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Tuesday, January 26, 2021

Elliott Wave Update ~ 26 January 2021


The best I can do with the DJIA count is that it too is on its last wave [v]. So at least that matches with the Wilshire in that regard.


Some thoughts;

Again, the exploding of the most shorted stocks is likely the final phase of this crazy market. At least it fits nicely into my primary count if the Wilshire can manage to move to the 42,441 - 42,485 range as suggested. This is less than 4% from today's close.  Going back to the Zero Hedge article I linked last night, it is remarkable that Citadel, the behemoth trading hedge fund giant, has bailed out a hedge fund by the tune of almost $3B (at a market peak no less - let THAT sink in). And if things keep getting squirrely, will it be enough? What other domino's are out there?

And what about Citadel itself? Who would have to bail their "investments" out? The NY Fed? How would that happen? Well, being that the NY Fed desk is the biggest behemoth in the final scheme of things, they would have to actively try and crush the market and stop the pain of hedge funds blowing up and market makers blowing up also. 

Ok, so suppose the NY Fed is forced sometime in the not-too-distant future of putting their weight on the scale (perhaps at 42,450 Wilshire no less!) in such a negative manner that their intention is to crush the market (crush the Robinhooders), at least for a bit and try and stop the feedback loops. If this were to happen, it would imply market makers are hurting, hedge fund behemoths are hurting, and the crazy market needs a breather. Lets suppose a cascade happens and then a negative gamma feedback loop occurs?  Who would be left short the market to soften the blow on the way down?

Not the hedge funds as they would have been all blown out. Not the market makers as the gamma feedback loops will chip away at their margins in reverse. Robinhooders? No, they'll be busy trying to  catch a falling knife and get caught en masse finally on the wrong side of the trade. Mom and Pop and run-of-the-mill fund guys regular passive investing? Nope, their clockwork "injections" into 401k's and such will simply be averaging down as the market falls.

What shorts would be left in the market?  Who will stop the vacuum collapse when the HFT algo's start reading headlines and spoof to the downside because they don't know any better?  And if they spoof too hard to the downside wouldn't the human emotional reaction would be to just "unplug" them? 

How would price discovery work when the algorithms, which have dominated the markets for the past 5 years, no longer function and unable to mask the fake volume of computers trading to each other?  Can humans even handle this market all on their own adequately?

Will Mortimer come running down to the stock market floor in a panic?

Where will the liquidity be then?? And if the market "flash crashes" maybe "mom and Pop" will get the hint and finally find their selling points (don't count on it, they are just as greedy as the hedge fund manager). I'll tell you who WILL find their selling points very quickly; the uber rich. And their big money can help move markets - in this case to a cascading downside avalanche.

CONCLUSION:    The market has entered an extremely dangerous phase. Its a fitting ending really. The computers algorithms got us here and will, not ironically, be the downfall of this market. 

We have truly reached the "ALL IN" moment. God help us. Hang on for the ride.

Just who is actually hedging this market properly at all? No one by the looks of the CPCE.  This is proof, that we are well-entrenched into the "all in" stage. That's why I keep showing it.




It appears the blowoff stage to the madness which is the (B) wave peak is here.  As Zero Hedge has been pointing out the most shorted stocks are getting monkey-hammered upwards in price. Hedge funds are under pressure from the Robinhooders who are providing the order flow which in turn is being amplified by the HFT machines, etc.. and making market moves particularly in single stocks. Gamestop again (as was suggested here last night) exploded higher as Robinhooders are piling in creating a gamma feedback loop (which I really don't completely grasp in its entirety) but Zero Hedge has a nice primer if your interested.

I had some time today and was poking around at some heavily shorted stocks and came across MAC ( I think I seen this in a Zero Hedge list but can't find that post or list).  These guys actually still have a positive earnings per share ratio. Why is the stock so shorted at this stage? Yes, I know, the "smart" money says malls are going bust (and they will), but maybe you might want to wait until the overall market peaks prior to getting a mega short hard on? 

And their chart is at long term resistance. Should it clear that hurdle, it too might create its own gamma feedback loop. Very volatile trading last few days.  This is just one example and I could post a lot more but you get the picture. 


Last night I explained that a strong Fibonacci  ratio relationship exists at 2 large degrees. The Wilshire range is 42,441 - 42,485.  In addition to explaining that range there is another smaller potential Fibonacci relationship that falls in the middle of the range.

Wave [v] of C = .618 * wave [iii] of C @ 42,458

(I derived this using midpoint of its orthodox [iii] peak and its (b) of [iv] peak) 

Thus the tiny squiggles would look like this:
And the daily:
But we are certainly keeping our eyes on our other counts. But until key levels break under, these are just counts. The next best count is that we are in an ending diagonal triangle with another marginal high to come. This one is labeled as [v] of 5 of (5) - which again, is acceptable - along with the false social mood irregular (B) wave top.

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