A liquidity driven market

250,000 to 500,000 people attended the rally in London against spending cut.

My previous wave count, a wedge formation, wave 5 was completed. Major wave (iii) as well as mega wave B were also completed. Mega wave C has started.


However, despite of all the unrest in North Africa and Middle East, earthquake, tsunami and nuclear plant problems in Japan, European debt problems, high commodity and food prices, high unemployment rates and others bad news, Dow managed to climb above 12,200 point in the last 7 trading sessions.


Dow has moved so high that it is possible to rule out the supposed to be mini-wave 4, especially when it lapsed into the supposed to be mini-wave 2 as shown above.


Unless Dow starts to drop in the next few days to below 11,600, failure which, the wave count is as shown, for a wave 6 formation, it is possible that Dow has gone into extension for a 9 waves formation for the major wave (iii) of mega wave B.



However the wave count for Nasdaq is telling a different story.
There was no wedge formation and instead it has a sub-wave 3 that consists of 5 mini waves as shown below. The recent low is sub-wave 4 and Nasdaq is currently in its sub-wave 5 that is likely to complete in April but has to watch out for failure.




Under QE2 US$600 billion asset purchase plan until end of June, on every trading day, Federal Reserve purchases more than US$ 5 billion of US Treasury securities from financial institutions under its Permanent Open Market Operations (POMO). On every trading day, these financial institutions receive a total of more than US$5 billion of cash to invest. A big portion of this money might have been invested in stocks. If so, I think they have created a bubble that grows with time. I think I will just watch the show from the sideline.


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