Bernanke vs. The Balrog

Posted: August 27th, 2010 under Predictions, Stocks.

Bernanke vs. The Balrog

Bernanke’s speech this morning indicating the Fed would continue “easing by other means” despite zero interest rates reminds me of the climactic scene from the first book of Lord of the Rings in which Gandalf (Bernanke) fights the monstrous Balrog (deflation) as he falls seemingly forever into the chasm (the coming bear market). At this point, Bernanke is still hanging on to the Bridge of Khazad Duhm by his fingernails.




The heavy volume early in the day may have been the plunge protection team at work as Bernanke spoke and they succeeded in pumping the market up for the day at least with a textbook flat corrective rally forming from Wednesday’s and Friday’s lows. With that in mind I have drawn today’s turn date in red (we are above a 5-day moving average at least at the close) indicating a possible top either at today’s high or early on Monday, or if the corrective wave extends further in price or time, then later next week.

Spiral grids are drawn forward from the April 26, 2010 high and the F3-aligned June 8th, 2010 low and both are quite often aligned with significant turning points in the decline so far. Note that we are near F6 from the June 8th low right now confirming the August 26th/27th turn date.

I will be posting the monthly turn date chart for September later on in the weekend.
Meanwhile I recommend the Youtube clips of Gandalf’s Battle With The Balrog set to Carl Orff’s Carmina Burana. These are not embeddable presumably for rights reasons.

I recommend clicking on each chart to see the enlarged version as browsers tend to do awful things to shrunken images, such as remove price bars entirely.

Dow

Spiral Calendar Turn Dates Chart For DJIA for August 27th, 2010

Spiral Calendar Turn Dates Chart For Dow Jones Industrial Average for August 27th, 2010 – click to enlarge

S&P 500

Spiral Calendar Turn Dates Chart For S&P 500 for August 27th, 2010

Spiral Calendar Turn Dates Chart For S&P 500 for August 27th, 2010 – click to enlarge

Nasdaq-100

Spiral Calendar Turn Dates Chart For Nasdaq-100 for August 27th, 2010

Spiral Calendar Turn Dates Chart For Nasdaq-100 for August 27th, 2010 – click to enlarge

New visitors: please see this post for a brief explanation of the spiral calendar.

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4 Comments »

  1. Gandalf is a hero. Ben Bernanke is no hero and I wish he were fiction.

    Comment by Jason — August 27, 2010 @ 8:14 pm

  2. Well politics aside, what I’m trying to convey is that the Fed chairman, far from being omnipotent as most people on the street seem to believe, is at best in for a very rough ride, and the market is in for a long fall from a great height. I doubt the Balrog can win in the long term – there will be a bottom at some point, just not anytime soon.

    Dave

    Comment by Admin — August 27, 2010 @ 8:25 pm

  3. I’m not sure I understand you thoughts on this turn date? Are you thinking that we are going to go back down after a top is put in on Monday, or are you thinking that we are going to rally for awhile like we did at the F3 point (June low) up to your next turn date at F8, (or F9… not on the screen)?

    Comment by RDL — August 28, 2010 @ 7:03 pm

  4. Given the corrective rally Wednesday morning through the close Friday, which appears to be a textbook flat – possibly some degree of wave 4 of minor 1 down, I think we are going lower on Monday. However corrective waves can extend so if we do go sideways or higher next week then I will be wrong about the direction of the turn. Given the trend I want to err on the short side – any mistakes will be much less expensive.

    Dave

    Comment by Admin — August 28, 2010 @ 8:20 pm

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