So ... what can we say but that the 1929 fractal scenario is still very much alive. I know, I know, I hate the Dow, I hate this shitty little 30-company index that is a pain in the ass to chart. I hate its place in the popular mind, where a +300 day can be powered by some quant jerks pumping IBM like crazy.
I hate the Dow. And it couldn't reach its 50 DMA today. Despite the SPX retracing 80%, despite the techs making new highs, despite everything I hate about this index ... the '29 scenario is still very much alive.
Let's talk about what this may mean.
First of all, should this play out, I would expect a wave 3 on the SPX, the main index of interest here in Deflation Land. At an expected 1.618x magnitude of wave 1, it would get us down to SPX 1646 by about the end of February. If we check the chart, we notice that critical chart support from the 1074 low in 2011 lives down here.
But the 1929 fractal describes a FIVE WAVE move. At three waves, you could label it a "wave 4" of some degree and start plotting out major wave 5 UP targets. But if it traces 5 waves down and breaks this key trendline, it's a whole new ballgame. So we would likely bounce and then violate the trendline from 1074, completing a wave 1 down from the top, bottoming into Purim, like so.
Oh, you noticed I drew a few extra waves.
Well this W1 is part of a larger structure, that runs through May and June and halfway into July. I mentioned the other day how insanely important the 4/30 FOMC is, for the GDP print, New Moon, FOMC meeting, and general seasonality. April 30, 2014, could be the best turn date ever.
OK, so what next? Wellllll ... this would set up a real crash in the fall.
|SPX 02-13 3Y|
Moving a little fast here, you're thinking? You remembered that this whole market is pumped-up and completely fake, right? Just like our entire economy. How did you THINK this would end? Five waves takes us across the giant megaphone, to the 2002-2009 lows trendline, and a final crisis in the $USD and bonds.
All this ... if the little '29 fractal plays out in the next few weeks.