When To Go In

Pathetic little drowning-market splash rally early today.  Might get a better one tomorrow.  Key question: panic is setting in and with it talks of Dow 3600 or lower,  yet this market may have only 7-10% downside (SP750 down to around SP700).  Why not try to catch the bottom, with a stop at 700? 

Andy Kessler in today's WSJ gave some great arguments why we should just stay out in December, and indeed until Feb09, given the unprecedented nature of the market:

• Tax-loss selling: Whenever you have a loss in a stock -- and who doesn't -- it's always tax smart to sell it, take a tax loss ... December can be an ugly month of indiscriminate selling.
• Mutual-fund redemptions: Mutual funds are also dumped for tax losses. ... As investors call or click to get out of these funds, Fidelity and the others have to unload shares the next morning ... .
• Mutual fund cap-gain distributions: To make matters worse, in December mutual funds do capital-gains distributions. {They are} forced to sell many ... stocks originally purchased at very low prices, triggering huge capital gains ... .
• Hedge-fund redemptions: Instead of overnight selling like mutual funds, hedge funds typically require 45 days' notice for investors to get out of a fund. They've been furiously selling since September to raise cash to pay investors.
• Margin calls: Whenever stocks go down sharply, you quickly find who owns them with debt. We have seen spectacular margin calls, a requirement for more capital to cover share losses.

In addition, maybe we are truly on the edge of a precipice.  A general belief is that the 2002 lows will hold.  All major US indicies have breached their Oct08 lows.  Today most of the indicies including the S&P broke their intraday 2002 lows, with the notable exception of the Dow, which remains above the 2002 levels (barely).  A look back on the S&P shows no really good support levels below here until the 1994 range of SP440.  On the way up from '94 to '98 there were brief pauses at 605 and 716, so if we break 700 we probably go fast to 600.  On the Dow it is a bit different - we had a pause just below 8K in 1997, then we had support in 1998 at around 7500 - the level we hit today, but below that a jitter around Dow5440 and nothng else down to the 1994 range of Dow3600-4000.  So if we break Dow7200, a major support level that has been hit five times and held over ten years, we may have no good stop until the Dow drops in half again.

Comments

[Upstart]

Oh...let's take another stab at some timing. I can show you 5 examples of 92-day turns (one was 93). Example: 7/07 top to 11/07 low. Another? Peak at beginning 6/07 to all-time high 10/07. Tomorrow is 92 from the July low. But if so, how much of a turn?

[Upstart]

One other thing. Looking at the long-term chart, compared to the drop into 1974 or 2002, we have had a tremendous loss in a very compressed period. Look at the XAU. That is not a sustainable angle of decline. When the dead-cat bounce comes, it should be something to behold.

[John]

Come on. Who the heck knows? What was the "Angle of decline" of the Russian markets in 1917? Sometimes things fall straight down. Maybe we'll bounce more steeply than we fell. Maybe we won't. I don't think there are good reasons to think our models are reliable.

[DG]

John,

I disagree because that's what wave theory, especially Elliott-based variations, does. It provides models that scale up from the smallest timeframe to the largest, via time and Fib relationships, as well as logical relationships via Neely.

Of course, each moment in the market also has its unique qualities, so if your analysis is too general, you'll miss key turning points coming up, expecting something else to happen.

[Rogue Poster]

Over the past year Elliott wave theory has offered remarkable insights into market behavior. A year ago the theory was all but discredited, dead on the vine if you will. And any mention of it in a trading chat room would elicit laughter and scorn.

Then, almost overnight, it suddenly came back into vogue and soon it was spreading like prarie fire through every trading chat room and blog on the planet. It stands redeemed IMHO, not just because of its new found popularity, but because it has proved itself a reliable tool for making accurate market predictions.

[rohrbach]

Tax-loss selling: Who has gains too offset?

Mutual-fund redemptions:They've been raising cash levels for quite a while.

Mutual fund cap-gain distributions: Holding period are two years or less for most fundies, this nbear has wiped out five years of gains.

Hedge-fund redemptions:Hedge fund blowups were last mos. story and the commodity unwinding, may have culminated today.

Margin calls--Margin requirement have been raised across the board. That's part and parcel of the deleveraging process.

Bottom line is you may get some selloff, but it won't be disproportionate enough to cause further gap downs from here imho. Maybe next year when the credit card delinquencies hit the fan!

[John]

I've been scouring this site for a while and, mind you, I enjoy it tremendously and appreciate what appears to be genuine hard work and sincerity but I haven't found a reliable predictor in anyone or in the group as a whole. I want to believe! But I cannot. Here's something good I've taken away from "Elliott" practitioners ( I didn't need Elliott to get there but it helped reinforce the idea.)...

The markets can do anything. Extrapolation is a fool's game.

[DG]

John,

I disagree that the markets "can do anything". For example, wave 2 cannot go beyond the beginning of wave 1 for a count to have any validity. Starting from "first principles" like that, Elliott can help you start to predict and react to the market in ways that definitely limit a trader's risk.

[TrAiLbLaZeR]

Elliott has trumpt every other form of analysis out there.
Look at the calls Neely and EWI have made. Sure EWI was off the mark for a few years but now everyone knows why they were so bearish for so long.
Neely's long term calls have been nothing short of mind blowing. He mailed his circulation list a while ago with the heading along the lines of the world as we know it is about to change, and all for free for those willing to listen.
The tops EWI has called too have been portfolio saving. Sure on a short term basis they have both been caught out but long term they have cemented their legacy.
Yelnick can we get some long term charts for the SnP 500 with projected road maps to 2015? Only as a guide of course.
Does any one here follow the Pakistan market (KSE-100)? It has been closed for the last 3-mths. This is the longest ever peace time closer of a stock market.

[Chris]

Just an observation...

The NDX wave 1 of 3 went down ~295 points covering 28 days. Perhaps, wave 4 of 3 went up just three days(Oct. 10 - 14) to ~1470. Now in wave 5 of 3,the NDX has gone down ~435 points(nearly 150 % of wave 1) in 28 days.

[I.Sosceles]

Deeper decline here than anticipated. Impressive TA rally on Friday, however.

[John]

"now everyone knows why they were so bearish for so long"?

What a crock!

If you'd taken Prechter seriously you'd have no money left! No money to keep in "safe instruments." No money to short with. No money for puts. NO MONEY. That guy's advice has been STINKSVILLE (Georgia).

Please. If we've got armageddon on our doorstep I'll toast prechter when they drop the bomb. Short of that and he's just a leech with a broken crystal ball.

[TrAiLbLaZeR]

Oh come on John "a leech with a broken crystal ball" that is harsh. One should never blindly follow someone elses calls however I have found the updates from EWI and Neely most useful over the years. All the Prechter bashing that goes on is unfair in my view. We all make mistakes that cost money. However, we are all counting waves and applying Elliott thanks to him. Give him credit for that at least.

[MT]

2 possibilities:

a) we bottomed yesterday, low probability

b) corrective B underway, high probability

see chart:

http://i366.photobucket.com/albums/oo106/mtcharts/possibleW5.jpg

Other possibilities?

[drg]

Form requires some sort of bounce to happen here as it's the 50% retrace level of 1932-2000 which provided the springboard for the 2003-2007 advance. One possibility I'm watching though is that W3 down may be extending such that W4 might not kick in until we reach 500. This does seem unlikely but then so has the the manner of the collapse we've seen so far.

[John]

Sorry. I'm not drinking the Kool Aid. I've been expecting an enormous crash since 1994, before I heard of Prechter or Elliott or Neely. I've been wrong, but at least for 7 fewer years than Prechter apparently has.

If you're version of "Elliott" has helped you get rich --which I, of course, highly doubt-- you might find my posts irritating. But I must remain skeptical that it's a trading tool of value in light of the quality of advice I've heard from the Elliotticians I've come across.

[Steven_737]

DG, yelnick, sds

It appears that the asian girl (yes, the one with the economics degree, that is seeking a job) who is married to the senior citizen in Florida (yes the guy who bought gold coins at 900+ usd), has flunked the interviews at the brokerage firm.
They asked her if she knows Elliott wave analysis. Nop, they don't teach that in college. Life is a bitch.

So after a glorious gold price analysis, and taking some flak, she bailed out; now she has morphed into a two-fold persona: a) John posting profound statements "Maybe we'll bounce more steeply than we fell. Maybe we won't" and b)TrAiLbLaZeR raising the ante
"Yelnick can we get some long term charts for the SnP 500 with projected road maps to 2015? Only as a guide of course.
Does any one here follow the Pakistan market (KSE-100)? It has been closed for the last 3-mths. "

Today John is going to short into the hole, and TrAiLbLaZeR will take care of the margin call.

This is so hilarious, that mguen decided to write a tv sitcom script. Genesis will invest the the proceeds of his gold trades,to become the producer. It will be such a hit that "Just Wondering" will start wondering why he has posted only once.

This is better than Late Νight with David Letterman.
Hang on, help is on the way.

[Steven_737]

That was not me!

"May your lousy impersonation of me come manyfold upon your tents."

[miguel stone crow]

Yelnick - you've displayed such flourishes of your wide knowledge, and patience, over the last 24 hrs. that I must compliment you. (I love that you're a student of the Romans.)

When to get in? Indeed. We are a sneeze away from that 7200 DJIA range which has been concrete since 1997, and as you write, Yelnick, the view from 7200ish is frightening. The Citibank chart is beginning to look like those Tulip Bulb charts Prechter published in "Crest".

The extraordinary social change that is possible under these circumstances is staggering if one considers the 1700's which began under the Sun King and ended with the American and French Revolts, which was ignited by THE financial crisis. The greatest sin a man can commit for his family is to be on the wrong side of history.

Probably all the "get your bullets" "by physical gold" tough guys are too young to remember any history that is of value in these times. If this Bear Market is as bad as the 1966-73/74 Bear, then you won't need bullets or gold. I remember what that looked like - much worse war going on, true mobs in the streets. We're not there, yet. My family survived the Great Depression by opening up...taking poor folks on at the Farm. No one was ever turned away. For the next half-century my family attained high levels of government power and enjoyed the largesse and good will of the community simply because the had given so much to so many during the Great Depression. In bad times your family will survive much better on an ethos of giving instead of taking. By giving you will receive. The crops are still growing, the cows are grazing, and wondering what the fuss is about. So, just who's getting slaughtered?

[Steven_737]

mguen

"May your lousy impersonation of me come manyfold upon your tents."

You can write poems and you opt to write slogans.

I kinda got used to your posts, don't quit, girl.

Stick to your version of financial analysis, poke fun at Elliot Wave, we like it.

If you keep practicing, I bet you can write for Jay Leno, maybe Jon Stuart.

cheers.

[Genesis]

737,

To be clear; I'm not John, an asian girl, the guy from the ticker site you posted, or Trailblazer. I've not misrepresented myself once here, and I'm absolutely NOT a gold-bug.

I just got a TRIPLE STAR LOCK buy-signal on gold just three minutes ago; I'm now looking for the December contract to close today up $92, with a close next week of over $3,000.

[Mguen Yeh]

This is times for try to be friends to each other. This is not times for hate. In my country (I am not girl, by way, I have Klinefelter) we do not cherish hard times. We live through it with love, kindness, friends. Story:

Old man come to my hut when my family is young many years ago. He is poor. He is old. He is sick. He have no money. Stock market down 80 maybe 90 percent. He say he lost money with Prechter and Hochberg and can he have soup? Do we kick him out? Do we say "You idiot!" NOT ON YOUR LIFE! We simply tell him to be on his way and give him soup. Kindness is love and will get you through hard time. Obama is leader, maybe but can he stop positive feedback? No. If market wants to go down down it go.

IF YOU HAVE ENJOYED THIS OR ANY OTHER MGUEN (pronounced Meh-Goo-EN) POSTINGS PLEASE LOOK FOR MGUEN IN HER LATEST ROLE: SASSY MOO. MGUEN DOES NOT ENDORSE OR SPONSOR ANY OF THE OPINIONS EXPRESSED ABOVE NOR SHOULD HER COMMENTS BE CONSTRUED AS MARKET ADVICE. MARKETS ARE RISKY. PLEASE TRADE WITH CAUTION AND, AS ALWAYS, USE ELLIOTT SO THAT YOUR TRADES ARE PROFITABLE.

Ralph Waldo Elliott was a spectacled accountant famous for developing fractal models of the markets with Fibonacci ratios, etc. For more info, please see ELLIOTT, RALPH.

[IMPRESSED, you mad genius you!]

Genesis, if you're right, I'll be very...

[Genesis]

Everything has been accelerated.

To add to my previous post, as things stand RIGHT NOW (meaning data can change, and with any data changes, my targets change too); I'm getting a reading of the the nearest month contract for gold touching $4,500/ounce or more before the end of December (I have no prediciton for a closing price by the end of the year).

[John]

Genesis, do you still see a thousand point plus drop in the Dow today?

Do you still see gold up $92 on the day?

[John]

Yes, we all know that predictions can change as info changes. Updating is good. Commendable. Often hard to do.

But making the right calls in the first place is better.

Otherwise you give all your money to the broker.

[Genesis]

John,

Yesterday, I made the call for an almost 2,000 point drop on the DJIA today; this will now not happen. I expect the DJIA & SPX to close almost flat (variance of +/- 0.10%).

Gold, though; yes, up $90-$110/ounce today.

* Please do not base your investment decisions on my outlook or prognostications. My views are presented here for entertainment purposes only. *

[Genesis]

Crazy action in the metals complex today; reminds me of '80. I'm cautiously revising my call for closing gold today; up $150/ounce...intense pressure on the buy-side, key resistance level about to get violated...just happened...wow.

Next weeks projected close remains constant. Be careful.

[Genesis]

If the December contract breaks above $802.50 within the next 15-20 minutes, then it's GAME ON; if not, my timing for today & next week is completely off, which would be both humbling and surprising to me.

[Genesis]

Yelnick,

I'm seeing the Copper contract in a state of backwardation as of this morning; please confirm and share your thoughts on this. My opinion? Copper could be the catalyst for the entire metals complex.

Anyone knowledgable, feel free to contribute.

[John]

GAME OFF!

Well, when you're as rich as we all are from all our brillant trades you can afford to lose one or two now and then, right?

[Genesis]

John,

The December gold contract is up $49.10/ounce today as of this writing. I am taking down ALL gold targets for next week and next month. I need to see where we close at today, and will then push forward from there with a revised target and strategy.

My ten (10) long Dec contracts have done quite well today though:)

[Genesis]

This came out a few minutes ago...not a good sign for paper assets:

http://www.theaustralian.news.com.au/business/story/0,28124,24687337-643,00.html

The Aussie Mint is absolute last mint you want to stop minting and selling bullion products. One thing is for certain, between now and the end of the year, NOTHING that comes out in the news would surprise me...unprecedented times right now.

[LeM]

"If you'd taken Prechter seriously you'd have no money left! No money to keep in "safe instruments."

Wrong!

You'd have your money in 3month T-bils until October last year when you could short all the crap after EWI TOP call :P

[Genesis]

Dec gold briefly topped $801, but was beaten back down. Copper is firmly in a state of backwardation now.

The next hour or so could get very interesting.

[Genesis]

Once Dec gold hits $803, I'll double down and add ten (10) more long contracts. I've got the GTC order placed and expect it to fill today.

[Genesis]

Looks like money is flowing from the long end of the treasury curve, straight into the short end; exactly the opposite of what the PTB wants. They have no control at this point, IMHO.

[Genesis]

Yelnick,

I'll make a deal with you. I will continue posting my views on equities, metals, and bonds for the next five weeks, if you'll compensate me for my time.

$10,000 works for me. If your answer is no, I will never post here again. Let me know.

[yelnick]

MT, like your charts in general. Have a question on this one: you are marking the wave 5 as corrective (series of 3's) not impulsive. Maybe you can clarify?

My view: the behavior in the last week is very impulsive, and indeed is why the ending diagonal count is gone - an ED would have slowed in intensity, not increased. The STU count has wave 4 a triangle ending in a truncated leg E where you have your first b wave off the wave 4 top in your chart - this gives them an impulsive count on the drop from there, albeit they admit the waves are still a bit scrambled - they expect that to clarify as the wave pattern unfolds. They would count the hard drop a few days ago as wave 3 of 5, as it should, and would now appear to be in wave 4 (or just a jitter - smaller degree corrective wave - of 3 down).

What they and Neely have been expecting is a sharp but short rally, possibly next week, followed by a harder drop down - maybe on a new Black Monday after a poor Friday-after-Thanksgiving shopping moment. The current wave - this jitter or wave 4 - could be the corrective moment on the way down, and there may not be a sharp snapback rally until the end of wave 5. Then we have a longer and stronger rally into 2009.

Figuring this out is the key to when-to-go-back-in. Your thoughts?

[yelnick]

Miguel, like your attitude. We can all survive the Greater Depression, and beginning with an attitude of giving not getting is healthier.

BTW on the Roman angle, I see a prior Elliott Wave back in Classical times:

- wave 1 is the rise of Greek civilization and the early Roman Republic
- wave 2 comes in the period of the Gracchi to Augustus where Rome was riven with civil war
- wave 3 is the golden age of mankind, from 27BC to 235AD, with a small wave 4 during Commodus and a revitalization under Severus.
- wave 4 is the huge disruption of 235-285 under the threat from the Parthians,
- the final wave 5 is from 290-410.

By the time we get to 476 the Empire is long over and Barbarians have divided up most of the Western Empire. The ABC is the Dark Ages, with a wave B under Charlemagne.

The analogy to our situation is:
- wave 1 was the Italian Renaissance to the South Seas Bubble
- wave 3 was the Industrial Revolution: 1784 to now
- what is unclear if wave 3 has ended or are we in but a bad wave 4 and can we expect a final wave 5 before a huge correction

Hence our situation is probably closer to 180-235 AD than 410-476.

[Genesis]

Order filled for 10 more Dec gold contracts at $802.50, for any of you who are wondering; that gives me 20 contracts going into Monday...I'm gonna' be RICH!

Since Yelnick has chosen to ignore my posts, I'm done here. Good luck, all.

One last prognostication (can't resist!)...Dec Gold delivery failure on physical in mid-Dec, contract goes to ZERO...physical goes to $3,000+ by end of month. I've got a sell order on my 20 Dec contracts at $938.00.

Good luck all.

[Steven_737]

It is reasonable to call that the ending diagonal scenario is on its last w5 from ES 793.25 at 10:38 EST, and most likely the ending diagonal will be completed when today's lows at 739 are tested.

[Steven_737]

That particular local top( ES 793.25 at 10:38 EST) was not correct, as the w4 top. Reasonable or not, it was a bummer. So 802.25 is the candidate for w4 top.

If the diagonal scenario reflects the price action, then it needs one test of the 739 low to complete the last w5. A slightly lower low will do the job, i.e. can terminate the final w5 of the Diagonal. The shallow Fibonacci projection is at 725 ~ 729. Please note that my count is on futures on 24 Hour Globex Data. This means that the wave 5 can take place Monday before the open.

A deep drop in this w5 would finish at 705~712. I have not sorted out if dropping so low invalidates the Ending Diagonal Scenario. Yelnick, your opinion on this will be appreciated.

If the diagonal scenario is trashed, we need to adopt the alternate scenario, i.e. that w1-w2-w1-w2-w3 have completed and w4-w5-w4-w5 will evolve to complete this 5th wave.

The price action will match Yelnick's tax loss selling, in one or two rounds.
Prices rise in w4 or in (w1 or a) of the advancing wave and people sell in w5 or (w2 or b) of the advancing wave. Very important not to hurry to call the first w4-w5 waves as (1 or a) - (b or 2) of the next wave up.

In the alternate count two sets of w4-w5 are estimated to unfold. Thus, two rounds of selling to reach catharsis.

Was yesterday's price action a capitulation? Your thoughts on this are welcome.

Have a nice weekend.

[Steven_737]

I found this amusing:

Argggg, Maties! Here's what shell-shocked financiers are laughing at on Wall Street Friday morning in a phony Bloomberg story:

Somali Pirates in Discussions to Acquire Citigroup

By Andreas Hippin
November 20 (Bloomberg) -- The Somali pirates, renegade Somalis known for hijacking ships for ransom in the Gulf of Aden, are negotiating a purchase of Citigroup.

The pirates would buy Citigroup with new debt and their existing cash stockpiles, earned most recently from hijacking numerous ships, including most recently a $200 million Saudi Arabian oil tanker. The Somali pirates are offering up to $0.10 per share for Citigroup, pirate spokesman Sugule Ali said earlier today. The negotiations have entered the final stage, Ali said.

"You may not like our price, but we are not in the business of paying for things. Be happy we are in the mood to
offer the shareholders anything," said Ali.

The pirates will finance part of the purchase by selling new Pirate Ransom Backed Securities. The PRBS's are backed by the cash flows from future ransom payments from hijackings in the Gulf of Aden. Moody's and S&P have already issued their top investment grade ratings for the PRBS's.

Head pirate, Ubu Kalid Shandu, said: "We need a bank so that we have a place to keep all of our ransom money. Thankfully, the dislocations in the capital markets has allowed us to purchase Citigroup
at an attractive valuation and to take advantage of TARP capital to grow the business even faster."

Shandu added, "We don't call ourselves pirates. We are coastguards and this will just allow us to guard our coasts better."

[Steven_737]

Gee, I am tired.

typo correction:

ES 793.25 at 10:38 EST should be
ES 793.25 at 15:38 EST

[Upstart]

92 days!

[Steven_737]

so??

[Steven_737]

Yelnick:

clean wave 3 chart

http://farm4.static.flickr.com/3254/3048356265_d7a1da15cc_o.gif

wave 3 detail

http://farm4.static.flickr.com/3184/3049193098_8679a655e0_o.gif

[Chris]

Yelnick -

FWIW...

In reference to :

"BTW on the Roman angle, I see a prior Elliott Wave back in Classical times:"

12,000 YEARS OF ELLIOTT WAVES
AND
WHAT THIS MEANS FOR THE 21ST CENTURY

http://www.gold-eagle.com/editorials_99/mbutler120299a.html

[george]

yves,
are you still a buyer
of u.s. stocks?
george