Ground Hog Market will Go Deeper into Hole

Wave count is now clear: wave 3 of (5) down. Prior wave (3) ended at the Nov20 (closing) / Nov21 (intraday) lows, and wave (4) ended at the Jan6 high. Expect bounces on the way down - perhaps as early as tomorrow. No clear downside target. If (5) = (1) we go to Dow6500 /SP625. Courtesy John Mauldin, watch the European banks, especially Austria; they lent heavily to Eastern Europe, often borrowing in Swiss Franks to do so. Now they are caught in a vise between crumbling economies and tumbling currencies.

Comments

[DG]

If we start to bounce at 625, I wouldn't go "all in" too quickly. If Neely's right, you'll still have about 20% downside to come.

[AG]

WHAT'S NEELY'S VIEW, DO YOU KNOW?

[DG]

Neely's looking for sub-500 on S&P 500.

[DG]

Neely's "big picture" view.

http://www.neowave.com/qow/qow-archive-488.asp

[AG]

We all have same big picture view. The question is when.

What was Neely's view last week?

Thanks

[Forkoholic Serge]

I can see 87 low argument
http://forkoholic.com/images/87low.jpg

[DG]

AG,

Neely posts his stuff about a week after the fact on Trader's Talk. I'm not comfortable giving away the man's work. Basically, it could be any time in the next two weeks that the downtrend really re-asserts itself.

[Wavist]

We all have same big picture view. The question is when.

I don't! I'm still looking at two possibilities, a bullish count that is bearish and a bearish count that is bullish. The bullish count is that we have just finished wave b of c of 4, which is bearish because it would mean we still have wave 5 ahead. The bearish count is that we are just finishing a truncated wave 5, the only question being whether it is wave 5 of the decline from May 08 in which case it is shortly to be followed by the larger scale wave 4, or the bottom to the entire decline from October 07 which would obviously be about as bullish as it gets.

[AG]

Basically, it could be any time in the next two weeks that the downtrend really re-asserts itself.

Within the next two weeks, does he expect surprise, large rally before the downtrend reasserts itself?

thank you

[DG]

AG,

From a NeoWave perspective, if you're short right now, you might want to reconsider at 790.

If we go above 790, and you want to get short again, wait until we retrace 61.8% of whatever the move off Friday's low to whatever the high above 790 is. So, if we go to 795, let's say, and Friday's low was 753 (just eyeballing it that looks about right), re-short at 769 with a stop at 795.

Similarly, if we go below Friday's low, short with a stop at 790.

Knowing Neely's methods like I do, I'm pretty sure that's what he's thinking. Tight stops and wait for the market to confirm where it wants to go.

[Wave Rust]

didnt see this post. posted under the last post.

DG, agree the 4th of this 5 (if thats what it is) will be strong up then fizzle.

this 4th&5th of a 5th is where experience risk management, position size, and stop placement is big,,, even for scalpers.

dont get greedy. greed gets killed by speed (fast market & reversal).

wave rust

[golden]

Agree we are in some sort of ending (5) wave from May 2008, but downside targets not as low as Yelnick mentions (for now).

From January 6 peak, may be ending wave 3 of (5) now -- beautiful `gap' at 3 of 3 last week. A bounce this week followed by another decline to 700 on the SPX to complete (5) of a second zigzag from the October 2007 peak. SPX 700 equates to where wave (1)-- May 2008 peak to July 2008 bottom -- would equal wave (5). Then a big rally back to 900-1000 (previous 4th congestion) before another wave down to 600's or lower into the Fall. Divergences are already appearing in volume, NYSE cumulative A/D, NYSE new highs/lows, etc. What reverses the market? News on the banks! Bradley turn date for a peak July 2009.

[Yves]

wave 3 still in progress... we still need 4 and 5 to complete of the larger 5th final wave of A
the 4th might appear on a "surprised" announcement
late this week or next.
hold on for the mega buy to come

Yves

[george]

i once read a little book that
discussed one of w.d. gann's
most successful trading techniques
whenever a stock, index or commodity
arrives at it's equilibrium point
the market should bounce in the
opposite direction an equal
percentage. the equilibrium
point is 50% of the high number.
on the
dow industrials it would be
14000 divided by 2=7000 (roughly).
the book went on to explain that a
counter trend rally would be 50 % of
the low number. so it the dow industrials
were to bounce it would be roughly 3500
points.this would be 50% of the low 7000
gann found this simple technique worked
in most markets most of the time.
it should be interesting to see if it
works this time because the index is within
points of the exact equalibrium point number.
george

[Howard]

Reading Neely's 12-10-08 writeup he seems to have caught the top in 2000, the bottom in 2003 and the top again in 2007. Has anyone been following him that long to know if he's that accurate?

[DG]

Howard,

Yes, he is pretty much on record as having been accurate in all of those cases. Of course, "accurate" in trading is a relative term, right? He did not, nor did anyone else that I know of, catch the "top tick" or the "bottom tick". In fact, in 2000, he didn't declare the bull market over until September of 2000, because in his method of wave counting, waves don't typically end at their highest price print, but end when the reversal off a price print is faster and larger than any reversal contained within the wave.

[Le Chiffre]

Not sure but Neely, but Prechter just told his subscribers that they should have been making a whopping 800 points on the ES since July 2007. I haven't followed all the turns, but if so, Is there any trader out there with that track record for 19 months, ever? $40,000 per each MINI contract, pretty sweet..

[Tom CZ]

Yelnick - regarding Eastern Europe as I live in the Czech Republic. You can not believe all those fakes being published - I can agree on the problems of Ukraine, Hungary etc. but not Czech rep. - I am sure this is one of the countries with cleanest banking sector. I am sorry to say but the dark game hit even this country in recently published articles in FT and Economist and some guys then taking that as the clean truth. Happily our central bank today published comunique which I am attaching. Tom CZ

CNB > Public > Media service > Press releases of the CNB > Press releases > The CNB’s statement on misleading information in articles published by Financial Times and Economist
The CNB’s statement on misleading information in articles published by Financial Times and Economist
24 Feb 2009

On 19 February 2009, the Financial Times published an article called “Scare warns of potential quake ahead”, which included tables of data for selected countries. A table called “Foreign banks’ lending to Czech Rep” states that foreign banks’ loans to the Czech Republic totalled USD 192 billion (around CZK 4 trillion) as of 30 September 2008. The CNB regards this table and also the accompanying text as very misleading. According to CNB statistics, which are in line with international standards, the Czech Republic’s debt vis-à-vis foreign banks is USD 38 billion. The difference between the real situation and the data in the article seems to have been caused by misinterpretation of the source statistics. The source was the Bank for International Settlements (BIS), which consolidates the balance sheets of international banking groups. These balance sheets consist of the balance sheets of local banks owned by such groups in individual countries. The USD 192 billion in question thus corresponds roughly to the sum of the balance sheets of Czech banks owned by foreign banks as of the given date. As most domestic banks are foreign-owned, this figure in fact represents almost the whole balance sheet of the Czech banking sector. The aggregated balance sheet was CZK 4.1 trillion at the end of 2008 H1, which roughly corresponds to the amount mentioned by the Financial Times. Of course, the volume of loans provided is smaller than the banks’ balance sheet. According to CNB data, total borrowing of households and corporations from banks was around CZK 1.6 billion as of the same date, the overwhelming majority of which, however, was borrowed in Czech korunas. Although the borrowers are foreign-owned banks, they operate under the Czech Act on Banks and are supervised by the Czech banking supervisor. Contrary to what the FT article suggests, therefore, not even this substantially lower figure can be interpreted as an indicator of the Czech financial sector’s foreign liabilities. It represents the volume of loans provided by Czech banks to Czech economic agents, mostly denominated in the Czech koruna and financed by deposits in the same currency. Any conclusions regarding exchange rate or other cross-border risks drawn on the basis of this misinterpreted data are completely groundless and misleading.

A leader published by the Economist on 21 February 2009, called “Argentina on the Danube?”, mentions the Czech Republic as one of the countries whose “tumbling currency” is causing “agony of households that have mortgages in Swiss francs or euros”. We would like to stress that there is no such problem in the Czech Republic and that the foreign borrowing of Czech households is a negligible 0.1% of total household borrowing 1. This conservative behaviour of Czech households is a direct consequence of the fact that interest rates in the Czech Republic have mostly been lower than euro area interest rates for the last few years and thus koruna-denominated loans have been cheaper. In the context of the article, which focuses on the dangers of foreign credit being “gobbled up” by banks in Central and Eastern Europe, we would like to draw attention to the fact that Czech banks, which are mostly owned by European groups, have never needed credit from abroad, since they have financed their loans from the deposits of Czech savers. The loan-to-deposit ratio of the Czech banking sector, which currently stands at 77%, is among the lowest in the EU. In the overwhelming majority of cases, Czech banks are net creditors and not net debtors of the European groups they belong to.

On 23 February 2009, the Financial Times published a commentary called “Eastern crisis that could wreck the eurozone”, whose author mentions two policy errors made by governments in Central and Eastern Europe. One of these alleged errors was to encourage households to borrow in foreign currency. We dare to say that neither Czech politicians nor Czech central bankers have ever encouraged Czech citizens to do any such thing. As mentioned above, Czech citizens have not borrowed in foreign currency, as they have had no motivation to do so thanks to a long-standing environment of low interest rates on domestic currency loans.

As the markets are sensitive to inaccurate data at the time of a crisis, this misleading interpretation could confuse investors and the general public. Therefore, the CNB deems it necessary to correct the aforementioned inaccuracies.

Czech National Bank

[DG]

Le Chiffre,

Neely's gotten subscribers over 320 points/ES contract since October 2008. Those following his "Daily" recommendations are at 390 points in that time.

[MHD]

DG.... Neely once again has changed the pattern, which he has done many times in the past two months. Still an X-wave , but it continues to stump him as to its end. With his current estimate of where we are he thinks the damage once this X-wave ends (if it is an X-wave?)will be even worse than his original forecast. Since you seem to have a lot of knowledge on his methods, why is the current pattern making him even more pessimistic than before?

[Rich]

Very simple. The new pattern, as he sees it, is a running, triple combination. Very rare, but if correct, implies incredible weakness.

[DG]

Rich got it right that it's a triple combination, which typically end in contracting non-limiting triangles. About the only thing Neely hasn't said about how far the downside could go was for it to breach the 1987 lows, which he has been saying should hold forever, basically. At this point, anything but that appears to be on the table.

It's shaping up as a once-in-a-lifetime (hopefully) "blood in the streets" scenario at this point.

From a "social psychology" perspective, I'm already seeing a lot of anger toward short-sellers on various message boards. I just hope that we get to keep our profits, if this comes to pass, and don't get hit with a "windfall" tax. I'm just trading what the market is giving me. If it gets as volatile as Neely's forecast implies (after such a nasty drop there should be a rebound of considerable size, then a retest of the lows, all of which will be serious trading opportunities), getting even 75% of each leg down, up and down again will yield a fantastic number of ES points. Then, take a year or so off and jump in on the next phase of the US long-term bull in late 2009 or 2010 (probably the latter), which will be Wave V up from the start of US history and will take us to 100K on the Dow by 2060, according to Neely's long-term forecast.

[Rob]

Prechter is being quoted on Bloomberg as saying "cover all shorts". The article says he made the call yesterday. Not the same as a buy signal, but the article:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aPCwImB7U3Kg

looks like the author is just quoting from an EWT, maybe one published monday Feb 23? I don't know his wave count but he says he'd rather be early than late, so maybe he is starting wave 4 of 5.

This is one way these guys become so accurate. Prechtor says cover. If the market drops 2000 points tomorrow and then he says "buy", well a year from now he'll claim to have "called the bottom".

[Yves]

if you want to imagine a pop over 9,000 short term then seeing an iregular flat does the job.
I dont see the kind of capitulation I expected to see if this was the start of a big B wave.My technical ratio is back at level where you would start to get off the bandwagon so I am having a hard time seeing what others see as a bottom yet.

Yves

[Steven_737]

"Prechter is being quoted on Bloomberg as saying "cover all shorts". The article says he made the call yesterday. "

Interesting Publicity - Marketing stunt.

I don't know what his count calls for, but he certainly is fast in promoting the idea that the bottom is close, at least when taking into account the extreme low that he was supposedly projecting for this wave.

Perhaps he estimates that w3 of (5) will not extend and that w5 of (5) will be an ending diagonal.

Unless he subscribes to the unfinished W-X-Y for wave (4) and estimates that X is almost complete at previous lows of ES / SPX.

Why the change of preferred count and forecast?
Is the % of bearish advisers too high?
OR
which sentiment indicator is ridiculously extreme to warrant such a call?

[Upstart]

Interesting, George. And the DOW dropped about 38% from its "high number" in 2000 to the 2002 low.

[MT]

Yves,I don't give up the irregular flat, but changes are 50/50 right now.The other 50%is for 5 waves down from top 2007.

If indeed 5 waves down (in a few days we know the answer) then I count it this way (monthly chart):

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

[Canadian Money]

It could turn out to be a plain old downward wave three or an extended sideways move. TSX Composite just broke below its Nov. low today...more Dow Trend Confirmation data.

Best guess...feels more like part of a third wave down to me.

[Yves]

MT, I recently got emails from very smart players who are starting to see what they view as the bottom.
My own problem with this is that I am getting an hindenburg version of a crash signal in my liquidity index.That is some extreme bullish signals and some extreme bearish signals at the same time.We will get a fast resolution of this situation within 4 weeks.I am on standby for a crash alert to BUY.I agree with you on 5th wave but it is becoming the accepted count .I am still thinking wave (3) of final 5 but unsure if smaller degree wave (4) and (5) can be the hair raising event for capitulation.

Yves

[da bear]

as long as the Dow doesn't break below 7,000 then a spring rally is most likely. Gold being under $1,000 helps the cause. The dollar isn't running away on the upside either. Dollar Index under the 88-90 level along with gold under $1,000 leaves stocks as the only game in town. what are you gonna do, put your money in the bank? lol

but Dow above 7,000 is the key.

da bear

Finance is what happens when neither party has any real money to bring to the table.

[Al from Oz]

Howard,

Yes,
Glenn Neely is on record as having been accurate in all of those cases, he got the top in 2000, the bottom in 2003 and the top again in 2007, most of them forcast at least 4 weeks in advance in his trading newsletter. If you e-mail him he may give you copies of these newsletters in which he forcast the turns well in advance. His Neely River technology is the real time expression of his technical methods in his newsletter. Its a treat to watch. I've watched it technically analyse and forcast the DAX in 1 minute, 3 minute, 5 minute and 15 minute time frames with precision. The DAX is a very tricky market to get consistantly right, some say the hardest market in the world due its high volitility and narrow range of movement.

[AG]

is "Neely River technology" software/program?

I thought Neeley does not sell any software. Can you send url address?

[Puravida19]

Prechter's EW Theorist advises, among other things, getting into gold, yet his short-term and long term prognosis for gold is down and he considers that one of the safest choices.

[Hank Wernicki]

GOLD FRACTAL ALERT <<

Subscribers :

A heads up on the $GOX ..... it is displaying the start of formation for a Parent Fractal at current levels.

141.35 is the closing price today for the CBOE Gold Index.

A rally beyond 146 on a closing basis would constitute a Clear Buy Signal.

I'll post the gold fractal chart on Thursday for subscribers.

THIS IS JUST AN ALERT AND NOT A BUY YET AT THIS TIME ........ A CONFIRMATION IS ALWAYS REQUIRED

Hank Wernicki

[dom]

Puravida19

He advocates it a small hedge, same position as in Conquer the Crash.

[Upstart]

We have George's observation that the DOW declined to 1/2 it's value at the top. We also have a timing stop: February is about history, and it's 89 months from the 2001 low and 76 (Lucas) months from the 2002 low. This week's low may hold for awhile. If not, look out below.

[Yves]

I will be on Bloomberg Radio tomorrow friday the 27th February between 3:30 and 4:00 NYC time.
The window has opened up for great risks and equally great opportunities .Yelnick should be posting my new text called " Crash Stress Test " .

Yves

[Hank Wernicki]

Thursday 2:30 pm

GOX Update

UP 2.58 %

Buckle UP

Hank

[Al from Oz]

Austria, Ireland, Iceland are all staving of bankruptcy. Before long 6 other European nations will join the unenviable club.

[mttoolkit]

Al from Oz

don't know if you will see this since the thread is a bit old, but if you can see this email me at [email protected]

I have also taken Glenn's River course.