Scenarios Galore

I was not able to illustrate a summary of potential scenarios last week since I was waiting for this particular initial drop strong enough to make a series of anticipated run downs possible, if not probable, at this stage.

First off is the very short-term scenario which had been highlighted numerous times in the past few weeks:

- img37.imagefra.me/i52m/aarc/141u_2cf_ubk...

- img40.imagefra.me/i52m/aarc/141u_b21_ubk...

Germany (and France) have proven themselves with Steady Hands during the EU Financial Crisis of April to August 2010. There is no reason why they should wither from the storm imposed by the supposedly peaceful civilian uprisings (but not bloodless) so far away from their borders. The uprisings are not specifically considered as Financial Crisis or Civil Wars that have potential drastic global financial implications (except perhaps an Oil Crisis similar to the 1970's - but that is not considered an imminent major problem since many nations of the world, including the USA, have already replenished or have completed expanding their Strategic Petroleum Reserves).

This is the Short-Term Scenaro:

- img40.imagefra.me/i52m/aarc/141u_487_ubk...

- img40.imagefra.me/i52m/aarc/141u_2f2_ubk...

Alternative Short-Term Scenario:

- img40.imagefra.me/i52m/aarc/141u_4bf_ubk...

- img40.imagefra.me/i52l/aarc/141u_590_ubk...

- img40.imagefra.me/i52m/aarc/141u_e31_ubk...

The Alternative Wavecount seems to have better probability of success than those of the first 2 charts for the SnP500 since the XLF (and $BKX) combo are more likely the limiting factor(s) for a very short-term Spx sustained rally.

There are many other scenarios both for the bulls and the bears such as using the higher low of August 2010 as the Start of an A-B-C rally that may become an X wave thereby providing at least 3 additional scenarios of minor to major pullbacks if an X-wave does materialize.

There is also the potential scenario that the 1st wave rally since March 2009 has completed in April 2010 and a running type of correction for a 2nd wave is still in progress and will keep continuing to consume massive amount of time before a 3rd wave vertical rally can follow.

The other medium-term scenario is that the 1-2-3 wavecount for the whole rally from March 2009 has already completed and the 4th wave has just started today. A pullback of more or less 3 months will be expected under this scenario that will more or less be similar to the 17.3% loss to Spx during the period April to July 2010 medium term meltdown - or what the more seasoned traders and investors call the reasonable long-term pullbacks and/or garden variety recessions or temporary bear markets depending on how they define recessions and bear markets.

There is also the possibility the whole rally from March 2009 to Present is simply a sucker A-B-C rally that should result in either an A-B-C down retrace of at least 61.80% of the whole rally OR a 1-2-3-4-5 Meltdown that presumably will break the low of 666.79 last set in March 6, 2009.

For all we know, the whole rally from March 2009 to Present may even be an X-wave that sometimes do occur after a major A-B-C correction such as the 2000 to 2009 secular bear market. The Dow Jones formed an X-wave in 1974-76 on the monthly chart. The X-wave connected the A-B-C secular bear market of 1965-74 with another A-B-C secular bear market of 1976-82 that formed the Prolonged Secular Bear Market of 1965 to 1982 spanning over 17 years over-all. Since Dow Jones and SnP500 are doing almost exactly the same pattern from March 2009; the rally from March 2009 to Present may turn out to be a giant X-wave similar to that of Dow Jones' 1974-76. There are at least 3 different scenarios that may happen after an X-wave has formed.

It is unfortunate that SnP500 has to enter this highly uncertain stage but it cannot be avoided. Rallies cannot continue without undergoing periods of uncertainties (pullbacks) and Sell-offs or Meltdowns had happened numerous times in the past and will keep happening in the future.

Myself, I consider it fortunate that SnP500 and Dow Jones are capable of having an Extended Rally for the very-short and short-term basis despite it's highly complex nature and the possible limitations imposed by the Compq and/or the XLF/$BKX combo. It is seldom that we may be able to experience an Extended 5th Wave Rally on the Daily Chart and it is something to behold if and when it actually happens. Who knows what might happen next if the uprisings in the Middle East and North Africa drove global investors into the safe hands of the NYSE.

Almost all of the above scenarios have already been outlined in my Instablogs and Comments for the past several weeks and months since majority of my postings are forward looking or pro-active. However, it is the short-term TAs that are of critical importance since they will have major impacts to the medium-term TAs in most cases and should flow-over to the long-term outlook. I will make more detailed TAs of the Medium-Term and/or Long-Term Scenarios if and when they become of imminent practical value. At the moment most of them can be considered possibles rather than probables.

Good Luck