Thursday, April 30, 2009
Potential topping candles on all the indexes, shooting stars, etc. Some of the bear ETF's such as QID have been what seems like a bottoming process. Its MACD line is curving upwards. Its rounding. Most indexes' Bollinger Bands were punched into hard today. Its just stupid.
Wednesday, April 29, 2009
The yeast keeps rising.
Permabears want that nice pullback. They want affirmation that they aren't somehow "screwy in the head". There is no way to do a 3 day settlement short swing trade as the market has not had 3 down days in a row since the 666 low.
If April was a big triangle, then the next moves are upwards and onwards to 900 and above. Indeed the SPX was only 18 points shy of 900 and once 875 breaks up for good, whats to stop a run to 950-960 and the 200DMA? Someone said the 200DMA just keeps acting like a magnet on the markets. I agree, but even I expected a brief moment of pullback, sprinkled with a bit of doubt, of fear. Will it come? or will it only come after the 200DMA is hit?
Regardless I am 80% long. So I am profiting nicely and won't think of selling until the 200DMA on the SPX is hit. I have a couple of short term shorts but I'm thinking of bailing after doubling up today on QID. I bailed on FAZ at $9. Small profit but the market wasn't behaving correctly so I dumped the poison. QID is more tamer.
The short term waves are just nothing but higher highs even the damn triangle was a "running" type which means higher triangle waves to begin with.
Overall I'll wait til Monday to completely jump on the bull bandwagon. I want to see what a new month brings and if Friday will be bullish or bearish.
A break above today's high of 882 confirms EWI's count. A break below 845 confirms a bearish pullback. How deep and how far I don;t have a good read just yet. Just educated guesses.
Its a difficult count on the short term. But stepping back, I have no doubt this is a Primary wave 2 and the ultimate targets are much higher and that all the 200DMA's will be hit. The SPX 200DMA is residing around 969 at the moment. It is still dropping which means this is still a bear market.
I will however wait until May comes. No need to get long on the last day of the month.
Primary Count: An ending diagonal has traced out in the final wave [v] of a larger ending diagonal. The next move is an X wave and the corrective could go sub 800.
Tuesday, April 28, 2009
There is a certain "minimum" for a Primary wave 2. There are no "hard rules" on this, but there are strong guidelines. A wave 2 is normally a deep retrace. Considering the market dropped from 1576 to 666 for Primary wave 1, a retrace to 1044 is not out of the question for P2 although in the midst of a depression its seems insane.
What is the minimum for P2? Well a valid ABC correction for starters. I have shown that the market has traced that with 875 being the peak of a C wave. Also usually at least more than a .236 Fibonacci retrace, which at 881 the market will meet that so its very close in that regard for the "minimum" but a 50% retrace is normal. Also a "time" retrace. The market took 18 months to drop so a retrace of 6 months can be expected. Also this rally was to be the greatest bear rally since the start of the drop in 2007. That indeed has been the case. So in EW theory, Primary wave 3 can happen tomorrow. So all in all, some "minimums" have occurred but they are unsatisfying from an EW standpoint
But also in EW theory, bearishness on a Primary wave 2 should be shaken out to the point where the entire bear market is in doubt. Perhaps that would require a retrace to 1000 SPX, or about 10000 DOW and then people would indeed doubt the bear market.
But what if things have become too sophisticated? What if we have outsmarted ourselves in market analysis? What if Primary wave 3 was to start next week? What would be the "spark" for the greatest bear wave we have seen in our modern lives? Walmart earning 10% less profit ain't gonna do that...
What if EW theory predicts a catastrophe? Swine flu? Mega deaths? Real and measurable economic impact resulting from a worldwide spread of a nasty virus?
I usually assumed that the main media issue of a Primary wave 3 down to sub 600 SPX and then sub 500 SPX would be Government debt getting out of hand to the point that the whole system is on the verge of collapse. Indeed we are on the fast track to that happening. I still think that will be a theme of P3 but this recent swine flu thing makes me wonder if EW theory actually predicts an event that is unpredictable in general.
These are just musings of course. But shutting down travel and stopping economic activity in the event of a real pandemic has an impact on world economics. I kind of poo-pooed the situation at first (thinking of the past bird flu scares turned out to be nothing) but I have reconsidered.
A world unable to pay its debts coupled with a "curve ball" situation could trigger the devastating Primary wave 3 down. It only makes sense. Will the swine flu be a contributing trigger? My charts tell me no, at least not at this time. Its not yet in the charts. The market is ripe for a pullback and saying that the swine flu caused it all is convenient but maybe just an excuse.
However, a real pandemic that cause real deaths and national emergencies and a blunting of economic activity is something other to consider. But for now, I am not focused on swine flu and its impact on the markets. As an Elliottician, I generally look for social mood indicators. But a real pandemic definately may have an immediate impact on social mood.
The question is: Could it result in an abrupt, early triggering of a P3 mood?
Things to consider as many have.
The DOW is of course what Middle America and everyone else quotes, tracks and pays attention to. It does not look particularly bearish. It is very much in a contracting pattern beneath a key Primary wave 1 bear trendline.
Look at the chart of December that I provided. It shows the market tracing 5 strange little waves up after a very steep decline from 895 SPX. After that 5 strange waves up, it retraced back deeply. I think there is a good chance for the pattern to somewhat repeat here. 5 waves up in a strange humping pattern following a steep 50 point loss.
But even if another push does not come, a retrace back to the 820's looks inevitable.
Is the market playing rope-a-dope for end-of-month window dressing? If your not into waves, then that can explain it. Ending diagonals are, again, supposed to break down hard at the end of the pattern.
What if this is some kind of leading diagonal in a new wave up? A leading diagonal basically looks like an ending diagonal but must occur in some kind of a 1st wave position. That would mean that 823 would be the "low" of the recent market pullback. It would mean that the market, after tracing the leading diagonal where I have marked the "5", would pull back in some kind of wave 2 and then explode upwards in a wave 3 after the wave 2 retrace. That would likely happen sometime next week.
So there ya have it. An interesting e-mini pattern with a potential move up to "5". That would make it either a leading diagonal or an ending diagonal. I prefer the ending diagonal at this time because it fits very well with the rest of the overall wave structure.
But lets just see if the move to "5" comes or not. Then we'll talk some more. If no move to "5" then the SPX is indeed headed down. Thats expert analysis folks. If it ain't goin up, its going down! LOL. Any break under today's low (where I have the "4" marked) would invalidate this pattern and just refer to my count I showed last night as still the primary count.
Monday, April 27, 2009
As I suggested in my update tonight, the markets could be tracing some kind of "X" wave triangle pattern. Though in the long run, its not much different in scope to what I have currently labled but it does allow the markets to make new highs and make unusual moves. Thats the nature of triangle waves. They tend to trace complex corrective patterns.
And they can take longer than a straightforward corrective or impulse.
Sunday, April 26, 2009
The correction off the top looks like a 3-3-5 flat (just like the SPX). The "five", or C leg has yet to play out and it holds the possibility of being a nasty little C wave down. Perhaps FAZ has a chance of doubling. I would certainly sell it at $16.
Saturday, April 25, 2009
From a peak of 89.53 the VIX has worked its way downward. The best pattern I can make is a double 5-3-5 zig zag with a Triangle (X) wave in between the 2.
Friday, April 24, 2009
Primary Count: SPX is tracing a flat from the 875 high. The C wave should end beneath 826 SPX filling whats left of the 825 gap.
Alternate Count: Haven't spent enough time analyzing a good alternate count.
Commentary: Its amazing that the NASDAQ was up 44 points and the VIX was almost green today and formed a doji and is holding above 36. That to me is bearish divergence. The pattern looks like a clear 5-3-5 zig zag from the 826 low. So thats how I have it labeled.
It suggests that a C wave downside is coming and the market should work its way beneath 826 and completely fill the 825 gap that is still half open. The upper gap is now closed of course. We also have intra-market divergence. NASDAQ again stumbled to a new near term high today and the SPX and DOW did not. Advance/decline volume was 3.4 today which is nothing to get the bears scared about for now considering we had a 6.9 up day ratio just a few days ago. This also is a bit bearish considering the market powered back to 870.
Also the bulls left another open chart gap up today. Just another bear target for the MM's next week.
I'll have more this weekend.
Thursday, April 23, 2009
So I will be reducing my chart size to 1024. I think Kenny uses 1280, I am not sure. Sometimes he uses smaller sizes. I think 1024 x 768 is a good middle of the road screen size yet detailed enough to convey what I want to convey.
Basically my options with stockcharts are 900, 1024, 1280 and 1600. I could use custom sizes too but I want to keep it simpler. I have been using 1600.
So I'll start posting in 1024. I hope this helps and doesn not hinder any detail. I don't think it would. Feedback is welcome. I want to find a good middle ground.
Wednesday, April 22, 2009
Tuesday, April 21, 2009
Lots of possibilities. The obvious count is that it is a 5 wave structure from 826 low to today's high. It follows all the rules so.....how can you fight it?
So since the bullish is rather obvious, I have the bearish case labeled on this chart...a fancy double zig zag....ala Kenny's count although this may differ slightly in the detail. Lots of sub wave, 5-wave counts....
Lots of wedges and triangles in the subwaves. Very interesting structure today.
It certainly looks bullish like a straightforward 5 wave count....but don't the market like to fool us? A double zig zag would fool the bulls indeed because that implies more downside after the correction up is over. I have good reasons to label it as a double zig zag. There are some oddities with a straightforward 5 wave count.
But...I have no super strong conviction either way (But I am sticking with my overall primary count that 875 was a near term top and market will correct further back from here) . Maybe the market does not yet know which way it wants to break so it traces these hybrid waves....a little bullishness....a little bearishiness.......reflects the overall sentiment yes?
I don't have a good read on the intraday waves. It looks like a slam-dunk 5 wave move up which suggest more up moves to come. However the end of day has overlapping waves and one can make the argument that the wave down to 828 ended in a truncation early this morning which means todays rally *wasn't* a 5-wave up move but merely a bullish ABC correction. Very goofy day, only half the open chart gap filled in the 820's. Its not so much the correction back up that was surprising, afterall the market went from 875 to 826 in a very short time. And the correction back up is only now hitting the 50% retrace mark which is *normal* for a wave 2 or a B wave of some sort.
However, the market internals were solidly bullish. 6.92 advance/decline volume seems more than your typical "B" wave. Solid volume on both the SP500 cash index and e-minis. It appears, once again, they are buying the dip. But the DOW was a bit weak today and a 1.62% Dow up day is nice but nothing to call home about. The NASDAQ and S&P were 2.2 and 2.1%.
But all in all, there is no reason to change my primary count that a further correction will eventually shake out lower and that 875 is a near term top. We had what appears to be a clear ending C wave diagonal and those are supposed to retrace deeper than what it has so far. So until it proves otherwise, I won't try and outsmart the wave structure. However I won't fight the tape either.
The market may again be "buying time" to keep from getting trapped back into Primary Bear wave 1 parameters. So a sideways chop may ensue for some complicated corrective waves in the next day or so. I have my eye on the 62% retrace level which is 857. Any move higher than that will definately be catching my eye.
Disclosure: Sold all FAZ today for nice profits (I learn to take them when they come easy like that). Held onto my QID and still have my SDS in my long 401k account as a hedge against S&P indexed mutual fund longs. I have no strong urge to make further bets on downside moves at the moment other than what I have in play.
Can there be no doubt this is a Primary wave 2 and not some weird monster wave 4 flat still continuing from late 2008?
Monday, April 20, 2009
Primary Count: Market is tracing an Intermediate (X) wave back toward the start point area of the ending diagonal which is 779.
Sunday, April 19, 2009
So what we have on this rally so far is this: Primary wave 2 has traced a valid ABC correction and has retraced the acceptable "minimum" Fibonacci sequence number. For you bears out there who feel the market will collapse to new lows from this spot, this will be your smoking gun evidence.
I however don't see that happening at this time. Nothing is guaranteed of course, but I'll play the odds that the market wants to revisit some higher numbers eventually. This trend change needs much more time to shake out.
I do however see this spot as a good spot for a nice pullback filling at least some of those lower gaps. 810 is a spot I am eyeing for starters. It may not be a massive bear wave like we are used to. So if it does pull back, it definitely might be a good spot to go long a bit.
As a guideline, ending diagonals retrace the entire move up from whence they started. That was 779 in this case. Even if this is a "leading diagonal" in a wave 3 position (not even sure if that is allowed at this point in the structure) they also retrace deeply but not back to 779.
Friday, April 17, 2009
This would definately be an "upside surprise". One thing this move would do is capture the public's attention which, so far, has likely remain uninterested in this 6-week win streak rally. Afterall, the market was much higher only in January. However 6 straight up weeks may garner some attention this weekend.
But maybe this is a C wave and it doesn't go to 1000...say only to where C = A at 936. Regardless, the upside potential is above 900 if this is the true count or a larger ABC structure. We have come to the point in the structure where there would be a spot where there wouldn't be "overlap" in the waves for a bit like we have been seeing in the past few weeks.
That spot would mark the "point of recognition". You have heard me use that term on the bear side of things when the bulls have that "deer-in-the-headlights" look and realize that all is going to hell and some gap down occurs that gets the ball rolling. Well, this would be the spot to the upside where that occurs. And if you think about it, its right at key 875 resistance, right at the previous Intermediate wave (4) triangle apex and right at key bearish trendlines. For if that breaks, you're looking at a run at least to 900-920 for starters I think.
Monday/Tuesday will be a game-changer either way. Straight up TA favors the shortside. But Primary wave 2 is all about upside surprise. 887 is another deal-breaker for the bears. Just like 804 was.
I don't favor this at all. The short and medium term waves don't seem to support it. The TA doesn't favor it. However remember the path of least resistance is still to the upside. 875 breaks (and holds) and the door is wide open to higher marks. That would be a "point of recognition" spot indeed.
So if 887 breaks to the upside, count on a move 936 which is the lip of the previous island top gap. That would be at least an ABC move from 666 where C = A.
I've been trying to get a decent read on the intraday waves for this final subwave 5 move from the 835 low. Its kind of difficult. If this is an ending diagonal from 779, then each leg should be a "three" preferably a zig zag. That's a guideline of Elliott Waves. So I am trying to count a "three" from the 835 low and it dawned on me that this may be an ending diagonal playing out within the larger ending diagonal. And that means we have another top coming shortly on Monday. But it shouldn't be much higher than 875. Maybe we do get some overthrow to 880. Its certainly gonna push my stop loss limit to the max although I am not really down in my trade so I will place my stop loss at 887 to allow for "wiggle room".
The stochs are pretty much bottomed. They could of course flatline or embed under 20, but its getting awful far away from its 20 DMA for my liking. But the stochs very much support that the VIX is short term oversold on the daily no less. And this still is a bear market so thats meaningful.
What does catch my eye is we now have some positive divergence occuring in more than a few indicators and over a span of 4 months hold some significane. The MACD is the most obvious. The RSI is barely confirming this divergence but it is nonetheless as of Friday's close.
Overall, a hard bounce in the VIX would equate with a collapse of the SPX. Maybe social mood needs a little fear reminder that not all is well with the world. It would be ironic if the VIX produced an unclosed gap up Monday at exact same spot it did in September.
The only thing that DOES bother me is that this ending diagonal is a near perfect structure. The perfect trendline touches almost look contrived. But if it looks like a duck....quacks like a duck....regardless 885 would invalidate the structure.
So until that is hit, we have to treat it like an ending diagonal. Which, in theory, often retraces the entire move from where it started and maybe even more. It started at 779.
I'll have more this weekend.
Thursday, April 16, 2009
Yet there is still no bearish MACD crossover so in theory you could go broke trying just to play by this indicator alone. But we do not use this alone do we? We have an ending diagonal situation and we have other indicators telling us that a 204 point runup without a 38% correction....well we are due.