I think that ultimately that SPX 450 base is going to be magnetic. I'm also very inclined to label that "B" top as a completed wave "V" in a lot of places, since that was clearly the top of the credit bubble. SPX, with the influence of tech, may not have done that, but a great many other measures did.
Of course, I think it should take a long, long time to get there. We have 4-year-cycle lows due in 2010 and 2014. My money would be on the ultimate bottoms coming in the Fall of one of those two years. Either way, you'll probably see me going heavily long in late 2010 and again late 2014. I think Clown Long will have to wait for a confirmed bull market, though. No need to be a hero any more.
Reviewing the charts, I see index charts that appear to have hit, or very nearly hit, horizontal support. There's this in $RUT
but no analogous structure anywhere else I see.
My idea of support at the old SPX neckline of 950 got smoked. NOTE: CHART NOT UPDATED
I think we could see a multi-week, potentially sharp rally, but then we might need another low. The wave count seems like it needs a 4 here, with a final capitulation still to come. I favor that, as events like this generally produce DEEP test of support, not glancing tests. We are now SO close to the 2002 lows everywhere that I would be amazed if we didn't just go ahead and test them and get it over with. Find out how "long-term" the long-term investors really are.
There's also a disconnect between the averages and the underlying issues. While some have been absolutely destroyed (Alcoa, yikes!) others have been largely spared. I don't think wave 3 permits that condition to continue. For crying out loud, why in the world would AMTD get shot, while SCHW continues to be bought? Those kinds of discrepancies need to be resolved. And that JNJ breakdown. Ugly. Just ugly. (I'm short all three names in case that needed disclosure.)
Those buying in anticipation of support are generally a little too eager, and that's actually probably OK. Given that we've fallen 40%, the 10-year expected returns for stocks have gone from whatever they *were* to 40% more than that - which amounts to 3% per year. That's a pretty big f*ing deal. Nobody would be faulted for doing that. However, we need to pay special attention to this chart:
It's early days yet, but it appears to be breaking below the 1998 and 2002 support, with a now-failed backtest. If that should stick, it confirms that the secular credit bull is gone. There is precious little support on that chart below 60, and, yet again, the levels of 1994 loom large. I doubt Paulson can find a bazooka big enough to stop an entire market from doing what it needs to do.
`BC |
