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Saturday, December 29, 2012

Saturday, 12/29/12 update

The equity market has given it's opinion on the prospects for success of the "fiscal cliff" circus, and it's a thumbs down.  But truthfully that situation could break either way, and whichever way it breaks is almost certain to lead to a very steep move in the market.  If it resolves bullishly then it's this author's opinion that any bull move is going to be relatively short lived.  The economy is going to continue to be inundated with massive amounts of government debt for the foreseeable future under any of the fiscal cliff proposals being aired, and long run that can only lead to disaster. 

The bull alternate is still alive and well even with Friday's late plunge.  In fact both the bull and bear counts have arrived at the cusp of a potentially explosive move at exactly the same time, which fits nicely with the fiscal cliff background.  However, from an EW point of view the pattern up from the mid-November low into the Dec 19 high is pretty choppy - much more typical of a corrective wave than an impulse - and this would throw the odds to the bear case.

The bull alternate has the ES close to completing an irregular flat 2nd wave, which should lead to a strong and sustained 3rd wave move up.
Bull alternate

There are two ways to view the current bear alternate.  The 1st is as a series of waves 1 & 2 of declining degree since the top of Dec 19, in which case the market is right on the edge of a 3rd of a 3rd wave collapse.  The 2nd is not as immediately bearish.  It has the pattern from the Dec 19 top classified as an almost complete leading diagonal, in which case a wave 2 bounce in the very near future is dictated.
Bear alternate

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