THE NEXT LEG DOWN FOR THE MARKETS ?

There are many chartist out there and the one chart most are watching is the Elliott Wave on the S&P. The thing about these charts is each person can have their own interpretation as in which leg we are actually in at a given time. Here is a link to a short lesson on the Elliott Wave Theory http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:elliott_wave_theory









I'm also posting this Excerpt which I came across at this link http://www.elliottwave.com/freeupdates/archives/2009/05/01/Dow-Below-1000-Seriously.aspx









Excerpted from The Elliott Wave Theorist by Bob Prechter, published April 18, 2009 Yes, Below 1000 in Dollar Terms

Readers sometimes ask if I am serious about the Dow eventually falling below 1000. People can understand that the Dow can fall in terms of gold, but they are so convinced about coming hyperinflation that they consider the idea of the nominal Dow in triple digits to be simply out of touch with reality.

The primary reason I believe the Dow is going to fall that far is its Elliott wave structure, which calls for it. But I can also see a monetary reason for this event. The tremendous inflation of the past 76 years has occurred primarily by way of instruments of credit, not banknotes. Credit can implode.

The only monetary outcome that will make sense of the Elliott wave structure is for the market value of dollar-denominated credit to shrink by over 90 percent. Given the eroded state of capital goods in the U.S. and the depletion of manufacturing capacity, it is not hard to see why all these IOUs have a deteriorating basis of repayment. The future has already been fully mortgaged; it's time to pay. But there is no money to pay, only more IOUs, which cannot be paid, either. So the credit supply (after a brief respite) will continue to shrink, which means that wealth, and therefore purchasing power, will disappear along with it. In the broadest sense, this change will constitute a collapse in the "money supply."

Such a monetary background would be consistent with the Dow falling below 1000 in nominal terms. It is one of the reasons that Conquer the Crash is subtitled How To Survive and Prosper in a Deflationary Depression . To be sure, the central bank does have the capacity to print banknotes. But I expect that the final implosion in credit value will be so swift that the authorities will not act in time to counter it. They will continue to try to maintain the fictions of full face value for IOUs until they fail spectacularly to keep up the scam. Then they will start to scramble, but it will be too late.









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Now I personally don't think the DOW is worth following as it's way to easy to manipulate with so few companies in the index.You get a much better picture when you look at the S&P which has a better spread of companies to get the story of what is happening out there. Here is a chart of the S&P with an Elliott wave plotted on it.

Link for this chart http://img7.imageshack.us/img7/5790/elliottwave1.jpg

Here is a second chart which I put a Fibonacci retracement on . The RSI on this chart could easly pull down from here also the slow sto is in danger zone here. The last two trading days are showing selling vol but not exceptionaly high. I'm beginning to think that with the first half of the year complete it's time to be very vigilant. Many stocks have had a tremendous run and the most likely ones to fall hardest are in my view the banks. Some posted great profits for the last quarter, but as we know these didn't reflect the true picture as they changed the accounting rules . The toxic assets are still there and will have to come into play sooner or later.

Link for this chart http://img7.imageshack.us/img7/8756/fibspx.jpg





Again This is only for discussion . Read my disclaimer at the bottom of this page.