Friday, August 05, 2011


A quick note from Bangkok before my HK shuttle.

The markets melted down over night and now it appears a new Bear Market is confirmed according to Elliott Wave.

SPX Elliott Wave

The close last night broke below the Primary Wave 1 @1219.  This has allowed for an objective Elliott Wave confirmation the 5 Wave Bull market from Mar, 2009 is over.

The 1st move on this decline should be to the 1150 area (head and shoulders top + measured move of the trading range for the past 6 months).

SPX 50 dma Std Deviation
The markets are extremely oversold at this point as per the Standard Deviation chart of the SPX above.  A 3 standard deviation move below the 50 day moving average is a rare "panic selling" event.  As such, we should expect a snap back rally soon to alleviate this oversold condition.

As Aug and Sept are the 2 weakest months for the markets there is very little to stop us from continuing down.  While I would normally wait to reduce my positions until the monthly chart confirms the move, I think it is wise to reduce exposure on any market advance in anticipation the monthly chart at the end of Aug will confirm the Elliott Wave analysis.

I will move to a 25% equity/75% cash position on any significant market advance over the next week.  Good levels to sell would be 1222 and 1240 on the SPX.

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