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SPX Update: In a Surprise Move, the ECB Declares Bankruptcy

That got your attention!  Too bad I’m making it up.

Yesterday, I gave my arguments in favor of the preferred count.  Today, I was going to play devil’s advocate, and actually wrote an entire article along those line.  That took two hours.  Then I scrapped it.

Then I re-wrote it.  I’ve been charting and writing for almost 12 hours straight now, so I’m completely exhausted and eye may and up with a bunchch of typoses and spalleing airors. 

After all the re-writing, I’ve decided I am going to publish this alternate count.  There really wasn’t much to add to yesterday, so instead of getting lazy, I tried to turn my views on their head.  I don’t want to confuse everyone with this devil’s advocate attempt, but I don’t want anyone to get screwed by this market either.  Normally, I can rule out certain counts by using historical confirming indicators.  But so far this market has blown those indicators up every time, so I feel like I’m charting with half the usual amount of tools. 

Today’s action has the potential to answer a lot of questions.

I’m favoring the preferred count by a 65-35 margin.  Perhaps in this market I should favor it by a 80-50 margin, since indicators and math haven’t really been working too well lately.  I’m sure Ben or the ECB can print up the extra 30 percentage points I need in order to exceed 100%.

First the short-term count:  I’ve tried my best to interpret the 5-minute charts in light of the preferred count, and have come up with an expanding ending diagonal as the most likely short-term possibility.  As a result, the upper end of the target zone has increased a few points, to 1385.  If this count is correct, the final wave could end at any time — ending diagonals often end with a spike-high and quick reversal.  The chart also shows the key short-term price markers.

The danger zone for bears is above the upper red trend line.  If the market shows any acceleration above that line, then bears are in full retreat, and the move is likely to run.

Next the 10 minute chart.

And finally, the alternate count.  I used the Wilshire 5000 to give me a chance to look at the market with fresh eyes, and this count considers the potential of an additional first and second wave in the structure.  Normally, I’d use historical indictors to give me an idea of how believable this count is — but those haven’t been much help lately.

As I’ve said, in a “normal” market, I’m able to use confirming indicators to rule out certain counts with better confidence.  But this market isn’t normal — it’s being driven by the central banks instead of investor psychology. 

Trying to navigate this market beyond the next couple hours has been akin to trying to fly a plane without instruments.  The compass hasn’t been working, the altimeter is broken, the control tower is speaking broken English, and the stewardess keeps insisting we eat the crappy quiche that’s been in cold storage since the Truman administration.

I know bears are anxious to jump in and do something after all this time — but I would caution those bears who choose to take action to stay nimble.

While I’m favoring the preferred count by 65-35, today the market will hopefully provide some clues to add confidence to, or subtract confidence from, that count — with the long-awaited ECB announcement finally here.  The first step for bears is to turn and hold this market back below the 2011 highs.

Again, this article was intended to be a devil’s advocate approach.  If you’re looking for more “conviction,” please go back and re-read yesterday’s article.  Trade safe. 

The original article, and many more, can be found at

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