21 SEP 2009, Monday

1. Below, and above is from Mish Shedlock's blog which I read all the time.
2. The above chart shows several different possibilities of what may happen. These are not the only patterns in play. However, the odds are increasing that one of these patterns is it.
3. That rising wedge can now be counted as an a-b-c-d-e bearish rising wedge, possibly representing a massive corrective "B" wave up. With that labeling, the 5 waves down into March is an "A". In this scenario, wave "C" will take out the March low. This is the most bearish outlook. It would match what happened in the Great Depression.
4. A second likely possibility is a "bottom may be in but we are not going anywhere for a long time" scenario. Perhaps new lows are made ultimately, perhaps not. Such a scenario would play out similar to Japan's "Lost Two Decades". This means that we'll be on a up-down rollercoaster between the near term highs and the March lows for another few years.
5. The least likely possibility but one that needs to be considered is a scenario in which the rising wedge breaks upward in a sustained way (as opposed to temporary headfake). Were this to happen, it would likely be in connection with a collapsing US$. Although a possibility, bearish US$ sentiment is so extreme that it's not a strong likelihood at this point.
6. Take your pick of the 3 scenarios...or make up one of your own. ;)
7. Fundamentally, technically, and sentimentally conditions are ripe for a strong retrace of a major portion of this move up. But.... That does not mean it will happen.
8. However, you need to consider what your willing to risk / give-back of this big upmove.
9. Being out wishing you were in is always preferable to being in wishing you were out.