This Bloomberg chart of the London stock index shows that our (and the boys in Gainesville) opinion that an initial 5-wave down may indicate the start of something much bigger could be correct. The Dow did manage a new high, a possibility that we had considered, but the FTSE did not and, in fact, stopped retracing within a hundred points or so of our target of , roughly, 6500. We shall see what comes next but what is clear now is that the bear side is gaining traction.

From Bloomberg another chart update on the Footsie. Despite Bernanke’s insistence on continuing an extremely accommodative stance, with half his board in disagreement and not a shred of evidence that any of this is actually working, we will stick to this “count” for this index un till it is proven wrong. We have had the usual 62% retracement of the first wave down at about these levels. Obviously we can still go higher without negating the pattern provided the recent high is not taken out. We will see.

With the US closed for the day Europe and the UK chose to go it alone. Draghi and Carney are quickly becoming more catholic than the Pope by adding their own “infinite” descriptions to their respective monetary policies. In the UK this helped the FTSE propel itself upward by an unbelievable 3.08% in a single day. Perhaps it was Carney taking the tube that resonated with the financial types in the city. Or, perhaps it was the waves.  That would have been 3 of c within an a-b-c correction if our analysis ( and that of the Gainesville boys ) is correct. This wave 2 has now exceeded the level of the 4th of previous degree at 6400 and appears to be on its way to the 62% retracement level slightly below 6550. Once there (or even a little further) the FTSE should collapse in wave 3. Time will tell.

PS. Mr. Carney may be the first foreign governor of the Bank of England but it should not be forgotten that the Bank received its Royal Charter in 1694 from King William the 3d, a Dutchman. The Bank has had a lively history as this cartoon from 1797 clearly indicates.

Just four days ago we showed the FTSE and commented that there were three possible triangles in this structure from the lows of March 2009, and that the whole thing definitely had all the characteristics of a B-wave. In the new Elliott Wave Financial Forecast that came out yesterday this was about the only chart evidence that the boys from Gainesville offered to “prove” their argument that we had topped. Neither they or I often use the Footsie as a beacon for the rest of the equities and the fact that the top actually occurred on the 22 of May, now more than a month ago, makes it a less likely coincidence. Anyway, I will enjoy the flattery.