Every bit of technical evidence still is aligned with a dire, near-term outlook, and relegates the market's bounce, yesterday and today, likewise fitting this same view forward. Apparent both on the surface and under the covers, complacency's last stand aptly describes the moment.
Today's bigger lift with much less help than was delivered yesterday from Chicago also saw volume retreat to its evermore diminishing ways. I'm not convinced technical means available to coax a bid can forever carry on in the face of diminishing turnover. There comes a day when turmoil — upset — can be overcome only with such increasing interest as assures a positive turn of affairs is well-established and more likely to persist indefinitely. Quite unlike today's circumstance, three years into a market levitation defying a persistently fading interest.
A 38.2% pullback from its April 1st peak would sink the S&P 500 to around 875. We could be there by the end of June.
The Elliott wave count above leaves open the prospect of a wave C higher still to come, this completing an a-b-c corrective wave up from March '09 bottom. Believe it or not, banks and financials are leading my thinking toward this possibility. Not on any known fundamental basis, of course. Rather, strictly from an Elliott wave perspective does this prospect appear both reasonable and likely.
Coinciding with this outlook yet again finds the EMU weak link of the trans-Atlantic banking system threatening to slip deeper into its solvency crisis, which of course all too likely will be followed by a hyperinflationary deluge that, quite possibly dwarfs the liquidity flood of the past three years. Physical breakdown only more likely to accelerate in the aftermath, the shortage of financial assets to mask collapsing wealth will become only more acute. Nothing will make up for galloping costs, while additional resources to deal with increasing deprivation will fail leaking from the tsunami of liquidity propping up the banking system. At some point, of course, hyperinflation must cease. Then the stock market will collapse.
For the moment the euro-zone has a date with turmoil more threatening than anything yet. Upcoming French elections could prove a big upset — the kind of thing requiring a swindle to mend fracturing unity. The intended outcome no different: unabated hyperinflation, physical consequences be damned. If this proves the general way of it, then the prospect depicted above could be the way forward. Just how high wave C might rise in this eventuality will depend on how breakdown of the physical economy is managed. We'll cross that bridge once the upcoming throttling has run its course.
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