A Look At Some of the Asian Markets

.... And it ain't pretty.

The Shanghai Stock Market (via the SSEC) has been speculation central. It is one of the biggest casinos out there right now. But like any streak in Blackjack where you leave your winnings on the table when the cards are finally going your way, the smart players know to take some of it off the action and back into your bankroll. ... because the house always wins eventually.

And like with any speculative endeavor, you only make money if you find somebody to buy it off you at a higher price: baseball cards, Tiffany lamps, Mark Rothko's (yeesh), Houses, or shares of Stock.

It looks to me like the smart money has already cashed out and is enjoying a nice meal at Carnevino. Everybody else is still at the table because all the economists are saying recession is over, the world is in recovery!

So while SSEC is the real casino (and potential canary in the coal mine), the HSI is a bit less erratic / correlates a bit closer to the rest of the world's markets. But it is still very much tied to the Chinese and Hong Kong economies.

So a very interesting observation presents itself: ..... The HSI is not making new highs with the rest of the American and European indices. I just checked Bloomberg (delayed unfortunately) and the high so far is 20750 today, still below the peak around 21300 reached a couple of weeks ago. Maybe it is too early (and they will break it today).

But it is worth pondering, are the Asian markets, the leaders in receiving the speculative investment inflow, signaling the sea change of speculative investment outflow?





South Korea is looking a bit healthier (maybe not "healthy" so much, but at least less manic than the SSEC and HSI), but there is a *huge* resistance layer to be negotiated at the 62% retrace. Lets see how this one plays out

Indicator Thoughts to Accompany My Last Post

Here are some indicator thoughts to accompany my last post. Notice the Major bearish RSI divergence in the first and last A Waves, followed by the RSI Low at the end of the Expanded Flat in the first and last B Waves. If the final C wave does actually morph into an ending diagonal, then look for slight bearish RSI divergence to help signal it as it is taking place.

I am just trying to arm you with some signals to characterize this C wave. I think the very simple nearly vertical impulse to end C is a ruse. My gut is really telling me that we will have a bit more complexity (and confusion) before Primary 2 is done.

Looking at the Rally Progress, Bigger Picture, and Some Wave Comparisons

I was going back and looking at the Wave A rally. I said on Friday that this was a Pathetic Wave B, and that it reminded me of the pathetic Wave B pullback in March. So I decided to go back and do some comparisons:

First A-B-C zigzag in March:
1. After a very clear impulsive, extended 5 wave move, Wave B is a meager 30% pullback.
2. Wave B is an Expanded Flat
3. Wave C is Diagonal

Middle A-B-C:
1. The meat of the "correction" takes place here
2. There is no real price retracement.
3. In fact the second X ends at about the same level as the first C
4. This makes the middle X-A-B-C-X and time extension (sideways extension) of the rally, and not a harsh price corrective wave

Final A-B-C:
1. After a very clear impulsive, extended 5 wave move, Wave B is a meager 24% pullback.
2. Wave B is an Expanded Flat
3. Wave C is .....

Okay, now here is where things get very interesting.

Right now we are seeing C wave shape up to be a very clear 5 wave structure. It has been nearly vertical so far with no hint of a harsh price corrective wave. And like I say in my last post, it seems like (at this moment) wave C wants to go out in a "Blaze of Glory".

However .... If we look at A-B-C of the first zigzag and the A-B-C of the last zigzag, the are some "spooky" similarities between A and B of both sets.

If the comparison holds true, then we can expect an ending diagonal for C, which is what Col and I were talking about on Friday.

So here is what I suggest.

1. Currently C is looking vertically impulsive
2. If we get a clear extended 5-wave sequence, then C is done
3. However we have 2 more 4th waves showing up in the sequence (based on the current count)
4. If one of these 4th waves has a severe price retrace of the previous impulse, something on the order of 61.8-78.6%, then I would suggest that this is really a B wave (since in extended waves, retraces are usually limited to 31.8-50.0%), and the previous move is an A.

What I am getting at is a way to tell early on if this seemingly straightforward final impulse for the final C will morph into an ending diagonal (which my gut is telling me it will).

I really think the overall wedge from March until Sept-Oct wants to fulfill itself and an ending diagonal seems to fit in time (extending the wave out until October) and shape.

Now That's Teamwork! and The Wave C Blaze of Glory

The last couple of days, the bulls have been putting a vice on the bears .... avocados ... :) But clear direction is better that the "did the mega-extended Wave A end? Are we in Wave B? Is Wave B over?" nonsense that we have been experiencing the past couple of weeks.

First -- Now That's Teamwork!

Columbia and I were discussing on Friday morning that were were in the final Wave C and that based on the move so far and the fact that we believed that P2 would like to extend through September, chances were that C would turn into an ending diagonal. Col put together a great chart on that.

But then at 12:57 in the CIL on Friday Russ put up a chart of a 1-2, 1-2, 1-2 for Wave C. This was the first time I saw it and I believe that Russ was the first to spot this possibility (and I ultimately believe is the right one).



I thought about this count for a bit, then at 13:48-13:49 I came to the conclusion that Russ was on the right track, identified a Wave 4 triangle setup (which turned out to be right) and added this to the conversation:

"Russ, I have been thinking about your count and have an option I am throwing out there

Maybe C doesn't want to drag out sideways like Col and I were discussing this morning. Maybe the bulls do want to burn things up in one last vertical move like your count suggests.? Just a thought"



So, my point is that in the CIL, we all iterated fairly quickly on some possible count options to the one that looked the most promising and called the rest of the day (and the depth of the correction) correctly. All before this count showed up in the more popular blogs.

Now that's what I call teamwork baby! :)

Second -- The Wave C Blaze of Glory

Like Young Guns and Bon Jovi and all other cheesiness, I think Wave C wants to go out in a Blaze of Glory. Since July 9 there has been absolutely no meaningful pullback. This rally is expending copious amounts of energy in making new highs with no real pullbacks. And no matter what Bernanke, the Fed, Krugman, zeroeth year Economics, or any other mainstream egghead economist tells you, the US economy is not getting better. It is getting worse. And the offsets / "stimulus" for the government to make GDP look better is not a solution. It is a band-aid in the short term but it is poison in the long term. Which makes this stock rally built on emotion and hope, but not sustainable fundamentals. Very bad news for a 54% rally off the bottom in 5 months on the SPX. This is a candle burning up the last bit of oxygen in an enclosure, not a new star being born.

Early to mid September (not mid-Sept / early Oct, like I was thinking before) looks like the more likely spot for Minor C / Intermediate Z / Primary 2 to end.

The Pathetic Minor B and Now in Wave C

I am still building on my preferred count from these posts:
Updated Count - Aug 19
Updated Count - Still Seems Corrective To Me - Aug 18
Market Update - Equities and US Dollar - Aug 17
Some More Wave A Thoughts - Aug 13

Why?

Because I still contend that the "leader" indices (NDX and COMPQ) made higher highs on Aug 12, and that is the end of Wave A. The 1018 on the SPX on Aug 8 is a Wave B of 4 overshoot.

Does it matter? No not really.

So based on the movement since, minor B is done. It was a pathetic pullback. Much like the "pullback" that occurred in March after the 20% rally off the bottom. The wave structure is a complete A-B-C. The bulls are giving back nothing. It sucks, and that's just the way it is :)

I think we are now in Wave C, just like Daneric has been saying the past few days.

Okay, lets get bullish sentiment up to 80%!!, Everybody jump on the bull bandwagon!!. Lets get Primary 2 done with!! Do Your Part to Help End the Current Bull Market. Become a Bull!