12.05.2011 -- Interesting timing..

very interesting timing for S&P to put Europe on credit watch negative. Just as we were taking out the 200dma, S&P shows up with the news and causes us to reject it and sell off.

did we sell off because of the S&P news or simply because we rejected the 200dma? Classic argument.

considering S&P's history, I'm forced to wonder why the powers that be decided today was a good time to release the news on the verge of a break above the moving averages.

I'm forced to believe that Ben maybe knows he cannot let this market break higher as he knows he must continue printing in support of both the US credit market and Europe and he cannot be constrained from doing so because he is confronted with a surging bubble market and inflation.

but that's just tin foil consipracy stuff right?

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Key Levels

Upside -- 1265, 1300

Downside -- 1244, 1212, 1205, 1173, 1168

(been doing this blog 5 days a week for over a year now.. one consistent pattern has been when the Upside/Downside # of key levels gets lopsided, it almost always means a reversal is near. Not sure if anyone else has paid enough attention to notice this.. i only did because I write them every night... worth watching)

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SPX Daily;

There is our corrective channel. The picture has cleared up quite a bit overall. Usually the "clearing of the picture" is a bad sign for us technicians and especially Elliott Wavers. Clear pictures are often rendered cloudy.

The clear picture here is that we have a 5 wave down bottom at 1075. We appear to be in an ABC corrective, A and B are finished at 1293 for A and 1155 for B. We are currently in C.. now we have 5 waves.. so we either finished C or we finished 1 of C. I personally think we just finished 1 of C and are about to correct this severe rally and then finish up this patter for the rest of the month. However, if we are done with C, its a failed C as it did not reach a new high and we are about to tank severely. I just don't see that happening in front of Christmas. But all that is part of our "pretty picture" here. Nice and clear with timing and all.

I dont like nice and clear, it always makes me nervous when things look like a lock.

I outlined in Green where I think we'll go for Wave 2 and 3 of C. I don't know if we'll finish 4 and 5 of C at the end of the Month or in early January.

This ABC is a violent pattern.. typical of a bear market correction. Massive swings in both directions... swings that normally are moves the market takes an entire year to do and you get equivilent moves twice in 2 months.

Slow Grinding = bull
Violent in both directions = bear

There is no escape for the world from this mess.. there are only 2 solutions..

1) massive printing and massive resulting global inflation
2) massive defaults of sovereign debt globally (Europe, US, UK, Japan, + many smaller independent countries)

Neither of these options have good outcomes economically for the worlds industrialized nations. Massive inflation or massive deflation. One risks loss of confidence in the worlds fiat currencies the other cripples the worlds credit markets.. both risk systemic break down of global financial systems.

Fools.. the inability to acknowledge and fix this 30 years ago has turned a firecrakcer into a global nuclear bomb.

GL

CJ