Registered User
Joined: 10/7/2004
Posts: 73
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Guys,
I have not seen such a bearish profile unfolding in a long time.
Wait for a slight pull back, I am thinking maybe by next week before expiration we may get a pause in the selling pressure.
This wave is unfolding with relentless fury.
Look to short by next Friday on option expirations.
Most crashes tend to occur on the Mondays after expiration due to the assignment of contracts.
Be ready...opportunities like this don't come along very often.
There IS BIG MONEY TO BE MADE ON THE DOWNSIDE.
I will post more as the wave develops.
<:o)
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Trumaster there is nothing new here. The wave as you called it started over 2 months ago.
Didn't you read my comments posted on May 18, 2006 which said
" Just 128 points down below is not just 11,000, but a psychologycal mile stone that if taken to the way down could trigger the nasty. Just think about it, it could happen tomorrow, just 128 points. For those of you thinking about buying longs, betting on a botton, or a rebound - I think you should think twice. The market mode is short, what else do you need to know? Try to catch falling knives and it is just a matter of when, not if you will get cut. Speculation is all fine and all, but get a grip on reality - the signals cannot be any more clear.
I strongly believe, that a rebound if any at all would just be a plus on add on shorts. I expect a correction of a bull that has already mature into more than 3yrs, will be much more severe than just 400 points.
good luck "
And then followed by some more comments on May 30, 2006 -
" Today's market action was as clear as water, except that the volume in a daily is not so great (not even above average). But for those who watch the market intraday, it was as clear as water that the heaviest of the volume came in the last hour and close to double from the rest of the day. Heavy sell off at closing.
I maintain my view that the correction continues to be in effect and continue to put emphasis on the 11,000 mark. As a psychological barrier is such a support is broken it can trigger some heavy institutional selling. It also coincides with the somewhere around the 200MA which could mean double effect.
good luck "
I am not sure what your claims are, but I thin you are a little late to the party.
By the way opportinity of the decade?? Where were you in 2000? That was the greatest bear market in the history of Wallstreet.
Are you proclaiming that this bear will be worse? I must say then that you would be wrong.
Let me advice you that if a satisfactory resolution comes to the geopolitical problems involvint N Korea, Iran, and now Lebanon you may be in for a nice up retracement, and may not be able to affort your shorts if your pockets are not deep. Just a warning.
good luck
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Registered User
Joined: 12/8/2004
Posts: 1,301
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I agree, we are not far from at least a minor retracement point. The s&p could start a retracement when it reaches the 1203-1213 area and the dow could start an upward move anywhere between here and the 10,600 area. Of course this will be temporary, but it will definitely be a place to begin your shorts.
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Registered User
Joined: 10/7/2004
Posts: 73
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I don't think you get it.
Wave 1 and Wave 2 are over now...
WAVE 3 HAS BEGUN.
WAVE 3'S ARE CATASTROPHIC.
If this is the beginning of wave 3 then the SELLING PRESSURE IS JUST BEGINNING.
BEFORE MY WAVE COUNT WAS A POSSIBLE COUNT, NOW WITH THIS CONFIRMATION IT IS A PROBABLE COUNT.
AGAIN, THE SELLING PRESSURE IS JUST BEGINNING.
YES, I AM PROCLAIMING THIS BEAR MARKET WILL BE MUCH, MUCH WORSE THAN 2000.
PROCEDE WITH GREAT CAUTION IF YOU ARE LONG...
P.S.
As a side note, this 3rd wave of the current 5 wave count down is simple the fractal expression of a LARGER DEGREE WAVE 1 DOWN. We will get a LARGER DEGREE WAVE 2 BOUNCE UP (maybe a month or more), THEN THE LARGER DEGREE WAVE 3 BEGINS DOWN, THIS IS THE BIG ONE...THE HISTORY MAKING BIG ONE. THIS TYPE OF SELLING PRESSURE CAN SHUT DOWN MARKETS FOR DAYS... I'm not sure when this will happen so we will have to just watch it unfold. If I had to guess I would say this sets us up for a LARGER DEGREE WAVE 3 DOWN early in the fall. How appropriate.
<:o)
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Registered User
Joined: 12/6/2004
Posts: 48
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Your opinion is a valid one and I respect it. But, you know, markets are made out of opposing opinions. I'd like to point out some factors that might make a crash scenario unlikely:
- U.S. companies are awash in cash: they have a combined $2.5 trillion on their balance sheets. All this cash provides a floor to the share price.
- The total float of the market is shrinking: companies are using their cash on buybacks and mergers. According to the FRB, shares lost outpaced new issues by a 5:1 ratio in 2005. There's a lot of liquidity in the world chasing fewer shares.
- The forward P/E of the S&P 500 is now in the 13.5 range. Your crash scenario implies a P/E ratio under 10. Typically, you need inflation rates of 8% or higher to drive the P/E ratio below 10. Inflation is creeping up, no doubt, but we're nowhere near the 8% runaway.
Take the Dow down to the high 9000's or the S&P 500 to 1000, and that will be a great buying opportunity. I'd be a doing a 'mon back for sure. Heck, even a dip to 1150 on the S'n'P looks like a good buy point to me.
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Registered User
Joined: 10/7/2004
Posts: 82
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A quote from "Stock Trader's Almanac 2006" (pg. 71): "Historically One of the Worst Weeks of the Year" (July 17 - 21, 2006)
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Registered User
Joined: 12/7/2004
Posts: 393
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I'm looking for a bounce between here and Dow 10500/S+P1200.
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Registered User
Joined: 10/7/2004
Posts: 794
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I respect all opinions but I also believe from experience that when the majority are in the same camp, that move becomes suspect.
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Registered User
Joined: 10/7/2004
Posts: 73
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Yes the market is made up of contrary opinions.
I am always looking at all options on the table.
For example, this week I tried to go long on the failed rally. The result was that I got stopped out... the reversal confirms the weakness present in the market. This week should have served as a warning to all imvolved.
I wish the scenario would improve...it is easier to make money on the long side. But until the landscape improves, I will have to go with the bearish count. It is becoming more probable by the day.
<:o)
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Registered User
Joined: 12/19/2004
Posts: 457
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While I think the idea of a crash so bad that the market closes is highly unlikely, I agree with the bearish sentiment expressed by Truemaster.
One need only look at the charts of the market leaders--metals, investment banks, home builders, and some of the speculative tech favorites--AAPL and GOOG, to see the writing on the wall.
Real wages are stagnant, costs of living are rising (in the short term), and the one bright spot for consumers--rising real estate prices--is slowing. All of this points to decreasing purchasing power for consumers, and a decrease in consumption.
Some points NutonaBike mentioned:
U.S. companies are awash in cash: they have a combined $2.5 trillion on their balance sheets. All this cash provides a floor to the share price.
Some companies are awash in cash, but the quesiton is--why wasn't it reinvested? Does it make sense for corporations to invest in the face of declining demand? How much of that cash on hand was generated by the sale of bonds, or the issue of stock?
The total float of the market is shrinking: companies are using their cash on buybacks and mergers. According to the FRB, shares lost outpaced new issues by a 5:1 ratio in 2005. There's a lot of liquidity in the world chasing fewer shares.
This is something that always goes on at market tops, not market bottoms. Think of all of the craziness that went on in 2000: ie. an IPO of all sorts of crap stocks with .com at the end of the name. Lets not forget the big blunder--the AOL Time Warner merger.
As for corporate buybacks--a poster child of a buyback gone wrong was EDS. They "bought" stock for their employee options programs by an OTC options transaction known as a covered straddle. They sold both calls and puts on EDS stock, and used the premium to buy shares.
The sale of the options were designed to reduce the cost of the stock, but it was in reality the same trade as a covered write on margin--a bullish position. With the tech melt-down, EDS eventually took a huge loss on the position, that was charged to earnings.
While corporations are "buying" stock, insiders are selling.
Forward P/E is subjective, to say the least. At best, stocks are fairly priced. At worst, they are at the high end of the PE range based on trailing earnings.
Everyone is worried about inflation. What they should really worry about is deflation--specifically asset deflation in stocks, junk bonds, and more importantly--housing.
Asset deflation, like asset inflation, has positive feedback effects. On the way up, price increases permit more borrowing, more lenient financing terms, and generate greater price increases.
On the way down, this process works in reverse. Price rises to a point where credit cannot expand fast enough to keep the game going. Prices fall, lenders tighten up standards, transactions fall, and a trend in the opposite direction develops.
Don't expect stocks to hold up well in that type of environment, regardless of what corporate balance sheets show. Cash, maybe a little gold, long term U.S. bonds, and short positions, look like the place to be to me.
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Registered User
Joined: 10/7/2004
Posts: 73
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rmr,
I just read the "official" elliot wave count from the site, and they are counting a finishing 5th wave right now (of the larger degree 1). I disagree and think we are still in wave 3....
Hard to tell...but either way the wave count is down.
<:o)
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Registered User
Joined: 12/19/2004
Posts: 415
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While we may be in an impulsive wave down, it looks more like a DZ to me. A DZ can easily turn into a impulsive wave, but it still looks corrective to me. It looks like we may be in for a small bounce Monday maybe SP1240-1245, then a 5th to complete this part of the DZ.
After that wave is complete, the wave struture of the rally off the lows should determine whether this is only a correction in a longer term bull or just the fourth wave of an bearish impulse.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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This is the one bad thing about elliott analysis. It could be so many things right now and we won't know until we see certain signs..
We could be in wave 5 of the first wave down. If this is the case then the sp-500 should drop to the 1207-1215 area, we will have an upward correction, and then we will have a long wave 3 down.
We could also be in a wave 2 down. If the june low of 1223 holds then the next wave is an upward move. I don't think this is likely, but it could still happen and we won't know for sure until those June lows are taken out.
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Registered User
Joined: 12/8/2004
Posts: 1,301
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The more I look at it the more I think we have had a 3-3-5 correction from the may 10th highs. If this is true the s&p should hold in the 1225-1232 area and then we should see a move up to the 1250 to 1269 area before our longer wave 3 down.
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