SPX

SPX

Hamilton

SPX oct 2011

With the benefit of hindsight it would now seem that the first 5 waves down was completed in early October (4th?). From there we already have an idiotically large retracement of about 70% in 1/5 of the time it took to go down. This wave 2 can retrace almost all of wave 1 down but this is already big, certainly considering that virtually nothing was resolved. There was no “catharsis” to be found anywhere, either in the US or Europe, so perhaps it was the usual culprits in the plunge-protection-team that stepped in right at the edge and then kept pushing to force out the shorts. No other indexes are this close to their tops. Wave 5 down would have to start before the thin red line is crossed due to overlap. But in the favored interpretation wave 3 could start at any moment! Perhaps it even started today!

SPX (SPY), S&P500

Hamilton

spx (spy) aug 30 2011

We can forget about the triangle idea. Instead we either had a failed 5th and an a-b-c from there or the entire thing from the lows of Aug 8 is an a-b-c. 124 would be a rough target. I guess we missed all the good news.

1 Confidence in the US dropped to 44

2 It did something similar in Germany earlier this week and also in England today.

3 There is a legal question with regard to the legitimacy of bond purchases in the ECB (to be resolved Sept.7) that , together with the political untenable position of Mrs. Merkel assures, that the trillion or so euros needed to bail out the system will not be forthcoming.

4 Irene’s damage is minimal compared to the hyped billings but it is still 10 bln.  or so more than before.

5 Home prices in the US fall another 4.5%

6 The new head of the IMF insists that the banks need to get more capital, now. Mr Trichet is equally optimistic with his remarks that the system is shakier than ever.

7 The Fed just confessed that they are impotent, leaving only the administration to work things out.

And so on and so forth.  What is there not to like? Maybe it is just month end.

S&P, DAX and the FTSE Athens top 20

Hamilton

spx aug 2011

dax aug 2011

athens

The top chart is of the S&P, the one below of the Frankfurt DAX and below that the FTSE Athens top 20. During the fall the S&P lost exactly 50% of its value. The DAX lost 69% and the Athens top 20, 76% Not precisely the same but in the same order of magnitude. Interestingly every single wiggle occurs in all three charts. This relationship holds for the first half of the rebound, then Athens goes its own way. Is it perhaps telling us something??

The SPX and the DAX continue listening to the same drummer except that the DAX is more robust. So far it easily exceeded the B-wave point on the way down, whereas the SPX has failed to make that high.  Concerning the structure, both are undoubtedly working their way up in an A-B-C correction, that is a counter-trend move. In terms of symmetry, both could still forge their way up to the green circle; Athens is obviously complete and perfectly symmetrical. The SPX still has the time and could have one more spurt, perhaps as a thrust from a triangle. That is less likely with the DAX, which has decidedly broken a trend-line and there is no time left and there is no (finished) triangle. Also it would have to regain all the losses which i consider a fairly tall order. ( By the way, the difference in the red and green circles reflects how the individual A and C legs , and the “pause”in the middle are counted ).

Athens is a clear train wreck, and both the SPX and the DAX have outperformed to some degree. Many other markets have been far less robust. Normally one would expect a retracement in the order of 50/62%. The STOXX 50 may represent what is normal best. Here is it’s chart.

Stoxx50 Aug

The yellow area represents the 50 to 62% range. Here too the circle is drawn with a view towards symmetry for the entire corrective structure, it does not show all points where C=A. Here the high occurred 5 months ago in March, which , by the way, was anticipated!

stoxx march5

The 76% retracement is wrongly calculated due to the fact that the chart did not show the top near 4000. The blog can be referenced by going to the March 5th entry, or searching STOXX50.