A new Duracell Bunny – the Stock Market!

No sooner have I identified a turn in stocks (and have been rewarded with a decent swing trade), than the market just girds its loins and lifts off again into the wide blue yonder.  Surely, with no bears in sight, it must be running on fumes (and a large dollop of hope).  The power of prayer is trumping logic in this market.

But doesn’t that highlight the fact that markets are driven my emotion, not logic?  But when hope is exhausted, logic takes over and the army of hopefuls start selling – and this selling snowballs into a rout.  Make no mistake, a rout is coming.

But this morning, I can sense the turn is near.  Many pundits are predicting a blow-off spike move for the Dow (and S&P), but stocks do not top in this fashion, historically.  Major tops in the Dow are rounded affairs with declines being met with deep upward retracements.  Stocks move off their tops in stair-step fashion.  Do we have this pattern in the hourly chart this morning?

I recommend you read this morning’s AEP article in the Telegraph “Coming oil glut may push global economy into deflation”.

This is a theme I have been banging on about for some time, and it is good to see someone else has noticed!  I would steer you towards the charts he shows, with one showing the steep disinflation in the USA and eurozone which is heading closer to outright deflation.  Money supply is also tapering off.  The omens are there for a big turn.

DOW

The market has hit an important tramline:

I have a superb tramline pair with a five up from Monday’s low and a hit on the Fibonacci 78% retrace from the high of last Tuesday.

With the five up in the FTSE I showed yesterday, the odds now favour a major turn here.

EUR/USD

Here is the hourly:

I have a new w3, which has the five sub-waves I have shown before.  w4 rallied to the Fibonacci 38% retrace of the move down to the w3 low and is in the throes of making the w5.  Next target: 1.35, then 1.33.