The market is poised to rollover. This chart from 1930 (courtesy EWI) shows how we have traced back to the same area of the end of the rally in 1930: the 'fourth of the prior third' of the big drop the prior Fall. The 'fourth' is a bounce after a deep fall in the third wave; the psychology is that this where a lot of folks bought into trying to catch the bottom back then, and got caught out; now they are given a last chance to bail out and recover their paper loss.
Will they bail? Right now insiders are selling, institutions are lightening up - and the poor sap retail investor is jumping in. A perfect time for the smart money to get out!
If they do, this rally stalls and down we go. If the little guy jumps in enthusiastically, the smart money will steadily sell into him, and the market could continue a slow creep up towards Dow10K. Watch the arena the small guy tends to ignore, Forex: a Dollar reversal signals a Dow top.
The S&P has already gotten to the fourth-of-a-third level; the Dow got right into the middle of that range today at 9714, right between 9654 and 9794. This morning the little wave ii had a continuation, then the wave iii was the strong rise during the afternoon. Perhaps a wave iv pause tomorrow or Thurs, then a final pop up. If this wave structure is correct, the market could meander up to the autumnal equinox of Sep20, this Sunday; meaning topping Friday or Monday.
It is a bit disconcerting to watch volume be so light, even after the pros returned from the four day week last week. Even in Forex we see lighter volume, with the USD dropping but an end nearing. This lighter volume is a validation of a topping market (and bottoming Dollar).
The edginess is a reflection of a brewing lack of trust. The Obama Bubble burst in August, and seems unrecoverable. He just had his little 'wave 2' rally, and it was brief. A populist rally surged into DC on 9/12, and was barely reported despite having at least half a million protestors (estimates range broadly; see photo for your own estimate). What can the public do to grab the attention of these leaders and get them to wake up? Their edginess is shown to be impotence, and is turning to anger. Not a mood to drive a rally!
This edginess has a simple cause: unemployment is worse than the official figures say. The reported 9.7% is people receiving unemployment benefits over the presumed labor force. Most people know that 9.7% understates, since many of the early unemployed are no longer getting benefits, and many others have taken part-time work and dropped off benefits. Perhaps most telling is the calculation of the presumed labor force is itself suspect. The Labor Dept has birth/death adjustments which skew the whole analysis.
Here is a simpler chart: employed over population. It tells the story: employment peaked in 2000 and has dropped since; currently it is falling off a cliff.
These charts and a lot of concurrent analysis was released today in Prechter's monthly EWT. Worth reading. He notes in several areas, such as real estate, the private economy is NOT coming back. Again, the populist anger emerges when people see this around them.
The now famous Congressman who broke protocol and shouted out that Obama was a liar caught the popular mood: who would you want us to believe, Mr. President: our eyes or your lies? I hear he is raising record amounts of campaign money from small contributors. People are voting with their pocketbooks, and it is not into stocks, nor into the economy, but into a popular revolt against the faded icon of Hope and Change.
"Rod" Prechter?
Is he Bob Prechter's vaseline toting pimp or something?
Posted by: min | Thursday, September 17, 2009 at 01:41 AM
Great chart of the aftermath of 1929 that we might be repeating.
What is confusing is that Glenn Neely, who was stated he would bet his career that March 2009 was not the low of this bear mkt, is now leaning towards a massive triangle to last out towards 2014.
Maybe Summers called any bearish commentators and put the arm on them as they are out of other methods. Prechter has not caved, but Neely's change makes no sense. Sheesh, at least let it start down and see how it is happening. It's not like he has had a hot hand lately!
Posted by: twitter.com/mkt_ronin | Thursday, September 17, 2009 at 07:13 AM
>>Note - in Neowave moves are rarely counted as beginning and ending at the actual price high/low, however in practical terms this count says that the bottom is in for good after all.<<
The problem is that Neely was insistent that the low in March 2009 could not be the low. Now, the count he is giving strong consideration to says that is the low for 50+ years.
Nothing took place in the last week that should make anyone go from sending out his dire warnings to subscribers of the end of the world to "the lows are in'. Couple this with his call for the top that was a disaster, one has to wonder what he is doing (and of what use is it?) that he is charting out 4-5 years when he can't get the next week right!
The guy lost all credibility with my by making this sudden change with no meaningful change in wave structure.
Posted by: twitter.com/mkt_ronin | Thursday, September 17, 2009 at 07:44 AM
>>Note - in Neowave moves are rarely counted as beginning and ending at the actual price high/low, however in practical terms this count says that the bottom is in for good after all.<<
The problem is that Neely was insistent that the low in March 2009 could not be the low. Now, the count he is giving strong consideration to says that is the low for 50+ years.
Nothing took place in the last week that should make anyone go from sending out his dire warnings to subscribers of the end of the world to "the lows are in'. Couple this with his call for the top that was a disaster, one has to wonder what he is doing (and of what use is it?) that he is charting out 4-5 years when he can't get the next week right!
The guy lost all credibility with my by making this sudden change with no meaningful change in wave structure.
Posted by: twitter.com/mkt_ronin | Thursday, September 17, 2009 at 07:44 AM
Mike,
He hasn't committed to the wave structure he warned about yesterday. I think it is more of a way of saying that could be happening and we shouldn't ignore the possibility. I agree with you that there was no real significant change in wave structure, so I'm a bit puzzled by the need to make any announcement at all, honestly.
Posted by: DG | Thursday, September 17, 2009 at 08:55 AM
Like I said:
Think 1970s style markets on steroids and you'll have a good enough road map to keep you profitable for quite some time.
I've never followed Neely so I don't know for sure, But there are a lot of other things besides wave structure he is looking at to consider the triangle possibility, I know this hit me back in June.
Prechter not "caving" is business as usual. He also didn't cave from 2003 to 2007 on equity markets, pm, real estate etc. so if you are looking for technicians to aid your trading and you don't have a 100 year horizon who would you prefer?
Posted by: min | Thursday, September 17, 2009 at 02:09 PM
DG wrote:
>>He hasn't committed to the wave structure he warned about yesterday. I think it is more of a way of saying that could be happening and we shouldn't ignore the possibility.<<
If someone says they are so positive that the March low cannot be the low, and keeps preparing people to get short for a drop of biblical proportions and essentially anarchy during a market that he expects to ride down, and that they stake their reputaion on, and then change, IMO, nothing said in the future means anything and his predictions are now worth little. I know EW well enough that I can make money with it myself. My guess is that a lot of subscribers wrote "WTF?" to him as he was telling subscribers that the top needed exactly what were doing. Now, NEELY is doing exactly what he accused others of doing...being emotional.
>>I agree with you that there was no real significant change in wave structure, so I'm a bit puzzled by the need to make any announcement at all, honestly.<<
As am I. I saw his calls for below 500 by the end of 2008 and then the call of below 500 by the end of 2009. Perhaps we need to be on our guard to load the boat as his compitulation of what he would bet his career on is what is needed for his original thought to be right.
Mike
Posted by: twitter.com/mkt_ronin | Friday, September 18, 2009 at 12:18 AM
Now, NEELY is doing exactly what he accused others of doing...being emotional.
Maybe. I can't get inside the guy's head. I think he may be worried that the market will turn out to have put in a low and wants to get "ahead of the curve" in calling it. The main problem with that thinking is that every mainstream financial pundit has already said "the bottom is in". Like I said, I don't see any real upside from the announcement, but I see similar downsides to what you are saying.
He did say this is only an "option" and he has not adopted this as his official outlook. So, on the one hand, he should be applauded for being up front with his readers and subscribers, while on the other it does obviously undercut all of his prior forecasts indicating much more downside to come. Either he should have been less certain earlier or he should have kept this new scenario to himself until it became the only real option.
Also, he should have bounced his proposed count off of someone who knows NeoWave well enough to give him feedback. There are two significant flaws in his proposed view that I saw right away. Now, NeoWave rules are one thing and market action is another, but if the market action always follows the NeoWave rules, that proposed outcome is probably impossible.
Posted by: DG | Friday, September 18, 2009 at 07:40 AM