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Friday, May 11, 2012

SPX Update: Things Aren't as Bad as You Think! They're Worse.

Before I get into the charts, indulge me a bit of a rant regarding some of the systemic fundamental problems facing the world. 

By now, everyone (with the possible exception of those guys who live under rocks in the Geico commercials) understands that Europe is in trouble.  However, not everyone understands why Europe's troubles should impact American stock markets.  I'm going to try to explain why in very simple terms, because the problems facing the world now are so deeply-interconnected that the technicalities quickly become overwhelming to the average person.

It's a little-known fact that European banks have been bailed out previously by the American taxpayer.  European banks received $30 billion in bailout money, using AIG as a conduit.  A "stealth bailout of Europe," if you will.  This fact alone would outrage most Americans, but for some reason, it's not talked about very often. 

And it gets worse. 

After the Federal Reserve opened lending to foreign banks, the Belgian-French bank Dexia alone received $59 billion.  So American taxpayers (and America) are on the hook to Europe.  If Europe falls apart, it will be the shot heard 'round the world, because banks like Dexia in turn owe Goldman Sachs and JP Morgan (and others) substantial debt; so if Europe can't pay its debts, then our banks will also suffer.  Thus, in a similar way, the European Central Bank's Long Term Refinancing Operations (LTRO) were a stealth bailout of American banks.

I've discussed this before, but many investors mistakenly believe that stocks are driven by fundamentals, such as the economy, the employment rate, etc..  While it's true that the economy can have an impact on the stock market, it's not for the reasons most people think.  The only thing that drives stock prices is liquidity.  If there is excess liquidity, some of that cash finds its way into stocks and other assets -- so one frequent by-product of a good economy is a liquid market, which means stocks rise.  However, the economy itself is, in reality, only impacting the market indirectly.  The reverse is usually true in a bad economy:  bad economies lead to a liquidity crunch and stocks fall.  But not this time.  In a moment, we'll discuss why.

To understand the concept of liquidity vs. the economy as a driver of stocks, simply look at the Nasdaq Composite, which is currently trading above its 2007 high.  Then ask yourself:  is the economy as good or better now than it was in 2007?  Obviously not -- so if the economy were truly the driver, then the markets would be substantially lower, since things are worse than in 2007.  So why aren't the markets lower?

Since 2009, the massive money printing from the TARP bailout, the ECB's LTRO, QE1, QE2, Operation Twist, and others, have provided the liquidity to keep the stock rally going. As far as I can see, this liquidity is virtually the only thing driving stocks higher.  The amount of liquidity injected into the system in recent years is mind boggling, yet stocks have barely reached 2007 levels.

Anyway, that liquidity gets confused with "real" money, and also gets spent as real money -- which drives stocks and other assets higher. ("Real" money is money created when an economy produces more than it consumes.  In other words: real money comes from production.)  In this current world, there is limited production:  the prime mover driving asset prices is inflation from the printing presses. 

But this game is not without consequence.

To illustrate a portion of the problems facing the world's banks and governments, I'm going to draw a simple (and probably illegal, if put into practice) analogy.  Please note that I'm not recommending you try this at home -- leave this stuff to the trained professionals at the Fed and ECB.

Let's imagine that you had three checking accounts, all of which had a real balance of $0.  Now let's further imagine that you write a check for $1000 to yourself from account #1 to account #2, while simultaneously you write another $1000 check from account #2 to account #3, and another $1000 check from account #3 back to account #1. 

So it looks like this:

Account #1 = $1000 ---->  Account #2 = $1000 ----> Account #3 = $1000 ---> Account #1

For a brief instant on your balance sheet, it will appear as if you have $3000 -- even though, in reality, once all the checks clear against each other, you actually still have a real balance of $0. 

This is not unlike what many of the world's governments and banks have done for themselves and for each other.  The reason it works better for them is that their "checks" take years, or even decades (with long bonds, for example) before they have to be cashed.  If you could introduce the same long delays into your hypothetical (and illegal) checking account activity, then you could pretend you had $3000 for a while.  And if the checks counted as credits immediately, but weren't actually debited to the parent accounts for years, then you could even spend the money in each account, just as if you really had $3000.

I realize this is a dramatic over-simplification -- what's really happening, especially when you factor in credit default swaps and everything else, is nearly as complicated as the quantum mechanical concept of paired particles and their ability to communicate across infinite distances at speeds faster than light.  Maybe 8 people on the planet truly understand the complete math behind either concept, and unfortunately, it seems that none of those people are actually in charge.  Which introduces another problem: the massive complexity of the system lends itself to human error.  We all know that the more moving parts something has, the easier it is to break... and the harder it is to fix once it's broken.

Despite my simplification for purposes of illustration, this checking account analogy is not entirely unlike what's happening out there in the real world, except out there it's occurring on a massive scale.  The banks and governments of the world have been spending as if the "checks" they wrote to themselves (and each other) were real money for so long, that at this point, virtually everybody owes everyone else a piece of the Pretend Money Pie.  Eventually, somewhere down the line, one or more accounts are going to need to be debited for the cash. 

And then it all falls apart, because there is no cash. 

This basic issue is the reason why, from a fundamental perspective, I remain bearish. 

Does that mean stocks will collapse this week, this month, or this year?  Possibly; possibly not.  The charts are certainly warning that the potential is there, right here and now.  But these are uncharted waters in a way.  We've never seen this level of massive and coordinated intervention in the "free" markets at any prior point in history.  This makes things a bit challenging for an analyst, because we really have nothing to go on except the lessons and patterns of history.  But this is an experiment that has no precedent.

Certain signals that often foreshadowed declines in the past have, in this new world of endless bailouts and the tireless printing press, sometimes simply foreshadowed more intervention -- leading the market to rally against the seeming odds. 

So the situation doesn't preclude stocks from moving higher over the intermediate term.  But it does lead one to wonder how long this massive Ponzi scheme can continue.  Further, there does seem to be a diminishing return to the money printing, if one compares how each successive money launch has yielded smaller and smaller rallies in stocks and bonds.  At some point, one of the links in this massive chain seems almost certain to fail.  And when one link breaks, the whole chain falls apart.

What are the charts telling us?

The charts are telling us that things may be about to get a whole lot worse.  The possibility of a big decline is definitely present right here and now.  As I discussed yesterday, this is a case of potential energy.  The market has wound itself up, and a solid break beneath the key S&P 500 level of 1340 could cause a rapid drop.  I hesitate to use the "c" word ("crash" -- get your mind out of the gutter!), but the potential does exist.

Will it come to pass?  I don't have a crystal ball, but from what I can see, the probability is reasonably high.

Let's start with an overview of several indices.  This chart shows that virtually all indices have broken, and most have back-tested, their key uptrends off the October 2011 lows.






Below is my "first-stage" chart of the probable decline.  I expect that, if this plays out, it will be only the beginning of a much larger decline.  I currently view this as the most likely outcome over the intermediate term.  Sustained trade and closes north of 1385-1390 would cause me to seriously re-examine this outlook.





Next up is the very short-term chart.  Unfortunately, my confidence in the very short-term patterns is low at the moment.  Red wave ii may have topped already, short of my target zone, since there does appear to be a complete a-b-c fractal in the 1-minute chart.  This could mark ALL OF wave ii, or it could string together a couple more fractals before completing.  I've outlined some signals to watch.


A short-term potential that definitely occurs to me is a weekend trap for either bulls or bears. Unfortunately, since the very short-term pattern is unclear as of the time of this writing, I'm uncertain on whom the trap will be sprung.  The two short-term counts both have the potential of a gap open on Monday.  We can see that if wave b plays out into Friday, the trap could be sprung on bears, with a gap up in a c-wave.  If wave ii completed, the trap could be sprung on the bulls, with a gap down in wave iii.  It's a treacherous market right now.  Hopefully, Friday's action will convey some signals in this regard and answer the question ahead of time.




And finally, the bearish potential present in the very big picture.  It's far too early to confirm if this will unfold at this juncture.  The potential is definitely there, however.  Bear in mind that this chart represents a general guideline of how things could unfold -- it's not intended to be an exact prediction, but more of a broad overview.





In conclusion, the bulls have been unable to get much done, and the market presently looks quite weak.  My expectation is that the market is beginning the next wave down (intermediate term), and still in the early phases of a major trend change.  The market is the ultimate authority, however, and what happens over the next couple weeks, and possibly as soon as the next few sessions, appears to be crucial to the bulls maintaining any hopes of a continued long-term rally.  Trade safe.

Reprinted by permission, Copyright 2012 Minyanville Media, Inc.

442 comments:

  1. Hey Katzo, I think you should take over JPMorgan's trading division. -DD

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  2. I did, they let me go yesterday. Guess I f*cked that up royally. LOL

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  3. Every once in a while, I write an article I'm really proud of.  This is one of those articles.  :)

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  4. Agree 100% as I'm sure most of your readers will - a great read. Thanks PL.

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  5. Well said, PL.  The problem is that the Fed (and other central banks) can't stop.  Even when it is not working, they have no other option.  This will not end well for anyone.

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  6. Good morning.

    Just wanted to bring a correction forward to today: As matstery noted, "The Disciplined Trader" is written by Mark Douglas...NOT Doug Kass.  Don't know how I got those two confused :-/  Thanks again to matstery for the catch.  Prolly be the last time I plug the book.  Ppl may start to think I'm either getting a commision from the sales or Mark himself in-cognito :-)

    Off to work...GL everyone.

    -whip

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  7. G'morning PL....Brilliant article...really...on quite a few levels...it is probably one of the most cogent, succinct articles you have written, and should be read by the planet. I'm not blowin' sunshine up where the sun don't shine either. I'm even printing it out and mailing it to the "World's Biggest Buffett Fan" in my family so he might get the hint. Really outstanding, beyond first-class work.

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  8. Excellent article PL, do you have a background as an economist? I might not be around too much today as I have to go open accounts at two more banks. lol

    Ppl, I am a very ST oriented trader at this point, was a buy and holder until the tech wreck. I had every tech stock and gobs of them per CNBCs advise that these things could only go up. Why, I even bought 10,000 shares for ten cents of a high tech coffee cup where you could check your email while you drank. Bought one cup myself, put it in the dishwasher, it did not work anymore. Guess others did the same, company went belly up. This is where theory outstrips performance.

    PLs article is excellent, provides some background into the whys and wheres. I do not have the time or skills to do this kind of research so I approach trading on purely a EW TA level (PL does this also, you are aware of this skill I think), analyze if it will go up, or down. KISS. Ppl say welll the market did this because the Bernank decided to do this or that, great backdrop but by the time you hear this the cheif JPM Prop guy is living in Bahamas in a multi-million estate. All I care about is 'goin higher' or 'goin lower.' Follow the money, price pays. . . Long winded article basically stating that recognizing chart forms (remember the 3P&DH?) [actually the idea to search for this came from A NUN, remember him? he kept talking about the rounded top so I went lookin, sure enough. . .  A NUN was a guy that traded others ideas (EWI) and not his own research], candle stick patterns, EW rules, etc. can provide a real arsenal of tools. At this point if you asked me where the mrkt would be in a month I could not tell you, I think lower but I would not know for sure. Very uncertain times here we are in.

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  9. Thanks jbg, I agree...  I think this is one of my better articles.  :)

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  10. And this one I bet took some time. I was wondering where you were after dropping kids and wife off at the airport, the Flying High Lounge? lol

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  11. Have a good day Mark...I'm buying your book today (through PL's link). :)

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    1. Sleeping of books can yu recommend a good ewt book?

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  12. Thanks, WT.  Agree it won't end well.  We've passed the point of no return.

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  13. While I am thinkin up, there is a chance we crash down hard today -- 8:30 am bad news(?) -- through the 40-2 level. As PL has stated and I have seen, TA falls apart right before a major down move. . . . just sayin. . .

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  14. lol.  I kinda pre-write in my head, so yeah I've been working on this one on and off for a while, actually.

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  15.  mrkt extremely dangerous right now, was stopped out of long trade (last thread entry)

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  16. Thanks for the donation, jbg!  You're a good dude.  :)

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  17. No Damn gets the funny award for today (damn him, I thought my coffee cup would have done it). Had to bring this forward from last thread:

    Yes...I have those [red PLs]...not kidding (feigned surprise by the
    crowd)....Reserved for Xmas day so the boy and me match...which reminds
    me that I gotta get something for the wife for Mutha's Day...or she's
    gonna beat me to death in my sleep with a Katzo. She'll wrap up a
    baseball bat with it, and go Capone on me, shouting "Ya like Katzo's
    huh, How do you like *this* Katzo."

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  18. Thank you for the intelligent post. Well-reasoned and well-explained.

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  19. Posted this GDOW update at AlbertaRocks' place last night. I have the current spot as 3 of Minor 1 of Intermediate 3 of P3 down. If it's 3 of Intermediate 3 down already (and I doubt it is yet), look out below -- on all indexes.

    http://i.imgur.com/bCelD.jpg

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  20. PL, you're my brotha from another motha... love this article.  Good luck to everyone. Be patient & be nimble

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  21. Thanks for your contributions K7...just a few of the lessons that I have had hardwired myself with are, "price, not news", "stay nimble or stay home", "if you don't understand it, don't trade it".  During my small contribution to the stock bubble, a day trader helped me make a relative killing (for me) on a pump and dump penny that was playable with a plan. The best advise he gave me was to eliminate the word "hope" from my trading vocabulary. It implied that by using "hope" I had given up control of my own actions. That's prolly the best lesson I could share with folks...We've seen what has happened with "Hope and Change" absent a plan.

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  22. Really good article, PL. Thanks.

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  23. Let me show what happens if/when we break this level.

    http://screencast.com/t/uOX6qyR9lf

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  24. Just wait til I make a killin'...You'll be able to get a double-stuffed pizza.

    or maybe one of these "wheels of death" inspired by the Mayan Calendar. :)

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  25. you f*ckin crack me up, I cannot compete.

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  26. Looks reasonable to me, thanks PB.

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  27. Thanks in advance, I know you're as good as your word.

    btw, your mention of pizza made me realize how friggin' hungry I am!  I've been working straight through, sans "break" to run the wife and kids to the airport, for roughly 8 hours and I'm ravenous!  So I'm now making a pizza, lol... which prolly sounds weird to everyone in the Eastern time zone... but it's barely 3 am here, so it's a late night snack.

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  28. Hairs on back of neck say this one is gunna break 40 es level, been 100% wrong with every trade today (well, I got a point but my direction was wrong).

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  29. ROFLMAO...I just realized that in a couple of your previous responses from threads long ago "thanx No Damn" you weren't succinctly responding to three different comments..."thanx", "No", and "Damn"...ROFLMAO...I'm such a farging idiot. OMG

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  30. PL:  Someone noted several weeks back that one of your articles was unusually full of "fundamental" analysis for an EWT-based blog.  Personally, I find these articles much more comprehensive and easier to follow since they point out how TA, EWT, and fundamentals work together in the bigger picture.  Of course, part of this comes from the fact that I don't have a real good handle on EWT yet.

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  31. Excellent post PL. I continually refer to Ben's printing as monopoly money and ask people "if your employer paid you in monopoly money for 3 years figuring you wouldn't notice, then decided to siphon it slowly out of your account before you caught on, how long would it take you to notice and freak out?" They usually just look at me funny.

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  32.  trying a short ES here, 47

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  33. Just an interesting comment I just heard on Bloomberg, matching one of PL's expectations for today:

    "Our traders are looking to go long at an SPX level of 1340 and stay long up to a level close to 1400."

    I know that usually these kind of comments have no significance, but I am just quoting this because it matches PL's 1340 level to watch!

    P.S. Today's post is one of the greatest articles I've read within the past several weeks! Thanks PL!

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  34. i took a sip of coffee at the wrong time...cracked me up...spilled my coffee

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  35. There's *no* wrong time for pizza...drive's my wife crazy. The boy and I could spend our entire lives eating little more than pizza....We're dudes.

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  36. Excellent article PL.  However, I would treat liquidity and economy as an equal factor to influence the stock market.

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  37. Tahnks K7...My kid is real comedian...I swear he'll be famous. I keep having to remind myself that he's only 4.

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  38. Now that's a scarey thought: no return.

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  39. A lot of people don't realize that Buffet made his big money not as an investor, but as a business owner. That's like studying Bill Gate's stock picking methodology. -dd

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  40. Your 480 chart presents a welcome dose of reality - especially for the impatient among us (hand raised).  Thanks!

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  41.  dollar flying, my trade good so far

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  42. Back atcha. :) By the way, as you reminded everyone recently, bear market wave 2s want to be bull waves. So Minor 2 of Intermediate 3 on the GDOW could be a vigorous retrace, and I expect corresponding moves on the intervention-distorted US indexes could overshoot and once again "break" big-picture counts based on them.

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  43. I've been sitting short ES 48.5 since 8:30...  bit nerve racking this last 20 minutes...  where did you put a stop.. (or do you just have your finger on the trigger?)

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  44. I am ending the week with my relentless scrutiny of UVXY, XIV and SPX. Trying to learn the charts "in motion". Plan to start watching the ES next week. Do you know how to get StockCharts.com to show ES ? 
    Thanks for all your input. After reading your posts I started changing around my time frames, intraday, and found that to be quite helpful. 

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  45. Overly simplistic my *ss. That was one of the best reads relating liquidity and market conditions I have had the pleasure of reading in quite a while. Well done. I appreciate how you have put the whole thing in context. My question would be what if several links break at once. Real experience with chain under load stress shows links begin to stretch causing failure at several of the welds that join the links usually simultaneously.

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  46. $VIX ALMOST reached 20. An important level for many..  (19.94)     It  sure is trying.  Next real pulse up probably will blast  to 21..   deflate mode now until it stops :)  may gap fill below 17?  just watching for a bigger short squeeze before a Bigger drop..

     Obviously not TA speaking...  The storm waves are getting bigger.    (for the non-ocean people, that means ups n downs... ( didnt katzo post some cool videos on youtube??)

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  47. Great article.  The example of the 3 checking accounts is a great way to explain to others (simply) what is going on.  You're a friggin genius

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  48. ES call option volume at 1400 strike price is tremendous. Illustration of round number psychology.

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  49.  finger on the trigger, mental stops relative to how I see the EWs progressing or not. My problem here was to believe the down pointing waves and not my rule of waiting til 10 am to place any trade, morning bullishness got me, it went up even tho $INDU is not green. I should have traded what I know (rules), not what I see in this instance.

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  50. Does the pay version of stockcharts.com show shorter timeframes? I like the charts, but 1-day timeframes aren't helpful for the shorter-term waves.

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  51. I gotta give Minyanville credit -- they're really working to get these articles published before the open these days...

    http://www.minyanville.com/business-news/editors-pick/articles/s2526p-update-banks-american-stocks-europe/5/11/2012/id/40946

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  52. ES at Gann resistance intersection. Good point to enter short: http://screencast.com/t/jxqHy0u69iAj ,,,DD

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  53. hmmm...early trading makes me consider this count

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  54.  thanks..  its like someone walking through the room with a box of donuts...  Sure, I'll have another...  :)  i'll reread at lunch as i need all the help i can get   haha

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  55.  What time frame is that?

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  56. While I was reading this article, it brought me back to my college days.... I had roomates that used to write each other checks to continue the "float" so they could have beer money in between either paychecks or checks from parents at the end of the month.

    One of them is a financial planner now. The other aparently works for the Fed! jk

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  57. If some other signals kick off, short es entry qill be either 1354 or 56.

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  58. Excellent analogy DRG...watched a Suburban get cleaved clear through most of its roof, on a chain failure. You've prolly seen much worse...."catastrophic" events are pretty spectacular.

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  59.  Dont know franny

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  60. appears to be a 5 wave impulse - might be done SPY 136.11

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  61. 1354 is good for re-entering short if stopped out. ,,,DD

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  62. one last push to 56, above that is bullish

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  63. Your last chart is to be prophetic. Thank you. -DD

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  64. I think the JPM news yesterday was sold in advance all day yesterday by the banks and then they kept futures down overnight so that they could be the buyer of all the selling on the open.  The retail investor had to be a seller at the open.  Thus the lack of  any real sell off and the weird weak market yesterday.  I stuck to my guns and stayed long through it all.  Obviously, I am looking for the 5 wave impulse off the open is the real deal for wave c of ii.  Or this was a sucker rally and I'm going to get killed as we go to 1290 today. 

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  65. st support at 52.5 es now, went long with a sl there.  Think 'b' is going to lead to ii on PL's chart...

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  66. gapped up as I posted the above

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  67. Trendline on ES from around 9PM last night connecting to the high from 4:30 AM & again at 10 AM today just smashed through

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  68. Gooooooo $RUT!...Daddy needs some cheap TZA!!!

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  69. The QE3 chatter is now flowing on the boob tube...  info ..    i'll re-fi the mortgage at QE6.. 

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  70. DD, how reliable do you find using the Gann stuff to be?

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  71. By QE6...I'll be adding a "damage due to civil insurrection" clause on my homeowner's policy.

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  72.  out, small loss, bullish day today

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  73. I'm looking at the same through my RUT glasses for a short entry.

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  74. Yes, you can get 1-minutes.

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  75. truerangeballisticMay 11, 2012 at 4:36 AM

    So is it the talk of QE XXVLI and the consumer confidence number this morning that is packing the hookah with hopium oday?

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  76. out at 59, could continue higher, not sure

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  77. ....and that his father was a "goldbug" who feared and loathed the Fed.

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  78. thank you for a wonderful article. Yesterday I was thinking to short SPX with SPXU - and I regret so that I didn't, because yesterday SPXU price was 9,91 and today - almost 50$ with gains almost 400%. Does anybody knows how could it be this way?

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  79.  smoke em u got em?   The Bernakie Maui Wowie is   expensive i'm sure!

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  80. SPXU has a 5:1 reverse split

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  81. Same here.  Standing aside until the picture becomes clearer.  It's just way too foggy to drive on this freeway right now.

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  82. Thank you! But does that mean that if yesterday I have bought for 9,91 today could have sold for 50$?

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  83. When the leveraged ETF's break below $10, a reverse split is imminent

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  84. So the open was b of ii and now we are seeing c??

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  85. If you bought 100 shares at $9.91 yesterday, today you will only have 20 shares to sell at $50.

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  86. Could be a low volatility, ramp/camp Friday from here es 58-62.  At least, that's what the bulls would want.  Realized overnight that my rant against the Euro in comments last night probably meant bearish sentiment had become too extreme.  PL's article title which I saw when I woke up, confirmed it for me.  As per PL earlier in the week, bullish sentiment will rise again during ii.  We never really got that in opening pop yesterday a.m, so I don't think ii is complete yet.

    Having said all that, you couldn't get me to hold long over the weekend no matter what you tried.  And a lot of others prolly feel the same way, which means there is possibility for strong open on Monday if there is just lack of bad news over the weekend as bullish sentiment revives.  GL, gotta get to my 'real' job now. 

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  87. I'm finally getting some clarity here on the VST stuff.
    Let me preface by saying I'm NOT sure if we're in 1 down of x of C down, or still in a 4th wave correction within B up, with 5 up to go.
    I'm favoring the latter though.
    But if I'm right on the VST, we should see most of the end of 1 or 4 on Monday.We may get (i) dn and (ii) up of one of those going into today's close.    Then a gap down open.     Don't overstay the move.

     

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  88. It's actually down about 1% today (adjusted for the reverse split), not up 395% as Yahoo, for example, is indicating.   

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  89. ES 60-61 is good re-short area, IMO. ,,,DD

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  90. geniuses think alike?

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  91. I heard that QE7 is to give everyone an iPad.

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  92. RUT has 1 lone gap to fill (at a good Fib #), and corresponding with PLs ii , so I'm sidelining my shorts until then...

    http://screencast.com/t/bDAsa3nJeG

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  93. TIP:   when Bulls n Bears are at war like today  ,   Put the $VIX Time N Sales box on your screen today and watch the spot price scroll each tick and it will be real time info on market SPX direction..  
    Big money watches it for indicator, so why not ??   you can see the speed of a big surge up or down coming on the tick price surges

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  94. and 24 hour "Dancing With The Stars"...I just want free pizza.

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  95. bullish MACD and RSI divergence on the UVXY 5 min chart?

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  96. Here is ZH takes on today's market..... Credit implies 1335 on SPX.....

    http://www.zerohedge.com/news/credit-vs-equity-spot-odd-one-out

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  97. It looks too easy...pardon me, I have to go cut the Beard's phone lines.

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  98.  This 1360~ area on ES is a bear!

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  99. The more they melt up the market today the more seriousness of JPM problem I think it is.

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  100. as if it wasnt all planned this way....

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  101. PL, the AAII chart is an original. You can do anything you want with it. Let me know if you need it reformatted in any way.

    Shel, the data is from http://www.aaii.com/sentimentsurvey. There's a button to download historical data.

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  102. Don't feel bad. I used to always get Charlton Heston and Anthony Quinn confused. How's that for messed up?

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  103.  I'm confused as to why the subject of your 'shorts' keeps coming up lately....... :)

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  104. Interesting. Keith McCullough is looking for 1334.

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  105.  es tgt 62.5 hit, do not short imo

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  106. Giarc,

    Very interesting way to look at the sentiment data... thinking outside the box.

    Thanks for sharing

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  107. Thanks everyone for all the congratulations and words of encouragement on the previous thread. Apologies for not responding sooner. I actually took the night off and veg'ed in front of the TV all evening for like the first time in two months.

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  108. Eh...must be the warm weather...or you guys are just in the gutter (again).

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  109. yes...it's a slow day...

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  110. I noticed that too, but with spx dropping the rebound in UVXy is weak, even though it didn't crap lower when spx reached new high...will see how the end of day unfold

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  111. Thanks, much.

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  112. Scotty_Doesnt_KnowMay 11, 2012 at 5:59 AM

    Yur my boy Blue!!!

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  113. Since the S&P has bumped up against 1363.5 3 times in 3 days, and been unable to get through there, does anyone think that that may be the eventual top of wave ii?

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  114. I was off by about a point, but I think short taken at 61-63 would pay off nicely on Monday/Tuesday as a good wave 5 down. The horizontal resistance at the multi-hump base is easy to see. Today was just the 3rd back-testing from below. Each test is a little lower. ,,,DD

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  115. Nostra - RUT trendline channel may not imply your gap fill

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  116. FWIW, I was looking at a tick chart of ES for cash market trading hours only last night -- I've now spent so much time staring at my OEC trader environment it's hard for me to look at the market any other way and all it really does well at the moment is futures -- and thinking it made the most sense to me to call yesterday's HOD the a wave of ii, and it seemed to like the b wave wanted a little more down in that case.

    Part of the reason is that the Calvin head -- feel free to laugh because it did start out as a joke, but now I keep noticing it -- is usually a continuation pattern off a pivot low. You always seem to get another bounce right about off the bridge of Calvin's nose, so it looked like it wanted a little more forehead if that were true, which actually correlated nicely with the more sober-minded EW analysis. Anyway, my best guess is that PL's mid-1370s target for ii is still very much in play for the ST. Here's the tick chart

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  117. Yeah...that keeps poking me in the eyes too...I'm so torn. I'm looking out for the gap as a bull trap, but really dunno. The action has been really sloooow. Thank you Furrrr. Always appreciated. (did you add an "r"?)

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  118. "his" father -- Warren's or Bill's? ,,,,,dd

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  119.  http://twitpic.com/9jugjn/full

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  120. Had to reset an ID after my extended absence- crazy disqus....

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  121. As good as any other set of resistance or pivot lines. One of those "if it doesn't break it, it bounces" thingies. It's worth something. When it rallied this morning, it paused there for a while, then broke to the upside. None of these things actually predicts where it goes from the pivot point. It's just a place to enter and place a stop.  ,,,,DD

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  122. These orange channel lines agree that's possible

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  123. I think SBUX has topped. 

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  124. Warren's...you can read how he (Howard Buffett) felt about it in one his writings...
    just go to the bottom of the article...It's got a reprint of a 1948 article....very well written by the way.

    http://www.zerohedge.com/news/charlie-munger-civilzied-people-dont-buy-gold-only-pre-holocaust-jews-sew-it-their-garments

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  125. TRB, am at work. Will get back to you on the option spreads this evening. An upcoming ATM trend trade would in AMZN gap coverage after the 5th wave and correction completes. Should top around 240 / 245 and retrace to gap at 200. Looking at July contract or later for this one

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  126. On the 1 minute posted above resistance is more like 1365.6 and looking at trend channels the C wave could easily push above that.

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  127. I was just so proud of myself for getting for finally getting the r-count right and ya go and change it on me :)

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  128. Clayton, at work. Will suggest some oscillator stuff to look at over weekend to help you get a system started. You want to also get input from Katzo, PL, and Doom on this as all use similar stuff

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  129. That was the 120min ES. Bad call. Broke upside big right after. The MACD upside crossover happened just at that point. The result shows that a LOT OF PEOPLE were trading off that signal. Have to watch out for that in the future. ,,,DD

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  130. SPXU 5 to 1 reverse split:   Very interesting that the fund picked today to do the reverse split.  Reverse splits suck for the shareholder.  I can only think that the market is in real trouble and somehow this all wraps up together – don’t know how though, anyone have the answer??

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  131. Fur you, it can be any number you like.  :)   
    Not insulted by lack of rrrr's.

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  132. truerangeballisticMay 11, 2012 at 6:34 AM

    Nice chart FURRRR. This has the look fo a bear flag to me. But as I am mostly wrong in pattern recognition I would take the flip side and call it a bull pennant of sorts. Always appreciate your thoughts. I know there is that 802 gap waiting to be filled too. Another day in the Sherwin-Willams booth.

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  133. Yeah, I'm watching that flag squeeze between the green lines and orange - we shall see....

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  134. ProShares also put a reverse on their leveraged ETN short silver play - ZSL.  

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  135. Facebook co-founder (not ZuckerBorg) renounces U.S. citizenship.

    http://www.bloomberg.com/news/2012-05-11/facebook-co-founder-saverin-gives-up-u-s-citizenship-before-ipo.html

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  136. Normally when they split one of those triples it is because it has gotten way too expensive relative to its reciprocal.  For example, when FAS and FAZ made their debuts they were both priced at about $65.  Over the course of the next 6 months or so they both went all over the place but with FAS ending up somewhere around $150 and FAZ at $20.  (Don't hold me to those numbers...they're just for explanation but probably not far off from reality.  I just don't remember exactly.

    Anyway... eventually they both met up again at the same price - BEFORE any splits had occurred.  You know what that price was? $9.50.  So every penny of difference between the debut price of $65 and the $9.50 where they crossed again was lost due to the erosion theft due to decay.

    So at first glance one might surprised that SPXU is going to split since SPXU and UPRO are not insanely far apart in price from each other.  How about this theory?:

    They might be splitting SPXU this one time 'before' the crash because if they don't, once it gets rolling it's going to be at $150 in no time at all.  If they split it now it goes to about $10 and those two ETFs would cross at something like $25.... a 'reasonable' price.

    Those numbers are "ballpark" and I only used them to explain what I'm thinking.  There's no reason to split SPXU at this time... UNLESS... they're expecting a big move in it and they're front running that move.

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  137. Agree...I got burned on my UVXY by about 1% at last reverse split right before it dropped by about 50% (just call me "Baggy") :)

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  138. truerangeballisticMay 11, 2012 at 7:02 AM

    No worries. I have been looking at AMZN too. Getting ready for a good setup there. Played some PCLN VPS late last week that worked out good. PCLN still has a 620 to 610 gap to fill. That could be a good one too.

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  139. The insanely rich only reside in the country of money.

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  140. What'd you guys do to Katzo?  Is he out for Chinese or in a meeting?

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  141. truerangeballisticMay 11, 2012 at 7:06 AM

    Oh that squeeze is getting tighter. This will bust loose one way or the other today.

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  142. I think I remember him saying he was going to be busy today.

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  143. Allegiance to none but themselves.

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  144. Sell signal went off at 11:30,, just whn I was shutting down my computer.

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  145. I hope The Beard didn't unplug him.

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  146. He's taking a meeting with George Clooney...

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  147. Go down the thread beyond 2 hours.  Explained: " under 10, you can bet on a reverse split."  Note:  SPXU is a triple leveraged derivitive.  If the SPX range traded for many months, SPXU would inch down to almost zero - like a call losing time premium - but it's in the math.  UVXY recently reversed 5:1.  Now around 14, without the split, its around $2.80.  Some one here said that UVXY loses about 14% a month in price - all things being equal.  Look at the weeklies of these versus the underslying index.  Scary!  TZA, TNA, BGU, TVIX, NUGT, DUST etc. - all the triples will eventually reverse split (and they have).   These are not "investments", they're short term rentals.  As a long term "investment" (e.g. several months) the prospectus says you're almost guaranteed that you'll loose money given static prices over a period of time.  Been there, done that, and it was very painful.  Most lessons learned seem to be a result of pain.  Me?  I love 'em, but timing has to be right, and it's not about a marriage. " Wham-bam, and thank you very much. Catch  ya on the rebound!"

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  148. It's worth waiting for.....

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  149. This is so funny: Tupperware parties will turn your brain to "mush" .. http://en.wikipedia.org/wiki/Charlie_Munger#Lollapalooza_Effect ,,, Thanks to the Nostradumass for that reference :-) ,,,,DD

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  150.  yeah, got meetings this aft too

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  151. wow, this is really strange, the charts look liks Switzerland mountains. If we go much below this level (55-6) it will break the strange looking EW on the 15 and could set up for more down. I am shocked and somewhat pleased that they could not move this higher.

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  152. Charlize Theron called and wanted to talk EWs.

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  153. Sorry to be fractal-corny, but that last hour or so on the S&P looks like the Gulf Coast. Are we about to go around the Keys next?

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  154. Shall we all start yodelling now?

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  155. Damn DD...you had to read all the way to the bottom for that...LOLlapalooza Effect....actually sounds like how EW functions.

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  156. This is pretty interesting, came right up to neckline and was stopped cold.

    http://screencast.com/t/UPF9wwYMa

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  157. Minyanville gives our hero, P.L., not one - but two headline articles today.  The second one is "The Rant" without the charts.  "Who's your Daddy, M.V.?"  Way to go!  That's called r-e-s-p-e-c-t!

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  158. While we're waiting (and since it's Friday):

    What's the difference between an epileptic cornhusker and a prostitute with diarrhea?

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  159.  take a look at the W%R on the 120 ES, if that continues pointing down, no flipping up, then we will go down ROD

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  160.  Well yes, she wants to meet and discuss this EW4 to EW5 transition. I am trying to find space in my busy calendar and may have to shift the meeting and discussion to No Damn (Nostradumass).

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  161. Afraid to ask but what?

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  162. ewes was Jodie Foster.

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  163. So, whaddya say No Damn - 4th or 5th sheep?

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  164. ...The cornhusker shucks between fits.

    (PL, I won't feel bad if you delete this).

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  165. there's  your    eeewwwwwwwww........

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  166. SPX pattern has yet to collapse - watch for bounce

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  167. ....ya forgot "...commission is on the dresser...see ya"

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  168. What is the difference between a Harley and a Hoover? 

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  169. LOL...I'm not very good with counting sheep yet :)

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  170. Jodie Foster likes the ewes.

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  171. Sweet J, got the whole thing running now on the options site. Including W%R! Small victories...

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  172.  http://www.youtube.com/watch?v=Oy1d9okC04s&feature=related

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  173. LOL...just for that

    http://www.youtube.com/watch?v=2Z4m4lnjxkY

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  174. It would be great to see the market surprise weekly options traders by pinning SPY 137 instead of SPY 136. 

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  175. LMAO--- I saw that thing years ago but also found this one.  Somebody dubbed it and I just can't watch this one without pissing my pants.
    http://www.youtube.com/watch?v=0bRlh5KO0VQ&feature=related

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  176. last chance?
     http://twitpic.com/9jvphn/full

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  177. Thanks DRG, Katzo, PL,  been busy with the day job so haven't gotten around to responding to all the great feedback.  I'll gladly read anything you all send my way!

    (dabbled in some shorts pre open today, had 2 really bad calls and got the ever lovin' chit kicked out of me)

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  178.  ROFLMAO...that makes two Depends before supper for me....The wife is gonna make me stop talking to ya if I go over budget again. That one is the best...This one isn't as good, but it just reminds me that everyone applying to art school should be admitted.

    http://www.youtube.com/watch?v=EcWfAwp_uSk&feature=related

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  179. truerangeballisticMay 11, 2012 at 8:34 AM

    A little Friday inspiration.
    http://youtu.be/p_kMCFVCFDc

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  180. I restrained.  I figured this is a family community and Pretzel's kids might sneak peeks at the threads.  But, yeah!  Back when we were both wet behind the ears, I used to work in "the house" (that house, the one which always wins regardless of the bet).  Get this!  This was before negotiated commishes and Schwab.  Gravy train.  However, I never sold my soul.  Got out when I had to leave my desk to puke.  Mangement said:  "You're not paid to think!" (for the client).  Nothing has changed except the technology, The Beard, and the Squid.  Bigger and worse!

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