[Update 11:20 PM EST: One last chart. In addition to this chart I showed a few nights ago http://3.bp.blogspot.com/_TwUS3GyHKsQ/S0u4qtWjunI/AAAAAAAADiE/jdyCWiRNVZA/s1600-h/wilshire.png the below chart helps to confirm visually in the receding patterns and strength of this P2 rally. Notice how McClellans is trending down and the final highs of each zigzag is slightly trending up. Each zigzag internals gets weaker and weaker. And they all have the same basic "tell". For instance look at how now this last pink Zigzag has a double negative divergence in place on the Oscillator.
Its also neat that the price highs of each zigzag seem to connect on a dashed blue line. I didn't make these patterns and lines, the market did.
So you can see, I am not just whistling in the wind here. I have technical evidence I feel, that backs up the overall wave counts. Until the market tells me something different, I have to trust that what I am seeing is waning strength. I also am betting that a break of the continuous rising trendline from March will result in the HFT algo's reversing course. And they won't reprogram them either for the benefit of Benny and Timmy. Why? Because the uptrend is tiring and this chart tells me that. So when the computers have to deal with a broken trendline, what do you think that effect will have on them?
Social mood has already turned down for the start of P3, the market is soon to follow.
What will change my tune and mind? Well, if the market has an up day that again shows expanding volume and breadth as compared to these previous spikes on this chart, then I have to listen to it. (But even then how can you trust anything in these markets?) So yes, a 36-1 up day will of course change my mind. A 10-1 means we are probably going to 1200+. A 20-1 up day would screw me up big time...
But we haven't had that since 1060 was broken through in early November with an 18-1 up day (and I said that night we were likely tracing another intermediate sized zizgag.) That was 10 weeks ago, and these intermediate waves don't last much longer.]
[Update 10:30 PM EST: I think the "safest" trade play for P3, particularly during the heart of it, will be simple shorting. It worked in the Depression, it should work here. Some things never change. P3 will, after all, be about getting back to basics in a way for society in general.
It seems to me that borrowing stock and selling it with a promise to buy it back is a lot safer than all the other exotic bets that can be made in which you hope to sell something to someone else or hope to get paid or hope someone honors a swap.
In a financial meltdown, everything may be viewed as risky including things like ETF's, options and other such variant bets. For in all those instances you usually want someone to take it off your hands. Your counting on having another sucker out there to sell to. In straight shorting, you made your profit first. Its like promising your wife to take out the trash but only if you get to eat that cake she baked first. Then once the cake is eaten, you can take out the trash in the morning if you feel like it.
I particularly like the double and triple ETF's. If they go bust, well then you will buying paper for pennies on the dollar after you short sold something like EDC for $150. In addition, I stay away from the "interventionist" paper like FAS and such. Short tech, those companies will be the last to get bailouts. Thats why something like an EDC at these prices seems very nice (I took a short position today in it. I am also short QLD and TNA) Its a win-win too due to the decay aspect.
If you cannot short (like in my limited self-managed portion of my 401K that can only buy stuff and 3 day holds) than I think sticking with popular short ETFs, such as QID is about the safest you can do if you want to swing trade something. Powershares is popular and has huge volumes so at least if it "blows up" you'll be in the boat with a crapload of people which is always better I would think considering.
Also not all ETFs are available for shorting at all times and depending on your broker it may not work out with what you want to play. But there are a lot of triples and double ETF's so surely there is stock to be found in something. Anyways just food for thought]
[Update 8:50 PM EST: I was playing around with the Wilshire which always traces excellent waves (because its 5000 stocks so it IS the market). Anyway, even the Wilshire shows a zig-zaggy advancement today that smacks of a potential ending diagonal. In either case it just looks bearish...]
[Update 7:05 PM EST: This Nasdaq chart looks nice. The wave pattern signature indicates that this is a wave [v] up (has not yet taken a new high so no guarantee!), not a wave [iii] nor about to embark on a wave [iii]. Yes wave [v] = wave [i] @ 2373, but lots of times wave 5's fall short of a [i] to [v] equality and even truncation. And since wave [iii] is clearly the extended wave, wave [v] should not extend beyond a 1:1 relationship with its wave [i] price move.]
[Update 6:35pm EST: Junk's weekly RSI is still defying gravity. Yet its having a down week on high volume. Indications of churn.
Junk has a nice 5 wave down pattern. I say this because it has a prominent "third of a third" area with a no-overlapping candle area. This candle area is also the target for any wave (ii) retrace. Much like the overall market now is doing the same.
Still tracking the ending diagonal on the DJIA. More "abc" up type waves. VIX is holding tough. Dollar is looking for support. As the chart says there is an (a) and (b) in there somewhere likely and possibly a (c) but we need another day to confirm the pattern. Its like playing Russian roulette.