Friday 17 February 2012

Long Greek Weekend.

When on January 10th, the great oracle of Elliot Wave theory proclaimed that wave 3 has started and everyone should leverage up and short the market with a stop loss of 1360, I should have realized that SPX 1360 would be taken out. Now that it has been taken out, can we come down to earth please? I think even the last bear has been killed by now. I want to join the fun but I am too old to give up on rationality and chase momentum. 

Let me quote from Phil Davis:
This is what it was like in 1999, when the experienced market players would be well-hedged and missing the rally while some kid who works for him quits because he bet his student loan money on Yahoo and now drives a Porsche.   
Sure 9 months later the Porsche was repossessed and the kid was flipping burgers but WE WANT TO BE THAT KID – IT'S FUN TO BE THAT KID – until it isn't again.

Last night I made a 2nd post showing / mentioning few divergences. The list goes on. Today the FX proxy AUD developed a huge divergence and I have not seen anything like this in last few years.
The next two charts are from Eric Swarts of Market Anthropology who does a great job of analysing the market in the most rational manner. The first one is the divergence between DOW Transport and SPX.

The next is TNX and SPX.

This divergence is going on for a while and I think they will meet by end of May 2012.      
Today Credit was down, gold  was down, Carry trade FX was down, DJ-Transport was down, RUSSELL 2000 was down, Nasdaq was down. But SPX was up and DOW as well. You tell me should I go long now? May be I will flip long if I see that SPX has decisively broken past 1370 and stayed there after end of February.  Till then I am still a non-believer.

While we shall be enjoying our long weekend, Monday will decide the fate of Greece one way or other. Either they default and get liberated or they get bailed out and live in semi-slavery of Germany for many generations. And this time, Germany does not have to fire a single bullet! Isn’t that sweet!

I would close the post with the chart I showed few days back and it is still relevant, if not more. ( Hat tip to

Thank you for sharing my thoughts and for reading Have a wonderful long weekend folks.


  1. As always, enjoy your post and appreciate them.

  2. BB, thanks for providing the various pieces of data! However, you posted TNX vs SPX twice - could you replace one of the plots with DOW Transport vs SPX? thanx! Have a gerat weekend!

  3. Done. Thanks for pointing out the error, Ringo.