>>So if I read it correctly, the timing would be right around LABOR DAY.
If it's a crash, then that's the time frame.
Is it a crash?
1. EWT
MY EW count calls for a correction one degree larger then that of last year. If my reading is correct, it is already under way.
In EW theory the first correction on a trend (wave 2) is usually deep and the second correction (wave 4) is usually flat, but they can alternate. On the up trend from the last recession (1990) the first correction is flat (from Jan to Dec 1994) and now we should get the deep correction (all other corrections were of a smaller magnitude).
The July - October '98 correction was also a deep 4 alternating with the flat 2 of 1996, both inside the bigger wave from 12/94 to 7/99.
I had trouble reading the wave pattern from the October low, but a glimpse at the NYSE composite showed me the light.
EURICA!
An ending diagonal
Wave 1 from the October low to 1/8
Wave 2 from 1/8 to 2/10
Wave 3 from 2/10 to 5/13
wave 4 from 5/13 to 6/1
wave 5 from 6/2 to 7/16
That means the trend from the October low (which was also the last leg of the trend from 12/94 low) is over, and we're in correction time. Big correction, and not a flat one, with a target anywhere between the October low (SPX 900 something) and 1/94 high
2. Pattern recognition
On the NYSE composite chart there is a channel from 12/14. The index visited and validated the trend line 7 times before breaking it on 7/29.
Then on the rebound from 8/10 low it made its way back almost to that smae line before reversing, validating the break.
Decisionpoint has this line drawn:
decisionpoint.com
3. The Pitbull Crash Index
wwfn.com
How appropriate that it should give a false alert and lose credibility just before the good one.
It sounded the alarm on March 1st, and later gave an all clear, then went off again on 8/3
Here are two cuts from the Pitbull site:
"since 1980 has signalled 12 times and been WRONG 6 TIMES....The last time it signalled right was July 24, 1998 and it was right. The previous signal to this one on March 1, 1999 was wrong."
"We have had two false signals in the last 5 years (1994 and 1999), but have never failed to signal a major U.S. market crash."
I know 12 is not a big group, but can you make any statitical observations on it?
4. Y2k
The markets hate uncertainties, and y2k is the biggest uncertainty of them all. Nobody, I mean Nobody, knows what's going to happen. The market should approach January from a low level, to rise sharply if the y2k effect should turn out to be small or negligeable - the biggest relief rally ever - hold its ground if the problems would be severe but manageable, and not trade at all in case of TEOTWAWKI.
The low point should occur mid December, and this IMO is going to be the biggest sell the rumor buy the news ever.
I believe we are already in a crash / bear market, and have formulated two scenarios:
Scenario a - A crash.
Next Friday panic selling starts, and after Labor day it intensifies. We hit SPX 900 and bounce, then bottom around SPX 850 end September. Next a rally to mid November and a deep correction to low 900s in December.
Scenario b - A severe bear.
The market enters a severe bear period in the form of a zig zag. First down leg into October, rally November and the low in December. No immediate crash but many strong down days, and a total of over 25% correction from the top.
Confirmations:
1. SPX trading under 1344 (confirms no new highs).
2. SPX under 1265 next Friday and or NASDAQ composite under 2470 (run for your lives!)
NYSE composite over 650 / new high on the SPX voids both scenarios.
Arik |
