What a shocker!
Yesterday’s heavy falls in stocks was somehow seen as a surprise by the Wall Street Journal:
So, an “unusual drop in stocks’, eh? It was only unusual when you expect stocks to be always going up! This sums up beautifully the level of complacency out there – a total reflection of that at the 2007 top, only much larger this time. Virtually no-one expects stocks to decline meaningfully – the most the bulls will concede is a dip where they will be buyers, of course. It is this entrenched bullish attitude that will provide the fuel for the rout to come.
The bulls proclaim the US economy is growing strongly, and even Barosso is trumpeting the pathetic ‘revival’ of the eurozone economy. That is like saying I am drowning in only six inches of water: it could be worse – it could be a foot deep! What many forget is that the economy is not the stock market. With tens percent price gains in indexes last tear, I believe any growth in company earnings has been well discounted and only downward ‘surprises’ are likely.
I maintain my bearish stance and yesterday’s action has only served to amplify it.
DOW
Remember this long-range chart I put up over the Christmas break?
The top tick hit my tramline and the market is now bouncing down off this strong resistance. It appears my C wave has ended and the new downtrend is underway.
The final thrust up is in five waves with w5 hitting my long-term tramline. In my Weekly Wrap, I wrote that I would be happier when the market broke below support at the Fibonacci 23% level. That level was breached yesterday with a swift decline to the 38% level. Nice.
But so far, I only have three down, so it could be an A-B-C leading to fresh highs. But I place that at lower odds than a w3 – if the former, then the market must slice through the very heavy congestion zone above. The odds tell me that after a bounce here, the 50% level at 10,100 beckons.
GOLD is following my flight path up hitting $1254 this morning.
MARCH T-BONDS is also following my flight path, hitting 131.20.
USD/JY is also following my flight path, hitting a low of 102.85 yesterday. The long USD/JY is a very crowded trade and that is being corrected this week.
