Sunday, August 28, 2011

Big Picture Points Up Near Term

The elliott wave pundits would have us believe that we are now near the beginning of a major market crash in primary wave 3 down to new lows, possibly at unimaginable levels for most people.  But the monthly chart of the SP500 does not suggests that such a conclusion can be made at the present time.

Below I am showing the SP500 on a monthly chart with 12 (1.5SD) and 50 (2.5 & 5.0 SD) period keltner channels.  All that has happened up to his point is the market has pulled back to the 50 month ma, and the 12x1.5SD keltner channel.  Looking back at previous instances over the past 10 years, it would seem that at a minimum, the most likely next move is a return to the 12 month ma around 1250 before before there is any more downside.  After the retracement, the question will be:  is this period more like 2001 and 2008, or more like 2004.  The guideline of alternation would suggests it will probably be more like 2004, but perhaps with a different look.  At the moment, the decline appears to be following the pattern of 2007-2008, but that similarity could break down at any time.

Terry Laundry has a calculated short term low around October 3rd.  I think the current retracement will make it back to the 1250 zone by early to mid-September followed by a decline into the October 3rd low, which may or may not retest the August 9 low.  In my opinion, I think the market is currently in wave (X) of [X], and wave (X) could extend well into 2012 before wave (Y) down begins.  This choppy action will make it difficult for everyone, but if this is the case, it would be prudent to temper any expectations of huge gains on the short side, as were possible in 2008.  Following market swings with reduced profit targets for the next several months may be the best course of action.

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