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Tuesday, March 6, 2012

Elliott Wave Update ~ 6 March 2012 [Update 8:20PM]

Update 8:20PM: Here is an update on the Gallup Obama approval tracking data chart.  It has obeyed the upper channel line and turned down and poked through the lower red up channel.  Divergence with last summer's 2011 peak approval. I improved the chart to show the timeline in days from Inauguration when data began, until election 2012.

If the lower channel line is the ultimate target - as I suspect it will be if the social mood downturn thesis is correct - welcome to the low 30:s Mr. President before the election. And dare I say, a possible poke into the upper 20's, something I don;t think  even President Bush managed to accomplish.

At any rate, if this chart was a stock, would you be buying or selling?  Does not "the trend is your friend" apply?? (snicker)
Update 7:23PM: A couple of bearish charts.
French CAC was down 3.58% today and the German DAX down 3.44%. CAC also sports an ending wedge and came within a point of the virgin space.
GDOW sports a wedge. Remember a subsequent price collapse from a wedge generally confirms it was an ending diagonal.
Possible Apple count. Another unveil tomorrow. Aren't we getting sick of Apple unveilings? IPAD 3? Honestly I bought an IPAD for my wife last year (cause she wanted one) but she uses her laptop (she likes a keyboard) just as much.  Now that we have had an IPAD for a while, I am convinced I would never buy another one. Its not a great value at all. Her nice HP laptop was for 2/3 the price and does way more (like print)

I still think a huge backlash is coming against Apple.  Overpriced products and too much control over content.  Slave workers in China. Big cash hoard being held mostly overseas.  Steve Jobs is dead and cannot be replaced so the loyalty factor may wane.  Doesn't even pay a dividend to own their stock. When you think about it, there really is not a wide moat here for their products. They have all been cloned and some of the clones are pretty damn good.

The "toy gadget" mania is running its course. There are so many products flooding the marketplace (phones, tablets, laptops, notebooks, etc) that prices are plummeting across the board. Except Apple products. Their "coolness" factor has allowed them to keep prices high. Before Christmas all the cheaper tablets had been sold out at my local Best Buy. But there were plenty of $700 Ipads to be had.

I just think when your at the top, there is no where to go but down. Social mood ensures it.
DOW Theory. Outlook: Bearish.

Today was easily a 90% down day on the NYSE. Down volume ratio ended at 96% down and down issues ended the day at 91% down. The NASDAQ was not quite as bad with 86% and 82% respectively.

Reasons I am very bearish and have a bleak outlook in the short medium and long term:

1. Wilshire5000 has not officially matched its 2011 intraday high despite most other indexes having done so.
2. Overseas wave patterns (Europe, Japan, etc) have very bearish wave patterns. 5 down and 3 up and are a long way from confirming their respective 2011 highs. See Global Dow index.
3. Sovereign defaults are likely around the corner causing massive disruptions to the financial markets.
4.  There is evidence negative social mood is ramping up further worldwide. Even the Russians are openly challenging Putin.
5. China is ready to pop for good. As is Canada, Australia and any other holdouts.
6. DOW Theory is flashing major historic warning signs of non-confirmation on at least 3 timescales.
7. Dollar seems to be in a series of huge waves ones and twos up.
8. NASDAQ100 seems to have completed a long cycle wave complete with a finished thrust out of a huge triangle.
8. Etc, etc, etc.

More recently the market seems to have put in an ending diagonal pattern, which is a way to mark a significant high, not a "pause". ED patterns are a sign of exhaustion. These should not appear within third waves. They appear in ending waves.  

This has probably been a much anticipated pullback by both bulls and bears. But so what? Does that fact help you now? Now that the winning streak has been broken, where to buy seems to be the question in the bull's minds.  

There have been three major pullback periods since the 2009 low. We had the 2009 infamous "head and shoulders" in which even TV pundits were quick to point out. We had the "flash crash" in May 2010 which was indeed scary.  And we had the sharp selloff in 2011.  Each time was a little different.  But each time has somewhat conditioned us to severe selling events.  

My guess is that all the previous severe sell events within the past 4 years (to include 2008) have conditioned both bulls and bears (and even the public) that its not a big deal.  In a way it can even promote complacency. "Oh the DOW is off 400 points? Ho hum, seen it a zillion times, when do I buy?".  In other words, it may take even greater amounts of selling to ramp up the same levels of fear.  

I lean toward the public being "ready" for Primary wave [3] down in all its force. After all Primary [2]'s job was to get us ready psychologically for wave [3].  Conditioning us to severe sell events was probably part of that package.

So have we topped? There is good evidence that we have. The waves count complete.  The Wilshire may in fact be in wave 3 down - or (3) if you prefer - of Primary wave [3] down of cycle wave C.  
What is ironic is that most everyone, if pressed for an honest answer - knows deep down that the financial system as it is now cannot survive forever.  Its always "in the future" when we have to deal with things. Why? Because we have been conditioned to that!  There always was a road to kick the can down. "just a little more debt until things get better". But its the debt overhang that is causing things to get bad! So more of it won't solve a damn thing.

Well, I think we are running out of road.  The system is strained, mood is ready to get very sour again after a 3 year bump, and we all are probably ready for a bigger wave down than that which occurred in 2008. We have been thinking of systemic collapse. It has been discussed by some smart folks - mostly bloggers of course . We know why it should happen. We can guess at outcomes.

And if your a follower of Elliott Wave theory the explanation is rather simple: The World is in a Supercycle degree social mood downturn.  And we are no where near the bottom.

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