Simply Top ~ The Risk Averse Alert

Wednesday, November 17, 2010

Simply Top

Venturing out on a sturdy limb is tonight's Elliott Wave view suggesting top is in...

NYA 5-min

"TOP" labeled above is meant to suggest something proving more problematic to Team Fraud could be knocking at the door. After all, the company whose IPO is creating buzz is heading into a buzz saw running across the Pacific ... where QE2 attacks Benito's "excess supply" in a Chinese market for American cars at risk of being sacrificed in trade war Fed policy ventures to precipitate.

Let's not forget, too, those capital starved pigs whose partners in Europe are being crushed. Their floundering cause lies behind a mysterious "flash crash" and its raid on "stop loss" positions (made easy marks in the electronic age). A new target arrives via a recently bankrupt company facing formidable competition — let alone an unraveling, global, commercial climate — with anticipation for such great things as only Joseph Goebbels could muster with little dissension heard from well-conditioned players who seem not to notice the calendar reads 2010 and not 1980.


So, what if five waves up from March '09 bottom were considered completed a little over a week ago? Granted, this might not produce the prettiest picture, but technical conditions helping substantiate this view are no less convincing. Both RSI and MACD reveal the same deterioration as is typical when a five wave advance nears its completion.

Channeling is seen to wave 1 peak (June '09), rather than wave 3 (as late as January, 2010). Indeed, peak momentum was registered during formation of wave 1 off March '09 bottom, so some rational case for this alternative can be made.

With this view, then, a 3-3-5 "irregular flat" up from November 2008 bottom remains a credible possibility. This — following (and alternating from) a 5-3-5 "zig-zag" down from October 2007 top — is seen forming wave B of an A-B-C corrective wave down. Next, then, comes a five wave decline forming wave C ... and index levels not seen since the 1987-1994 period.

This possibility, no doubt, simplifies the view forward. Likewise, May's desperate drive for capital (revealed with elevated volume rivaling that in 2008) remains foreboding circumstance in much the same manner as was revealed in July 2008.

So, much like occurred during the market's initial decline from May '08 peak, look for momentum (MACD) to deteriorate in a similar manner. As you can see, the range to be reached lies lower and is wider than that in '08. Most fitting the "c" wave upcoming, indeed.

Lo and behold, RSI has collapsed from its recent peak in a similar manner as occurred following its May '08 peak, too. Yet in the present instance relative strength's fall appears more precipitous. Again, this is entirely fitting the "c" wave set to unfold — one degree larger than the "c" wave unfolding from May - November, 2008.

This possibility is put forward with the lesson of 2008 well-ingrained: a market facing much risk has every capacity to rapidly fall apart to a degree most find difficult to imagine.

It was a failed Austrian bank in 1930 triggering a mad, global scramble whose end brought down the U.S. banking system in 1932. Oddly enough, continental Europe — Great Britain's playground — finds itself entirely vulnerable once again. Go figure.

Fast Money
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