The Black Swan is being noticed!

In our last post, we were among the very first to notice the Black Swan (the Middle East problems). Now almost everyone is blaming the recent decline in the markets on the Middle East. But we were in the final stages of an Elliott Wave Theory Fifth wave and the Black Swan arrived on schedule. It always does!

The important thing for me is that the trend has changed. The markets are now in a downtrend. Bring up a chart of any of the indexes and you will see that this is true. It is confirmed by drawing a trend line from the previous low to the high of the market. The line has been decisively pierced. Also the MACD is also confirming that the market is in a downtrend. (Daily Charts)

The strategy now is to take profits if you have been long the market and either go into cash or go short the market. Right now the markets are in a SHORT TERM market downtrend. But, I think it will have a long way to go down. But, this warning is in order: I have been wrong before. Remember, this is all about probabilities! Anyone who tells you otherwise is a faker. In conclusion, it appears the market's trend has changed. Act accordingly. Keep your feelings out of your decision making.

Has the long awaited bear market returned?

It appears that minor wave 5 of a larger wave 2 has finally been completed. This has been like waiting for a baby to be born from the moment of conception to the date of birth. In the case of the stock market, it took more than nine months. If this view is correct, the market will decline. How it will decline we do not know. It may be a quick decisive drop like the 2007 bear market, or it may be a slow horrible decline. At any rate, according to Elliot wave Theory, it will drop to the previous 4th wave. Depending on what market you follow, look back to see where the 4th wave began. At that point the strategy would be to cover your shorts and go long for a profitable trade. If this is truly the beginning of a bear market, and you are positioned correctly, it should be fun.

The right strategy at this time for the cautious is to be in cash or short term treasuries. For the speculators, go short at this time if you are not already short.