Friday, July 10, 2009

Lots of non-traders agree....big downside in economy ahead

OK, last February lots of people were coming straight out and telling me how awful things were. And then we had a bear market rally. Don't fool yourself and don't be deceived, that is what is going on-- A BEAR MARKET RALLY. But also keep in mind...standard Elliot Wave principles can easily see the S&P going to 1050 AND STILL BE PART OF A BEAR MARKET RALLY. Now these last 2 weeks, when I suggest to "normal people" that there is more downside ahead in the overall economy....I have 90% enthusiastic agreement. That worries me since my core position is short, way short.

However there is one thing that Elliot Waves cannot see forward, nor other studies based on prior correlations. The financial system is in Deep Kim Chee (that's the nice Hawaii way of saying Deep Shit). There is going to another wave of mortgage defaults, and credit card defaults, and car loan defaults, and when Arnold Schwarzenegger cannot even give out an IOU, bond Defaults certainly of private enterprise and probably of many government entities. The charts can't "see that" and most people don't "know that" or at least they don't want to believe that.

Look at the "beggar thy neighbor" policies being instituted all around you.

A combination of ignorance, misinformation, and denial could lead to some serious DKC. And we don't know when this will happen, but the volume will be enormous in terms of socio-economic effects and sell off in the markets. And you best be ready in terms of your financial planning, your physical security, and your mobility.

What is the risk of expending energy to be ready, and then nothing really happens, compared to being on the brink, yet not getting ready?

1 comment:

  1. That's interesting. I've never used TA with the PC ratio. I just use it as a sentiment guage when readings get extreme. I do always change the levels of "extreme" based on market conditions. For example, now I consider a reading above 1.0 bullish, whereas a few months ago it would take a reading of 1.2 or more for me to think a short term bounce was coming. Maybe we're about to change the context of "extreme" once again here with this flag. I'll keep an eye on it. Tx

    By the way, great analysis on the S&P channel... I can appreciate that effort.


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