Monday, February 23, 2009

Respite, or utter collapse?

Well, that is the question before us tonight. How much further will this leg of the bear market decline, or is there something more gruesome lurking out there? Bob Prechter closed his July, 2007 Short (up an astonishing 800 S&P points!) at today's close, saying in relevant part that things are short-term oversold, but that the next decline will be so precipitous that holding appreciating shorts carries the risk of underlying institutions defaulting on paying off those shorts. Scary stuff.


S&P Weekly


Above is the Weekly S&P chart. On it is placed a horizontal blue bar with two vertical black bars and the numbers 650-670 along side. That is where my EW software is suggesting the next level of market support lays. The vertical black bars are the weeks most likely to achieve that level.


S&P Daily


The same tool drawn on the Daily chart gives similar levels for this part of the decline. Another 100 or so S&P points.

S&P 240 minute


S&P 60 minute



The above Sixty minute chart is the most bearish of the EW charts, suggesting we are in the midst of a 3rd Wave decline that seems to be targeting a minimum of 100 more S&P point decline, maybe much, much more. It is this chart that lends credence to fears that something nasty is about to befall Global markets, a no-place-to-hide financial disaster.

Oh yeah, the respite part. A week ago I introduced a Cycles generated road map that suggested a straight down market, which was spot on in its accuracy. One more time, clicking on the insignia above my name for the Foundation for the Study of Cycles, will bring up more information on these Cycle programs. Here is a current chart generated after today's close:



The implication of this chart is that a cycle low is due the first week of March, followed by a one-week rally.

The one scenario that might satisfy all of this speculation is for a significant low to be put in place in the next couple of weeks, followed by a substantial rally.

How low and how much of a rally?


Stay tuned.



A



16 comments:

Anonymous said...

you rock dude! I don't know why all the hate towards me. I said I just want the damn market to capitulate so I can start betting long again. I'm cheering the way down to 6000 for my own selfish need, not to goad your readers.

sincerely,
mysterious anonymous jerk

mlomker said...

"Bob Prechter closed his July, 2007 Short (up an astonishing 800 S&P points!) at today's close"

Yeah, so he could withdraw his money and buy gold with it (stored in Europe). Guy is a bit bomb-shelterish, imo.

Anonymous said...

Allan,

This question isn't meant to be flippant or anything, but -100 on the S&P is quite an extraordinarily dismal prediction from where we sit right now. I've been a "doom 'n gloomer" for a couple years based purely on fundamentals but it's already gotten about as bad as I expected. I can't see it getting THAT much worse.

Do you envision any credible scenarios where it DOESN'T get drastically worse from here? And, I know you usually say you have nothing to say about timing, but... what about on this occasion?

Allan said...

You can refer to yourself as a "doom 'n gloomer" if you like, but that's not what this blog is all about. I am trying to read the charts and come up with a highly probable forecast based on certain chart formations, patterns and indicators. Sometimes they lead to bearish forecasts, sometimes bullish, but in no way do labels of perma-bull or perma-bear belong on anyone trying to make a buck in the markets.

As to your question, which is a good one for this rant, when my charts, patterns and indicators say Buy, that will be my forecast. It will occur, but I don't know when. That's the nature of things in this business, go with the flow and therein lays the art: Determine the flow.

Anonymous said...

Alan,

Does your software see a time cycle on the weekly charts that is reliable that happens to be about 18 or 19 weeks?

Alex

Allan said...

Alex, I've been working with the cycle software on and off for the past 10 days and although I can see some 80-90 day cycles, I'm not too sure how accurate they are at this point. More to come as I become more proficient at operating and interpreting the program.

I enjoy your alternative Wave counts, always well thought out and engaging.

Anonymous said...

Thank you, but I didn't make any money on this recent decline.

You did an excellent job. You have been much more agressive in your bearish call than I, and you were spot on.

I felt the overall trend was down (6800 to 7187 target) but I was on the sidelines waiting for larger retracement on the upside. That never happened.

You were short and agressive about selling every retracement. Excellent call. Excellent timing.

In the end a trader needs to get the direction right AND the timing right to make money.

That brings me to another point. I'd like to put Pretcher's call in proper prespective.

It was great in the sense he has been calling for deflation and a credit meltdown when no one thought it was possible. Not only that, he described what it would look like in a lot of accurate detail.

However, he has been calling for this since the early 1990's. There is a very good reason he is an analyst and not a big time money manager like Bill Gross. Pretcher's timing was terrible. He would have blown himself up many times since the 1990's anticipating the end of the Grand Supercycle.

There are many more analysts, most of them fundamental, who started to warn about this credit meltdown maybe a year before it occurred.

I think Mike Larsen of Weiss Research was one and this Roubini guy too.

Alex

Anonymous said...

Though I listened too and went short weeks ago, I panicked just once when there was a bounce and lost 40% on FAZ and 30% on SKF and never recovered. Also Muathe - mentioned here - has been a disaster since
nov. with 90% wrong calls. If it weren't for Allan's solid stance on market direction, I'd be further up the creek since it moderated my view.
Still down big time on ACTC though. Time to double up???

Anonymous said...

Allan,

Thanks for the good work and forecasts.

Any updates on your views on HYGS, GFRE, ACTC, and NNV. I am still holding.

What do you think of PSPM which has a proprietary technology on dimmable florescent lighting and ballasts- a very Green technology which has big application worldwide.

best regards,

Harvey B.

Anonymous said...

Allan,

Vincent Michaels believes that this market is oversold.

He is calling for a turnaround in the Dow to the 8300 level in the next few weeks.

If you believe a bounce is coming what areas would you invest.

Any comments.

Thanks,

Harvey B.

Anonymous said...

market up hge today ...

NNVC down to 63 cents, ouch ...

Anonymous said...

That last anonymous was NOT me. Anyway, NOOOOOOOOOOO!!!!!! I don't know if I can handle another cycle of drop after nice gains. Rather have all the punishment at once.

Anonymous said...

That last anonymous was NOT me either ...

I am the original Anonymous !!!

when are we going to have some real huge news ???

mlomker said...

I'm shorting everything at 820. Based on the cycle analysis that I use it should be next Tuesday.

I'm expecting an extended wave 5 down to the low 600's on the S&P. I think we'll catch support at the 61.8% of the bull market.

In the meantime the volatility is as close to printing money as I've ever seen. If I thought this would continue forever then I'd quit my day job.

Anonymous said...

you mean S&P will get to 820 by next Tuesday ???

mlomker said...

"you mean S&P will get to 820 by next Tuesday ???"

That's my opinion although it goes against most analysts right now. I believe that wave 3 of (5) is done and we've now started a complex wave 4.