Fallout of the Crash: Pound Getting Pounded

First the Euro, now the Pound: the wolfpack is winning. GBP was $1.49 yesterday, and has entered $1.45 territory today, a huge drop. The Euro entered $1.25 territory and is now below last week's crash low-point. ZH suggests Europe is capitulating already. Volcker is now openly concerned over the disintegration of the EMU. 

US equities sold off on the afternoon. The Nikkei is opening down, and the Shanghai market may follow. This bodes for a bloodbath tomorrow unless the ECB and the Eurozone central banks defend their currencies. 

Stocks have been sideways for the week with an upwards bias until the selloff today. Should we expect a hard drop tomorrow, especially if the capitulation in Europe is on? Some wave musings: 

• If you peruse the bottom "wetware" chart from this post which removes the effect of 'bots gone wild, the normalized bottom occurred Friday. 
• If you then smooth out the gap up on Monday, a three-wave move has followed (with waves a/b on Friday and the gap move the start of c). 
• the c wave has broken in five waves (see chart from Market Thoughts)
• the whole pattern has retraced just over 62% of the drop: 1220 to 1094 or 126 pts down, then 1094 to 1174 or 80 pts back = 80/126 = 63% 

If the big drop was wave 1 down, this retrace is a normal wave 2, and the dreaded wave 3 is to follow. Hank Wernicki made a good short call mid-day today, and may be more right than he realized! 

 

Comments

[Mamma Boom Boom]

Not a good start. But, another gap. (let's see if I can shut this off)

[Hank Wernicki]

Thursday May 13th
2:56 pm

Stay Short with the SPX Puts for tomorrow with the Stop

Lower the Stop a bit

Or if you wish take the 10 points at the close --- @ 1162

Staying short here ........ looks like a top tick short for Friday

Remember the Full Moon ...... 1165.24 now for the SPX

[Wave Rust]

The same market that sent us the Flash Crash in the stock market is setting up nearly exactly the same way again.
Tomorrow may not be a time to be long stocks. I won't be.

wave rust

Posted by: Wave Rust | Wednesday, May 12, 2010 at 11:53 AM

I am still short and will be into the close, but Monday will be the buy.

wave rust

[MHD]

Just saw the bumper sticker on the back of Ben Bernanke's car.
It said....WHAT WOULD MOE, LARRY, AND CURLY DO??

[Wave Rust]

Momma

If you use the italics '<'i '>', you then have to use the '<'/' i'>' to close off the italics at the end.

(without the quotes, of course. The forward slash "/" closes the function.)

Get it ? :)

wave rust

P.S.
Yelnick, It seems that a following post that begins with the closing tag will close it off too, as it did in my first post.

[Mamma Boom Boom]

Like this?

[Wave Rust]

Gold bugs and slugs,

Prechter was just on CNBC saying that their gold sentiment survey is at 98% bulls, which has marked tops.

He said that this did not mean that the exact top was in but that their survey hits 98% bulls at major turns.

Remember, you can't eat gold.

wave rust

P.S.
The british guy on CNBC called him Precher ('ch' as in church). I guess he's never subscribed. :))

[yelnick]

Mamma - yes! thanks!

[Wave Rust]

Yeah, that worked, momma.

wave rust

BTW, Prechter had a couple of nice charts too. look up his video on CNBC ,,,, it was on around 11:10am

[yelnick]

Wave, yes, that sometimes works, but also we can get nested italics where it takes multiple end-italics to end it.

[MHD]

Wave Rust.... since the markets have been up the last 31 out of the last 35 Monday's, that was a bold call on your part. We can all become rich buying at the close on Friday, and selling at the close on Monday!! I see no reason this won't continue forever, and ever:)

[Mamma Boom Boom]

As much as I'd like to be bearish, here, I have indicators flashing 'short term rally"

[Hank Wernicki]

11:30 am

IF no bounce here ( 1132 ) another - 25 points down for the SPX

scanning

[Canadian Money]

I continue to see the possibility that that large down move on May 6th qualified as an EW Extended Wave. If this interpretation is correct for the SP500, we may now be seeing the second retracement once again moving over the same ground (downward). Canadian TSX Composite looks similar. This would all fit with the April 26th SP500 peak as an important downturn.

[yelnick]

canadian, what do you think of the count which makes the deep 'bot drop an extended wave 3, and the Friday action a truncated wave 5 to end the move? Then the bounce this week is a wave 2 and we are in a minor wave 3 of P3 down? It should run through Friday's level fairly quickly and then pass Thursday's 'bot bottom

[Mamma Boom Boom]

>I have indicators flashing 'short term rally"<

I assumed we'd see an a-b-c off the May 6th low. Looks like the c is about on us.

[Canadian Money]

Yelnick,

I try to maintain the viewpoint that the wave structure always keeps other options open. It seems to me that it must be that way in order for nature's law to keep up with this ship of fools we call mankind. The "crowd" is always making up it's mind from day to day.

So, yes, other wave counts are a definite possibility.

Now that boating season has arrived I spend less time looking at the details but extended waves always catch my attention.

Just spent a couple of nights over in the Desolation Sound Area, BC. For some photos see Cortes Island, Squirrel Cove Anchorage...beautiful this time of year with only a handful of boats...but the wind off the water is still a little chilly.
Link
http://www.google.ca/images?hl=en&source=imghp&q=Squirrel+Cove%2C+BC&btnG=Search+Images&gbv=2&aq=f&aqi=&aql=&oq=&gs_rfai=

[Wave Rust]

Hi MHD,
good to see you posting again. Post more often so I don't have to. You ususally say it all, leaving me without anything to say! LOL

vis a vie Monday's buy. They got get it lower than this here before a buy can set up. So, the close will be instructive today.

So, the first hour will probably look optimistic then dismal.

So buy the dismal and despair. It'll take some stones though. Maybe boulders. :)

I don't see new lows below May 6th at all at this time. Later for that.

wave rust

[cloudslicer]

The New York Times contrary indicator is alive and well :)

http://www.nytimes.com/2010/04/11/business/economy/11rates.html

Take a look at where the long bond was on April 11th when this article appeared.

How do they do it?

[yelnick]

Canadian - Squirrel Cove looks beautiful! A good place to hide some acorns against Kondratieff Winter.

Any thoughts on the Loonie? It is fading as fast as the AUD as the carry trade unwinds.

[Wave Rust]

MHD,
Should look real ugly Sunday night for US indices unless they take it down another 20 points on snp's before today's close or before RTH Monday.

That's the trade I'm looking at for now.

From April 26 it looks like a higher degree 4 and very deep which works with the shallow and simple 2 in June-July '09.

So at least 3 waves up to come from this low into Labor Day.

Alternate is to rally into a secondary high for the B of 4 in June '10 then down into month end, then rally the rest of the summer.

wave rust

P.S.
Anticipating DG's "No" :))

[Account Deleted]

DG Yelnick !!

Wht do u think about the current wave structure.R u of the opinion that we have started the 3rd wave down and this could be an extended wave as its now evident that 1st Wave wasnt an extended one since it was retraced more than 38.2 %.

Or do u subscribe to Neelys view that we are in B wave triangle from 11300.So possibly could be in the "c" wave down of this Neely triangle.Has Neely changed his view of the Triangle or he is still sticking to it.Asking u cos I am not a subscriber to his service.

Regards
VB

[Account Deleted]

DG Yelnick !!

If really the 3rd wave extension count fructifies then we could be in for a 1200-1500 points fall minimum in DOW from here in next few weeks I guess.

Regards
VB

[Mamma Boom Boom]

>Should look real ugly Sunday night<

Don't know! But my bet is on a gap up Monday morning.

[Michael]

Looks like investment advisory firm Waddell & Reed sold 75,000 E-Mini's during the 20-minute Crashette last week. That was 9% of the entire daily volume, but on a thin trading day and "vacuum" that is going to cause quite a shock to the market.

[Marry]

Nice wave1 from yesterday then wave 2 in last 30 min.

Get ready for 1987, crash Monday wave 3 of 3 down.

People made fortune this day!

[upstart]

Don't remember when I posted that a pattern of tops pointed to April, but that worked out big-time. In the rest of the post I think I indicated a month that should bring the end of the correction, based on THREE monthly cycles coming in phase during the same month. We ain't in that month yet! And that jibes with Jim Rogers believing we are in a corrective period for awhile. In fact, when those cycles all bottom together, it will be enough of a correction that people will in retrospect say it was 2010's 4-yr. cycle low.

[yelnick]

VB, I will post on the current count Sunday. Reason for the delay is I expect a huge rescue attempt Sunday evening (Monday am in Europe) as the Wolfpack War continues. If we don't see it, Europe has given up already.

If you buy the truncated fifth count, where Thurs was a wave 3 bottom and Friday a wave 5, the subsequent waves look normal. The initial bounce off the 'bot bottom was around 38%, the bounce off the truncated fifth (so far) has been around 62%.

Stories came out today that the 'bot bottom was not 'bots alone. This lends credence for treating the Thursday plunge as an elliott wave phenom, not a glitch or an anomaly. This makes the drop off Apr26 a "5" whether you call it at the 'bot bottom or at the truncated fifth. Consequently I do not buy the Neely triangle. (For readers who do not subscribe to Neely, he has the Jan-Feb5 drop an X wave, the rise since wave A, and says we are in a triangle wave B with a C to go to new highs. The sharp drop is leg a of B, the bounce leg b, and we either are still in b or have started leg c.)

[Paul]

Gold bugs and slugs,

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Prechter certainly puts in a lot of faith in those sentiment surveys. He treat it like something holy and carved in stone. He makes a big deal about a one percent difference in sentiment figures (97 to 98 percent for instance), not even taking into account margin of error or degree of bullishness.

That being said, I do believe that we are awful close to a top in gold. My wave count shows we are currently in a fifth wave of the uptrend that started in Oct 08. I believe gold will top around 1360 or maybe a little more.

[Marry]

Elliot wave phenom, come euro crash

1987 dollar cras
h, 2010 euro crash

mark my word

Monday no deal w3 of wave 3

[Paul]

Gold bugs and slugs,

Prechter was just on CNBC saying that their gold sentiment survey is at 98% bulls, which has marked tops.

He said that this did not mean that the exact top was in but that their survey hits 98% bulls at major turns.

Remember, you can't eat gold.

wave rust

P.S.
The british guy on CNBC called him Precher ('ch' as in church). I guess he's never subscribed. :))

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I was responding to this post. Somehow the original message disappeared.

[Canadian Money]

Yelnick,

Sorry...I don't have any insight into what drives the Canadian Dollar.