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« Market is Looking Bullish | Main | A Few Charts For Weekend Contemplation »

Saturday, February 20, 2010


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About the Chinese real estate bubble:

Pretty insane..


Remindeds me of a story I read in on the web a few days ago. Our illustrious political leaders are chastising the banks for not lending more to individuals and businesses - despite the fact that demand for credit isn't there. "Speaking to the BBC, Lloyds spokesman Stephen Pegge admitted it was "unlikely" that targets for business lending would be met, saying that there was insufficient demand from companies." Probably not the whole story, but an interesting anecdote.

da bear

Might be a good time to open your own bank. lol

da bear

"I don't mind central banking just as long as I'm the central banker." -- da bear


Next week should tell. I put the odds right at 50-50 we fall hard or rise to new highs. The moment of maximum entropy to use chaos theory speak. If you believe the market is always technical - news and fundamentals don't matter except over long stretches (ie general rise of inflation and growth in earnings) - this moment can really go either way.

Absolutely. Neither side has a very compelling story right now. There are some time-related aspects which will come to a head in the back half of the week. If we haven't made new highs by then, I'd say that favors the bearish view.

Also, looking at past rallies off of what turned out to be significant lows since March 2009, this rally is weaker than all of them, for the amount of time elapsed. If the current count isn't Neely's version, which sees this rally as near an end and the prelude to a larger drop than what we saw in January/early February, and I had to make a bearish case, I'd lean toward the idea that this rally is the A-wave of what will end up being a Contracting Triangle to end the rally from the March 2009 low. That would mean a high this week, either below the current highs from mid-January or marginally higher, followed by the B,C,D and E waves of a Triangle, and then a hard drop to resume the bear market.


Hi Duncan;

I see that you have a link to Lucas Wave;
are you following Greenblatt too?

On Thursday 2/18 he sent out an e-mail "warning" Elliott wavers.

I will quote a good part of it, since it addresses our concerns:

"In markets, if you stick with one methodology you are going to get killed. Especially one as subjective as Elliott wave. It might be fine for your friendly neighborhood Elliott analyst to just adjust the wave count but every time that happens, you lose money.

It’s the same as blowing your arm out. By only looking at the wave count you are missing important support and resistance lines. There are a host of other hints the market offers if you are only willing to listen and look. Some of these include price and time balance, percentage change readings and median lines. How many of you are aware of the fact that when median lines are drawn correctly, they are statistically 80% accurate? No other method offers such accuracy.

Do your due diligence on Babson and Andrews; it might open your eyes.

Why am I telling you this? Because I have clients who read my newsletters and sign up for my training program that still are looking for the market to crash. And you probably know why they think that way.

I’m not saying the market can’t have a serious decline, what I am saying is that if you want to make money, you need to be objective about the whole picture, not just one part of it. In the big picture, when has the market crashed so soon after a prior crash? Not counting other markets, just the stock market, we had a crash in the 1907, 1929, 1987, 2000 era and 2008. But while the NASDAQ crashed to start this century the Dow only pulled back 38% from the 1970s. Stock market history suggests all of these lows were to be retested at some point and they were. The 1932 bottom was retested in 37-38 and 42. The 87 adventure was never really retested while the prior bear from the new century is being tested now (last year) and will likely be tested again at some point.

But the simple truth is you are not likely to make money waiting on such a low probability event. You’ll do far better understanding the charts for what they are right now. To give you an idea this is what my subscribers saw last Thursday.

Here are a couple of excerpts from last Thursday’s Fibonacci Forecaster STU:

On the SPX

“Polarity isn’t flipping here although it’s not in the clear yet but prices weren’t stoned at resistance the way they were last Thursday. But it is hitting a new form of resistance at the new bullish pitchfork just for this new leg. It probably can get through that line easier than the polarity line. For now there are no readings like we had in Gold last week that should kill this trend. To use a football analogy, the bulls have scored here and if we are looking for any penalty flags that could bring the play back, there aren’t any. Score another for the bulls.”

On the Dow and NDX

“Look at the new trend in the Dow. Prices are above mid line and polarity line. No penalty flags here either. Bulls 3, Bears O.

Remember, it was tech that had the best geometric reading at the low with its 1.414 on the hourly. This one is safely past the polarity point and in the upper portion of the green pitchfork. Bulls 4, Bears 0.”

Mind you I think this rally has some technical flaws but those are yet to play out.

This is what our little community was looking at while the vast majority of Elliott wavers were looking for a serious decline. Of course, we are not going to get it right every time, nobody does. But constantly inventing doomsday scenarios without a stack of evidence to support you is a recipe for financial suicide. Which is my whole point. I was doing just fine on my own but I saw a need in the community I felt was not being met and decided to fill it. We do Elliott, but we also do price and time, candlesticks, median work to mention a few. How many of you realize that by the time the Dow recently bottomed, it was down 894 points in roughly 89 hours? It’s this balance of price and time which removes much of the subjectivity of the Elliott method and something Lucas Wave International is very good at. "

What's your take on Lucas wave
and Greenblatt's track record?



Steven 737, I like what Greenblatt is trying to do, which is to move ewave forward using timing. I reviewed his book, and although dense (rivals Neely's!!) has a lot of good stuff in t to explain his timing methods. My review is here:


Steven737... technicals are being distorted by the Fed. The recent crash would have been much worse had the Gov done nothing. By preventing a worse crash they have assured another one is coming soon. Too much debt assures this outcome.
What you and other Ewavers can't do is predict exactly when and what the spark will be.
When you say another crash scenario is very unlikely if you look at the past, you also must realize that we are in a debt scenario unlike anything we have ever scene.
Who knows how long this can continue, but in the end, reality will soon come to those who think we can continue to pile on the debt for as long as we want.



I just want to clarify that I was quoting an e-mail sent by Greenblatt.
The e-mail is sent to all that Sign-up for his free newsletter.

He is saying that "another crash scenario is very unlikely if you look at the past"
in the context of one crash following the previous in a short time span.

My goal is to understand the parameters of both bullish and bearish scenarios, to avoid being taken by surprise.
I thought that his point of view might be worth some consideration.

I am glad that Duncan responded with a new post "A Few Charts For Weekend Contemplation"


Y - enjoy your blog and comments but saying next week is a 50/50 proposition...that's a coin toss right?

All other indicators aside I'm going with the equation:
Rising price + declining volume = Wrong Price.

Don't get me wrong, I can envision a nice technical bounce, but from the mid 900s (where, I have noticed, even a few of the "mainstream" bears such as Rosenberg have pegged "fair value," as subjective as that might be).

Dave B.


Duncan posts an article about P/E ratios and there isn't one comment regarding the topic at hand...or the consensus estimate of roughly $75 per share for the S&P 500 in 2010.


i have posted an updated count for the Euro/USD pair if anyone is interested.

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