Probably Was Not An ED

Yesterday, I was calling for a small ED to finish off (c) of [a] or [w] of 2.  Based on the lack of selling and the level of initial support, I have updated my micro count as shown on the 1 minute chart.  My feeling is that we are going to see a [w] wave here, and not a real [b].  That would imply that 2 would finish with an a-b-c [y] wave, as opposed to an impulsive [c].

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EDIT:  I should add that my top alternate count at this point would be that we are seeing (i) through (iii) of an impulsive [a] of 2, rather than the depicted (a) through (c).  That would obviously mean a new high for [a] before a downturn in [b] of a classic zig-zag 2.

8 8 I forget was 8 for....

RUT looks just about ready to Kiss Off here for a bit.  If 2 is evolving as a classic a-b-c, the [b] should be at least a 90 % retrace of [a], and could even extend below the start of [a].  If 2 is going to be a w-x-y, then the retrace in [x] is likely to be quite a bit shallower.

Currently, I have us completing a small ED to finish (c) of [a] or [w] of 2.

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The DAX did not have much of a day today, but I expect quite the retrace of August's decline before we see significantly lower lows....

DAX DAILY

I recommend another great article from Professor Copeland, found here.

KISS OFF!

Riding The Snake

RUT 60 MIN

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DAX DAILY

DAX 60 MIN

Video Recommendation

"C'mon baby, take a chance with us"

From a song by the Doors, the title implies that a long position seems justified at this juncture - just don't get married to it.

DJT 60 MIN

DJT WEEKLY

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TNX MONTHLY

Satisfied

My last post noted that a five wave structure down was necessary, even if it truncated.  I am satisfied that has now occurred.  As implied by my last post's title, meeting this condition was necessary to my count, but not sufficient to prove it to be true.

DAX

(no truncation here)

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RUT 10

(Here we did truncate, but looks like a nice five wave down from [iv].  BTW, this is a very nice tradeable bottom, in that a gives you a nicely defined stop.  Obviously, I am not the first or the only person to think of that.)

Necessary, but not Sufficient

My count demands that the current rebound be a fourth wave, which means it needs to end rather soon and be followed by a fifth wave down.  That fifth wave can, and likely will, truncate - just to keep things interesting.  If this does not occur, the Primary [C] concept is premature or just plain wrong, and I would probably hand the mike back over to Mr. Binve.

DAX DAILY

RUT 60

RUT 10

Markets will be looking at growth numbers in Europe, particularly Germany, today.  Forecast is for +0.5% growth in the quarter.  More importantly, they will be looking for signals coming from the discussions to be held today between Merkel and Sarkozy.  Talk of Eurobonds seems to be ramping up, despite the opposition of the majority of the German electorate.  If Merkel caves on this issue, don't expect it to go down easily in Germany.

This raises an interesting question.  When most of your electorate is adamantly against a proposal like Eurobonds, for instance, what is your role as a democratically elected leader?  Are you to be a representative leader, reflecting the views of your electorate; or a patriarchal leader, doing what you think is best for your electorate despite their wishes?

I've Got to Stop Taking Vacations...

I am recently back from two weeks in Spain, much of the time without Internet access, and how things have changed!  My prediction of a lackluster deal to raise the debt ceiling came true, although the speed of S&P's much deserved downgrade caught me by surprise.  However, I certainly did miss what appears to have been the top of Primary [B], which is the wave we have been in since March of 2009.  My call is that we are now in Primary [C], and that the top is in for quite some time to come.  If I am (again) proven wrong, then I would probably have to go with Mr. Binve and others' concept of this being a cycle degree x wave since March 2009, with higher highs to come after some period of consolidation.  I personally cannot accept that concept right now because of my perception of the macro picture, but who knows.

At any rate, here are some tentative counts to look at.  They are all concentrating on the bigger picture.  I do not believe that a micro count would be worth much right now.

CAC

WEEKLY

DAX

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FTSE

MONTHLY

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RUT

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TRAN

WEEKLY

Apart from the counts, I would also like to comment on Europe.  I see the EU debt crisis as a binary event.  By that, I mean it has two nearly opposite potential outcomes.  The first would be the establishment and proper funding of some type of central facility to issue European area government bonds that would have the ability to tax countries and would be backed by the federated credit of all European nation states.  The other outcome would be the fragmentation or possible break-up of the EU altogether.  For the former to come true, we would have to see Germany willing to backstop the debt of the remainder of the Eurozone.  (I don't think France will be much help, given the pressure it is coming under.)  For many reasons, I seriously doubt that Germans will be willing to do this.  In fact, I think they will eventually realign themselves with their major trading partner - China.  Thus I am of the opinion that the latter outcome will prevail.

In that regard, today we saw rumors of France about to lose its AAA rating, which were denied by the French government, as well as the rating agencies.  Personally, I think France will keep its rating for now.  However - and this is critical - it will lose it if it contributes in any substantial way to the type of  massive expansion of the EFSF or ESM that would be necessary to backstop Italy and/or Spain.  That is the great Catch 22 in Europe, and is the primary reason I feel that the Germans hold the trump card regarding the fate of the EMU.

Something definitely worth watching in this regard is the widening spread between German and French 10 year yields, shown over two time frames below:

3 YEARS

6 MONTHS

To my eye, this is the widest this spread has been since the start of the EU debt crisis, and distinctly does NOT bode well for the establishment of a fully funded facility to backstop Italian and Spanish debt, in the form of the either the EFSF or ESM.  Unless, of course, Germany wants to go it alone...

Germany eurozone: Pressure mounts on Merkel at home  (BBC)

"German Chancellor Angela Merkel faces mounting discontent from within her own political bloc over the continuing eurozone debt crisis.

A new opinion poll suggests a majority of members of the CDU-CSU bloc oppose bailouts for fellow eurozone countries."

Slithering to the wrong kind of union  (FT)  by Otmar Issing
My summary:  The key point is the lack of democratic process in the current move to collectivize debt. Such a process should have necessarily been in place before the EMU was formed. Instituting the process now demands that citizens of countries who currently enjoy low interest rates fore go that benefit for the sake of the highly indebted. I highly doubt that such a demand will be fulfilled in a democratic process, and current attempts to do so by bureaucrats will lead to social and political upheaval. 

Why is the West bankrupt?  (Reuters)  by Laurence Copeland

"However, there is one prediction I would offer for the medium to long term outcome, and it applies not only to the euro zone, but to Britain and America too – in fact to the whole of the comfortable, complacent industrialised world – and it is this.

We are living through the death throes of an ideal, a dream which has turned into a nightmare – it is the end of the social democratic welfare model."


Greek Bond Swap May Be Extended (WSJ)