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Wednesday, May 20, 2009

The DOW Sell Signals

I am not the most super TA guy around so my attempts at identifying "sell" signals are not always right. Kenny taught me most of what I know because I study his TA charts with eagerness when he was updating them more frequently.

However the DOW has some consistent bearish patterns on all its indicators from the looks of things. It doesn't mean this market is headed to new lows as people keep emailing suggesting that "wave 4" is finally over. I do however see this as a nice spot for an [X] wave pullback.

There are several potential support layers for the DOW. I like the 7800 - 8000 area roughly.

I mean c'mon, EWI showed a chart where trailing 4 qtr P/E ratios were approaching an all time high of 60!


  1. There is no way that's wave 4, those people must put in in public instead of e-mailing and get the explanation why they are wrong.

    5-wave structure ended in March. For now it's over.


  2. About P/E ratio.

    I keep saying everywhere that there is NO reliable way to calculate P/E for S&P.

    I mean, there must be a way, but it's not discovered yet. It must be a very tricky formula.


  3. Have we topped? Elliott Wave Forkology May 20th update
    Ok, let's gather evidence one more time and see if we indeed have topped

    1. $NYSI Summation index rolled over. Since 2007 top it was a very good(a bit delayed) indicator of a top. Not so much before 2007 though - 2nd lower top was needed to indicate a top.

    2. $TPC (CBOE Total Put/Call Ratio) has broken an uptrend + had huge divergence since late March. Yes, we know - never trade on sentiment alone.

    3. $BPSPX looks like rolled over. I prefer to see a sharper peak at the top as at previous tops so I'm a bit conflicted here. So MAYBE

    4. $NYMO rolled over, that is for sure

    5. Our proprietary Market Structure Indicator alerted us what top on May 8th was very similar in structure with May 19th, 2008 top.

    Many readers remember earlier in 2009 we said 2009 will look similar in many ways to 2008, so there is also a nice 11 days symmetry with 2008:

    Lows: Mar 17, 2008 - Mar 6, 2009 17-6=11

    Highs: May 19, 2008 - May 8, 2009 19-8=11

    Smells like a top, looks like a top, quacks like a top
    Send us any more evidence "for" or "against" a top

  4. TA and EWT aside, fundamentally speaking there is nothing in the economy that supports these PEs. The S&P is at a projected 17 trailing assuming earnings comes in the 50-55 area this year. However, that is a valuation in normally expanding economic times where companies are expected to grow profits at a 15% rate. But we are not going to see that in 2010, it will probably be flat so a valuation of less than 10 would be a lot more reasoble. Which if we apply to current earnings, we should be getting an S&P around the 500 area. If we apply depression PEs we would get an S&P at 250!

  5. This market is going down as its top out!

    One last word "SELL"

  6. hey danny, that's good news, cause i'm SHORT!!! how's the Capn Morgan?

    steve forbes

  7. Dan, love the blog been here for a couple of weeks. I follow you and Kenny regularly and have learned much. I noticed also today, if no one has caught it, we had an outside key reversal day on $SPX. I think I'll short at the open and stop at 925, is that the normal strategy to use?

  8. You know what is funny is that even if the P1 wave 4 crowd is right and this heads down towards a new low the p2 crowd will just say that p3 is started because to say otherwise would be to admit they were wrong.

    Short term I don't know who is right since the counts would all point down but long term it could make a huge difference.

  9. Simple strategy here. Go short at 895 or go long at 907. These are 1 point past support/resistance. But I wouldn't hold overnight.

  10. You are on your own without Kenny and well qualified to do so, consider yourself graduated. Move forward but try to overlay more classical TA on top of your EW. And use the daily and weekly chart more for the classical TA, then come back to the intradays afterwards with EW so that you are more aligned with top-down analysis to skew perspective in the right direction. JMO, take it or leave it. Analyze.

  11. spy next support line:

  12. 5 waves of C played out today!

  13. May 21 Microsquiggles fwiw.

  14. S&P heading to 400