Okay, one day means nothing. But go back and compare all the somewhat large down days to all up days over the last few months and look at the size of the volume on those down days to the up days. Then look at today's down day. Wow. The volume is clearly screaming distribution.
Now that said, there is a feeling out there that the market was pushed up further (extended) to kill all the puts that have been bought in Feb. The volume in the market has been so low that it's not been to hard a thing to do if you got the money.
But that's just speculation that makes some sense as today being op-ex would mean most of those puts were expired worthless and now 'they' don't need to hold things up here anymore.
So, I think the next target for the SPX will clearly be 1150 which is a monster level that goes back to the 90's for support/resistance. It seems to be a magnet level. Everything in the market returns to the 'mean' as defined by either the 50/200 mas, or more specifically a linear regeression level. For the Q's who I think is pulling the market's chain the 200 is way down at $43 which is about 12% lower. A 10% correction in the DOW would take it to magically around 10,000. If I'm correct in my wave counts, then we should begin an ABC correction all the way down to that level on this A wave, bounce big off it in a B to the mid to high 10ks and then shoot down to the mid 9000s. That's a perfect scenario. What puts all that into chaos is not just the cycles coming, but the reasons behind why they could be big.
As many of you who've followed along over the years and have seen the cycle calls play out almost to perfection sometimes is that always a catalyst comes out from the blue and seems to be the reason for the market doing what the cycles suggest it should do.
Now let's look at wave theory and those who claim it all to be nothing more than voodoo BS, I want to argue otherwise and use a most recent example of what you're dead wrong. If you have access to a chart that goes back on a weekly basis, not monthly, to the 1980 timeframe, you can actually count a large grand cycle wavecount from 1981 to 2000. What then threw it all into strange weirdness was the extension of the referred to 'b' wave in 2007, where the DOW and SPX made new highs. That had many elliotwave guys scratching their heads, but when you look back and the reasons for the market doing that, it makes perfect sense how many would actually buy stocks into a clear overvalued market not understanding what was going on. For example, Ken Fisher of Fisher investments was always on CNBC screaming away at why the market was going to 15k and then 17k back in 2007. His logic made perfect sense for a fundamental standpoint - many were borrowing money at a low rate from Japan, then buying stocks here and getting 5 to 8% back. It's called the carry trade. Bank earnings were on paper looking so good that the valuations were extremely low even with C for example trading at $50 or whatever it was. So, the SPX combined earnings were to be suggested in 2007 and into 2008 around $99 to $100 per share. Multiply $100 by 17x you get 1700 target for the SPX back then. EVERYONE was going along with that basis.
But, what happened? The stocks that made up the SPX were actually looking to bring in $99 until they didn't. In less than six months, those numbers started to fall with the market falling faster than those earnings were coming down. The market LED the EPS decline. So, in March 2009, the low, the expected SPX earnings had come all the way down from $99 to $50ish. At 12x SPX multiple of $50 per share, you got an SPX target of 600. Well, we hit 666, but the idea was if that was a low side risk, then you could easily be safe buying anywhere under 700, which is what happened. But what did happen? As soon as the market started climbing again last year, the companies started doing better. The MARKET LED THE EPS UP again. You see how it works? The market wags the dog, not the EPS dog wagging the market tail.
So, the other day I'm watching CNBC and this guy comes on, like so many cheerleaders the damn network has on all the time, and says the SPX will do $77 this year and you multiply that by a PE of 16 you get a SPX target of 1230 to 1280. But he thinks the multiple should be 18 giving you a target of 1380.
What the? These guys just make this stuff up as they go, I swear. Why a multiple of 12 at the low but 18 at the high? Huh?
Clearly it's all about scaring the retail guys into the market because without their money to invest, these money firms can't charge commissions. That's what it's all about.
But the elliot guys were right about the wave counts. Where do they see things now? Well, I think this last year's rally is clearly a 1 through 5. I think it's a wave 1 of a larger new bull market. But we just completed a wave 1. (5 impulse waves within a wave 1 impulse). Prechter says it's a 4th and says we should bottom out on the DOW around 3800. He knows way more about this stuff than I do. But I don't see that. For now, I'll stick with my thesis. However this will take years to play out. Wave 2s are ugly. They typically retrace as much as 78% of the wave 1s. Considering how much is in front of us in terms of taxes and other government garbage, I can't imagine a scenario in which the market will run and make new highs until these clowns running the country now get voted out. I personally don't see the Republicans taking over congress. It takes 40 seats. They might get 35. They'll need 10 for the senate. No way. So, that could be a catalyst for the fall.
Cap gains taxes go away this year and run from the current 15% to 28%. Wow. That exit door might get very small once the market starts to break down as all these investors who were getting ready to sell by year end to take advantage of the lower cap gains rates end up competing with everyone else with the same plan. Ugly.
Banks are still technically insolvent because they are holding onto a record foreclosure shadow inventory that if weren't for the government bailout money, most would be shut down. There is no way in hell the public will allow another bailout if things start getting ugly again. No way. So, what are they going to do this time?
You see, the scenario looks like a perfect setup for a bigtime drop. Plus when compared to the mid 1930s where the biggest market decline happened AFTER the initial 1929 drop in which the market fell 82% off the 1931 recovery high, it's scary how it looks nearly the same. Seriously.
So, as The Net suggests, shorting TNA or buying TNA puts is probably a bit better of a trade than going long TZA because of the $$ declines that will occur on it. But I am going to play things a bit more cautious with the $10k account this year and with my own money. I think TZA has at most .50 downside risk to $5.50ish and a quadruple upside potential. It was almost $140 at the March low. So, we could be sitting on a lotto ticket here.
You could only dream.
AI
