The developments of the last 2 trading days make me consider the whole rise from the post crash bottom to the last week's high as a W2 Kane ABCD:





Timewise it doesn't look good because it rarely happens in a zigzag that CD leg lasts 80 times longer that AB leg. But if it comes to proportions - it's almost perfect: AB and CD legs are nearly equal and whole ABCD retraces between .685 and .786 of the preceding leg down from the top.

Initially I thought that whole zigzag should finish at May 11th high. Now I see that high as a C point of a W4 correction in the CD leg:





The behaviour of the market in the next couple of days should help us jugde whether this interpretation is correct. This is rather important because in such case we should expect a drop to at least 1020 (1.272 external retracement of the ABCD) and probably much lower if W3 down has just started.

We have very interesting development in rates as well. The recent drop reached the maximum point allowed under the scenario of higher rates in front of us:





The potential brake of this low would invalidate my conclusions from the "vinegar story" presented here last December:

http://www.mypivots.com/Board/Topic/5305/1/trading-discussion-week-12-28-09-12-31-09

At that time I was pretty convinced that at certain point in time the market will impose higher rates on the governments around the world. But now in the situation where the governments are in fact the markets, we might rest assured that they will not impose anything upon themselves. Actually I'm now believing in a scenario with high inflation, which is unavoidable, AND low rates, which are required for the whole thing not to fall apart.

The single best investment strategy in such environment is to buy real estate with borrowed money. And it's hard to argue that millions of Americans, who already have such investments, would not profit from it at the end of the day (which in my opinion at least partially justifies such policy). In the middle 80's a young couple from my family bought a house they always dreamed off with money borrowed from a state bank at 8% fixed rate. Monthly installments constituted a lion share of their income and everybody in the family was scratching their head on how they would find the way out of it. Few years later hyperinflation came and they paid off the whole credit with just one paycheck...

This is a spot where the dollar(and most everything else could reverse.

Wow, are they dumping this. New low for the move, 1121.75, down 13.50. Did you see the 4PT 'W2' right at a key line for both the B and D points, to set it up? Just sweet. Now at the lower //, so a bounce might be expected in here. If not, watch out below. Perhaps a 'W4' bounce, and then a 'W5' here.

Here is this 'W2' 4PT right at a line from my downsloping set above:

Another 'flash crash' in the making?

1.272 at line, 'should' create a bounce of some kind. If not, prepare for another 'liquidity crisis'.

It was an .382 EXP ABCD which drove the move to the new LOD:





More and more signs are pointing to the scenario of at least an intermediary top beeing already in.

Yes, I was going to post that EXP comment, so thanks for doing it for me. One setup to the next, eh? Got to love it.

They better come in for this if they plan to, as this is a 'bad' spot for it to roll from.

But wasn't LOD a good spot for the first wave off our big ABCD to finish? :-)

I suspect a big run up in GLOBEX and a huge gap up over that line. We'll see. The weekends are getting longer and longer as the inevitable blowup gets closer.