the market is headed overall.
Here’s my 2 year chart. Please note that the timeline here is not to scale. This is a very rough preliminary draft and may change over time depending on the market movement. It also shows why a move to 1080s is more optimal than the market staying in the current area.
You can see part of the math and methodology of picking these points in the pink box to the left. the 798-800 area would be a retrace to a former fib which is the drop from 1000+ to 666. This drop would mean an overextension of the 61% retrace, but it would give it a defined reason why it was overextended. However, for the C to be at least as long as the A, we would need a drop down that far. This would keep us within the confines of the 1220 61% retrace to the north side of a MAJOR P1 retrace. If we broke north of this P1 retrace, I would have more problems with the EW counts.
To show more proof of why this is possible let me link two charts 1) 1929-1930 chart and 2) current 10 year chart:
If you compare the two, the first part of the 1929 chart is the last part of the current 10 year chart. Hopefully it is self explanatory on where I think the two charts supersede. Also remember that the 1929 chart is on a straight scale while the y axis of the 10 year chart is not, so the upper portion of the graph on the 10 year current chart actually would look a lot higher if both were to scale and look more similar.
Additional support for this option is that we are currently on a 5 wave movement upwards, this means that we need a 3 wave down and another 5 wave up to finish an ABC correction at the LEAST. I don’t see how it is possible to count this current movement up from 666 as a 3 wave. If you want to do that, then it’s a VERY ugly 3 wave. The previous 1 and 3 tops that I’ve gotten are also based on a 1 wave (to 840s from 666) that has mathematically made sense up to this point, which also gives support towards this being a 5 wave movement because there is no way I could have predicted the previous 954-956 3 wave top otherwise.
So my long term outlook is fairly bleak. Watch for a bit more of a rise within the next 2 weeks. Then look for a fairly steep drop. Then what will be deemed a recovery of the stock market up to 1220s or so, then…300? 400? great depression-esque bubble pop. The president, the government, the FED will no longer be able to BS their way into making it seem like things are going to get better. There will be no more skewing the news to make it seem like news isn’t AS BAD as it seems. Stupid huge leveraging by banks and other large companies will bust. No company has fixed their ways, they are doing the same things to gain back their money, that made them lose money in the first place. Deficit increases will eventually start catching up to us and the dollar will start going to hell. No other country, especially china, will want to buy our debt anymore. hyper-inflation will start creeping up on us. Hopefully the money we make off the market will be worth something by the time the US economy is down in the gutter.
Let me know what you guys think. All comments and criticisms appreciated. It’s going to take a lot of convincing to make me change this chart I’ve been looking at for over 2 months though…but if the market goes against the chart, I am always willing to change it at a moment’s notice.
Good luck! let’s make some money.
p.s. – One word of CAUTION. I’ve stated this many times in the past, but the minimum requirement for the 5 of 5 wave has already been met. There is always the chance that this could just start heading lower and tanking to start the B movement. Place stops on any long/call positions as there is a definite possibility that we are near the top. Although it would be incredibly ugly for at least 1046 to NOT HIT, I would have no qualms with the market deciding to tank even tomorrow. Mathematical ideal point is 1046 or 1088, but the current points we’ve reached are mathematically acceptable.
Thanks so much for this!
Thanks Woo, sounds like we’re all in agreement that we’re going to newer highs before a big fall.
Awesome work as always !!!
Thanks Master Woo of the Waves~ (TM).
Really great stuff Woo. I for one really appreciate it when you can take the time to do such a well drawn out and time consuming update to all your counts.
I’ve been lurking here for awhile to try to learn from you folks and have a couple of questions:
What will happen to the price of gold if the market does drop to 300-400? Will it go down accordingly since this is clearly deflation?
If the market does drop to that level, does this mean that all appreciation in everything (food, housing, etc.) that occoured during the bubble years get’s wiped out and prices get pushed back to pre-bubble levels? Scary thought.
P.S. Thank you Woo, Idan and others for your great insight and help.
this is a fun question. does any economist want to answer this one? i’ll let them have fun with it.
Appreciate ur work and tend to agree with. As for gold, not an econo but am a
amateur student of depressions.
Gold and silver are repositories of wealth driven higher by fear. both inflation and
deflation are fanners of fear with the caveat that a gov’t will outlaw PMs to encourage
risky behavior and asset inflation. They and the corps profit from inflation, they
don’t know how to deal with deflation and it strikes fear into their cores.
the first gov’t that outlawed PMs was not during depression era US. It was the
Golden Hordes of Ghengis Khan. The mongols issued paper script in place of
gold and killed and tortured those that insisted on PMs and refused their script.
They insisted that the conquored surrender their PMs in exchange for worthless
script or coinage of the mongol empire.
How will PMs behave in deflationary times? We are in deflation, looks to be
doing very well after a brief period of adjustment. Gold foreteold the credit crisis
and announced the pending inflationary recession as foreign holders of debt
scramble to unload the tonage of us currency issued to stave off absolute ruin.
If nothing else, gold holds its own as u just can’t print up a few boat loads of it
although ETFs attempt to do so.
The growing consensus now is that gold is the new reverse ETF. Goldman
can’t use your own money to squeeze you out when u buy or hold gold.
Excellent post as always. Thanks Master Woo.
The chances of this playing out is virtually 0. IMO, the sentiment damage done from dropping back to 800 nullifies any chance to get back to 1200. Either we shoot up to 1200 now or never.If you’re right, it would be an amazing call. Im sure you’ll be here to remind us if it does.
actually, i think this scenario is a little ridiculous too. there have been a lot of times in the past where i picked certain numbers and people didn’t believe it were possible. actually, i even doubted my own charts. now i just wait and see what the charts say. if a movement in the market offsets the current charts i have, i will be the first to admit that the charts have been disrupted and a new count needs to be made. i’m perfectly fine with the above long term scenario not happening. i actually think that if a dip to 800 were to happen that it would be an awesome trap and a great chance for MM to make tons of money. we’ll have the same amount of people believing a greater drop is coming, and doubting the rise, until it’s too late, and too much money is lost.
either way, i’ll keep everyone updated on the long term outlook and keep people informed if my views change. thanks!
I agree whole-heartily with both your technical analysis and pessimistic (no realistic) view of the fundamentals that still lie just beneath the surface. I wont talk about the fundamental aspect since it does nothing but aggravate me. As for the technical analysis, I am going to be real generic and just say that an uptrend is an uptrend as long as the market continues to make higher highs and higher lows. Stupid i know. I forgot this, and ended up really cutting into a lot of profits i could have (and should have) been making had i stayed to my first rule (favor trades that go in the same direction as the rest of the market). Scalping the moves up and down has been my only savior in keeping my portfolio slightly green.
That being said, I will again scalp the down move (like you suggested with puts) and will scale back until the market breaks below the most recent low (990 S&P right now). Then I am going heavy to the short side. My plans buy otm options several months away, Roll down and Re-roll down until the market fails to meet the strike. In my IRA, its all about the inverse etfs.
I dont think there will be money that flows as quickly for shorts as it did last year, but it will flow, and i intend to scoop it up. I just have to wait for the flood to start.
yeah i get angry talking about US economics, loop holes, etc.
Woo, Thanks for your post. It is an excelent post I have ever seen. I was wondering how the situation of economy and comanies earning will play in your forecast. I do believe comanies earning wil not support the move to 1200 as you have shown. How is your forecast on dollar and commodity prices?
actually, i don’t take any of that into account when doing my charts. my charts are based solely on math and graphs.
but i can tell you how the news might be spun in order to fit the projected movement of the market to come…
earnings really can’t support a rise to 1200s. however, soon job cuts and expense cutting won’t be enough to drive up net profit for companies, which will probably bring about the drop to 800. at 800 i’m assuming some sort of stimulus will pass or, the previous stimulus will start kicking in. that stimulus should probably drive the market up for another false rally of about 300-400 points.
after that people will realize that we’ve just created a bigger bubble. there won’t be much to sustain the market when that next top comes in, and we’ll just consistently head lower and lower over a long span of time similar to the 1929-1930s scenario.
it’s going to suck being obama when that happens…
Woo,
Great market analysis! What is your timeframe for the SPX to hit around 800s? Is it October or November?
Thanks.