Tuesday, September 1, 2009

Wave 3 is Likely Underway, the Modern Day Financial Dark Ages are Here; September 1, 2009


Today was a horrible day for the market as good ISM and employment data came out yet the market sold off sharply in reaction to it. On top of that, NYSE had declining stocks outpace advancing stocks by almost 5-1 and almost 95% of all volume today was the to the downside. And speaking of volume, today's selloff was on monster volume. The selloff also confirms the momentum indicators' (MACD, RSI and stochastics) bearish divergence with today's weak close.

All this suggest a severe exhaustion to the wave 2 rally and a high demand to sell stocks, even on a good news day! Most likely the big wave 3 crash into a modern day depression is now underway.

My initial target for the S&P is to break 450 before the end of 2010, but it can possibly go much much lower. I am fully invested in put options on the SLV, SPY, QQQQ, IWM and XLF with most expirations occuring Jan of 2011 which gives plenty of time for the market to collapse.

4 comments:

Madzia said...

Hello

I'm reading Yor blog form a couple of weeks ( found in other blog).
You're doing great job!! Thank You for that!!
I've got a question about $USD and OIL, whitch way should they go in next 1 year in Your opinion??

Regards

Gustavo said...

Hello:

Can you post one analysis of Elliott Waves about the commoditty silver?
I think what this could be interesting how this metal is in your high range of the last times, and may be one insight for another trades.
Thank you.

Todd S said...

Thanks for the kudos, Madzia.

As for the US dollar, I strongly feel that it will be SIGNIFICANTLY higher a year from now. Oil, on the other hand, should be significantly lower. Oil will probably trade around $10 before it bottoms.

The dollar should really be the only thing that rises during the next year or two during this crash.

Todd S said...

Gustavo, as for silver, I am short it through long dated put options and am obviously not doing well with them at the moment. However, gold traced out a clear "triangle" and is now thrusting from that triangle. Thrusts from triangles are terminal/finishing moves. This means that once this strong thrust rally in gold is over, it will reverse very sharply into the mid-$600s at least. Silver should fall with it to around $7.

So I'm waiting for this temporary gold rally to finish, then both gold and silver should fall off a cliff in practically a straight line down to the levels I just mentioned.

I'll try to post a silver chart with an EW count soon

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