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Friday, May 8, 2009

The SPX 200 DMA


DISCLAIMER: This is one of the "what if" charts where my brain is churning wave patterns and I feel I have to spit them out on a chart.

(The market always likes to fool the most people it can at any one time. I am usually one of them.)

There exists 2 very distinct near term targets for the bulls. 1) Closing that massive January gap down at 927-934 2) The 200 DMA for the SPX (and DOW) currently at 954. I am counting on that gap to be closed early this week. The 200DMA depends on how Monday goes.

If the waves push up weak on Monday on yet another ending diagonal type move and make "C" wave high point at say 937, and start to do a bearish retrace, what I *expect* is that the market will drop and at some point support will kick in (either at 910, 897 support, 888 or 875 support - you get the idea) and then the market will turn up again and head for the (now even lower) 200 DMA spot.

So this chart shows a scenario where the 200DMA is hit but not at the C wave peak. The main point I am trying to make is this: Look for a touch of the 200DMA one way or another before May is out or early June. If it did not hit it, THAT would definately be a downside surprise.

23 comments:

  1. Thanks, Daneric.

    I'm glad you "got this off your mind" because your thinking this through is actually quite useful for all of us to consider.

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  2. Daneric, you were right with this last move up, congratulations. And I also agree with your scenario for next week.

    I set my targets with Gann and I had two tops - either 905 or 930. I did not believe the index could temporarily overcome 921.50 and move up to 930.

    But you are not right about the gap on January 6/7: the data of Thomson Reuters shows no gap... Check it out.

    Then, as a true Elliotician, you should work with a DMA of 191 and not 200. A weeky MA of 38.2 results in a DMA of 191. At the moment the 191 is at 940.

    Have a great weekend.

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  3. This big and clear ABC up looks somewhat obvious for a sharp zigzag in P2, maybe P3 begins next week, keep care...

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  4. doesn't look like last 5th wave is finished, looks like we gap up monday .

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  5. Nice work Dan, I didn't expect to see SPX 930, My target was 925 top follow by a correction to 875 before hitting 200 DMA, Now I'm looking for 937 to be the top.
    Like you said The market always likes to fool the most people it can at any one time.
    If we do slice through 200DMA, i don't see any major resistance until 1090 although we could have 980 as resistance but not a major one.
    What do you think? is 1100 in the card?

    TD.

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  6. Is truly "A" (March) internal five-wave ?
    When not, will be "C" (after !sideways! "B") internal five-wave ?

    I see from March "five-wave A - B - five-wave C" in NASDAQ (still in "[iii]/C") but "W-X-Y" in SPX and DJIA - then we are just in wave [v]/Y (in !seven! waves Y) or at end wave [a]/Y.

    H.B.

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  7. Real Estate index rises along with delinquencies.
    http://www.marketwatch.com/News/Story/Story.aspx?guid=7fe145cc0a6643dd9b1d59817cbaa621&siteid=nwhpm&sguid=F9lsx5fdAEuhjtlVkIeOWQ

    Go figure.

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  8. So all we need is more bad news for the market to go higher at this point? While the share prices shall be diluted when printing more shares, stocks go higher. Monkey see, monkey do. Why not, while the U.S. government keep the printing press busy, the Wall Street follows. Stop trading is the solution. This appears to be pure gamble.

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  9. Doug Kass speaks the truth - the honest man, but the good guy might get finished first.

    http://www.thestreet.com/story/10498431/1/kass-partys-over-for-financials.html?puc=_btb_html_pla4&cm_ven=EMAIL_btb_html

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  10. Dan,

    The "big bear line" from 11/21/ to 1/21 is not accurately drawn on your chart. If you use Think or Swim which snaps the line to the low points, the line would have been exceeded by last Friday's price action.

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  11. Kass is a smart one. Though he's historically early with calls, he hit March's bottom pretty close to the mark.

    Maybe I'm pulling my fangs in too early here but I've started slowly scaling into SKF to hedge my IYG holding in my SEP. It's too dang close to the end of C for me to leave it hanging.

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  12. Hey Dan - What do you think about an ABC correction moving down to form a flat instead of an X wave - esp since commercials are so short now?

    Thx

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  13. Dan, when bears regain control and P3 is underway, I suspect the bear rallies will be less frequent and/or less intense compared to what we saw in P1. Is there any historical evidence to support that?
    TIA

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  14. Good stuff. Gives 3 EW competing interpretations of where we are. All 3 have room for considerable more upside. Surprisingly, the most bearish scenario seems to me to have the most room for possible ST upside. Be sure to read the comments also, there is good insight there also. Are you in agreeance with any of these Dan?

    http://blog.afraidtotrade.com/sp500-elliot-wave-update-competing-interpretations/

    another good read;

    http://blog.afraidtotrade.com/are-we-reliving-1982-or-1975/

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  15. Dan, i like the thinking but i think it's too easy to reverse at dmas these days. MMs want anything but easy. My guess is we fall when most don't suspect and we rise the same. If you were to ask me, I'd say we'd get a HARD pullback that aligns a 5 wave down on the banking index and maybe starting asap next wk

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  16. If we gap up on Monday, it will be a weak gap up of 4-6 SPX pts. The one thing that I would pay attention to the DX Index. It has broken through some support level. There is nothing stopping this thing from hitting 78 on SPX.

    However, it is drastically oversold right now. Therefore, I see a dead cat bounce starting from Monday. Such a dead cat bounce could cause some indices to sell off, pulling in more bears and scaring off weak bulls. Then, we might probably rally to 980-1000 SPX to kill all the suckers. Afterward, the reality check from July-Sept ERs might give this market a real correction.

    Right now, too many traders are waiting for that big correction. I am thinking that the market will surprise us all and push this rally through the 200 MA. The 200 MA target is too easy and obvious here.

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  17. It is hard to say if there are too many traders left anticipating the big correction. There were also many bears got shaken loss and joined the bulls in the last 2 weeks, I have noticed after reading many posts. MM are going to try to shake the market enough to keep the activities and interests alive. Many TA keep on postponing the correction time and raising the SPX bar higher is an indication that we very well be losing more bears and gaining more bulls along the time. MM put themselves into higher risk when there are more and more bulls than bears as that SPX bar get raised higher & higher. Anyone who choose to gamble into or reinstate next week's rally are pure speculators and gamblers. I am more afraid to lose what I have gained than missing the boat today if without a reasonable pull back for at least 30 points off on SPX. The ongoing none stop rally and the overdue correction tell me not enough people in the market believe that we are due for a correction. Then the market will be more likely to give surprise. That's normally how it happens. GLTA.

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  18. Hi Dan,

    Given the lent of P1, wouldn't we expect that P2 would last a few months?
    Its hard to see SPX suddenly turning bearish 8 weeks into a correction when only in the past ten days have so many woken up to it being a rally.
    Also, 666 to 930ish has barely had a pullback....
    My think is that, overall, we are in an A-B-C type rally toward 1050-1100
    The fact that everyone thinks 1000+ is on the cards now is what makes me think we will retrace. this retracement to (750-820) will be "B" of P2... followed by a large "C" rally (everyone will be bearish at/below 800) toward 1050-1100. there is a huge gap near 1125 that needs to be filled...

    What do you think of this view? I enjoy your charts a lot, they are very thoughtful and interesting.

    Ed Boylan

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  19. I don't know about the EW counts right now. However, the main leading indicator for the stock market is the DX Index. Right now, the daily RSI and hourly RSI is indicating an extreme oversold level right now. Whenever the DX Index hits 30 on the RSI, it bouces back to at least 60. The hourly RSI is below 20 for the DX Index. There is bounded to be a correction, leading to major short covering for the DX Index. When that happens, you will see this market dropping like a rock.

    We will get our nice correction by then.

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  22. Food for Thought:

    Weekly 50EMA = 987.33
    Weekly 40SMA = 943.25
    Daily 200SMA = 954.58

    Alternative 1:
    A = 670 to 845 => +175
    B = 845 to 847 => +2
    C = 847 to C_TARGET
    if C = 61.8% times A, C_TARGET = 847 + 108 = 955
    if C = 1 times A, C_TARGET = 847 + 175 = 1022

    Alternative 2:
    A = 670 to 845 => +175
    B = 845 to 835 => -10
    C = 835 to C_TARGET
    if C = 61.8% times A, C_TARGET = 835 + 108 = 943
    if C = 1 times A, C_TARGET = 835 + 175 = 1010

    I realize Fib percentages are just guidelines.

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