June 4th, 2012 by Leonard




The Teutonic Two Step and Double Dupery

 In Case You Were Wondering About the Recent Activity in May …………It’s Déjà Vu

Through the months of Feb, Mar, and April 2012, a small Head and shoulders top formation completed itself on the daily E mini S&P, created by the heated financial battles between the Germans and everyone else  It is pictured below. The minimum price objective of the pattern was the 1289.75 area. As you can see, more than one trader in the world was aware of that price level as the market bounced up sharply upon touching it.

After that a bear flag developed as bearish news began to compound itself with a messed up Euro Zone, Slowing china , Dying India , and sluggish domestic employment numbers. It’s price projection is 1223.00 on the downside.

This is the third and smallest  Head and Shoulders topping pattern created since 2007 when the largest and most major of the 3 patterns developed from Dec 2005 thru Sept 2008 crushing the markets in a crash.

Click on chart to enlarge and then click again for clarity

The second largest Head and Shoulders topping pattern developed from Jan though July of 2011, as the Germans spent countless hours lobbying France’s Nicolas Sarkozy to be the intermediary puppet, to bring the southern countries into line with the dictates of the north and the Germans. It was a time representing all of the brunches, meetings, discords, cajoling, threats, lies and theatre called the Euro Zone crisis.

During that time, the peacocks of the finance ministries were jetting off to and from country to country, neck scarves flailing in the wind as they exited their limos waving, trying to foist off the debt load and losses of their banks, on to the “let them eat dolmades” citizenry. All of this after they blew up their financial systems with risky banking bets.

That pattern reached it’s price objective of 1117 on Aug 8, 2011 with climactic volume of 6 million contracts traded. That volume was a blow off an it put an end to the decline in the market. It only took two more months for Sarkozy to become Angela Merkel’s surrogate.

Click on chart to enlarge and then click again for clarity

The Teutonic Two Step

The Germans seem to move between two paradigms. When they run into trouble they hint at ways in which they can compromise to bring about a resolve but then that is quickly followed by a very stiff protruding chin that is followed by a mouth opening and dictating the rules and regulations that you must do to bring yourself into compliance.

It’s a hopeless endeavor to tread on the sovereignty of another country by disciplining the culture. Germans are not Greeks or Italians or Spaniards and they certainly are not French. It seems all too easy from their perspective for everyone to just follow the rules .  

As time wore on, the union wore out, and Europe began making a political left turn that cost Sarkozy his re-election. All of a sudden being really good friends with Germany’s Angela Merkel can get you fired from your government job.

The current Head and Shoulders top developed from a higher price level than the 2011 top due in large part to the Fed’s Operation Twist and a strengthening US economy.

However this new H&S top came as Germany’s Angela Merkel lost her French power broker puppet Nicolas Sarkozy to the “let them eat crepes” citizenry when they made a left turn and elected Francois Hollande who is generally an anti-austerity advocate. By the way anti-austerity does not mean against austerity. It means against the imperialists who are attempting to foist off the debt they created on to the middle and lower classes by quickly and forcefully jamming extreme austerity programs down the throats of the masses without sharing in the losses.


In the meantime, the “let them eat dolmades” crowd on the left in Greece has also been winning approval of the citizenry.

Left Turn Signals

There seems to be emerging left turn signals coming from the Euro Zone lately as the general masses both here and abroad are beginning to understand that they have been duped not once, but twice.

Double Dupery

The underclass was first duped by systemic fraud originated by bankers, corporate heads, lobbyists, and politicians, who used the masses as cannon fodder, to create the fake home loans, that generated all of the fake commissions, that generated a very large and unwieldy fake economy, that imploded, and created more debt for the underclass  than was already created by unfunded wars, coupled with deep tax cuts for the investment class. 

Secondly during the worst part of the implosion and crash the masses were duped a second time by clever marketing groups masked as “grass roots political action committees” tied to the interests of banks, corporations, lobbyists and politicians. These so called “grass roots” political action start ups knew that if they struck early enough, they could deflect and divert the anger that should have rightfully been targeted at them and their constituents, to the “let them eat $5 pizza” crowd, the very same people from whom they just stole the money.

Interesting and Historical Times

We are indeed in the midst of the most interesting times with a contentious election ahead of us. Both sides want to take America back which presents a problem going forward. Then there’s the shifting of our naval forces to a 60% Pacific 40% Atlantic presence from the current 50/50% to counter a military build up of Chinese who seem to believe that every sea shell and island in the South China Sea all the way down to Malaysia belongs to China, a thought not universally shared. 

Anything, at any time can deck these markets but the traders seem to be way too bearish for a very hard crash. Interestingly the dollar recently has not been a safety haven. The scared money has gone to the bonds and gold. But this would make sense if traders are betting on a Fed intervention within weeks. QE’s tend to drive the dollar down.

This Thursday all ears and eyes will be pinned on Bernanke’s testimony for the Humphrey-Hawkins testimony beginning 10:00 am EST. The market may consolidate briefly to await that testimony. The road will be rocky.

I will be starting a new sequence of courses starting the week of June 11, 2012 with a new 8 week class on the foundations of Novy Principles of Market Flow and look forward to working with all of you throughout this year.

For information regarding this class please inquire at
or leave a voicemail at 760 841 1522 
Calls will be returned promptly

This information is for educational purposes only.  Trading with this information is done at your own risk. All concepts and writings including the Novy Training/Trading Method NTM© are proprietary and the sole ownership of Leonard A. Novy and may not be reproduced for profits without expressed written permission. Copyright1995-2012

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