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Friday, December 30, 2011

SPX Update: Is Your 401(k) Ready for a 70% Haircut?

If you knew with pretty good certainty that the market was within a few percentage points of a long-term top, how would you behave?  Would you warn your friends and family?  I would... and have. 

Could I be wrong about what's coming?  Absolutely.  But here's how I lay out the logic:

1)  If my long-term technical work is correct, the market will lose more than half its value over the coming two years. 
2)  A rally that breaks the 2011 high would prove my current outlook wrong. 
3)  At present, the Dow is only 4.5% below its 2011 high. 

From my point of view, that's a potential risk of more than 50% loss vs. a potential gain of less than 5% --  define "no brainer."  And in actuality, my technical work suggests the market could lose much more than this, likely in the neighborhood of 70%.  Investors sometimes forget that if one's portfolio suffers a 50% loss, one then needs a 100% gain just to break even.  In other words, your portfolio has to perform twice as well to earn money as it does to lose money.  Bear markets can be hazardous to one's wealth.

Let's take another quick look at my long-term chart.  This chart is drawn using a technique called Elliott Wave Theory.  Elliott Wave was derived from decades of back-testing; during which R.N. Elliott discovered that the market's price movements create patterns in the form of repeating fractals.  Market prices are of course shaped by investor psychology; and people tend to respond to situations in similar and consistent ways, which is what forms the patterns.  In other words: history repeats itself.

A key factor on this long term chart is the wave which lasted from 2007 to 2009, labeled with the big red A.  This structure is called a "motive" or impulse wave, meaning its fractal consists of a structure formed by five smaller waves (see chart).  Under Elliott Wave Theory, this particular motive wave must be paired with another five-wave structure of similar size, shape, and direction.  However, there is currently no wave to pair this A-wave with -- so the implication is that its "mate" has not yet arrived.  This type of understanding is what gives Elliott Wave Theory its predictive value.

The current wave, blue Wave (2) could end anywhere within the turquoise target box, and may in fact have already ended.

 
The chart above represents the 10,000 foot view.  Moving into the shorter time-frames, the hunt is still on for the exact top of Wave (2).  The market appears to be in the process of completing this top, but there are still numerous paths it could take over the short term. 

Yesterday really didn't help much in eliminating any short-term possibilities, and in fact formed an inside compression day -- meaning prices never traded outside the range of the previous day.  The implication of this type of day is that buyers will show up at prices above Wednesday's highs, and sellers at prices below Wednesday's lows. 

My short-term target box was hit, and the expectation now is for Friday's session to end in the red.  An interesting seasonal fact is that the last trading day of the year has ended in the negative on 9 of the previous 11 years.  The lower blue box represents the next short-term target; however, this target would be invalidated with trade above 1269.37.


The market is still living within the black trendchannel on the chart above and that suggests the possibility that wave 4 of the black alternate count was completed on Wednesday.  I don't believe that's the case, but that's what KO's and stop losses are for.

The next chart I'd like to share is a sentiment indicator, in the form of the ISEE put/call level.  ISEE excludes the options purchases of market makers and big firms, so their numbers are specifically indicative of small ("retail") investors -- the investors who, more often than not, are the ones getting burned at the casino.  When ma-and-pop investors become heavily bullish, the smart money knows it's time to start betting the other way.  After all, Wall Street pros make their livings taking money from the little guys.  Oh, you thought their goal was to "help" you invest?  Sure it is!  And someday trained antelopes will pilot the Space Shuttle. 

This chart below illustrates the last 3 times ISEE sentiment reached these levels.  In two of the cases, it was at the July top, right before the mini-crash.  The third case was in September, when the market bounced, then made a new low. 

AAII sentiment numbers were also released yesterday, and bullish investors came in slightly above the long-term average (40+%).  Both of these sentiment indicators are at levels which have been consistent with bear market tops.



In conclusion, my long-term view for this market is quite bearish.  Given the fundamental stresses, such as international debt levels, LIBOR rates, the economic slowdowns in Europe and China, and the overarching threat of sovereign default, it appears to me that the charts are once again leading the news.  The TED spread has been at "financial crisis" levels for over a month, and is still rising -- so the stock market's continued elevation appears to represent some degree of suspended disbelief in all the real-world problems.  It seems to me that something has to give; and given the fact that the world's problems aren't likely to be cured overnight, that "something" is much more likely to be the stock market.  Trade safe.

The original article, and many more, can be found at http://PretzelCharts.blogspot.com 

244 comments:

  1. Good morning!  Future's are up .75 cents, woo hoo.

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  2. Morning PL. Another great update. Just wanted to mention that I too have been telling my friends and family members about this for months, but they do not believe me. I probably sound like a broken record to them by now, but it seems vindication is on its way.

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  3. ty. 

    Regarding friends/family... Use the little button at the bottom left of the article with the "M" on it and email it to 'em.

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  4. Futures are ALWAYS up Mr Silly !  When is the last time we woke up (at least the ones not in Maui, to see S & P Futures down, say 20+ ???????????????  Maybe August ?  Since them - up every day like the Sun rising.  Had dinner with some friends a week ago and was told Apple was headed to $450.  I chimed in and said not before it visits $250 and they looked at me like I had 3 heads

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  5. Thanks for this really clear explanation. I'm new to investing and have been following your blog for a couple of months and it's given me the confidence to wait in cash to make any long term buys until the U.S markets catch up with reality and we hit the bottom that seems inevitable.

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  6. Whoops- didn't mean to post my email... How do I get rid of that?

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  7. Hi, Rich, welcome!  I have no idea how you get rid of your email -- I think you just have to create a username instead.  :)

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  8. Besides - who doesn't want positive futures !  This is America and the future is always bright.  Tis why 70% of people surveyed thought 2012 would be better than 2011 and 99% of CNBC guests said the S & P would be heading up.  Change you can believe in, hope for the future !  All of that stuff is true, there will be better days - just don't think the timing is there - need 10% optimistic people and the bull parade on CNBC to stop

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  9. Seems about perfect for a top, though.  Future's so bright, I gotta wear a blindfold.  ;)

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  10. Morning Pretzel.  Wasn't expecting yesterday to close near HOD.  Hope today will be better as I have to cloof se my positions by end of the day.  From your charts, I guess you are expecting no higher than 1265 today but what is the possibility of sideway action and not much downside too (so trading within the black channels)?

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  11. Hi TJ, no real feel for the market today since it's still closed.  :)

    Sideways day is possible w/ downside in next session.  Odds strongly favor a move down today, though.  9 in 11 winners -- pretty good odds for a red session. 

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  12. Good morning PL, Thanks for update much appreciated. A couple of short questions ? I have been reading a fair bit of news lately and reading some various blogs. Its seems to me every one is expecting the market to drop in January, due to the earnings downgrades, turmoil in Europe, maybe downgrade in France and China slowdown. Would this be a bear trap as the what I can see is a lot of people thinking the market is going down big time.

    The other question is, If the elliot wave counts as predicted is saying its possible for the grand super cycle is near, would it be possible for the the central bankers ie ( ben ) to stuff this up, or does it just prolong it for another day. If the bankers keep wave c and wave 3 away how does this affect elliot wave.

    I am a great believer in your site and thankyou to all that post helpful information on this blog.

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  13. Sharon, thank you for the donation!  :)

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  14. Hi m-at,

    Based on the sentiment, as partially discussed today, I don't think "everyone" is expecting a big drop in January.  The majority are bullish.

    As far as CB intervention -- they could theoretically prolong things a bit, that's always possible.  I don't believe they can ultimately stop what's coming, though.  In fact, I believe the more they prolong things, the worse it will be when it finally goes down.

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  15. Ok shall wait for the market to start before I ask you the same question again :)

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  16. Thanks PL, Sharon is my other half.
    That is what I thought myself the world is going down!

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  17. Had a suspicion it might have been from you.  Many thanks, m-at.  :)

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  18. Look at Dow Futures on 10 minutes chart - perfect rising wedge with falling RSI - I think we print Red today :)

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  19. I agree with you. Ran a Jan bcs 445/455 on aapl Wednesday. Looking good so far.

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  20. PL, thanks so much for all you do. In Aug. of 2008, Bennett Sedacca wrote an article on Minyanville titled "Dead Banks Walking.". It was the most impressive predictive piece I'd ever seen written and was so convincing that I sold everything out of the market and spared myself the losses I would have incurred in the massive decline that immediately followed. I guess up til then I'd been your average buy and hold, long-term, asset-allocation investor. Since then, I've been led down the road of TA, eventually finding my way to EW.

    Unfortunately, Bennett Sedacca unexpectedly passed away in early 2009 at the young age of 55, but I will never forget what he did to help me and others protect our money during that time. Like your piece today, it was a warning that was completely free to the public. I sincerely hope that more "average" investors can heed your warning today and take the necessary steps to protect their hard-earned money from the market decline next year.

    After all, as they say "foretold is forewarned.". Happy New Year and thanks for building this site and all the hard work you put into it.

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  21. You probably weren't a reader back on September 19, when I predicted Apple would make its top at 420 (see chart) in October (almost to the day and to the dollar!)... but that's another call I'm pretty proud of.  :)

    My LT target is 250-280.

    http://pretzelcharts.blogspot.com/2011/09/apples-new-all-time-high.html

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  22. I couldn't believe it when I saw the survey also!

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  23. good early am pretzy,

    i was wondering if you generally give any additional weight to the first two trading days of the year, or if you view them as any other trading day?  some say these days represent an extension of the santa period, but in recent years i believe we've had large swings in both directions.

    i know your preferred count calls for an imminent trade into the 1240 range, but just wanted to know if the early january calendar influences you at all. 

    happy new year!

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  24. Finding the bottom is very hard, unfortunately. But I guess you look at the EW at a suitable degree..., and if you scale in your buys.

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  25. I don't give additional weight to them.  Historically, first week of January is still fairly light volume and bullish. 

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  26. The bull-bear spread is something like 20%.

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  27. FYI ....

    Yesterday, there was a show down between Hungary and IMF. Hungary is totally  decimated by their debt burden and wanted to nationalize their banks to lower the interest rate and print more money. IMF fired their shot across the bow threatening to withhold their bailout funds for Hungary. The EU president also warned that Hungary is heading for the wrong direction and risked being on its own.

    A Hungarian default would send European banks wheeling and make Greece a tea party.

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  28. Good info, ty.  I remain the world's worst "news watcher" so I appreciate the updates you guys provide. 

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  29. Hi Pretz, good morning. Curious what made you change your views from yesterday to today in labeling  the SPX ST Alt 3 and Alt 4 whereas yesterday was labeled as Alt (1) (where you label it Alt 3 today) and Alt (2) somewhere above 1229 KO for bullish Alternative? Seems with today count you are expecting the bullish Alternative to end at ~1290 and be it for Minor (2)?

    PS. I have also been telling frieds and family to guard safe their 401K into next year and generally speaking the answers I get are: "So what's the alternative, go to the matresses and wait? Market has its ups and downs, we'll be in bull market down the road!". I think to myself: Matresses here we come (at least until Wave C has found bottom) :)

    Great work as always, thank you for what you do!

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  30. Actually, I generally find true bear market bottoms much easier to predict than tops (once we get out of the Wave (2) corrective declines, those aren't "true" bottoms like early October was).  Probably because you're working with motive waves (down) in a bear market, as opposed to corrections (up).  Corrections are generally more difficult to predict because they can do screwy stuff (like double zigzags) that motive waves can't do. 

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  31. Morning PL and thank you for the great work. I was not a reader back then and it was only thru  Minyanville that I found your site. I am looking to do a goog 790/800 bcs for Jan. today. I trade credit spreads and your work has helped me tremendously. Thanks again and I do enjoy freight trains when I am out your way.

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  32. Wow! Thanks for your "news feed". I have a day job so have no time to read the news. Keep your news commentaries coming!

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  33. Hi BigO.  Changed it not in my mind so much, but largely to make folks aware of the possibility... and because of the trendchannel holding.  I'll reasses based on the next couple sessions. 

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  34. Hi Pretzel, I am trying to figure out how to trade ES on OPX.  Was going through the tutorial but it didn't really teach you how to find out about the margin requirements or size of each futures type.  For e.g. for ESH12 what is the quantity of the underlying for each contract, maintenance margin, etc.  Mind helping me out on this whenever you have some time?

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  35. It's amazing how much they actually *sound* like freight trains, especially on certain days. 

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  36. morning all! let's start with : H A P P Y   N E W   Y E A R!! Great read as usual and let's see if we print red today. It should IMHO, or well be so red on tuesday it ain't funny anymore. Since I'll bail somewhere half-way today, I want to thank PL for all hard work and great stuff he's been providing; helping us navigate the toughest market in years. If you lost money this year, don't worry you are not the only one. Let's hope 2012 is much more directional - up or down doesn't matter as long as it has direction- and that would make PL's life much easier too!

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  37. Nice article, Pretz, was kind of you to print a few words for the unintiated. If you could save a few moms and pops from losing their life savings, that would be good karma.

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  38. No kidding and they are fast. Could not believe it till I was out there. Once again, great work and thanks for all the hours you spend.

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  39. ES $5k margin, $50/per point per contract.

    You should just give me your account and I'll manage it directly for you.  I'll split the profit w/ you.  Pretty sure it would take less time, and we'd both earn more.  :D

    I'm kidding, of course!  Definitely need some type of disclaimer on this post, lord knows what type of regulatory violations that joke entails.  NOT A SERIOUS SUGGESTION.  :)

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  40. ty, Arnie, Happy New Year to you to!  And yes, a trend would be much nicer for all of us.

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  41. So yes, btw, I should do the official:

    Happy New Year to everyone!  :)

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  42. hahaha. honestly i would :P
    i somehow figured that out.  but i realised my commission and fee is about $60 (which is hefty i think compared to my rates for stocks and options).   just out of curiosity, what is your commission rate and fee like?  I am guessing you must have a better rate given the freq of your trades

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  43. I figured since everyone's doing their "next year's predictions" and the majority of ma and pop investors only hear the crap from the shills who are out there *selling stocks*, it might help them to hear the other side.  Hopefully it saves somebody a few bucks.  I remember talking to people in '08 who lost a good chunk of their life savings... it was depressing at times.

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  44. Pretzel you must be anticipating this question so to save you the suspense: what's the feel so far :)

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  45. Wishing you a great year next

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  46. hey guys, who's buying????

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  47. Happy New Year to you too pretz!

    Thanks for all of your hard work.

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  48. This can't be right.  Unless it's something to do w/ you being out of the country.  Your commission should be about $7... you're telling me you have to pay a $53 fee?

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  49. The question is "Who's NOT selling?"  Answer: Everyone with profits.  They are waiting for next year to sell in order to avoid paying the capital gains for 2011.

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  50. "70% Haircut" - that title should peak some interest

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  51. lol, makes sense. well, seems like another directionless day today again, or what?

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  52. can it get more boring than this?

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  53. We may head down late in the day (after 1:30 or 2:00 PM) as market participants try to get ahead of the expected selling in 2012. But who knows what may happen over the weekend before Jan. 3rd market open.  I just read this regarding China on Bloomberg:
     
    “A reserve ratio cut is likely to happen by Jan. 3, before markets resume trading,” said Li Wei, a Shanghai-based economist with Standard Chartered Bank.
     
    How the market makers / news outlets will spin this (if it happens) is anyone's guess.  Would we open at 1300???

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  54. Pretzel, love your blog and have been watching the community dynamics here for a while.  As a fairly new trader, I have a question for anyone wishing to comment or offer insight or wisdom (of course not trading advice).  I am currently holding a good number of shares FAZ with an average cost basis around $56.  Yes, looking ridiculous right now, but, I'm learning the lessons and have learned alot with this!  If I go ahead and bail on it today, I could use the $70,000 ST loss against my roughly $70,000 short term gains for the year and avoid a tax consequence.  However,  if we are truly inches from a top, that seems foolish, yet tempting, since I am so far off.  Anyone with the patience to respond?

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  55. We may head down late in the day (after 1:30 or 2:00 PM) as market participants try to get ahead of the expected selling (due to profit taking/ capital gains postponement) in 2012. But who knows what may happen over the weekend before Jan. 3rd market open.  I just read this regarding China on Bloomberg:
     
    “A reserve ratio cut is likely to happen by Jan. 3, before markets resume trading,” said Li Wei, a Shanghai-based economist with Standard Chartered Bank.
     
    How the market makers / news outlets would spin this (if it happens) is anyone's guess.  Would we open at 1300???

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  56. Take the loss!!!  If you are convinced that the market will drop and want to invest expecting a downfall, purchase another bear ETF such as SDS or QID (to avoid wash sale rules).

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  57. Hi, and welcome!

    $56?  Ouch.  Must be holding those since October?

    That's a tough one, since you have the tax factor at play. 

    I don't mess w/ those triple inverse funds.  Best play with those types of funds is to short 'em since they drop like rocks when the market goes against them.  Short the triple longs when the market's going down; short the triple shorts when it's going up.  If you can find shares to short, that is.

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  58. I'd say also, close out everything to simplify your taxes - and start the new year with a clean slate. I wouldn't bet too heavily on the market tanking right away anyway, January effect and all. And if China cuts rate, like the other members here say, well, that would jack it up for a day. EW is a form of statistical analysis and individual events hit whenever they do in outsized ways at the moment when they hit.

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  59. I would take the loss in '11 and get back in a different vehicle on the open on Tuesday (assuming you are still bearish Tuesday a.m.) as per the other Guest to avoid wash sale rules.  Your only real risk  is gap down Tuesday a.m. that would result in a greater profit than the tax liability on your ST gain. 

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  60. I would concur with this.  Of course, I'm supposed to say that you should talk to your broker, accountant, and priest as well.

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  61. They did that once already and their market still goes down most every day

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  62. Could my gold and silver shorts get their ass kicked any worse ? Enough already - geesh

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  63. And Spain is finding out their deficits are bigger than 'expected' :).  Ole`!

    "
    MADRID (Reuters) - Spain's new government said on Friday the public deficit for 2011 would come in at 8 percent of gross domestic product, well above a target of 6 percent, and announced income and property tax hikes and a civil servant wage freeze in response."

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  64. GGekko, the concern is what happens to U.S. market prices on the news, regardless of whether it is effective in solving any problems.  Remember what happened on Nov. 30th, 2011?

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  65. Again, this is all speculation... no reserve action may be taken by China.  Its all smoke and mirrors right now.

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  66. Spain warned that next year's budget deficit will be 8% of GDP, not the 6% promised. The government pledged to raise taxes and reduce benefits further. It's a downward spiral.

    Italy's new technocratic PM asked the Euroland countries to boost the bailout fund. Saying that it is insufficient to do the job at hand - especially with the pending sovereign downgrades. Which will reduce the fund's ability to leverage.

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  67. Does some huge fund manager get a big bonus if the SPX closes the year between 1262 and 1263?

    I'm going to head to bed I think.  That'll give the market a chance to decline.  Obviously, my continued sacrifice of sleep is holding it up.  :)

    Actually, it might be rolling over now...

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  68. Gold and Euro short covering this morning. It may be over if you go to bed. :)

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  69. ANON?????? You out there? Somebody please get a picture on a milk carton or an Amber alert!!!
    I am getting concerned.
    Rebel

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  70. Ha!  Ya I've been wondering that too...

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  71. What would this blog be without ANON. We love ANON. He kinda reminds me of the Anton Chigurh guy in No Country For Old Men.

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  72. The divergence between TNX and SPX, NDX, RUT is getting wider. Someone is terribly wrong here. All indexes aligned at the bottom on the 20th. TNX is the only one headed back again. Any thoughts on this?

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  73. lol, sleep well, we've got a small pullback in the cards now.

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  74. Treasury bonds looks ready to breakout in price to the upside, (yields to the downside). A similar situation occurred in late July right as the market tanked. Perhaps another selloff is coming?

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  75. Historically, the bond guys have better record. But that's not a certainty.

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  76. Some bond bulls are of the opinion that US 10-year can go all the way down to 1.20-1.5%. That is basically free money. :)

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  77. And Hungary also getting ready to go over the cliff.  Coming next year - pictures of  Hungarians with wheel barrow's full of Forint's going up the street to buy a loaf of bread.  Their plan is brazenly simple: politicize the CB so it can print as much ccy as needed to pay off creditors/suppliers/workers.  Thus, no IMF loans needed!  If they only had the Bernank in charge of their CB, they wouldn't need to change the laws to accomplish this...

    "
    BUDAPEST, Hungary (AP) — Hungary's Parliament on Friday approved a disputed central bank law, as well as other legislation which may hinder upcoming talks with the International Monetary Fund and the European Union about financial support."

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  78. lmao

    But seriously, if this is the trajectory, everyone who could would have distanced themselves from them now, so this event will no impact whatsoever outside of Hungary. Correct?

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  79. Guess who loaned them the money? :)

    By now, I think the world is resigned to the fact that Euroland will be a major drag next year. What it wants now, is for them to come up with a credible plan. They don't have to solve the problems all at once. Just be nice and steady - no more heart pounding whack-a-moles.

    Even that may be a tall order. :)

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  80. Intraday wave count ....

    I'm waiting for 4 to be over and take profit at the end of 5. Am I counting it right?

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  81. Closing call: 1258 - flat for the year.

    Seconds?

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  82. Italian 10 year back up to 7.11%
    Hungarian 10 year 9.9%

    Bad headlines coming

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  83. It may make the Greeks, Irish, Spaniards, Italians drool with envy...:)  At least initially, until their ccy is worthless and there are riots in the streets.  Well, the Greeks won't mind that last bit, that's just a normal day at the Acropolis for them.

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  84. What is it about light volume holiday sessions that the market just hovers and traces out a four point range?  We've traced out a two point range for four hours now. One gets the feeling this is just the computers doing the trading today.  Will have to wait for the adults to return next week apparently.

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  85. How many pundits last year predicted a wild ride in 2011 which would end with the S/P basically flat for the year?  I also wonder what % of  US domestic equity mutual funds beat their benchmark this year?

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  86. Pretzel, I was hoping for a quick clarification of your three-point logic.  If I were a bull, which I'm not, I would interpret #2 and #3 as follows: The market only needs to move up +4.5% to invalidate point #1.  In other words, it won't take much to prove you wrong.  So, if you're right about the January effect, then you'll be proven wrong pretty soon.  Moreover, I would point out that the risk reward isn't +4.5% vs. down 50-70%; I would say that it's whatever upside comes after your upside knock-out level is breached vs. some other alternate count.

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  87. Cudos for the very good call on the post 2 pm drop!

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  88. Ah, good to be released from that bot triangle.  What a waste of everyone's time.  And that decisive push out of it seems a good preview / indication of what sellers will be doing to longs all next week.

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  89. Just pulled the plug. Watching wave 4 was like watching paint dry. And now looks like the sucker is on the "a" wave up.

    Happy new year to all.

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  90. Happy New Year everyone!  It just dawned on me that this would be my last chance to say that with the markets still open, lol.

    Some of you might be interested in an interesting analyst named Erik McCurdy.  I really like his style because although he's quite knowledgeable about EWT, it makes up only a small portion of the inputs that go into his quest.  And his quest is to identify cycle highs and lows which allows him to project a short distance into the future with his best opinion about 'when' those might happen.  His own website (Prometheus) is a 'paid for' subscription service and I wouldn't bother you with a link like that.  But 'this link' is to a recent short article that he published on Global Economic Intersection.  And of course it's a freebee.  By subscribing to GEI's nightly email, I get a very clean email with a  short list every night of the new articles published on GEI that day.  Most of the time, that includes a short article by Erik... and of course they're free that way.  I honestly think all of you will at least find it interesting and probably helpful.  In the name of honesty and full disclosure, I can tell you that I know Erik vaguely through Seeking Alpha and have exchanged a few messages with him.  I know him only slightly better than I know Pretzel, which isn't very much yet.  But he's a great guy and I like his work.  Hopefully you'll get something out of his nightly reports too:
    http://econintersect.com/prometheus.htm?utm_medium=email&utm_campaign=gei+12-29-2011&utm_content=gei+12-29-2011+CID_fa8d66c7be31e3d649d522f8e4e0e361&utm_source=newsletter&utm_term=Stocks+Retreat+from+Strong+Resistance+Level

    Have a great weekend and don't get too tanked.  On second thought... go ahead :-)

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  91. being the restauranteur you are brian.. what's your feeling about the actual state of the economy?to me, the "real economy"  presently seems much stronger and more resilient than a lot of people acknowledge. 

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  92. Bastiat,

    I am very interested in hearing about the reasons for your positive outlook.  My strategy in trading VIX generally has been that the market will not die an absolute death; but lately I feel that the market will have a heart attack soon, recoverable but still a heart attack.  Ever since feeling this way--based on seeing what banks have been doing and the way the market has been, my trades have not been as profitable as they would have been. 

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  93. Brian, I hope you are right.  It looks like there is a struggle between the two swings at around 2:13 and 3:00.  It would suck if that were the new bot range... lol

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  94. well mind you i was referring to the economy and not the stock market. 

    everything is local and anecdotal.. i live in milwaukee wi where the housing bubble didn't do near the damage as in other parts of the country.  here things are decent, malls and restaurants are busy, unemployment is relatively low, confidence seems high. 

    one of my favorite gauges of economic activity is the weekly rail road traffic report.   rail traffic seems to be surging into the year end.

    http://www.aar.org/NewsAndEvents/Freight-Rail-Traffic.aspx

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  95. Happy New Year to everyone here!

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  96. The US economy is not in recession. It is growing, albeit anemically. Otherwise, the stock market would have tanked, big time. Globally, the markets tanked double digits. China, for example, was down 20%.

    In contrast, the US stock market is flat. Which is quite unbelievable.

    Having said that, the stock market is a discounting machine. It smelled rat and is not liking what is coming down the road - from all over the world, not just the Euroland.

    Happy new year.

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  97. Nice collapse at the death might just make it easier for the fundmanagers to post a profit in Jan ;-)

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  98. Son of a gun, SPX closed at 1257.59 - down 0.07% for the year.

    A  lot of rowing and peddling for nothing. :)

    Happy new year.

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  99. Closed out of all my trades. 

    Happy New Year everyone!  Best wishes for profitable trades in 2012! :)

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  100. Did anyone see the cute little Head and Shoulders the bots printed for us, waving Buh-Bye to 2011?

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  101. Anyone holding onto their shorts into the new year?

    Ps happy new years to you guys and gals!

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  102. Actually 1257.60, down 0.04 points for the year!  As close to being flat for the year without actually being unchanged.

    Get ready for fun trading in 2012.  Happy New Year everyone!

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  103. It's magic! We printed a perfect doji for the year.  I am sure someone messed up the bots goal of 0.00% with a large trade at the last millisecond.  :b :D :P  Good call on your prediction of SPX at 1258 by the close.

    Happy New Year!

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  104. I am holding short ES position over the weekend unless/until SP breaks 1269.37 ~ 1264.25 ES.

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  105. Holding some IT TZA that I bought in the mid 25 range. Not a big position, but comfortable hanging on to it. Hoping to add very soon in the New Year once everyones hangover goes away and their eyesight clears and they see the Euro train driven by Sarkozy with Merkel on the front screaming 'AUSTERITY!!!' coming right for them, they through all their holdings into the wind and run for the cover of the US$.
     
    Might take a few days, but am comfortable that the moment is coming. Odd feeling comfortable about inpending doom!
     
    Happy New year all

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  106. Fantastic summary, Pretzel! Exactly the same logic I have been using with my friends as well, but of course without a widely read blog like yours, I merely get weird looks and some mutterings about being a nutter...

    A quick comment about your long term view, if I may.

    I just did a similar "forecast" for myself a few days ago, and for the want of any better information, I used the same timings for the next wave down as in 2008.  In that year the market took about 6 months to go from (2) to (3), whereas your forecast profile has the market going from your blue (2) to the grey (3) in about 10 months.

    May I ask if that is deliberate timing, or just the way the lines worked out? I am thinking that the next wave could be (or rather, "should be") more violent than in '08.

    I realise that trying to get the timing right on such a long-term thing is always going to be fraught with danger, but it's something that I like to do, especially when there is a similar example in the near past.

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  107. Here's a fixed up copy- feel free to use him as a mascot for next year...  ;-)

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  108. Very funny! - Nice work.

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  109. Hi Rod, first off, welcome!

    The logic is if one went to cash now, and the market moves up 4.5% to invalidate my long-term count, they could always buy back in.  So they would only have missed the 4.5% move.  Hope that makes more sense now!  :)

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  110. Hi Jed -- just the way the lines worked out.  As it says on the chart: just a guideline, not a roadmap.  I was really trying to illustrate the price action moreso than the month-to-month timing.

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  111. I'm short.  Based on the charts, looks to me like a gap down open may be in the cards next session.  Any fund managers who needed to prop up the market into year end can let go for the New Year.  :)

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  112. LOL -- looks to me like he's being held-up.  Maybe even more appropriate than waving bye-bye.  :D

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  113. Held-up as in "Hand in the air, this is a stick-up!"

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  114. "no more heart pounding whack-a-moles" -- very nice!  The writer in me appreciates a good turn of phrase, and that one's fantastic.  :)

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  115. Also, I'm not anticipating much of a January effect.  I mention seasonality at times, but my analysis isn't based on it in any way.  The first week of January tends toward a bullish bias, just as Christmas week does, just as Thanksgiving week does -- but I give that limited weight in my analysis, and I'm *definitely* not expecting a face-peeling 5% rally by any means.

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  116. Thanks to WL for the donation, and Happy New Year to you too!  :)

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  117. Andrew, many thanks for the 2nd donation!  :)

    Wishing you a prosperous New Year!

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  118. Happy New Year Pretzel.   I've tried to post today but for some reason they're not showing up.   Is there any problem I'm not aware of?  It contained a link and I'm wondering if that's the issue.  In any event, thanks for a heck of a good summary.  All the best.

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  119. you too pretzy, thanks so much for everything you do.

    hope you get some well deserved r&r with the fam this weekend

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  120. Hi PL, found your site last week.  I've back tested your calls for the last few months and am simply amazed, got your site bookmarked.  I was just reading your long term Dollar analysis and am yet again immensely impressed.  I do have a question.  Lately the market has been vapor locked on the EUR/USD vs. equities relationship.  Based on your USD Oct. 29th chart which appears to be unfolding correctly, you expect the Dollar to top out at around 84 in the next month or two.  I'm hearing a lot of chatter about a massive short interest on the Euro.  If that short interest should unwind, I'm assuming that would cause the Euro to rocket and the Dollar to plunge.  Are you expecting such an event to occur soon?  If such is the case, that would signal a full risk on mode for equities.  If your chart is predicting a C wave down to challenge the October 2011 lows soon, then it would have to be a very powerful and fast move down, no?  Especially if you're expecting the Dollar to peak around the same time at 84.  I'm thinking any sustained rally in the Euro will be very powerful once it bottoms.

    Sorry for the long message.

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  121. thats definitely reassuring to hear. I was out all day so I decided to let them ride as well.

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  122. I can't get a comment to post Pretzel.  I think Disqus has it in for me thanks to flagging on my good comments on another site.  Damn it's aggravating.

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  123. Large TZA position and calls on TZA and VXX. Will add more upon confirm of downturn. Loaded for bear so to speak.

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  124. PL,

    Just a note to wish you and your family a fantastic 2012.  May the year bring you health, safety, and happiness.  Really wanted to get a donation off to you (specially after your hosting troubles), but I bet the farm in September (before I found your blawg......as many people have mentioned here.....we are are all big boys ...and girls...so dont' feel bad for your mistakes).  Needless to say, the farm is gone and mamma told me to take bessie to town and trade her in.....at this stage of the game, I'm inclined to take the magic beans, but being as I am holding puts with a Jan OPEX, I will hang tight (my broker eliminated my option account......so the only ones I have left are the ones I bought prior to november.....ouch!!!...).  Have some fun this weekend and watch and play with your kids.  Hopefully 2012 will be an inspiring year!!!   Thanks for your insight!

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  125. Keeping mine too... I'm slightly in the money, but thought it not worth it to cover here...

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  126. HNY...and thanks for your help...Did my utmost to direct my family and friends to your excellent info, but unfortunately only had a couple of folks actually act on the info by adjusting their 401(k)/403(b)'s to the least harmful of their options. Forewarned is forearmed. Thanks again for your great info.

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  127. Rebel,

    I closed out of my long VIX calls for the long weekend, but plan to get back in at confirmation like you.  I just didn't want to hold over the long weekend.  I suppose this friday/weekend would be one of those times one asks themselves if they have the guts to add on risk for greater profit with their strong convictions of a down turn, or if one should take a profit and ensure their  capital will be there for trading the next session.  I've tried both roues, and though I am still ahead for the year, I have been humbled to get my dicipline in place to preserve my capital and grow steadily. 

    Mavrich,
    Thanks for asking the question.  I was very interested in what everyone would do. 

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  128. PL,

    I am glad I can do it; and plan to do more when I can.  As I said, I really appreciate everything you are doing and the wealth of knowledge and enjoyment I get from reading your blog.  This group of like-minded individuals you have brought together is amazing!

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  129. On a related note on preparing for a market drop, I would be interested to hear what actions some people might be taking to prepare themselves.  What are some of the things others are doing? Buy gold and hold? Allocate to "safer" mutual funds or bank CDs?

    For my 401k (serviced by Fidelity Investments) with my current employer, I am setting up "BrokerLink" at FI to associate with my employers 401k at that allows me to directly manage the 401k.  Normally, people have a selection of FI mutual funds to select from for the 401k, but I just don't think leaving my money in a mutual fund is enough to protect my money in such a down turn.  Once set up, I plan to trade with  that 401k account tax free until I withdraw at retirement age.  I will be doing this to another 401k from a previous employer as well (after I bring it over to FI).   Not all employers or brokers allow you to manage 401ks directly.  I do not mean to advertise for FI at all.  I am mentioning them because I don't think all brokers allow you to directly trade in your 401k.  I believe your employer would also need to allow your broker to do that.  On a side note, FI is very expensive with their options accounts. :(  I suppose if you make enough profitable trades, the ability to directly manage your 401k might outweigh the commission costs. 

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  130. haha... that is awesome!

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  131. If my recent experience with FI helps, I would caution you against using Fidelity as a trading platform.  They are more suited for long-term buy/hold strategies.  Unless you have well over $25,000 total in your account, you'll get hit with restrictions on day trading, especially if you trade on margin.  They also take 4-5 days to "settle" transactions, and that will distrort the value of your cash on hand, and what your purchasing power is.  It is very difficult to be nimble this way...unless you have enough in your account.  I'd say minimum to be comfortable is $40 - $50K so you can protect yourself against any major market swing.  Otherwise, you may miss important buy opp's like I have recently.  If you want to trade actively, I would recommend another platform.  If you want to protect your portfolio with Fidelity, rebalance your positions to less risky allocations and just let them sit there...as painful as that can be in a fast-moving market.   BTW, I'm not an advisor, and this is not advice...blah, blah.

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  132. Hi Juan. I don't think the $25k minimum and restriction on patterned day trading - 4 within a rolling 5 day period - is a Fidelity hang up. It's federal law, I think, and you'll encounter that with any broker. I also don't know about the 4-5 days to settle because again, I believe federal law requires settlement in 3 days. I didn't like Fidelity for other reasons. a) They wouldn't let me trade options, not even buy them, in my IRA account. b) Their commissions are expensive. c) They don't give you their real platform unless you're "premium" which means a hefty account balance. Switched to TD Ameritrade.

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  133. William, I asked my broker about 401K restrictions to only a small selection of funds. They said the restriction policies are whatever the employer sets. They just comply and adminster. The restrictions includes not being able to rebalance the 401K more frequently than once a month. The idea behind the employers set of rules is that they don't employees to lose the savings by trading or speculating or whatever you want to call it. I call it stupid. Nevertheless, I can "rebalance" over to 100% cash - which I did to avoid the 2008 crash.

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  134. I don't like buying SPY puts or calls because of the spread I have to pay the market maker. However, it's the only way to be nimble as you described. Without a tremendous amount of capital, a couple of trades will put you on the sideline for days, even with triple leveraged ETFs.
    I took my account off margin last week because of the need to avoid the patterned day trading threat. If I'm leveraging from options, I don't need the margin from the broker to have meaningful trades. I'm trying out cutting back on holding overnight. Probably in the day trades, option time value doesn't decay, or at least not perceptibly.

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  135. I agree about the federal regulations.  Other brokers have let me trade right away prior to "settlement" by loaning me the difference at a very low interest rate.  Options (with a taxable account) are what killed me with Fidelity...and their commisions are expensive.  Even their "real" platform, ActiveTrader Pro, isn't all that it's cracked up to be.  They have these stupid rules where they won't allow you to trade on-line if you have a minimum margin requirement, even if you do have the cash available in your account, but they'll fill the order for you on the phone (cash) for a bigger commission...after wasting about 30 mins or more of your time, although there are some things they won't let you buy, like some leveraged ETF's.  I think they really discourage active trading.  Bottom line, there are other better alternatives.

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  136. re "Other brokers" - Right, with TD Ameritrade, under certain condition which I've never been able to figure out, even without a margin account, they will lend you their money to trade immediately after selling a prior position. But it's one shot, meaning that if you then sell that, you have no buying power at all immediately.

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  137. Taking it off margin is something I'm considering.  BTW, where is that picture of the dust devil from?  Takes me back.

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  138. Happy New Year to all of you and then let's see what's coming on

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  139. THANK YOU, AS YOU ARE IS 1 QUASI-INTELLIGENT AMERIKAN. 
    BUT I AM WORSE THAN CHIGURH, I WOULD EAT HIS SPLEEN.
    ALL THAT BULLSHIT ABOUT A TOIN COSS WAS FAGGOTY,
    HE SHOULD HAVE 3 HOLE FUCKED HIS ENEMY'S WIFE,
    NOT KILL HER.  LET HER LIVE THE HUMILLIATION.

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  140. The coin toss was his recognition that chance has a role, even in a pre-determined line of development that a super conscious being might know and/or determine. It reconciles the active/passive duality. As traders, this should be an absolute experiential truth.

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  141. That picture was from the web ;-)

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  142. Happy New Year to everyone!

    Answering a question from below about my understanding of the state of the 'real economy':

    The recession basically wiped out all frivolous, marginal and unncessary businesses ventures.  And made most companies reassess and trim those non-performing parts of their businesses.  This was HEALTHY.  The creative destruction cycle of a freee market economy.

    And on a basic personal / household level the same sort of reassessment happened.  Frivolous expenditures that add little long term or meaningful value were dropped.  Core and necessary expenditures were given priority.  And the home balance sheet has generally improved.  Though that process tends to be a slow one.

    What we are left with now is essentially the core and necessary economy that enables everyone to live their lives and function.  And those businesses that are outside of core and necessary that are still left standing (most respectable restaurants, my line of work, fit this description) are probable pretty fucking good at what they do and therefore can capture the leisure and lifestyle expenditures of the populations they serve.

    So in a sense the economy is 'healtier' insofar as how business and people operate are more sensible. 

    That being said, it's just not as easy to make money in this world as it was several years ago.  Any business owner will tell you this.  The way people spend is far more sensible.  Meaning there is greater thrift and economy involved.

    So in a sense, yes the 'real economy' is functioning okay. 

    But it's also a FRAGILE economy that will surely descend into another tailspin from another financial shock and meltdown. 

    And in a deflationary crisis environment, our economy WILL NOT weather it well.  The strongest businesses will survive.  But millions more people will lose their employment and a multitude of other businesses that just barely were able to hang on through the current malaise will certainly falter and close. 

    In that sense that we are doing 'okay' right now WON'T MATTER much when the system finally unravels and exposes itself for what it really is.  A fraud and vote buying scheme that has been making payoffs to constituencies who are now wantonly entitled and dependant using funds that will never actually be repaid EVER.  Or which will be repaid in a massively devalued currency.

    What this would mean in most likely probable outcomes is:  massive deflation that reduces the prices of just about everything to where they SHOULD have been all along. 

    To then be followed by massive inflation of the currency to essentially write down the debts (which will be the same thing as default only it will be under the cover of the Fed's printing press). 

    So you get the value of everything you own wiped out. And then you get the value of the dollars it's priced in wiped out as well.  The worst all possibilities. 

    Which is the natural evolution of a scheme that is built upon CONFISCATION, ENVY, FEAR, POWER, AND IMPOVERISHMENT. 

    Keeping voting blocks impoverished and wanting and feeling vitcimized, entitled and dependant.  And the power structure supplying the benefits to those voting blocks through various forms of confiscation from everyone.  And especially from the actual wealth creators in our society.

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  143. William, rather than bringing in 401k's from previous employer(s) to your current employee 401k plan, you would have much more/faster control, lower commissions, and the same tax benefits by rolling into a self-directed roll-over IRA at an online broker.  Bringing your prior 401k's into your current employee 401k is the equivalent of trapping your retirement money instead of setting it free... 

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  144. If it were me my entire 401K would simply be in cash or cash equivalents.  Or in defensive and inflation proof ventures.  First we'll get massive deflation though.  Inflation comes later.

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  145. Yes, TD Ameritrade is much better than most other brokers in this regard.  Anything you own since yesterday, you can sell today and reinvest the proceeds today.  But if you sell what you bought today, you have to wait the customary 3 days to use the proceeds.

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  146. looks like some dry lake bed somewhere.  Long time ago.  Far, far away.

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  147. Is that how it works? I'll have to keep close tab on it to see if it fits this model.
    re. Not having a margin account - One advantage I see is that if you're not borrowing from your broker, you never put up anything as collateral, and so nothing in your account can be hypothecated. That's only true of the agreement as TD Ameritrade worded it, not as MF Global had it - the two are drastically different. So at TD Ameritrade, if you don't have a margin account, you're safe from hypothecation risk. That's my mostly conjectural understanding but I'm not sure at all since I can't understand any of the legalese. Any comment on that?

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  148. I ELIMINATE MY COMMENT, ON YOU BEING INTELLIGENT.

    DESTINY HAS A ROLE, WITH A COIN TOSS OR NOT.
    HE WAS ALWAYS REDUNDANT, BECAUSE---
    THAT WAS HIS PSYCHOSEXUAL
    PERSONAL STOPGAP.

    CHIGURH EXHIBITED NO SEXUALITY.
    HE WAS STUCK IN HIS OWN TIME AND SPACE.
    WHY?  WHY HIS METHODIC PLEASURE IN KILLING MEN?

    BUT HE KEPT PUNCHING ON DESTINY---TO FEEL SOMETHING.
    AND WITH THAT REDUNDANCY, HE FELT---HIS CHILDHOOD ANGST.
    PROBABLY FATHER MIMICRY.  INGRAINED, WHIPPED DOWN TO HIS CORE.


    SO, GO BACK TO PSYCH GRAD SCHOOL.
    OR BETTER YET---JUST ASK YOURSELF, WHY---
    WHY YOU MUST BE DUST, BEFORE, YOU ARE DEVIL.

    TOO SCARED TO BE CHIGURH, THAT YOU ADMIRE---SECRETLY.

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  149. Thank you Brian for another very insightful essay. I fully agree with everything you said. If I may add, we have had a serious deflation in the past 3 yeras when defined in terms of  supply of credit (marked to market) far exceeding the demand! The inflationary action in commodity prices is just a reflection of QE's forcing people to misallocate money to what they perceive to be infation-resistant. which takes me to my final point, in the environment that you have very accurately described, tangible assets are the only REAL store of value over the long term, and clearly we are talking here about several decades of deflation or depression depending on your point of view/definitions!

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  150. Guest,
    What you suggested is correct and , what I mean to do for my 401k from my previous employer, roll it over to a Roth IRA.  Doing that and also changing my current employer's 401k to be self-directed will allow me the freedom to trade with both accounts, or to just put them as cash or defensive plays as Brian mentioned. 

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  151. Brian,

    I agree 100% with your statement, "
    If it were me my entire 401K would simply be in cash or cash equivalents. Or in defensive and inflation proof ventures. "

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  152. Dust Devil,
    I have a non-IRA margin account with FI that allows me to trade options. I applied for a high risk account. It allows me to buy and sell the same options contracts the same day. You may need to request for the options trading feature. When you request for it online, the application process will ask about your profile (single, married, with children, how risky you want to be, how much assets you have, etc.) If you profile is a single person with a lot of assets and no dependents, then they are likely to give you a margin account that allows for options trading (even naked options trading).
    I also experience the lag in the settlement on my balance. It makes calculating my margin requirements difficult. Another frustrating bit with FI is that their fill times take extremely long! I swear all other orders get filled before mine. Many times I would need to price myself out of $.05 profit just to get the orders in!
    I cannot move my 401k to another broker because FI is what my employer uses. So I am stuck with FI for my 401k for now. Yes, their options commissions are very expensive. I am considerring to transfer my non-401k account to Interactive Brokers. They are less expensive and they have an API that allows "Multicharts" to hook into. I recently purchased "Multicharts" and will spend time learning it later. I just don't have the time right now. Multicharts allows for programing your own "bot" trading. :) It's just something that I would want to learn more about.
    Have any of you used "Multicharts" (http://www.multicharts.com/) ? Also, what do you folks think about Interactive Brokers? Do you think TD Ameritrade is better? What matters to me most are Fill time, ticker feeds, and customer service (I know... should I even expect that?).

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  153. Happy and prosperous New Year to everyone

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  154. Juan, thank you for your 3rd donation!
     
    James, thanks for your donation as well! 
     
    :)

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  155. Foomer, regarding your message:

    "Hi PL, found your site last week. I've back tested your calls for the last few months and am simply amazed, got your site bookmarked. I was just reading your long term Dollar analysis and am yet again immensely impressed. I do have a question. Lately the market has been vapor locked on the EUR/USD vs. equities relationship. Based on your USD Oct. 29th chart which appears to be unfolding correctly, you expect the Dollar to top out at around 84 in the next month or two. I'm hearing a lot of chatter about a massive short interest on the Euro. If that short interest should unwind, I'm assuming that would cause the Euro to rocket and the Dollar to plunge. Are you expecting such an event to occur soon? If such is the case, that would signal a full risk on mode for equities. If your chart is predicting a C wave down to challenge the October 2011 lows soon, then it would have to be a very powerful and fast move down, no? Especially if you're expecting the Dollar to peak around the same time at 84. I'm thinking any sustained rally in the Euro will be very powerful once it bottoms."

    First off, thanks! And welcome. :)

    Regarding the dollar: the dollar is still at a level where it's *possible* for a C wave back toward the Oct. lows to form, however if it continues to rally up to my next target in the 84-85 range, I would no longer be worried about a retest of the lows.

    As far as the COT Euro short interest which eveyone is talking about: I was considering that at one time as well, until a reader sent me this letter via Minyanville (thanks, Robin!):

    "I am not an Elliottician, though I am a somewhat serious student of technical analysis generally. I have been extremely impressed by the very high level of the work you share on Minyanville.
    In your most recent article, you mention some misgivings concerning the large short positions in the Euro evidenced by the most recent Commitment of Traders report as a possible caveat to your view of lower equity prices, though you still favor the view of lower prices short-term.In your most recent article, you mention some misgivings concerning the large short positions in the Euro evidenced by the most recent Commitment of Traders report as a possible caveat to your view of lower equity prices, though you still favor the view of lower prices short-term.I question the usefulness of the Commitment of Traders report with respect to the Euro, as this is really an enormous world-wide market where interbank flows must easily dwarf recorded futures positions."I question the usefulness of the Commitment of Traders report with respect to the Euro, as this is really an enormous world-wide market where interbank flows must easily dwarf recorded futures positions."
    I think he makes an excellent point in this regard. It also brings to mind the "sliding down the slope of hope" tendency of bear markets. The large short position which "everyone" thinks will lead to a big Euro rally is just the type of news item needed to keep people hoping/expecting a big Euro rally... that never comes.

    My Euro work suggests 1.10-1.15 as a potential target over the intermediate term... so if the dollar can break out above this potential inflection point, it should be smooth sailing for all targets. Hope that answers your questions! (talk about a long post, lol!)

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  156. Okay, fixed that post.  Stupid Disqus gives me a lot of grief when I cut and paste.

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  157. Hi PL, thanks for your thoughtful reply.  I've also read both side of the COT data argument.  Don't know what to think.  BTW, I don't know how to reply to comments as there is no reply button, so I'm posting this as a new comment.

    Happy New Year

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  158. If you view the blog page in IE9, the reply to post button will be visible. Do not use IE8, if you do not (cannot) have IE9. Other browsers work but the button will be invisible. You can select the entire page with control-A to see the button in reverse colors. Or, you can just hover your mouse over the expected location of the button. The pointer will change to a hand, indicating that you can click there to get the reply box to show up.
    Alternatively, you can click the Subscribe to Discussion button at the bottom of the page. It is located near the left, just below the last comment on the page. Then when you get posts in your email, you can just reply to the email to reply to that person.

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  159. IB is seamless once you get to know the platform.  I liked it a lot.  Unfortunartely, I was not very experienced, and found their customer service to be lacking, so I dumped them.  OK, there were other issues, but some on my part.  It is a much better platform for active trading, and you can trade options, FX, and (Ithink) futures.

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  160. William, regarging your 401k --

    One of PretzelCharts new sponsors is "Hedgeable" and they offer a 401k transfer bonus of up to $500, as well as the ability to manage your entire account online, and invest in things like ETF's in addition to mutual funds.

    Quite honestly, I don't know a whole lot about them, but it seemed like it might be helpful for you to check them out.  If you sign-up through the link (in the right sidebar toward the top), then you're helping to support the blaaaawg.  :)  So if you *are* interested in 'em, please sign up online through the blog link (as opposed to calling them or what have you).  I'm actually allowed to mention my new sponsors, because the blog doesn't make money when people click those ads, only when folks actually sign up for the products/services. 

    Anyway, as I said, I don't know a ton about them, and I'm not a shameless shill, so check them out on your own -- but from the little bit of research I did on them, it seemed like it might be a helpful solution.  :)

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  161. Message to Albertarocks:

    I have no clue why Disqus isn't posting your messages.  I do get them in my e-mail, so I know you've tried, but maybe the thing you mentioned about you getting flagged on another site is impacting your posts here for some reason.  No clue.  The Disqus platform doesn't seem to work the way I think it should 80% of the time.  Maybe try starting a new Disqus account?

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  162. Fred, we agree.

    Except that I would respectfully add that the only REAL store of value in this world is your acquired ability to produce  some form value that other human beings will happily and willingly PAY you for.   And which you can replicate in any market you may choose enter. 

    Which is worth far more than any tangible thing or asset. 

    The ability to create or supply some product, experience, information or service that normal and regular people will willingly pay you for (and make a profitable undertaking for you) will make it possible for you to acquire just about ANY particular tangible asset of your chooising or which you may need. 

    The question then becomes, what exactly is that you will offer to the world around you?  People who engage in private business ventures and endeavors have to offer something that free people will buy. 

    And those who choose create and also to have direct or partial owner in such ventures tend to be the individuals who end up with the greatest amount of wealth.  As they justly deserve.

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  163. Had a look at the Multicharts web site. Pretty interesting tool. The volume histogram on the left versus the price bars is pretty cool. I've never seen that before. Would makes spotting the skirmish levels much easier, one would think. Thinking of Brian's comment about a green day being a successful one for bears if it's clear they've defended key levels.
    I really need to study the Think Or Swim platform from TD Ameritrade. What I need are pre-programmable trades, e.g. sell options at market if underlyer hits this level. I think Think Or Swim handle these.
    Have you also considered taking training from schools (or have you already)? E.g. http://www.thechicagoschooloftrading.com/ -- The point is, a great tool is not gonna deliver the potential unless the user is fully trained.
    Ameritrade offers professional level training. It's a few thousand bucks. Not too sure if it's worth it though. They might just teach how to read oscillators.

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  164. My apologies that you're probably going to get a bunch of emails about that one comment above Pretzel, because I edited it several times.  I assume you'd get an email every time it's edited?  Just a hoop I have to jump through in order to clear things up.  It appears my comments are going to stick around for a while.  The next step is to see if they're editable, and that's what I did with the comment above.  I apologize that it's going to cause a few extra emails to hit your inbox.  So this time I'll include a link.  Just something mundane for now.  How about the Bloomberg economic news calendar:
    http://www.bloomberg.com/markets/economic-calendar/

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  165. It would be like a world without hemroids.

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  166. I fully agree. and beleive that except for extraordinary skills, most people can and will adapt to gain the sklills necessary to survive. Admittedly to your point, given the large difference between our inherent abilities and flexibility some will do much better than others....the fittest will not only survive but will do well! What ultimately determines the limits is what is in the ground that is not renewable, or the ground itself assuming it is blessed with enough water to be productive farmland.
    Have a happy New Year!

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  167. Are you using Explorer, it works much better than Fire Fox!

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  168. No, I'm using Firefox.  Next time I have a problem I'll switch over to Explorer and see what happens.    I 'do' believe the problem lies with Disqus but this is a good way to maybe zero in a little closer to the source of the problem.   Thanks for the idea.

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  169. Ted, thanks for the donation! 

    Happy New Year to you and yours as well!  :)

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  170. I'm not sure if anybody is here today or even if Pretzel's blog goes somewhat silent on weekends.  But the purpose of this short comment is four-fold... to thank Pretzel (on several levels), to test whether or not I can once again post a comment that contains a link (I think I'm OK now), to wish all of you the very best in this new year... and lastly, to remind you that 'yes, it has happened before', lol:
    http://stockcharts.com/h-sc/ui?s=$SPX&p=60&st=2008-11-30&en=2009-02-28&id=p42573308375&a=252414049

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  171. Seems like I'm always on email :-)

    AR, what is the chart trying to say? To expect a couple of weeks of upside, even with some slight initial drop, before the big gap down? That is PL's perferred count, isn't it?

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  172. Hi d_d... the chart I posted was only intended to show one instance where the market opened the year with a huge drop.  Just to show that it can happen... as in "Yes Virginia, there is a Santa Clause".

    I can't speak for Pretzel of course but I'm under the impression that he's totally open to the possibility of an immediate sell-off, although I don't believe he has actually declared that that's what he's expecting.  He also noted that the level of 1269 is pretty darned important and I'd have to agree with that because if the S&P were to surge beyond 1269, really, who knows how far it might go after that?  It could go a long way higher.  My personal opinion, which isn't worth a grain of salt (lol), is that the market opens with a gap lower and just keeps right on truckin'.  But I totally admit it could certainly go either way and I wouldn't be surprised one way or the other.  I just think it's heading lower.

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  173. Hello,

    just a question: have you ever considert the possibility that your big A could be the C from an irregular correction?

    I think so - and that would bring a big long move!


    greetings from Austria
    Fuzzy

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  174. Hey AlbertaR, not to worry -- nothing here is trading advice, as we all know :-) Although I'm gonna use the 2009 open as inspiration - expecting a down day on tuesday, then a mini rally on wednesday, then finally a small scale cascade after. Why? Cause there's pent up sell pressure from the last two weeks, but then there's the idiot crowd that's gonna see this as a dip opportunity for the tremendous year ahead! You gotta remember, sure, the S&P was flat but the Dow was up 6%!!! So my strategy is actually is to buy calls on the best guess for LOD tuesday, then do a turnaround on wed. Not trading advice, of course. Just idiot babble with a dash of sarcasm.
    Best of luck! And much thanks for your chart. :-)

    - DDevil

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  175. Hi fuzzy, welcome!
     
    I actually gave consideration to this possibility as far back as 2007, however I do not favor it due to the structure since 1974, the structure of the rally which culminated in the 2007 top, and the most recent overlap of the July crash deep into the theoretical territory of what would have to be wave 1 off the March '09 lows (under the irregular correction count). 
     
    Fundamentally, I also find it exceedingly difficult to imagine a rally of that magnitude starting from these levels, given the fact that the world is essentially bankrupt.  There is no more "credit" available to keep funding the debt-driven market explosions of the prior two decades.
     
    Thanks for the question, and Happy New Year!  :)

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  176. Over on the left side of your keyboard, you'll find a little key labeled "Caps Lock."  If you find your posts are all in capital letters, it's often because you've mistakingly hit the Caps Lock key. 

    Or, if it's an issue of font size and the font is so small that you simply can't read that everything you've written is IN CAPS AND THE INTERNET EQUIVALENT OF SCREAMING HYSTERICALLY, then the font size can be adjusted.  If you're using Windows, hold down your "control" key and use your mouse wheel to zoom in or zoom out.

    And now you know.  "And knowing is half the battle."

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  177. Actually, you must have missed my reply to Mav on Friday:

    "I'm short. Based on the charts, looks to me like a gap down open may be in the cards next session. Any fund managers who needed to prop up the market into year end can let go for the New Year. :) "

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  178. My apologies Pretzel... yes I did read that.  Now that I see it, I specifically remember the last sentence you quoted above.  But I admit that I haven't read all the conversations here.  In a way it almost feels like snooping on my part since I'm so new to posting here, lol.  I also have to find the time to learn how your participants interact here.  What constitutes too big a comment or should a person be careful and not post very often?  What would aggravate you (if anything) and what wouldn't,  etc.  It's just a learning curve and man, I'm so short of time  especially at this time of year.  But I sure do like what I see here and will continue to shamelessly point people your way when the opportunities present themselves.  Only good people though, lol.

    Yeah, I can definitely see things that make me think Tuesday's open could be a nasty red one.  Here's one example.  This chart still has annotations from the last time I posted it publicly which was quite some time ago.  So it's set up with longer duration than is needed to show what I intended to show.  But you should be able to go beneath the chart to the settings and select a time frame of about 6 months.  Just the shape of the bullish percentage line inside the blue circle seems so darned negative to me.  It sure doesn't seem impulsive from where I sit.
    http://stockcharts.com/h-sc/ui?s=$BPSPX&p=D&yr=2&mn=0&dy=0&id=p03984663719&a=220365951

    Also, I just finished an article today and another one a couple of days ago.  One will be published on Tuesday and the other one I'll probably publish tomorrow.  Both are pointing to the same conclusion, that a deflationary outcome seems to be in the cards.  At least for now they do... and until something happens to change them, I have to go with what the charts are suggesting... deflation.  True, those articles don't address the open on Tuesday because they're such long term looks at things but I still think the gig is about up.  We'll see if we get a red open or not but that's what I'm thinking.

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  179. LOL, "idiot babble with a dash of sarcasm".

    Best of luck to you too.  I hope 2012 is awesomely good to you.  And you're welcome about the chart.  Wait till you see my magic "Holy Grail" chart.  Just make sure you're not drinking anything at the time because it would likely make you spew that Pepsi right out your nose like it does for everybody else, lol.  I'll post it here some day.

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  180. The $ Chart looks like ready for a correction and the Euro is forming a bottom from where we may get a move. A Weak $ favors a Rally in the market at least till the Result season that starts with Alcoa later this week. How would you read the $ Charts ?

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  181. Jose- to save PL some time - his Dec 26th article hit on the USD/Euro and other points. It's up under the December archive. Not sure of the day to day squiggles being set up after the big move last week - but the larger trend is clear from PL's charts

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  182. Hi Pretzel,
    Been following you for a short time. Great EW analysis. Hope you do not mind me posting a chart. There was discussion of TZA below, I have been buying it below 26 for some time based on this.

    http://www.screencast.com/users/katzo7/folders/Jing/media/40cc51e5-7214-438b-80fd-1e771ca1500c

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  183. i would not chart TZA because it is leveraged. It bleeds through time tecay which means it will NOT obey EW rules. If you are trading TZA, you should chart the index it tracks...the russell 2k (RUT)

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  184. RockyTop,
    Yes I am aware of that and have done plenty of homework, see chart below. Respectfully, we will look at this again in a week's time.

    http://www.screencast.com/users/katzo7/folders/Jing/media/f2281261-687f-490b-9f8f-f6c0362bb8dc

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  185. PL, it appears everywhere I look the main stream media is predicting a decent 2012.  These are exactly the headlines we would want to see if your analysis is going to be correct.  I know anything is possible come Tues and Wed.  You mentioned you stayed short over the weekend as did I.  I'm wondering if there's a short term scenario where we pop to 1275-1285 by Wed, put in the 2012 highs on the first or second trading day, and then reverse from there.  I'm wondering if there are any other years where that happened. 

    I'm looking forward to your update and hopefully an inclusion of why a gap down on Tues is a real possibility.

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  186. Katzo, if the price bottom for TZA is correctly label with 5, then what follows should be a correction; and what you labeled as 1 and 2 wouldn't be right.

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  187. dust devil,
    No reply buttons noticeable on this site to me. Not quite sure what you are saying, see that .618 retrace, that is where it currently slowed down and represents the possible correction. Here are some stats about EW1 to 2 retrace moves:

    1) Approximately only 12% of Wave 2’s hold the 38% retracement
    of Wave 1. 

    2) Approximately 73% of Wave 2’s retrace between 50% to 62% of
    Wave 1.

    3) Approximately 15% of Wave 2’s retrace below 62% of Wave 1.

    IMO the chart is labeled correctly but future mrkt action needs to prove this out. So since the 38% retrace is out, it leaves #2 or #3 as a possibility. Is it in the 73% or 15% category? There is one other category, below the labeled EW5 low means it has not defined the bottom yet. I know my exit point for my TZA if I am wrong, trading to me is mechanical and this decision is automatic. It is that long take-off bar that becomes notable.

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  188. Looks like us bears could get some pain tomorrow morning.  Europe markets up big today.

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  189. Gotcha. I see what you mean about waves 1 and 2.

    If you use Internet Explorer version 9, the reply button will be visible. Otherwise, you can highlight the not so visible button by selecting the entire page with control-A. Even when not visible, moving the mouse there will detect the button.

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