At the risk of making a total ass of myself – – – which is endemic to doing this blog, I suppose – – I offer the following update to my world-famous WAG, originally posted on April 25th:
Whenever we see any weakness in the market, some Slopers have declared my WAG dead. Pish-posh! The WAG is alive and well.
What got me thinking about this was this post from my good friend Serge, the mercenary dictator of ETF Corner. He emailed me this particular image from the post which, on its surface, projects that the /ES will get back to about 1170 before turning down again. He has confirmed privately with me that we are right about at that dotted line now.
With the utmost respect to my Parisian friend, instead of being between "7" and "8", I think we're between "9" and "10". Observe my own labeling, lovingly crafted in the fine calligraphy you've all grown to respect and adore (as always, click on it to see a bigger version):
I've done two big things different than Serge. ONE, I've put in my own labeling, and TWO – – importantly – – I've taken into account the "X" factor. To explain:
"8" should have been a rocket launch to 1131, and "9" should have been an ease back to the neckline. Instead, "8" was completely limp-wristed, and "9" fell 21.25 points farther than it should have.
When I initially did this drawing, I used this absolute delta to project a target for "10" at 1150, but subsequent to this drawing, I used a percentage instead, and I came up with a target of 1143 instead. This just happens to correspond beautifully with the January high.
It also conforms with the entire WAG scenario beautifully, in addition to the Light That Guides Us All, which is my 1937-1942 analog.
The ideal scenario would be for us to shoot to 1143 (plus or minus a few points), stall, and then start falling. I think Serge's analog with China is brilliant, but with these two important modifications, I think the top before 2010's big plunge is much closer than he postulated.
