Thursday, October 30, 2014

The Christmas Crash Scenario

When he's not scoping out moldy old sci-fi in the local Goodwill, the modern Elliotician spends most of his time war-gaming various scenarios, some of them extreme, about the future.

It's a little like those great old Avalon-Hill games we played as kids on the giant hex maps where the Soviets were pushing through the Ruhr Valley with the Czech mechanized units, and, well, could you counter it conventionally, or does it need to go nuclear?

If we can make it to the top of the megaphone -- an insane 2040 SPX -- by, say, Monday, then I can get us a crash by Christmas.  It would be triggered by a rejection off the underside of the 200 DMA, and then ... nothing but air for 700 handles ... a true historic panic.

So here it is, mechanized units thrusting into the Ruhr.

SPX - Christmas Crash scenario

But we gotta finish the rally and -- hopefully -- make our new highs first.  Bicycle is worried about us hanging around up here for a while like a bad canker sore, and so am I.  We are bold men of action, eager for the future!

Wednesday, October 29, 2014

Charts 10-28: Speculation on the future

After a week of watching this meteoric squeeze, which puts Bryan's idea of new all-time highs very much back on he table, it's time to throw up a pile of speculative chart rubbish to match.  The gibbons at the Lincoln Park Zoo in Chicago really do try to defecate on visitors, all day long.  Please allow for plenty of room between you and their enclosure.

First, let's take a look at the VIX, whose breakdown through an important support yesterday supports the idea that this will continue in the short-term.  Next support is down in the 12s.

VIX 10-28

VIX dropping back to the 12s would power us to new highs, per the channel we have carved out since the 1820 lows.  2038 SPX marks the top of a megaphone-like trendline coming over from the previous highs.

SPX 10-28

After this presumed top, crash models are very much back in play.  An important deflationista theme is that when things do finally start to move, they will move so fast that everyone who is still playing by the old rules will miss it.  So even bearish shorts will cover too early because some responsible technical indicator told them to do so, and they get to sit and watch the rest of the crash play out.

SPX 10-28 6M crash

Deflation.  What you imagine is money is not, and it is a lot less liquid than you think.

The hour is late.

Sunday, October 19, 2014

Eerie similarity between the 2007 top and now

Posting this chart again, just to drive the point home.

A false break of the 200 DMA, followed by one last high ...

2007 top and today

My daughter and I saw two river otters out in Puget Sound on our walk this morning.  Then I went completely Hobbesian on a couple of Seattle idiots whose filthy unleashed dogs came over to visit us.

"Oh, but they're nice dogs."

And yet I will kill your dog if it bites my kid.  Right here on the beach.

This sort of primordial psychotic intensity scares the living hell out of your average passive-aggressive New York Times-home-delivery wussy Seattle people.  It's great fun, it should be a sport, really.

Saturday, October 18, 2014

Charts 10-17: Breakout ahead

But which way?

Friday's tape and close left us just about where I thought it would the other day.

You can see it even better in the trendlines on this chart.  What a meat-grinder.  One of them has to break.

SPX 10-17

I think new highs are possible if the bulls can spark a short-covering panic brushfire this week, starting with a taste of trading above 1900 SPX.

This isn't his call, but this week we tripped one of Dr. Bob McHugh's favorite tactical technical signals, the "VIX buy" signal.  This is where the VIX closes outside of its 2SD Bollinger Band, and then back inside, indicating a "buy" across all of the indices.

We shall see ... we shall see ...

Edit: chart for Permabear Doomster, our man in the London.


Actually, I think this last chart should give any short-term bear some serious pause.  Whoa!

Thursday, October 16, 2014

Got C?

Stackin' C

Charts 10/16: All-time highs are still possible

First we have to get back to the revised channel edge at SPX 1895 into opex tomorrow.  Very possible.

There we face a hard choice --

1. We can either crash again next week to support at 1740 SPX

2. We can gap out of the pink channel and make it up to 2050 SPX into October FOMC

The leg from 1970 to 1820 was precisely 1.618x the 93pt leg down off the September highs.  But do we count this series as 1-2-3 or A-B-C?

BTW, if the lower leg wins out, that pink lower trendline takes us all the way back to the 1040 SPX area by January opex FOMC.  It would mean that pulling QE simply returns us back to where we started.

Short-term S&P 500 doodles

Wednesday, October 15, 2014

Charts 10-15: To the bear trendline

Updated count.

If it's on, we are finished trading above 1900 SPX in this monetary regime.

SPX 10-15 a.m.

Added: the "eat everyone's theta" count:

wave 4 eater of option theta

Friday, October 10, 2014

How the market can reach 1233 SPX by the end of January

The bear trendline for this drop is already in place.  Surely it is the end of days!

I don't know if we'll put in a new low under 1925 SPX this morning, but I'd like to see us close the week at 1948.  This will clear the table of the 195 SPY puts I should have held on to ... grrr ... oh well, plenty of good trades ahead.

A lower trendline from the waves already in place takes us to 1233 SPX by the end of January.  The Fed will accomodate, you better betcha, and we will bounce 300 handles back up (.382 retrace) into the Spring.

But first for the crash call.  Big picture with the bear trendline and surprise support from a triangle from 2011.

SPX 10-09 4Y

It starts this fall with a series of breathtaking drops to key support levels: 1814, 1737, 1560.  The crash leg in January kicks off right after Christmas on the 12/26 Bradley turn, as everyone tries to secure year-end profits.  This quickly gets out of hand!  ONOZ OMG ...

Bounces are typically .382 of a previous larger leg, and they also correspond to corrections we experienced on the way up this thing.  Yes, these are all 3PDH numbers as well, you know the drill.

SPX 10-09 6M

Short-term -- I'd like to see that close at SPX 1948 today.  We can make it as high as 1962 into Monday if there is a B-wave triangle playing out here.

The question re the drop from 2019 to 1926, whether it counts as a 5-wave impulse or not, is moot.  Call it "A" and be done with it.

SPX 10-09

First important support is at 1814 SPX just after October opex.

Wednesday, October 8, 2014

It's time for a book thread

Schizoid market, but it looks now like we may get that new high after all, after which the waves will tell us if it is the ultimate one.  We will pray this can end quickly with a sharp spike instead of weeks trapped in some tedious ending-diagonal pattern.  Let's give Bryan Franco credit for now for his historical model that demands one more all-time high for the chart gods to be satisfied.

So what's new on the bookshelf?

Well, I found this 1956 Mencken collection at the Ballard Goodwill.

H.L. Mencken, A Carnival of Buncombe, Johns Hopkins 1956

And A. N. Wilson's book on the decline of Britain, at Value Village.

A.N. Wilson, After the Victorians: The Decline of Britain
in the World
, FSG 2005

I've been picking up solid book club science fiction published by Nelson Doubleday, like these.

Harry Harrison, The Adventures of the Stainless Steel Rat, et al,
Nelson Doubleday, early 1980s

Anthony Boucher, ed., A Treasury of Great Science Fiction,
Nelson Doubleday, 1959

I'll buy Nelson Doubleday sci-fi books all day long.

Mark Anderson's shop in Ballard is now my favorite bookshop in Seattle.  If you're in the area, stop in on a Saturday and spend some time in his stacks.  Here's what I have got from him lately.

J.R.R. Tolkien, Rings trilogy, Houghton-Mifflin, 1965 revised ed

I upgraded my old boxed set of Tolkien to one with dust jackets -- for $45.  Such a deal on the set!

Immanuel Velikovsky, Worlds In Collision, Macmillan, 1950 1st ed

Velikovsky is crackpot science, but it holds a special place in my heart due to the 1978 release of "Invasion of the Body Snatchers", one of my favorite cult films.

I also picked this up from Anderson's, Naipaul's account of his first visit to India.

V.S. Naipal, An Area of Darkness, Reprint Society London, 1966

This will go well with this other Naipaul I found at the Value Village over on Lake City Way in Seattle:

V.S. Naipaul, India: A Million Mutinies Now (signed), Viking 1990

This one is signed, from 1991, and worth at least $50.  Who gives a signed book away?

Here's another signed book, James Howard Kunstler's latest from the World Made By Hand series.  I've been a real putz not to get to this just yet.  Soon, very soon.  The story may go well with Kondratieff winter.

James Howard Kunstler, A History of the Future (signed),
Atlantic Monthly Press 2014

A book from my local Value Village.  All you need to know about the French existentialists is that Sartre was a salon commie piece of shit, and that Camus was the real deal, and a very good guy.

Olivier Todd, Albert Camus: A Life, Knopf 1997

A clean, crisp edition of a Northwest mountaineering bible:

Manning ed, Mountaineering: The Freedom of the Hills,
Mountaineers Press, 1967 2nd ed

I wanted my daughter to read "To Build A Fire", so I picked up this fine edition of Jack London from last week.  I wish more books were published with such care as this.

Jack London, The Bodley Head Jack London, Bodley Head, 1968

When she's a little older, I'll get her into Fritz Leiber.  Stacks of paperbacks will help.

Fritz Leiber assorted paperbacks, hells yeah!

And here are a few books from Robert D. Kaplan.  I really like his work, and have just about all of his books.

Robert D. Kaplan miscellany

Of course, this has all been leading up to something, a very special book I found, heavily discounted, from the closing sale at Wessel & Lieberman Books (R.I.P.) in Pioneer Square, Seattle.  I walked out with one of their gems, on the relative-cheap.

J.H. Speke, Journal of the Discovery of the Source of the Nile,
William Blackwood & Sons, 1864 2nd ed
Speke, Source of the Nile

A fine copy of a rare book, and one actually worth reading.  Now I just need to get more and better Sir Richard Burton to match.

Anderson's Books has even got a set of Captain Cook's journals, pretty badass, and waaaay too rich for this collector.

It looks like I'll have plenty to keep me busy when the fall rains arrive.

Tuesday, October 7, 2014

In this thread I apologize for making fun of Daneric and his wave count

I took a cheap shot at poor ol' Daneric yesterday, but he gets the last laugh, doesn't he?

What looked like a forced count, another one of those, bear-with-me, it's a leading-diagonal, it's only retraced 98%, it's still a legal wave 2, trust me here ... counts ... well, after all of the broken counts and disappointments of the last 5 years, Daneric just nails it.

The rally -- yes, a wave 4 that retraced almost 70% of its wave 3 on the SPX -- indeed DID stop short of the wave 1 he had counted at 1978, and was thus legal.  And today we got the follow-through.

Well, bully, Daneric!  I only hope that my acknowledgment here doesn't send us to fresh new all-time highs.  Indeed, maybe this count working out (so far) finally confirms a new bear.

I still think we can reach support at the 200 DMA on the SPX this week, if we are in a 5th wave that is set to extend.  The triangle we drew today indicates a wave 4, sure, but we then notice that the wave (i) and (iii) in the series did not extend, so we could see it here in the 5th, with an expected bottom on the Bradley turn Thursday.

SPX 10-07

There is then another Bradley turn next week, which would mark a kissback to an old rally channel and the beginning of the drop to 1737.

Monday, October 6, 2014

Charts 10-06: Let's look at a couple of short-term cycles

Disappointed Deflation Land readers, hungry for blood in the street and on the indices (instead of the clearly corrective tape from the last high), should at least be grateful that I don't foist anemic wave counts like this on them.

Sorry, Daneric, but that count is strictly from hunger, and deceptive since you don't draw that BROKEN topline from 2019 SPX.  And I'm sad to see that Daneric is counting the Wilshire 5000 lame index again, just sad.

I won't do that to my audience, neither of you out there, I respect your intelligence.  Instead I will labor to find something fresh even in these tedious corrective charts.  We'll try a short-term time cycle or two.  What this one suggests for me is that there is no rush to try any more speculative longs of any magnitude until the FOMC minutes come out at 2:00 pm EDT Wednesday.

SPX 10-06

Friday, October 3, 2014

Inverse heads and teh shoulders

Blow-off finish with new highs next week?


A chart for Mr. Bicycle

How about they run this thing straight up to SPX 2030 into mid-next week?

Shorts will be scattered about like Varro's legions at Cannae.  And [only?] after that, big red candles, finally a real impulsive [scary] decline.

The blow-off megaphone leg scenario

Megaphones on several different scales, a larger diamond-top pattern, etc.

Thursday, October 2, 2014

Charts 10-02: We're in a non-extended wave 3

Needed to get a revised chart in.  Tonight I'll update the dual-nested Three Peaks and a Domed House patterns.  Yes, two 3PDH.  One inside the other.

I was excited Monday over the 20 handle gap down on /ES and then support, but what I think we actually had here was an end to an oddly-shaped minor wave 1 (see chart).

The larger count has us in wave 3, but this is a subtle one -- it's not extending.  At SPX 1930 (today) it should be slightly longer than wave 1, but not at a multiple of 1.618x of it.

So we either have a stealth wave 1 (bear case), or this is yet-another ABC off the top that is just a correction.  If we close with a stronger-than-expected push into Friday (SPX 1957?) that will leave us sitting right on another inflection point.  Which way to go?

The bear case would take us still lower next week to meet the 200 DMA at 1904 support and the Full Moon.  The following week we would have one more kissback off the old rally channel at SPX 1966, and a dive to the low-1800s into EOM October.

SPX 10-02 a.m.