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Saturday, May 2, 2009

Banking Index Triangle





The banking index tracks excellent Elliott Waves. I don't know why but it just does. I love these charts. They are pure me. I made the counts. I keep these on my Stockcharts.com public lists.
The banking index seems to be in a different wave than the rest of the market. This is not surprising to me because this index is one, if not THE, leading bear sector index. It will likely be throughout the rest of the bear market.
The long term daily chart shows an extended wave (3) from the Sep 2008 highs. It follows form and plays by all EW rules. Perhaps I have this mismarked. I dunno but its nice to look at.
In any regard the key point today is that this index has been toying with a great bear market upper channel line. It had a failed breakout and got pushed back into this channel. Every other index (I think), including the DOW has broken out of their respective bear channel lines this past week except this index.
It appears that after a failed breakout it morphed into a wave [iv] triangle and is ready to hit point (e) in the triangle first thing Monday. Question is, will it bounce and break up and out of the triangle and upper bear channel line? Is this index a laggard?
It makes one wonder why they moved the announcement of the stress tests back to later this week. Does the PPT employ Elliott Chartists? I would hope they do. They throw a lot of taxpayer money around if they didn't. Or is it all just coincidence? No matter.
What matters is the index is coming to the end of an apex formation. It can break up and out or down and stay in the Great Bear channel and make a possible run for new lows on this index leading a great pullback on P2's rally.
P2's further upside (or downside) this week hinges entirely on this one lagging index.
Laggard to the upside or leader to the downside? Place your bets.
As an aside, this chart suggests that even if this index breaks out and achieves one more high, its high point will be easy to see and will likely mark an important top to P2's rally overall.

27 comments:

  1. Excellent, thanks !

    Fair Warning ! More gray beard hippie guy ramblingsTo some extent charting falls into the category of a self fulfilling prophecy as so many folks use and react to them. If the power possessing beings did not consider them in their market manipulation they would be fools. I feel it is safe to assume they employ experts in all forms of TA, including some we are not aware of.
    In typical conscious thought we employ words in a linear fashion to achieve symbolic thinking. It is slow and limited, much like single CPU sequential processing. Heuristic or subconscious processing is more like parallel processing in multi CPU or cluster systems. Sub conscious processing in the human mind becomes fully functional at around 50 years. The "white matter" has a coating or insulating layer that affects signal transmission speed. This is done by varying the thickness of axon coating or myelin. Myelin considerably increases the speed that nerve signals move down the axons. A thin myelinated axon transmits impulses at 5 to 30 metres/sec, an unmyelinated one transmits them at 0.5 to 2 meters/sec. It does this both by insulating and containing the nerves. As we do not have buffers to store data for future processing, we have to time data flow or signal speed so it arrives at the correct part of the brain at just the precise moment needed for use. This is how we achieve "super computer" status. Sub conscious processing in the human mind becomes fully function at around 50 years. My point ? I hope I am alive when you hit fifty, you will be impressive !
    Now I am curious, what do you see in the real estate index ?

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  2. Excellent, thanks !

    Fair Warning ! More gray beard hippie guy ramblingsTo some extent charting falls into the category of a self fulfilling prophecy as so many folks use and react to them. If the power possessing beings did not consider them in their market manipulation they would be fools. I feel it is safe to assume they employ experts in all forms of TA, including some we are not aware of.
    In typical conscious thought we employ words in a linear fashion to achieve symbolic thinking. It is slow and limited, much like single CPU sequential processing. Heuristic or subconscious processing is more like parallel processing in multi CPU or cluster systems. The "white matter" has a coating or insulating layer that affects signal transmission speed. This is done by varying the thickness of axon coating or myelin. Myelin considerably increases the speed that nerve signals move down the axons. A thin myelinated axon transmits impulses at 5 to 30 metres/sec, an unmyelinated one transmits them at 0.5 to 2 meters/sec. It does this both by insulating and containing the nerves. As we do not have buffers to store data for future processing, we have to time data flow or signal speed so it arrives at the correct part of the brain at just the precise moment needed for use. This is how we achieve "super computer" status. Sub conscious processing in the human mind becomes fully functional at around 50 years. My point ? I hope I am alive when you hit fifty, you will be impressive ! Now I am curious, what do you see in the real estate index ?

    Sorry if this shows up as a double post.
    I screwed up while trying to edit a preview..

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  3. That was a nice intelligent post!

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  4. Dano I agree, for some reason the BKX seems to obey TA very well (perhaps because it can't be traded and I don't think there's an ETF that directly mirrors it). Anyways, those major channel lines you drew are also fibonacci fan lines from the Sept. high to the March lows. Like, perfectly.

    http://stockstop.org/download/file.php?id=1352&mode=view

    Question is, what's next, the 40's or the 20's? It really seems to gravitate to those lines very quickly.

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  5. Mark good point about the Fib fans. Also about how the index cannot be directly traded. That does make a difference I think

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  6. arevamirpal::laprimavera,

    What is the meaning of your mirror-name?

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  7. Personally, I'm thinking these 2 articles say a lot on whether the banking sector is leading a surge higher or the pull back lower:

    http://finance.yahoo.com/news/Obama-says-financial-sector-rb-15110919.html?.v=2

    Older, but none-the-less, very relevant:

    http://finance.yahoo.com/news/Goldman-sells-stock-in-duty-rb-14926695.html

    In essence, Goldman shorted it's own stock at $123 after announcing $1.66B in 1Q profits. The gov't isn't asking for Tarp funds back. In fact, they are talking about extending the loans to 5 years. I don't hear of the Obama administration tinkering with GS at all(unlike the weaker C, BAC, etc). So, my thought is GS sees the next leg as down. Time will tell.

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  8. Eric, an alternate count would be (A) where you have (2) and (B) where you have (3) i.e. a running/expanded flat. I think this is probably my preferred count at this point.

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  9. Aren't the stress tests a lacking indicator, really, at this point in time...Are the Equity and Credit markets strong enough to recapitalize the Banks while the dollar is slumping and commodities appear to be moving higher again?

    Favorable Stress Tests Results are meaningless... IMHO...without Higher Employment with Increasing Consumer Spending...

    Government Reflating bank balance sheets by printing money and fixing it from the inside out is like pissing in your pants to stay warm in the cold weather...

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  10. forgot to say thanks above Daneric...

    Thank you for sharing your insights and science.

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  11. Hi Daneric nice charts nice work.
    DAX - Europe
    Open the chart. Will be different this time? Why?
    Next significant decline will start next week or secound week of May.
    http://rounderstrader.blogspot.com/2009/05/dax-where-they-want-to-go.html
    SPX - Different I don`t see why
    Many sites and blogs, traders write and speak that this moviment it`s different that we have seen in the past.
    It`s just the same for me. Until now I don`t see any difference.
    See the charts and you will understand better what I want to saw.
    Can see the number of weeks of spx move higher. And the number of points between de low and the top.
    http://rounderstrader.blogspot.com/2009/05/spx-different-i-dont-see-why.html

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  12. SPX - More Higher - Bulls will kill this market again
    Important this month to understand better what we will see in the coming months.
    Mybe we will test MA first. Let see the first 2 weeks.
    I trade what I see.
    The same mybe. See 2002.
    If spx go more higher 940 or 1020 bulls will kill this maket again, and we will see new lows.
    But market have a chance next 2 month we will see 750 and mybe we will have a new uptrend.
    The market will broke this pattern.
    Until now continue with a creazy zigzag.
    Big trades for all.
    http://rounderstrader.blogspot.com/2009/05/spx-monthly-charts.html

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  13. can you write some posts in spanish for my brothers to understand? thankyou, your friend paco

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  14. Long term NASDAQ Composite Count
    This weekend we look at NASDAQ long term count since 2007 top. The count is similar to SPX in many ways. We see 5 waves structure down from 2007 top to March 2008 low as well as from July 2008 High to March 2009 low. This could be a completed ABC or a much bigger 5 waves structure with only 1-3 waves completed. Elliott Oscillator at the bottom confirms 5 waves possibility as well.



    Spent whole weekend working on Phi/Fibo/Lucas Dates calculator. So far it works on Calendar days, with trading days hopefully coming soon. If you guys have or find I'd appreciate it : 1) IsTradingDay function 2) algorithm to detect major Highs/Lows preferably in Delphi/Pascal language.

    Here are some upcoming cluster dates on SPX:
    Calendar Future Date:5/9/2009 Lucas:123 From Date:1/6/2009
    Calendar Future Date:5/15/2009 Lucas:521 From Date:12/11/2007
    Calendar Future Date:5/19/2009 Fibo:1597 From Date:1/3/2005
    Calendar Future Date:5/20/2009 Lucas:3571 From Date:8/10/1999
    Calendar Future Date:5/30/2009 Fibo:144 From Date:1/6/2009
    Calendar Future Date:5/31/2009 Fibo:377 From Date:5/19/2008


    Just for fun I ran it against winning lottery days in LA county - looks like your best chance for next big win after a big win day is 34 and 55 calendar days after, at least in LA county.
    http://forkoholic.spaces.live.com/

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  15. daneric
    great charts and nice analysis.
    respectfully, however, on your daily and 60 min, the $38 is perhaps the red 4. I think we are goin to be in 5 and heading down at least 30% down. perhaps $29.
    I do agree that bkx tracks waves the best. it is truly the social mood indicator.
    qqq is technology and does shows a small sector of the society.
    linus

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  16. First visit to this site. Like your art gallery. Nice work!

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  17. carlos, the market will broke this pattern? wtf?????

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  18. get the sht out of your mouth carlos.

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  19. Nice DE - guess I need to post on black holes anf the event horizon to make it interesting hugh? OK, I can do that but not now. TA tells the truth. I agree with the pop up you are showing and this is just gonna piss off the bears even further. This index will most likely top before the market and will lead P3 down. Just gotta keep an eye on it as a leading indicator. Thanks for all your great work.

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  20. Shanky, how do you account for the fact that folks using the same TA rules arrive at opposing conclusions ( or assign different outcomes different levels of probability )? Hindsight is 20/20 but it seems that forecasting with some degree of accuracy requires more than rules. Still, as there are traders that do profit, it can be done. Any insights you can offer would be appreciated.

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  21. Anon - Individual interpretation is how you account for the varying conclusions. Dan and Kenny are on different counts all the time. I have had my beefs with EWT (and DE may remember a semi-harsh response a year or so ago on Stocktock where I bitched about the accuracy of EWT and the need to "go back" and recount to get it right - since then I have come to accept it and glad I did as DE's counts have proven invaluable over the past month). Some simply use pure TA, some pure EWI counts and TA, some (like me) try to incorporate TA with news and finally some are more talented and knowledgeable than others. I prefer not to pick sides. Dan, Kenny and Cobra have rarely been aligned thru this bear market until the trends have been made clear.

    The fake out that occurred on 4/20 has me really scratching my head. I used to believe the psychology of the market is the most important aspect, but now I am convinced that the markets today are more rigged than ever before which is leading to the possibility of the total breakdown of classic TA. With the failure of the ratings agencies to do anything honest (they can't or everything crumbles), the analysts on Wall Street being in bed with the companies they derive most of their income from, the fact that GS controls 30% of the trading, the SEC's lack of ANY oversight, the governments need to save the universe at any cost, congress is not willing to prosecute anyone for fraud which gives everyone a free run, Ex GS people control everything, don't get me started on the FED (I could go on and on, sorry for getting off topic but it is really on topic). It's no wonder why TA is not working. Pay no attention to the man behind the curtain in the Land of Oz.

    Using a non-TA barometer check this out - the current PE of the SPX is 59 - that's FIFTY NINE (http://www.decisionpoint.com/TAC/SWENLIN.html). Please go to Decisionpoint and check out their chart on SPX PE. It is quite humorous (largest spike you have evr seen) and then ask yourself why any of this that should make sense doesn't. How in this economy could the SPX be trading above it's historical averages (or even near them)? It is totally screwed up and manipulated and will come back to earth in a hard way (P3).

    Hope this helped.

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  22. Thanks Shanky, that does help.

    gray bread hippie guy ramblings ...My one word answer to my own question is experience. Given human nature , it is hard for me to believe we have not seen this level of manipulation in the past. Market manipulation equals profit for the manipulators. Hence, they have always done it ! Science ( I am a techie, cannot help myself) is showing us a physiological reason why experience matters. It may be brain development that allows for more comprehensive non verbal or non symbolic thinking, i,.e. arriving at correct conclusion without adhering to rules or logic. I suspect in time we will see that EW does in fact account for this manipulation and those with a lot of experience in EW will be closer to on target than those who have less. It may be that 50 year old brain thing. It would be nice to get some feedback that confirms this. Again, thanks for taking the time to respond, it helps me understand. I feel we all benefit if we can develop an understanding of how things work that we can communicate. For now, I am going to try to ride the manipulators coattails....

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  23. So the breakout to the upside already happened...looks like it's thinking about backtesting shortly.

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  24. Daneric,look at XLF.O this chart Intermediate waves are different,and XLF ir very good for EW counting too. The major bear channel is in about 13-14 usd zone and when it reaches it,that would be perfect Intermediate wave top for (4).Why are you using only BKX?

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  25. I don't have a clue wtf is going on... therefore the markets are rigged. TA in a nutshell. At least Dan gets it.

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  26. Shanky,

    Excellent comment! Thank you for summarizing many of the signs of a manipulated market.

    How to trade it is the challenge.

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