Arik,
Major Outlook Shift...
After searching for weeks for a day by day look at the '29 crash, One finally popped up on the web, and allowed me to recalibrate and get back into sync with what is really going on here. As I will fully explain, my conclusion is that the downside action we've seen in the last 2 months is about to be dwarfed by what happens in the next 6 weeks. But first, here's the link to the daily '29 chart:
geocities.com
My conclusion is based on the following facts and theories:
1) The 1st wave of wave 1 of A completed at the 9/1 low. The count from the top works out like this.
wave 1 ended at 7/24's lows
wave 2 ended at 7/29's highs
wave 3 ended at 8/8's lows
wave 4 ended at 8/25's highs
wave 5 ended at 9/1's lows, and completed wave 1 of 1 of A
Wave 2 of 1 of A began at 9/1's lows, and has already completed. It was a 5-3-5 zig-zag wave with a drawn out Wave B. Wave C of 2 of 1 of A completed on 9/16's close, thus completing wave 2 of 1 of A, and setting the stage for Wave 3 of 1 of A. I believe we're in the first wave down of 3 of 1 of A as of Friday's close.
2) The decline thus far is in near lockstep with the '29 chart reference above. Notice from that chart that Wave 1 of 1 of 5 (labeled "WAVE 1") completed in the first week of October. That wave took 23 days to complete, and fell 17% (NOT 12% like the chart editor incorrectly states). In comparison, Our CURRENT WAVE 1 took 31 trading days to complete (7/20-9/1), and fell 21%.
Next, note from the '29 chart that wave 2 took roughly 6 days to complete, and RALLIED 12%!!! Our Current Wave 2 rally completed most of its move in 8 days, but leaked higher for 2 more days (into Wednesday, 9/16's close) to COMPLETE A 12% RALLY in 10 days!! (Dec S&P futures, 946 to 1060). Are we tracking closely enough for ya? ;o)
I have to disagree with the "You Are Here" labeling on the '29 chart. We're only about 2% off the Wednesday high, so that would put us at the equivalent of 352 on that chart, and only a couple days into the decline from the Wave 2 peak.
It took 23 days to reach the bottom from the top of wave 2 in '29. Since the current market is tracking at a 3 to 2 time ratio versus '29, I have to believe we're looking at roughly 31 to 33 trading days, beginning from early to mid last week, before we reach the crash
floor. Note how wave 3 in '29 resulted in a 40% decline from wave 2's peak, and ended at the early November lows. Would it be a stretch to believe our current wave 3 could outperform '29's wave 3 just as it outperformed '29's wave 1. If the same ratio holds, we're looking at a 49.2% decline from wave 2's peak (1060 Dec. S&P).
One important thing to note is that the ending of wave 3 of 1 of A will most likely be the low point of wave 1 of A. Notice how wave 4 of 1 of A ended in early Dec. '29, and wave 5 of 1 of A ended in late December, at a much higher level than the depths achieved by wave 3 of 1 of A.
I remember a response from you that suggested the ending of the 5 wave move we were then tracking would prove just to be the end of 1 of 1 of A. How right you were!!
In summary, This read remains valid as long as we see no close above 1047 SPX, and will be continually confirmed by lower prices over the next 6 trading weeks. Getting through 875/6750 will be the key to setting off the panic. My recommendation is 450 October & November OEX puts bought early this coming week, along with short futures/stock positions. The absolute bottom may not arrive til the end of October (10/28 looms large as a key Bradley turning Date). Seeing indices at 50% of their highs should not be a surprise to anyone, and a 50% rally from that point shouldn't either.
Regards,
David |
