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, July 6, 2010


This is the perfect illustration of why I am not getting too hung up on the squiggles or the possibility of bounce, no matter how big its "potential" is. If this is a Minor 3 down (and the odds on that are *NOT* trivial), all of these bounce setups will be truncated, reversal candle sequences will be invalidated at the last minute, playing divergence setups will fail because they are not confirmed.

The more I think about it, the more I think this wave won't "crash" (huge gap down impulses that are easy to count), it will show potential setups that crush the bounce-timers, eating up bulls the same way the move ate up the bears from Feb to April. When you zoom out, the wave will be clearly down, but if you stay zoomed in, the squiggles will fool you.

Will it happen this way? I have no idea. But it is worth pondering. And if you are a bear in this market (and I am) is it worth it to time these fakeout bounces? Answering for myself: No. I am short and very comfortable with my position.

And you know what, if we rally 50-70 points from here, I will still be comfortable with my position. Because I know why I have my positions, and have my reasons for thinking what the Primary, Intermediate and Minor trends are. And potential divergences and the promises of capturing part of a bounce are small potatoes compared to what I believe this wave will yield to the downside.

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