Monday, October 3, 2011

Afternoon Delight - The "Duck and Cover" Edition

Quite the day in the markets. That early head fake threw a few off the scent, but it was pretty easy to pick back up after the minis ran into double resistance and reversed course. Bottom line is we're so close to collapse I'm inclined to think the majority have moved to the denial stage. This is a move I even experience, you know it is coming, you have called it, it is painfully obvious, but as it nears and when the signs are the greatest you withdraw. Call it a protection mode or whatever psychological term you like. It might be time to learn how to duck and cover.

The raw idiocy of the following video (duck and cover - YouTube) draws succinct parallels to today's markets. Watch this and enjoy the laughs (we all could use a few right now). I laughed the whole way thru (once you get past Bert the turtle it gets really funny). You see the atomic bomb is very dangerous and if you see the bright flash get under your desk and all will be well. The bright flash can throw you down or knock you against a tree. We sure don't want that to happen. Oh, and remember sometimes the bomb can explode without any warning!

I trust you enjoyed that (if you did not watch it go back now and do so - you must learn to duck and cover when the flash (crash) happens. I get the feeling this market is about to flash. When you see the flash, duck and cover. It can hurt you. Remember there is not always a warning.

Minis /es Daily - So, how do you make sense of something like this? Why are all those old lines on there? What in the world

Minis /es - 15m - That channel guided us gloriously since identified last Thursday.  But what about all those other diagonals? See the original blue resistance diagonal off the top? Still there and price reacted to it 6 times in the past 5 days. It worked in tandem with the upper yellow channel resistance this morning to stop the ramp in its tracks.

There are so many versions of head and shoulders you can make out of this large consolidation period it would nauseate you. I don't like any of them because they are mutated (have too many body parts). The one I do like the most (seen on the daily chart above) would be slanting down and captures the last three tops (so ignore the first hump - first low - some are calling a left shoulder). Each scenario gets you to 1010 on the minis. Now, what you should expect is a backtest of the channel or pink/orange diagonal before significant weakness. So this next move south should be 100 SPX or a 1,000 DOW points. Pick your poison.

The channel broke down, both support diagonals are gone and a lower low was set. If the Fed has any bullets left (doubt that) they better pull the trigger tonight.

Remember, DUCK AND COVER! That flash means to act FAST!

And don't forget your Aluminum Foil Deflector Beanie

GL and GB.

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