Do we have a setup for a crash now ? - Yes. But what we have is a just a necessary condition. That's all. I have been observing the SPX P/C for the last few weeks. There has been huge put buying by these folks right from near the top and it still continues. SPX puts are not bought by the retail speculators, but mostly the intituitional crowd. Judging by the SPX P/C ratio, the institutional investors are fairly well hedged at this point. If the average joe on the street knows about the market risk here, i bet the veterans who manage big funds surely do. These are the strong hands and are not the folks who start capitulating until the monthly trend turns down. With so much hedging in the background, the possibility of a market crash is highly diminished here.
But there's a difference between 2002 and now - the huge proliferation of hedge funds. We did not have 10,000 hedge funds in 2002. I bet there aren't 10,000 hedge managers that are qualified. These hedgies and the retailers are the ones panicking here and throwing in the towel. That could create a washout kind of a situation. But crash, i highly doubt it.
Enough of the rant. From a e-wave perspective, as i wrote last week on my blog, i expected a bounce and we got it.
http://nav-ta.blogsp...t-thoughts.html
I said after the bounce we should head to a price climax. The million dollar question here is "Is this the climactic move ?". One has to operate under the assumption that it is. But if we fail to break the ES 1532 lows and the hourly gives a buy signal, we may have another shot at the upside.
Based on my long term count, we are in a X-wave and this market is showing the typical charateristics of an X-Wave. If we break the ES 1532 lows, then we are in the final wave C of X. If we are in the wave C of X then RUT will start underperforming on the downside. The peak of the negative breadth plurality comes during the wave A. Wave C will start diverging both in terms of breadth momentum and price momentum relative to wave A. RUT relative strenght will be the first sign that we are in a wave C. As i said in my blog, this wave C has a wide range for downside target 1410-1360 SPX cash. LarryT mentioned that we could in the wave 3 here. I disagree. For that to be true, we need to make a lower low on the NYSE MCO and a lower low on the weekly CCI. The breadth plurality required to make that kind of lows is literally mind blowing. You do the math !
1998, 1998, 1998, Crash, Crash, Crash, Wolf, Wolf, Wolf - Now i feel better
Edited by NAV, 10 August 2007 - 01:21 AM.