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

Thursday, November 17, 2011

Nov 17

The large triangle (which implied a bullish continuation) proved indeed to be a fakeout. Huge props to ZimZeb who was calling this move correctly for the last couple of weeks. Really just some outstanding analysis.

I was relying on several points in my analysis for my triangle call, mostly backtesting/statistical. But stats, like I have said before, are simply odds not prognostications (otherwise there would never be any exceptions). So this wave was a perfect example of why a statistical approach (the way I approached this wave) doesn't always lead you down the right path and a real time EW count of the substructure (the way ZimZeb approached with wave) can give you real insight as to when to call the statistical results into question.

Enough waxing philosophical.

My 60-min Trend System issued a short signal today at 12:30. See here and here. (These updates are sent out as part of my Trend System Notifications).

I think, clearly, the wave has rolled over and is trading down. The question is, how far?

I continue to think (for many other reasons) that the October low marked an important low. I continue to stand by the call that the count down from the top is NOT a viable impulse down.

Here was a count and projection that I showed last week (Nov 9) that I am going back to (before the triangle capture my attention):

And here is how I think it could be playing out. I think the large triangle was the red herring, and the smaller triangle was the legitimate one (for ultimate confusion). And an A=C projection would put the end of this wave in the middle of major lateral support right at the 50% retrace from the October low (around 1180-1190).

However, whether my count is correct or the more bearish counts are correct, either way I think we have more downside from here before the next viable trading bottom.
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