Sunday, June 28, 2015

Books: A summer trip to Anderson-Butler Rare Books

If you live in the greater Puget Sound area, and you can read, and you prefer to read good books instead of popular trash, then you owe it to yourself to visit Anderson-Butler Rare Books in the Ballard neighborhood of Seattle.

With the demise of Wessel and Lieberman last summer, Anderson's remains my favorite bookshop in the Seattle.  A good book excursion into town would have you stop at Anderson's first, then John Michael Lang's good shop downstairs, Twice Sold Tales across the street, and finishing up with the indispensable and very high-turnover (churn is good) Magus Books in the University District.

If you ding your book budget elsewhere, you'll feel like a real mook when you show up at Anderson's with only $20 left on your open-to-buy.  Don't do that.  Go there first.

I walked down to Ballard on Saturday; here's what I got.

Norman Cohn, The Pursuit of the Millennium: A history of popular religious and social movements 
in Europe from the eleventh to the sixteenth century, London: Secker & Warburg, 1957, 1st ed.

This is a modern classic of social history, sort of an applied Ernst Troeltsch, which we dig in these parts.  If this blog evolves into a full-on chiliastic movement, we'll certainly crib notes from this.

William Shakespeare, Complete Works, London: Oxford, 1969

This is a good bare-bones edition of the bard, handy, portable, no-frills.  Don't expect to borrow mine after TSHTF and you need to check some allusion to King Lear.  You can pry it from my cold, dead hands.

Rabelais, Works, London: Bodley Head, 1927 2 vols, numbered copies

Gorgeous books here!  I'm so enjoying finishing up Fritz Leiber's various adventures of Fafhrd and the Gray Mouser that I think it's time I finally got around to the Life of Gargantua and Pantagruel.  This is one of those classics, like Boswell's Life of Samuel Johnson, which I'm deeply ashamed for never having read.  Book people know that a Gutenberg Project text file just won't do -- you simply must have a beautiful analog edition.  And now I do.

Seattle has some very good book shops.  Drop in and make tour of them all.

Public libraries are great -- for commies.  Time's running out -- start stackin'.

Friday, June 26, 2015

Does 1987 have any lessons for today?

I think it does.  Well, I think, you know what I think, the usual speculative nightmarish scenarios, the usual apocalyptic distractions on the internet. 

But this one is novel, because it's based on an analysis of the 1987 (the year, not an S&P 500 level) crash.  Well, what happened in 1987?

We had a decline off a significant high, followed by a bear-bull battle off that initial low.  The low held a second time, with a deeper retrace back up, before we got our famous crash, a true waterfall.

It's a clear A-B-C move in my book. 

1987 S&P 500

I was 16 and a Senior in high school when this went down.

So let's apply the 1987 idea to today, see if it suggests anything interesting.  We are currently in the process of finishing up a very long-in-tooth ending-diagonal 5th wave rally off the October 2014 lows at 1820 SPX.

When an ending-diagonal finally breaks down, we get a rapid sell-off straight back to the point of origin, 1820 SPX.  For a 1987 scenario, the speed and slope of this decline is our first critical piece of information, as it gives us the final target for the catastrophic "C" wave collapse.

The second critical bit of information is then how long the fight off the initial low -- 1820 SPX -- lasts before a final crisis.  Why is this important?  The fight over support and resistance levels creates a delay ... which only makes the ultimate target for "C" go lower and lower, into the depths.

So, you want a crash, one for the history books, one that removes all doubts about the future we have already consumed?  Look to October.

The 1987 crash applied to today

The vertical lines on the chart mark various cycle turn dates of interest to me along the way.

I'll propose a sequence of events for how this plays out.

  1. The Greece problem gets resolved in the short-to-medium term.  We are not talking about huge sums of money needed, as well as just enough "austerity" to dissuade the other worthless grifter Mediterranean EU states from asking for their gibs and gravy, to kick this can. 
  2. The market tops in two weeks, on the release of the June FOMC Minutes, at 2150 SPX.  Fed members feel cheap and used and are generally pissed-off at this point, so they are screaming for hikes and "normalizing" rates.
  3. The market breaks wedge support and sells off to 1820 SPX.  This is the long-awaited "correction", and it is bought.
  4. We rally halfway-back to 1985 SPX into late August.
  5. The 2nd estimate of Q2 GDP is released, and it is negative, meaning an official recession.
  6. The market returns to 1820 SPX on this grim news, and the knowledge that the used-and-abused Fed is really, seriously-this-time-guys going to hike rates at the September meeting.
  7. We sit right on critical support, 1820 SPX, into the September FOMC.  The market calls their bluff in the most sick and insidious way.
  8. The Fed blinks, cites the recessionary GDP, and does not deliver the hike they had promised.
  9. The market rallies hard, Shemitah shorts are eaten alive, to a higher level than late-August.
  10. The S&P 500 gets back above the 2000 level, but fails to retake the old rally channel.
  11. October.  Something breaks (bonds? yes, probably) and the Fed can do nothing but watch.  We are still at ZIRP and they have no ammo, nothing.  Fear and loathing grip the land!
  12. If the 1987 model holds, now we seek out the target defined by (1) the slope of (A) down, and (2) the delay produced by the fight during (B).
  13. Yes, it could go truly vertical, return us all the way back to the trendline between the 2002 and 2009 lows.  This would be an epic finish to Dr. Bob McHugh's "Jaws of Death" pattern.
An objection would be that 1987 only took 36% off the indexes, while what I am proposing here is a 74% crash, pretty much all at once.  It would blow through any support levels that seem reasonable -- 1500, 1100, 1040, etc. -- in a violent orgy of panic selling -- day after day after day.

I only want to suggest that something like this is possible, based on the geometry and logic of the 1987 episode, a true vertical collapse.

I mean, this is just foolishness, right?  We have recovery, and the markets are real, and the Baby Boomers are going to get paid.  Sure they are.

the un-possible true crash for the ages

No one gets out of this alive.

Tuesday, June 23, 2015

Elliott means never having to say you're sorry

Even in times of deepest anxiety and confusion, we're obligated to put up some sort of count.

I could see us top right around 2150 SPX about a week into July.  Back to 1820 SPX a mere calendar month later, rolling over into the wave 3 near the end of August.

FWIW, here's my count.  The 5th wave in the ending-diagonal since the October lows turns out to be a very mundane 5-3-5 zig-zag, with (a) and (c) of 5 very similar to each other.

SPX 06-23

Good luck to all (bears).

Monday, June 22, 2015

Value Village score on Saturday

Market-permabears need to remember that we could still run all the way up to the top trendline of the ending-diagonal off the October 2014 lows, i.e. a blow-off target well above 2140 on the S&P.  Extreme caution is advised, as early means dead for aggressive positions.

Reader Bicycle thinks we're on the verge of a violent reversal.  I think the market may still be on ice for a few more weeks, working out a "5th of a 5th" grind, while long-term indicators (monthlies) setup for the final top.  There's the Greek payment to the ECB in mid-July.  3.5B Euro is pocket-lint in American QE terms, so there must be a real reason that we are quibbling over these debt matters for the subprime nations of Europe.  A cynic would say the whole effort is a sick pageant to draw in and eat any bears stupid to play it short here, anywhere.

market on ice until it's not

I did manage to win big at the Value Village lottery this past Saturday.  Some good soul donated a slew of Grosset & Dunlap biographies for young readers from the early 1950s.  I snagged them all, at the cost of $1.25 each.  All in fine shape with good DJs -- I'll get Brodarts on these ASAP.

Sunday, June 7, 2015

Charts 06-07: This projects out nicely to the June FOMC

The tape since the 2044-ish low is drawing an ending-diagonal, with its recent chop making the case that the top is not yet in, and that we are not yet impulsing lower.

Looking at the slope of a few of the legs of this mess, one more leg of similar slope would land us back at the top of the wedge, up in the SPX daily Bollinger Band land at last, right into the June FOMC meeting.

SPX 06-07

Janet will raise.  She already told you this.  Several times already.

So now we wait and see.

Friday, June 5, 2015

Charts 06-05: Nested ending-diagonals

Here is a chart with two ending-diagonal 5th waves in play: one that began with the spike off the October 2014 lows, and a more recent choppy minor 5th.

Each pattern provides an initial target upon its break: the 2047 SPX level initially, followed by a full return back to 1820.

Looking ahead to this fall, SPX 1266 and eventually 1074 are support for the big drops.

Good luck, volatility is returning soon.

Edit: the pink vertical lines on this chart are Bradley model turn dates per Manfred Zimmel, our friend in the Austria.

SPX 06-05 nested ending-diagonals