I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Friday, July 2, 2010


Nothing ground breaking in the post. Everybody has seen probably a million charts of the potential H&S formations. So why I am showing a few more? Because it helps to tune out the noise. Are we in a Minor 3 down? I don't know, and neither does anybody else. But I think the odds favor it. At least to the point that you must be respectful of the possibility

-- In wave 3s, the corrections within are smaller and subject to severe truncation
-- A wave 2 (which normally retraces 50% - 78.6%) within a wave 3 will be much more of a fakeout and can retrace as little as 23% - 38.2%

So keeping this in mind, and being cognizant of the odds that a Minor 3 here is possible, if not likely, why go to the trouble of timing a Minute degree bounce that has the possibility of being severely truncated? This is not an outright question, and it is barely a rhetorical one. I am not looking for a response. I am simply illustrating why I am not killing myself to count the squiggles in this wave.

Because they are (IMO) not particularly relevant. We have technicals that are breaking down, and we have moves that are accelerating down, and we have breadth that is increasing down. We have death crosses on many indices. We have topping formations that are happening in conjunction with a flattening 200 day MA and a clearly downturning 50 day MA on every single major US index. This is the main reason why I wrote: Real.

If you are a bull or a bear, it would make sense to wait for a clear bottoming move before either covering shorts or going long. This move is building up steam and is not something that makes sense to stand in front of.

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