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Thursday, October 22, 2009

The DOW Trendlines

I like the DOW trendlines in log scale. The very preciseness of the trend lines leads me to believe that this is indeed that chart to keep a close eye on. Its telling us something.

The bottom line is rising fast. And the DOW wants to stay away from it apparently as much as possible. Like a dog quickly skipping over his morning business...

The EW counts are admittedly muddled. I have seen a multitude of counts from various bloggers and EWI and its not worth fretting about too much I suppose. I too am adjusting on the fly.

What is important from an EW standpoint is that the entire structure "looks" like a giant 3 wave ABC zigzag (or combination zigzag) correction and thats all that matters at this point. Also the last set of moves since mid-August have an "expanding" upward pattern (within a rising wedge no less!) which is a bearish pattern in general.

The whole thing is a rising wedge pattern which is also bearish. It may require one more hit on the intraday upper trendline (blue) . However if you use the green closing price trendline, perhaps 10119 is sufficient. Either way its running out of room no matter which line it heads toward first, green, upper blue or bottom blue.

So no matter what your count or trading position or stance, looking at this chart keeps things in a somewhat simpler perspective even if the DOW rallies to 10300+.

The public is definitely engaged in the rally at the moment. Maintaining 10000 Dow for a while will enable them to submit further cash to the cause. As Kenny said in his comments, the I.I. survey is not quite yet at a typical place where market tops occur. But it may have went up today. The longer DOW stays above 10K, the more bullish everyone will likely become (and me too probably hehe)

Bottom line is this is probably the most important chart for P2. The preciseness of its trendlines are very neat. The rising wedge shape is bearish. The upward expanding diagonal triangle shape within is also bearish. But DOW 10000 blinds the eye.

Also all those "wow" earnings means we must be on the road to recovery. (ya think a lot of Apple ipods and Macs weren't bought on credit?)

And the fact that fundamentally, America is bankrupt, is downright scary. But whats more scary is the market's ability to utterly ignore it.

The key rule about any Ponzi scheme is that when it is finally recognized to be a Ponzi, it collapses rather quickly. That is the constant danger of this market.

I have done the simple math. It doesn't add up. We will never pay our debts. But what is strange is that somehow I always knew, even when I never followed the stock market that we would never be able to meet our debt promises. I even knew that when I was a kid in the early 1980's no less!

Does anyone actually think GE will ever, ever, ever be debt free or that they will earn their way to an acceptable amount of debt? No! They can only try to earn money through playing the casinos of the rich.

Does anyone think Citadel will get out of its bind?

Is not the FED utterly and hopelessly bankrupt? When they are backing the entire world system, isn't that insane?

So somehow everyone knows the situation. Its not even arguable anymore. Its all about debt. Yet the reality is that we bury the "known" deep into our collective subconsciousness.

Its almost as if we must "go up or perish". And thats exactly the mechanics of a Ponzi scheme. It constantly requires new inflows or else its deadly secret would be revealed. And upon revelation, its over rather quickly.

So it is a collective rally. We have no choice in the matter.

A Primary wave three down is the exact spot where that collective subconsciousness, could in theory, recognize the Ponzi. That "point of recognition" may not even be survivable in our fiat credit system as we know it.

Have we fixed anything since P1?

Is it any wonder then that the market, is perfectly aligned fundamentally for this P3 wave?

Is it all just a horrible coincidence?

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