The Great Crash of 2013

By -

People sure to change their minds in a big hurry. If you had chatted with traders on Wednesday morning, they were convinced we were finally heading lower. The Elliott Wave folks talked about how we were in wave 3 and how it would be a “wonder to behold”. (Conveniently, the same folks are now saying that we’re in wave 5 and will see higher highs………the magic of Elliott Waves is that one can never, ever be wrong, because there’s always an alternate count).

Well, just a couple of trading days later, everyone’s changed their tune. The consensus seems to be that the five or six days of selling we experienced constituted the entire “down” market for 2013, and now that we’ve filled the gaps in most index charts, it’s up-up-and-away time again.


You probably will not be shocked to hear I view things differently. The ES chart tells the story well. The big bounce we’ve seen since Wednesday morning was a relief rally, and I think the prices we experienced late Friday were great selling opportunities. The descending trendline on the minute bar graph remains unbroken.


Of course, I do feel that the market won’t be allowed to go too much lower before those with a vested interest in its artificial inflation intervene, but I simply do not buy the notion that a couple of days of spirited buying have wiped out the bears chances. Below are my assumptions about how far the market has the potential to go in the coming weeks. First, the Dow 30:


The Dow Jones Composite:


And, finally, the Russell 2000. (I am not showing the S&P 500 chart, but you already know my target on that – about 1575).


One other interesting tidbit that took place was that, for the first time in half a year, we got a “higher high” on the VIX. It was modest, and it was subtle, but it was real.


Lastly, I think the US dollar is set up for a tremendous rally. If this takes place, it will make the job of equity bears (I’m not sure if I should even be using the plural at this point………….) easier.


That’s it from me……….guest writers, send in those posts, and I hope everyone has a safe and relaxing weekend.