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Monday, May 28, 2012

Monday, 5/28/12 update

The pattern in the ES last week following the May 20 low was very corrective looking, especially during the last half of the week.  Looks very much like a bear flag.  Although anything can happen, this doesn't look like the start of a sustained rally.  Odds are that the sell-off of the last couple of months has either resumed last Friday or is close to resuming in the next few days.

The preferred count at the moment is that an extended bear market is underway with eventual targets around the ES 1000 area (see posts of Sunday, 5/21 & Thursday, 5/24).  However, there is an alternate that is apparent that has almost equal weight at this time.  That alternate has the ES in an ending diagonal "C" wave of a 3 wave structure dating back to the lows of July, 2010.  That 3 wave structure is itself part of a larger A-B-C formation since the crash lows of March, 2009. 


There's symmetry in this count between Intermediate W2 (purple) and Intermediate W4 (currently in progress).  Both are double zig-zags that look quite similar.  Intermediate W2 retraced .618 of Intermediate W1 almost exactly, a .618 retrace of Intermediate W3 by Intermediate W4 would be at 1251.50.  
If this count is what's going on, then Intermediate W5 will follow with a target near the 2007 high in the upper 1500's.  A serious bear market will follow that high.  If Intermediate W5 has a slope similar to that of Intermediate W1 that high could occur in Sep - Oct this year, which lands right where market crashes have an historical tendency to occur.  This could be quite interesting, not to mention profitable.

There are plenty of intelligent and well spoken bloggers who do an excellent job of outlining the extreme danger the domestic and world financial system is currently facing.  So I won't reinvent the wheel.  But both the preferred and alternate count here provide for some quite serious economic conflagrations in the very near future.  Which is no surprise.  Socialism has been proven to be a failure over and over, and the US can now be added to the socialism club in a lot of respects - so the prospect of economic turmoil is to be expected - in fact you have to wonder why it's taking so long to come to fruition.
As Margaret Thatcher once said "The problem with socialism is that eventually you run out of other people's money".

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