Monday, August 8, 2011
Markets in Chaos (again); Euro a Mess
The stock market action has been jaw dropping to watch the past two weeks to say the least. The Dow lost almost 1800 points in just two weeks. Wall Street overvalued the market going into the so-called "recovery", and now there is a severe repricing of that recovery. It's happening in a hurry though and panic is well set in. That doesn't mean a bottom is in though, the market closed down huge and on its lows today, and both the international and US governments have so far failed to calm the nerves of investors over the crumbling backdrop of our financial system.
But just like the market overshot to the upside recently, it will also overshoot to the downside and lead to a sharp relief rally. When that happens though, I have no idea. The selling pressure is beyond intense and should be very worrisome for investors and politicians. Today's volume on the NYSE was a whopping 2.54 billion with practically all of that volume going to the downside. It's really jaw-dropping. Just crazy.
Should Stock Investors "Fret Over Economy"? No -- See Chart to Understand Why
I'm going to address the giant elephant in the room, Bob Prechter. There's no more avoiding it, or sugar coating it, Prechter's Primary wave ((3)) analysis is fitting in well here. Primary wave ((2)) would have stopped shy of an all time high, and the strength and speed of the current decline is certainly that of a very large wave 3. Prechter's call is back in business, and as prudent investors and traders, we should all at least be mindful of the current downside potential if Prechter is right. Today's selloff feels like a "point of recognition" at some degree, meaning that we should be approximately in the middle of this current Intertermediate wave (1) of Primary wave ((3) down. If correct, the market should continue sharply lower for most of this week taking the Dow at least another 1000 points lower before any meaningful bounce occurs.
Learn Elliott Wave Principle
The euro is a mess. It looks like a correction, but the lower highs and lower lows keeps the downtrend intact and open the door to a sharp selloff at any moment. But with this structure in price being so choppy, it's hard to gain confidence in the bearish outlook.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.