No Changes to the two possibilities for Dow

What we have established so far is as summarized in the above chart. Dow has completed its major wave A and is currently in major rebound wave B, this is a major bear market rebound, in theory it can last until end of 2009. The detailed wave count is as shown in my older posts. The Monday and Tuesday candlesticks do not alter the wave counts that were mentioned in my last Friday post. My two possibilities for Dow remain the same as shown below. Hopefully the next candlestick can confirm one of the following options


If one were to refer to other indicators such as RSI, MACD, stochastics, etc from Yahoo or Google Finance, Dow is due for correction/consolidation. The technical indicators are pointing more toward Option 2.

If Dow goes for Option 2, Fannie Mae and Freddie Mac are likely to complete their sub-wave ii with an a-b-c corrective wave. So far the a and b mini waves were completed. The mini c wave is likely to move their respective prices to about 60 cents level. The subsequent wave for both of them will be sub-wave iii of wave 3. As mentioned before, the iii of 3 wave is usually strong, dynamic and is accompanied by high volume. This wave 3 is likely to bring both their prices from 60 cents to a minimum of US$2.20 (1.618x wave i magnitude)

Freddie Mac and Fannie Mae are the 'giants' of martgage business in the USA. Between two of them the total martgage gaurantees is an incredible US$5 trillion. These mortgages were financed mainly by issuing bonds that were sold to financil organization all over the world. Due to the free-fall in house prices and the subprime mortgage crisis their stock prices have fallen from above US$60 to about 30 cents. Following the injection of US$1.2 trillion by the Federal Reserve to take over the toxic mortgage gaurantees, their stock prices have recovered.

Refer to the Federal Reserve's assets explosion as mentioned in me older post, we are about to enter a new era of weakening US dollars, high inflation and high interest rate. The initial phase of inflation and raising interest rate is usually good for real estate and related business, it will benefit Freddie Mac and Fannie Mae.