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Tuesday, May 5, 2009

How Long Will P2 take?

I recently posted a speculative chart http://2.bp.blogspot.com/_TwUS3GyHKsQ/Sfr1gfRMzUI/AAAAAAAAAc0/TMGObmALEHA/s1600-h/week.png based on a triple zig zag and a market retrace to a .382 Fibonacci in time and a 50% retrace in price. This puts the market roughly at 1100 come January 5th 2010. Do I really think that it could climb so high and take that long? Basically that would make 2009 a very profitable year for the bulls.

So what makes sense?

Well let me answer it this way: I don't think a 2.5 month rally is sufficient either. A simple ABC zig zag for an entire P2 that tops out less than a 38% correction does not make sense.

This C wave is going to end around 950 maybe above within a few weeks I think and hit the 200 DMA. Will that be it? Will that be all of P2? I presume not which is why I have labeled my waves a one degree less than EWI and Kenny. Yes I am speculating but its a calculated speculation.

I think social mood needs more time. I think the bear market needs to be largely "forgotten". The only way this can truly occur is rally over time. From a stock buying standpoint, will investors and institutional buying really completely bail so quickly when social mood is on the upswing? When improvements in the economy are just seeming to bud? Would a 960 peak in only 2.5 months be enough to create a downward vacuum selling force that breaks all support zones from here on down to 666 in whats supposed to be the worst bear wave of all, P3?

Does that make sense? Sure I definitely think we may/will get our 38% correction from the C wave peak, but at some point one of these recent support zones will hold as soon as the selling subsides. And wouldn't that be heralded as the much needed market correction the media heads have been talking about? The market would get real bullish then yes?

I think P2 has a long way to go. And I expect at least a DOUBLE zig zag correction at the intermediate wave level which would be counted like (W) (X) (Y). A triple zig zag would be (W) (X) (Y) (X) (Z). And the ironic part is that a triple zig zag may even look like a huge 5 wave move overall as I have drawn on the chart.

Wouldn't that be just like the market to confuse the chartists at the very peak of P2?

Call me crazy, but the masses MISS and yearn for the "asset mania" to return that we have abandoned for 17 months. And then some day it will peak again. And again we will face the reality of living in a Ponzi nightmare. Yes US national debt at all levels will ensure a nasty P3 finally comes. But the Ponzi can surely go on for many more months as long as world social mood is in an upswing correction. When we peak, they will change their minds.

And our national nightmare will continue.
If there is a P3 and I do believe in EWI's overall count, then wave 3's are usually always the strongest. Don't doubt that. If P1 chopped off 55% of the market, expect P3 to chop off 60% of the market yet again.... So if we top at 1000, your looking at 400 SPX for a wave 3 bottom....

I look at it from a momentum standpoint too. If the market achieves 950 in the next few weeks, is that a high enough springboard to dive from? Is there enough kinetic energy built up for such a devastating P3 when you just got done with institutional buying in big volume since early March?

I do however think that 950SPX will create enough energy to blast through some of these recent upper crust support layers so the market can experience an overall 38% correction. But more than that, I think P2's social mood will kick back in for another corrective zig zag up. At the least.

So my chart on a 50% P2 correction I speculated on shows a triple zig zag. I expect at least 2 zig zags. I would not be surprised about a third.

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