Friday, December 16, 2011

MTU Weekend Ed. - Make or Break (12/16/11 Close)

It's possible to count major stock indexes as being at various stages of an impulsive decline.  While the initial overlap in price structure along the current decline and the lack of notable risk aversion offer prospects of a corrective retrace, stocks are yet to offer confirmation of any sustainable upswing. Global stocks have arrived at a make-or-break point - making it above the December high or breaking the November low, possibly beyond in either direction.

On Dec 12, 2011, we observed: "Looking to GDOW for clues reveals that all (parts of the world) is not well."  Following an additional 4.21% decline over the past week, GDOW apparently has arrived at a make-or-break point.

Chart 1 shows the top bullish (blue) and bearish (red) counts on GDOW since its October low.  More importantly, the squiggle count on GDOW in Chart 2 shows

(1) a completed zigzag correction since the December high on the (immediate) bullish side or
(2) further "immediate" weakness on the bearish side which is at best a wave 5 down or at worst a [iii] of 3 mini "crash". Let's figure out the wave degree afterwards.

One cannot help but notice the high correlation of key global stock indexes.  Like GDOW, major European benchmarks (Frankfurt DAX, Paris CAC and London FTSE) are at various stages of impulsing down on the bearish side or a double three at or approaching completion on the bullish side.  See Chart 3 to Chart 5 and also ... so goes the world (12/9/11).

In the U.S.,  NDX is still leading the slide.  SPX and NDX are yet to offer confirmation of any upswing. See Chart 6 (NDX) and Chart 7 (SPX).

Let's not forget the triangles of maximum confusion discussed in recent weeks (Chart 8) as well as the curious behavior of the VIX (Chart 9).