Weekend Update – The Wave 3’s Are Coming!

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Tuesday Update...

Sorry gang, I had a busy afternoon. Just a video update again, as I'm to tired to write up a new post. Plus, not much has changed, except we are one more day closer to the coming crash.

Red

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Monday Update...

We hit our target area of 1080 in the morning reversed hard off of it.  That might be all we're going to see?  If you're already short, I'd stay that way even if it rallies tomorrow or Wednesday.  People are now talking about the Hindenburg Omen, and that it was confirmed on Friday.

We'll, if I had to guess I'd say we are going to see it happen this coming Friday as panic sets in.  We could open up tomorrow with a gap down very easily.  Will it happen?  I don't know, but any rally is just a shorting opportunity now that we reached 1080 and technically fulfilled a wave 2 retracement back up.

We are in a period now where the best thing to do is to hold on to your shorts and not try to swing trade in and out of the market, as you might not get another good re-entry spot again.  If we bounce any at all, the 1070 level is now going to be resistance, and would be another good shorting spot.

Ok, that's about it for now.  As I said in the video's below, after we rally up for the wave 2 the rest is a down hill ride.  We hit our target area today, so now it's time to look out below...

Red

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Lookout below, an avalanche is coming!

Yes folks, the much anticipated Wave 3 of 3 of 3, etc... is here now.  The next few weeks should see the market fall down to a low of Dow 8300, and it will probably end around the Legatus Pilgrimage meeting.  It could bottom in the middle of it, but I'm leaning more toward the end of it... maybe even the end of September.

After the bottom is in (not the final bottom of course), a major wave 2 back up should happen and continue until the end of the year I believe.  Why so long?  Because I think the Illuminati members coming out of the Legatus meeting will implement another Stimulus package to rally the market.

This will be done as a political move by the Obama gangsters to try and win the democratic majority with the November elections coming up for the house and senate.  Anna and I were discussing this and it makes a lot of sense from a political stand point.  There is also the possibility that Obama will extend the Bush tax credits that are due to expire at the end of the year.

This should rally the market higher, as many long term investors won't have too sell this year to keep from being taxed at a higher rate on long term capital gains.  The republicans will be happy too, which would help Obama too.

Moving on the technical side of things...

The TA's say that we are rising back up the 60 minute chart, and should continue to rise until Tuesday or Wednesday.  At that point, I expect us to fall into a minute wave 3, of major wave 3 of primary wave 3... which is the bulls' worst nightmare!

So gang, I've said just about everything I can think of in the video's above.  I think we will rally a small amount into Wednesday and then fall off cliff after that.  Maybe 1080 area, or a little higher... but regardless of how high it makes it, Thursday and Friday should be heavy selling.  Just look for the 60, 30, and 15 charts to peak out around late Tuesday or early Wednesday would be my guess.

Then hop on the inter-tube (or ski's for the brave) and ride it down the snow slope from hell...

Red

P.S.  I've been waiting for this wave 3 ever since I started this blog.  It's finally here and I don't know how to act... it's that ironic?

114 COMMENTS

      • G'Day Red,

        I have been reading and listening to your comments for quite a while now (albeit from the other side of the world), and have always found them informative, thoughtful and (sometimes) even entertaining.

        Your comment up above about the wave count has finally caused me to put fingers to keyboard. I am an EW subscriber, and although I can't forward or publish their information on this website, I think it is ok for me to “discuss” my “interpretation” of what I am seeing.

        The accepted wave count so far is thus: the bottom of Primary Wave 1 was in Mar 09 (S&P500 numbers, by the way); the top of Primary Wave 2 in Apr 10 (on the 26th, I think). The bottom of Minor Wave 1 was in late May and the top of Minor wave 2 was on Aug the 9th.

        So what's got me worried is that we are not yet starting wave 3 of 3 of 3: right now we are only going to the bottom of Minor wave 3 (target: Dow 8500/SP500 at about 880). This Minor wave 3 is just part of the five -wave down trend of Intermediate Wave 1.Then there should be a 3-wave counter trend rally to the top of Intermediate Wave 2 and only then will we be in a position to suffer/enjoy the pleasures of Minor Wave 3 of Intermediate Wave 3 of Primary wave 3… (At this point a well-known US demographer has a target of DJIA 3000, whereas EW believes it will be even lower – I believe Robert Prechter has said in the regoin of DJIA 1000).

        I enjoyed your FP of the Gold chart – BTW, EW has a target for Gold at about $690…

        It's too hard to talk charts and counts without using pictures, sorry about the long post: I'm definately not trying to steal your thunder!

        Keep up the great work – thanks!

        • Actually Jed,

          I love to read the long posts, so keep them coming. As for the count, you are right… we are just starting the Minor wave 1 down, which should bottom at the FP of Dow 8300.

          Then minor wave 2 back up until the end of the year should happen. Next year would give us the minor wave 3 down, and be the most volient wave of all.

          However, inside this minor wave 1 that we are currently in from the April high, we should have 5 minute waves… of which I think the first one ended at the 1010 low.

          Then back up for minute wave 2 to the 1129 recent high. Now we should be in minute wave 3 down. Of course inside of it will also contain 5 smaller waves. I think we completed the wave 1 at Friday's low and are now in wave 2 up.

          When finished this Wednesday, I expect the wave 3 down to start inside of minute wave 3, inside of minor wave 1, inside of primary wave 3. Whew! I hope I got that right? LOL

          I'm sure those EW guys got the count better then me, as I left out the minor wave 1 part. Labeling them correctly seems to be different by each person that does it. But regardless, we still have a lot of wave 3 downs coming.

          Thanks for posting, and keep me informed.

          Red

    • What's the target if we out of the wedge on the upside, and the downside San? It should break to the upside of course but falling wedges can just keep on falling sometimes.

      • another dip from here which should take the index to the support line of the pattern and a reversal from there which should break the resistance line. A daily close above that will target the recent high of 1129.
        above scenario will play out if the pattern works perfectly. If it breaks the bottom line, It will keep on falling as you said.

  1. Keep in mind everyone, we still have that FP of 111.17 spy. Although it doesn't look likely that it will hit it, anything is possible. We are only assuming that we completely smaller wave 1 down on Friday and are now in wave 2 up.

    If the 110.25 high is broken then we are still in wave 2 up from the 1010 low… meaning this would be C wave in an ABC move from that 1010 low. While I don't think that is the case, and I give it low odds, the FP of 111.17 still lingers on my mind. It will be hit, but when?

  2. red, how much importance u will give to the turnaround dates i.e. 26&27 aug. if we might in wave 2 up they can take it higher from our expectations……………..
    & wat about fp 111.17 spy is there any other clue that we find when it will going to achive that target……….

    • I wish I could answer that question, but I can't. I only know that those dates are “turn dates”, and not which direction they will turn. However, from looking at all the larger time frame charts (daily, weekly, and monthly), I give it low odds of a rally occurring.

      I don't know what the high will be at, but I believe it will occur on Wednesday… probably in the morning session. As San has posted, we are in a falling wedge now and should breakout to the upside soon.

      That breakout would be out wave 2 up, but how high is anyone's guess. I'll just be looking on Wednesday for the 60, 30, and 15 minute charts to peak and look ready to roll over. I think that would be the best shorting opportunity.

  3. Man, that 60 minute chart rolled over quickly today. It looks ugly right now, but I still think the market will climb back up into Wednesday, before it finally rolls over into a wave 3 down.

    • I would say that we probably just had wave A up to 1081, and now wave B down to the current low. I expect wave C up tomorrow and possibly early Wednesday too.

      This is all inside of a wave 2 up, which once complete should give us wave 3 down on Thursday and Friday.

  4. The VIX has been falling while the market trades sideways. While this sideways trading is forming a bear flag, with the VIX falling I don't know if it will play out or not?

    We'll see into the close I'm sure. We may go back and test the double bottom at 1064, or not? However, with 60 minute chart so oversold, we are going to need a couple more days to work that off. We could trade sideways of course, but I expect “C” wave up to finish this wave 2 before any really heavy selling starts.

    • Hmmm… I never thought of that count. I guess it's possible that we still go up into the Legatus Pilgrimage, as that would peak the market during the middle of the meeting (Sept. 9th-20th).

      Then we could fall off a cliff into a wave 3 down. That would certain make sense, and fulfill the 111.17 spy FP… plus give us the ABC move up to make wave 2.

      However, the TA's are pointing to more downside, so unless it turns back up the daily (and possibly the weekly) charts, I just don't see how it's going to make it up there?

      Anyway, thanks for the chart… it's something worth considering.

      • One reason I like the count is because it indicates we are only in P2-B. We would hit the 111.17 FP in this P2-B-B wave, go lower in P2-B-C to hit the 8300 dj print (870ish spx), completing P2-B, and still be able to go higher in P2-C to hit the 118.16 dia print before beginning P3 and the hell that predicts sometime next year.

        That was a mouthful. Another way of putting it, its the fake print count.

  5. Russell 2000 down to a new low for the day, down 6.66 to 604.12. Today is 369 days from the 3-6-9 low. August 25 is 18days from August 7 which was 666 calendar days from October 10,2008 financial crisis low. July 1 was 55 calendar days from May 6 flash crash. August 25 is 55 cal. days from July 1. 55 days was an important cycle in 1929,1987. The market topped on August 25 in 1987. July 1 low was also 333 trading days from 3-6-9 low and 66 calendar days from April high.

    • We might just repeat that this August 25th Geccko? A couple more days of chopping around up and down like today, and then a huge sell off. I think it's coming… and within a few more days.

      • Actually June 30 is 55 cal. days. I know 111 calendar days separate 5-6-1 (111) from August 25. So August 24 could be the start of the plummet. Right now, today's action reminds me of May 18th. On that day there appeared to be a daily reversal in progress following a doji/hammer day but it fell short but completed during afterhours.

        • The 67 td cycle between May 17 and Friday when similar bars were made on the chart and then of course 67 tds between today and May 18.

  6. If the market is going to get out of this falling wedge it will need to gap up tomorrow. I don't know if it's going too, as it's looking pretty weak right now. However, this could have been to lure in some bears to squeeze first?

    If it does rally, I don't think it will get past the 1100 double top area. It may not rally at all? Looks really sick.

    • The bears need this to breakout of the wedge to the upside to get a better short entry, as I believe that any breakout will be short lived. Do you have an upside target for a breakout (upside that is)?

      • Price is trading below all major moving averages. I am expecting this pattern to break the support line and go down. Support line was violated once last week. So as you said an upside breakout may end up as a false one too.
        But a good volume breakout will target 10500 and above in Dow.

  7. The afterhours is showing a high print of 108.40 spy, which I don't see where it hit that level. It might be a FP, and could be a target for tomorrow or Wednesday? It's hard to say for sure as we hit an actually high of 108.57 today, so it could have been a late fill?

    I find it unlikely to go back up there, but anything is possible…

  8. I think futures hit low of 1052+-

    How will they bounce this now that i am less than 50% of my short target?

  9. asian markets not shows that much selloff except nikkei, r they look for any reason/bad news? might be on turn date…….
    red, what u think if market want to go down from here it shall be on the account of any big news..any guess which one?

    • I'm not sure Rk? I only know that the 26th-27th is a big turn date. I would expect it to be blamed on the claims numbers on Thursday, but regardless of what's it's blamed on, the charts say the markets will continue down.

      We could have an small pop higher Wednesday morning and then some panic selling into the close. Most people won't want to hold in front of those job's data.

      If there is ever a day to have a crash,it would be this Thursday and Friday I believe.

  10. Gang, we also have a FP of 107.13 spy in the morning premarket session… so we could rally up there before going back down. It's just another spot to get short in my opinion.

  11. Looks like the market is holding for now. We might see a bounce tomorrow if the economic news out isn't too bad? If so, I think it's just another opportunity to get short.

      • Seems likely as the 60 minute chart is pushing up from oversold territory and should peak tomorrow and roll back down again. That could give us our gap fill, and another chance to get short.

        That spot could be the very best spot to be short as it's in front of some nasty claims reports on Thursday. It will probably line up with a bunch of wave 3's down too.

        • I was hoping it will close above 1055, I am watching the close, does not look good so far, why do you think it will peak tomorrow ?
          I am now tending towards closing my long and go short again?

          • I wouldn't do anything long right now, as that's very risky. I think it will peak tomorrow because the 60 minute chart is still rising. It should push up a little tomorrow morning and then roll over into the close.

          • Thanks, I did close my long position with profit that I bought at the lows today . If there is a bounce tomorrow I will go short.
            At what level do you expect the bounce? do you still think it will fill the gap tomorrow?

          • I'm not sure how high it will go, if it goes up at all? I'm thinking we might fill the gap in the first hour or so, but regardless… the afternoon should continue the selling. Just keep your eye's on the 60 minute chart.

  12. New low on Mcclellan Oscillator going back to late May. Crash tomorrow and/ or over the next two days since TTheory Dude has had August 26 as a longtime high for the market and he is always money on these calls (in the reverse). We also had a stealth daily reversal lower(like May 18 when new lows were made in afterhours) which projects possible selling into the 26th. Also look at the fractal similarity to the pre flash crash day and the pre May 20th meltdown day. Russell and Nasdaq bars are more appropriate but if one looks at the action of the last three days, there is a similarity.

    • I meant we had a stealth daily reversal yesterday which was completed in the afternoon after-hours session

  13. I've been taking some time and looking at the move in bond prices. This is very similar to the pattern in late 2008. Bonds peaked, then the market put in a mini-rally, then everything tanked.

    Does this down move feel like a wave 3? I don't think so. I remember 30% up days in FAZ and SRS back in '08, and with the exception of the flash crash, we haven't seen any of that.

    • I do agree with you Dreadwin, as this doesn't feel like a wave 3 down… yet! I really think we are going to fall off a cliff starting as early as tomorrow and continuing at least until the end of the week.

      A crash is coming, and tomorrow should start it. While we should go up a little in the morning, the rest of the day should be down. I don't know how good or bad anymore news out tomorrow will be, but the charts are still pointing down… so it won't really matter about it.

      • My only concern is that this is a very-much anticipated crash, telegraphed by the move into treasuries.

        TLT is well above the levels when $SPX was flirting with 1000. It reminds me of the move gold made just before December of 2009 (including exhaustion gaps). Everyone is on the same side of the trade, and it *will* unwind quickly, but I don't know from what level.

        If we gap down tomorrow, I'm going to go “stupid long”. I fully expect another short squeeze by the MMs before any real crash starts.

    • I have read the 10 yr tends to bottom about 2-4 months ahead of the stock market. We aren't there yet so plenty of downside in the future. Agree Red, the rally today should be short lived.

  14. Gonna bounce. i am seeing a possible 1068-1072 but hope i am wrong.

    MSNBC this am talking another flash crash. So we know that out.

    • Jim, what makes you think we are going to bounce to 1068-1072 area? The vix is still screaming up and the most important data of the week is being released tomorrow and Friday.

      If anything, the claims numbers and GDP will cause the market to crash, not rally. Somehow I don't think both of those numbers are going to be good.

  15. Goldman broke below it's 50 dma of 143.88 this morning. Apple has now had 2 days below it's breakdown support line from the triangle it was in on the daily chart.

    San, do you have any downside targets for them?

  16. The market looks top about here. The 5 minute chart has peaked and the 15 minute is struggling too. Plus, it's hitting the downward sloping trendline channel that's acting as resistance.

  17. The 60 minute chart is trying to go back up from oversold territory. If the initial claims numbers meet estimates, or are too far off, a small relief rally could happen.

    If so, that would allow the 60 minute chart to become overbought again and setup Friday to be another down day… especially if the GDP number comes in really bad.

  18. Anyone have some insight into homebuilders? July had the lowest number of homes built/contracted… and the homebuilders are up 1-4%? WTH?

      • It's hard too say Jim? The 60 minute chart is still pushing up, but the 15 and 5 are already topped and could roll over at any time. It's going to be up to claims numbers tomorrow I believe.

        A good number or simply one that meets the expectations is going to rally the market a little high, but a really bad number will likely mean that the rally has ended.

  19. Well…

    Tomorrow and Friday an important turn date for the market. So will it turn up and rally, breaking the down trend… or a high be put in tomorrow, followed by another leg down of selling? The charts say this is just a retracement move, but if the data released on Thursday and Friday is viewed positively, the market could turn back up for awhile. I personally don't think it will, but it's good to have an open mind.

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