Look: I am eager to learn stuff I don't know--which requires actively courting and posting smart disagreement.

But as you will understand, I don't like to post things that mischaracterize and are aimed to mislead.

-- Brad Delong

Copyright Notice

Everything that appears on this blog is the copyrighted property of somebody. Often, but not always, that somebody is me. For things that are not mine, I either have obtained permission, or claim fair use. Feel free to quote me, but attribute, please. My photos and poetry are dear to my heart, and may not be used without permission. Ditto, my other intellectual property, such as charts and graphs. I'm probably willing to share. Let's talk. Violators will be damned for all eternity to the circle of hell populated by Rosanne Barr, Mrs Miller [look her up], and trombonists who are unable play in tune. You cannot possibly imagine the agony. If you have a question, email me: jazzbumpa@gmail.com. I'll answer when I feel like it. Cheers!

Friday, August 5, 2011


Yesterday's plunge looked like panic to me.  Such a quick, dramatic move has (Elliott) 3rd wave written all over it.  This morning's Zach's email from Steve Reitmeister says:

The odds of a recession have increased. And the average stock market decline during a recession is around 40%. So with much greater risk to the downside, investors are fleeing stocks in a hurry. I sense we will make it down to around 1151 for the S&P 500 on this leg of the journey. What is so special about that level, you ask? Because nearly every time the stock market has declined greater than 16%, it signals a recession and further stock declines. 1151 is the 16% mark from the recent highs. Put a note on your computer to watch what happens as we approach that mark. 

It's an interesting view.  But do average historical precedents mean much in today's specific situation?  I see nothing special about either 1150 or 16%.    Looking at the intraday highs and lows since the 7/21 top at 1347.00, which I am taking as the beginning of a wave 3 down, suggests that the drop from the 8/01 high of 1307.83 is a 3rd wave of a 3rd wave.  The first wave was a decline of 64.14.  This 3 of 3 is at 117 and counting.  I can't see this 3 of 3 bottoming anywhere above 1170.

Here's a best case scenario.  At 1170, the 3 of 3 drop is 138 points.  A .38 retracement would put a subwave 4 top at 1223.  Then, if sub wave 5 = subwave 1, the end of wave 3 is at 1158.  That's pretty close to Reitmeister's 1150, oddly enough.

There is a potential support band in the range of 1000 to 1050, and that is where I expect this wave 3 down to end.  But this is nowhere near a real finish.

Some roller coaster rides are all fear, no thrill.

 Update (1:30 p.m):  Subwave 3 of 3 bottomed a little before noon at 1168.35.  Around 1220-30 looks good for a subwave 4 top, and we should get there before day's end.

Update 2 (after closing):  The post-opening intraday high was 1213.59, within a tic of a .33 retracement.  This ended wave 4, and wave five down has begun.   Subwave 1 bottomed at 1191.57.  Sw 2 is in progress at today's close of 1199.38, very close to a 50% retracement of sw 1. If it hasn't ended already, it should early Monday, followed by a sw 3 down.  We shouldn't expect 3 of 5 to be as dramatic as 3 of 3.  But with two down subwaves ahead of us, the bottom is still quite a ways down.  If wave 5 = wave 1, that will take us close to 1100.  I still expect a bottom in the 1000 to 1050 range.

Here is a Yahoo chart of today's action, with wave labels added.

Again, this is just the beginning.  Look out below!

No comments: