A Joe Granville Sighting ~ The Risk Averse Alert

Monday, January 23, 2012

A Joe Granville Sighting

Nice to see Joe Granville still in the game. His New Strategy of Daily Stock Market Timing for Maximum Profit was one of my first reads in the voodoo of technical analysis. Finding Granville presently quite bearish on account of his "on-balance volume," no doubt, is encouraging.

Now, being old school the Dow Jones Industrials Average is the object of his outlook. Appropriately enough, too, the Dow, the granddaddy of them all, ever so slightly today exceeded its intra-day peak of last July, much to my analytical chagrin...


Back in the day, the boys would call that a "C hair." It is what it is, and for this index means wave B (of an a-b-c Elliott corrective wave down from October 2007 peak) did not end early-July.

Maybe, then, for the Dow Industrials wave B ended on May 1st.

Or, maybe formation of wave B is extending. Per this possibility there are a couple alternatives. The least likely of these will have the Dow leading all other major indexes into nominal new high ground, post-March '09 bottom. More likely is possibility that, forming from March '09 bottom into last year's peak was but wave (a) of B [up], with wave (b) of B [down] presently forming since May 1st.

Rather than ponder nuances of these possibilities, let near-term prospects rest on the fact that, first, early-October 2011 bottom found fearsome technical confirmation on a couple key fronts such that only a die-hard monetarist monkey — a junkie for mis-priced credit — could shrug this off as being inconsequential, and second, 2011's swoon did considerably more technical damage than did 2010's, indicating underlying weakness increasing (as already was evident for months on end leading up to 2011 peak). In other words, let's not lose sight of the forest for the trees. Odds remain that, recovery from last year's setback will fail to match the market's bounce off late-June 2010 bottom. Indeed, even now there are several technical disconnects versus 2010's second half recovery. These, again, confirm underlying weakness is increasing.

Speaking of which, how about those Greek bond holders! From a 20% haircut to 50%, and now 70% while the Greek economy faces collapse as the critical flow of Iranian oil is set to cease on account of EU sanctions announced today. Greece has nothing to lose holding firm in its ongoing negotiations with well-dressed swindlers representing bond holders who risk losing everything. No matter what prospective Elliott wave variation is taking shape, a disorderly Greek default could deliver Granville's 4000 Dow points in a week, rather than take the entire year, as Granville suggests. Keep this in mind, because the possibility unquestionably dwells within the dark forest of longstanding, underlying technical weakness that, indeed, only has been increasing.

Fast Money
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