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

Tuesday, January 26, 2010


Here is my current count. I don't like it (I tend to have a healthy disdain for my EW counts), but I think it is the best fit.

I have yet to see a compelling count that says Minor 1 is over and fits all of the tendencies that waves usually show.

The part of this count that I dislike is the very truncated 5th at the Subminuette. But I rationalize it as: a) the Subminutette 3 was *extremely* extended and b) it is a Subminuette wave (these are very short term waves subject to manic moves and can become distorted). I would not find this to be a compelling argument even at the Minuette Degree.

The main reason why I think the move is not done?

We have not seen any meaningful positive divergence with the indicators on the 30 minute and 60 minute charts (you have to go down to the 10-15 minute charts to see a little bit of divergence). This is *not* a prerequisite for a wave to bottom, but it is a tendency.

And the odds favor divergence, so unless I saw a *very compelling* count that shows a completed 5-wave structure (which I don't) without positive divergence, then I play the odds. And the odds say a 5th is coming.

(That is how I use EW and TA. I *don't* try to predict the future. I use it to perform risk management: What is likely, what is not, what tendencies usually manifest themselves, and what moves negate potential counts. That is the best anybody can do).

However I did lighten up on my short positions (in my short term swing trade account). I do think we will get a 5th wave down, but the risk/reward no longer favors being *heavily* short. I do not like going long here. The odds favor a Minute 4 bounce, not a Minor 2 bounce (IMO). I will play a Minor Wave from the long side but not a Minute one. But everybody's aggressiveness / risk tolerance is different.

So that's what I think at this point.

blog comments powered by Disqus