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Thursday, June 4, 2009

Its Hard to Sense P3 is Coming

Above 950 SPX, the last of the permabears will turn bullish. Then the jig will soon be up. With no more shorts to squeeze, all institutional buyers fully engaged, and retail (the few that feels like playing again) having jumped on board for this last little shindig, what choice will be there but for prices to go down?

I feel all comfy and warm watching the little bear rally waves chug-chug-chugging along. It is amazing that hanging around so many permabears for 1 year and now many of those same permabears are convinced its too early for P2 to end!

As if!

Get your bear suit back on!

SP50o is trading at a 4 qtr trailing P/E somewhere north of 60-65! At 986 it will likely be 70 or 75! Never has it ever been so high. Can you say parabolic?

Grow into earnings?

As if!

You think our F.I.R.E. economy that is hanging by a thread, in which we, as a nation, "DID a DOUBLED DOWN DARE of DEBT", will magically *bloom* into something else? When our largest manufacturing corporations just went belly up and the rest are old and creaky or out of country?

You think a 1.7T national debt per year won't ever have to be paid back and soon? You think we can get away with 2.7T next year?

When will the public outrage at corporate handouts start to come to a head?

At what point does the nation realize we are living in a National Ponzi Nightmare? I want to throw up when I think about it. Its like I am living in some zany cartoon....Are we nationally retarded?

Per EW guidelines, the next wave 2 should trace into the price range of the previous subwave 4. The previous subwave 4 price territory is between 742 low and 1007 high. We are at 940-ish pushing the last possible bit. Why would I assume it will go higher?

I no longer do because the waves are saying something. The (X) wave triangle meant a LOT. It means one more ABC pattern until a price retrace, whatever that is, is satisfactory. Its that simple. The theory is sound and works.

P2 has a sense of urgency. Why? Well, earning season is coming again! And we are already priced for boom times baby!

I'd love to see shorts squeezed one more time above 950. It will break most of the last of us permabears.

Remember fear didn't start correcting in March 2009, it started correcting back in November 2008 from peak. It has been subsiding ever since. From that standpoint we have had 7 months of declining fear from the peak.

And looking at it that way, maybe P3 truly is right around the corner.


  1. Agreed. The fly in the bakery case is that EVERY waver, either print or internet also thinks we are at a major top. This doesn't mean they are necessarily wrong. It does suggest that the top may be more rounded than say falling off the proverbial cliff.

  2. Oh yeah probabbly wont fall off a cliff. need some distribution first....

  3. If I were to take a guess, we will trade sideways for a few months before the start of P3. October is usually the month of calamity for almost every financial crisis we've had in the last 100 years. That and the fact that Benner's theory calls for significant a top on 2010 and a significant low on 2011. It's been known to be a few months off, so maybe we will see the last peak sometime between October-January before some financial collapse type of scenario happens.

  4. Just a question as a trader: Is there any chance for this final move a Wave A (960/980).....then a Wave B down ( instead of Primary 3)....for a final Wave C up to further highs.....???? tks in advance, and appreciate your analysis.

  5. Hey Dano -- Congrats again on your on your chart target calls -- you really are in the zone.

    I agree completely with your comments above -- unfortunately there are too many of us who see it coming but it never does before the margin calls kick in.

    Like Madoff, who claims he wanted out but couldn't -- the GREATEST PONZI EVER supported by the PPT can only last so long before it implodes.

    I now believe that if we see snp 999, we may also see a 333! The unresolved problems which initially brought us to the triple 6 low have only been complicated by ever more costly and potentially disasterous intervention.

    There.. I said it, and I feel good! Thanks for providing me the opportunity.

    PS -- my current shorts are in cash having learned that you can't win with margin unless a daytrader or a long term trend clearly exists.


  6. Trading sideways for a period after the P2 peak makes perfect sense. The VIX could continue falling during it - making sure to minimize profits earned from option trading. It could also happen slowly enough that many bear funds could leak more value than earn profit.

    It's time to figure out a long term plan for a very LONG term market decline because it's doubtful the usual methods of dealing with a secular bear market will work in the disaster we're about to see.

  7. Joe,

    I guess if one had balls one could sell naked calls, but that could be very risky. Just a thought.

  8. Daneric, great chart!! I've been following you since SKF chart. What is your possible high for P2

  9. Ok, yes, I've said earlier my opinion is that:

    1. p2 will NOT end soon

    2. Hovewer in terms of the price I gave it very little upside. Maybe 1050

    I just look at Japan chart and see it was pretty tipical for the Nikkey to go sideway for years.


  10. It does not matter how high P2 will go as long you put stop loss limit and ride the wave.

    Bear is a bear and bull is a bull. The only difference is one change their believe. Of course, monetary is involved....LOL..

    Better get ready to September puts, October puts.

  11. Dano, check out my VIX chart on my blog today.

    What do you think? I noticed it today and then read yours and realized our timing from two different angles could be totally in sync. I am looking at it from a VIX technical chart reversal.

  12. One more washout to a new low maybe for the VIX. I just dunno.

  13. Excellent post, Dan. Looking at the trillions of debt that we have along with so much business moving to offshore, I couldn't agree with you more the P/E of SPX is heading to a very risky level. The jobless report today is saying not only more people are losing work and corporates are not ready to make any hiring either. The Fed did previously mentioned that U.S. jobless is going to be over 10% high by the year end. With expectation of more people losing jobs into the year end, here we are we are talking about growth, profit and recovery. It is very obvious that government and banks are manipulating the market in the past few month using the stock market to try to lead the trust and confidence to be higher. You can't give from an empty well. Talking about building a castle in the air here. When you take, you must give. No way the growth can sustain when we are in this huge of debt and looking to grown even much bigger in the two years ahead.

  14. That big reversal shortly after the open did not look like a normal drop to me. P2 or A of P2 may have peaked at 952 for all we know.

  15. Selling naked calls isn't something I can do in my SEP. But it's certainly the right idea...

    I think the PPT will do their damndest to make P3W1 a controlled decline. It's going to result in NO ONE making any money (except GS, of course).

  16. Right or wrong, just made my "big move". Hope there's more runup, but the lack of an impulse up after hitting today's lows is disturbing.

    Now ~ 60% cash, 25% bull, 15% bear invested. Will now only pick and choose - no more mutual fund investing.