The wags on ZeroHedge have suggested for a long time that the German election in September could be such an inflection point. We can speculate on the game theory re how it could turn out:
- Merkel loses the election to some wild Young Hegelians?
- Merkel wins the election and can now dump on Europe?
- Merkel wins the election and Europe reacts against her and Germany?
- Other scenarios where the election signals a massive risk-off moment for Europe.
SPX 1768 is the target for a W5 similar to its corresponding W1, which ran 208 pts from 1266 to 1474.
If this is indeed an ending-diagonal, then the first wave looks complete -- a three-wave move. Confirmation will be that we continue to drop, possibly in a very steep channel, which would bottom violently into next week's FOMC.
My take on QE and the future is that the Fed will keep not taper, that QE will continue at full speed, while the rest of the world collapses around us. This will produce frightening drops and violent retraces, in other words, a bear market.
|SPX 5th wave E-D into the German election|