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Thursday, July 23, 2009

A Comparison to the Last Wave 2 Rally


I like to compare things to past precedents. I do this sometimes just to see if things that I project to happen could have happened in the past. Its useful analysis at times.

The last wave 2 rally of significance was of course the Spring 2008 rally Intermediate wave (2). Looking at that rally closer I realize the current rally has some recent moves that look eerily similar to the 2008 rally. All my notes are on the chart.

77 comments:

  1. I find the timings very interesting. For instance one of the comments is: "Consolidation over several weeks ..." yet on the chart I can see it is less than 2 weeks. Then subsequent last jump to peak is again only about 2 weeks.

    So this comparison implies P2 peak before end of Aug while I expected it to occur some yime in Sep.

    In general, your old comments about bulls being in a hurry and time running out for P2 seem again to be very relevant. This latest move almost feels like a panic buying move even as they are trying hard to scare bears and convince everyone that there are no limits on price level or duration.

    Indeed bullish sentiment peek will signal P2 end. I would add your older comment about VIX getting burried to around 20 as another inidicator of P2 end. These 2 together should be a fairly solid pointer for P2 top.

    Thanks for all the insights :)

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  2. Hey Dano, can you provide any help with the NASDAQ? I'm having a little trouble reconciling the count of COMPQ with SPX. The former looks much more mature than the latter. TIA.

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  3. Bob, looking at this chart, I am getting the feeling your September target will be correct.

    I really am concentrating on price and wave structure and sentiment. time is secondary at this stage.

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  4. GBT same basic pattern as the SPX since the 666 low.

    Triple ZZ I think with the final B and C yet to play out

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  5. OK, thanks. I was looking at EWI and Hochberg has it labeled ABC.

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  6. Would not surprise me a bit to see a 1987 style beginning to P3. Sept sounds about right as most will be expecting such an event in Oct.

    We shall see. Thanks Dan.

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  7. until every last bear squeals like its cousin -the pig...true dat i'm afraid

    eyeing the daily rising tops trendline off the march lows and looks like 1100 is the target...would coincide with a test of the sept 2008 lows before the waterfall

    the velocity of the decline may very well be mirrored by a similar rise over next few weeks...nice symmetry so i'm thinking 1100 by mid sept 2009

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  8. so the move down to about 950 take 2-3 days if im reading that correctly. makes sense. timed to the big treasuries next week.

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  9. Let’s evaluate the H&S bottom in light of the recently failed H&S top. There are frenzied bull penguin’s jumping off the berg right now just like there were bear penguins that jumped two weeks ago. If the inverse H&S fails, they will be crushed worse than those bear penguins (RIP).
    My conclusion upfront is - It’s clearly in the bulls’ court. The pattern has a real problem.
    The fathers of TA, Edwards/Magee (Technical Analysis of Stock Trends) wrote the book so to speak on H&S. They forgot (before they passed) more about H&S than Art Cashun or 99.9% of contemporary ‘quant’ or pattern traders have ever learned. So here’s my humble stab at what they might have said about the growing frenzy over the inverse H&S which has an unconfirmed neckline break. The following chart is the focus:
    http://www.screencast.com/users/Virginia_Jim/folders/Jing/media/d0f8a270-1f34-441a-9846-f800c6830640
    I’ve sectioned the H&S into defined phases to evaluate volume pattern. Each phase agrees with E&M description of the volume pattern that should be present except for the right side of the head.
    Pg 81 “The essential difference between Top and Bottom patterns, you can see, lies in their volume charts. Activity in H&S Bottom Formation begins usually to show uptrend characteristics at the start of the head and **always** to a detectable degree on the rally from the head.”
    You’ll see on the chart, volume DECREASED notably after the head (see 4). Oops. That’s a big oops. That’s diametrically opposite to what E&M said “always” occurs in a successful pattern. Here’s some more support in E&M.
    Pg 81 “Wall Street has an old say which expresses it: ‘It takes buying to put stocks up, but they can fall of their own weight.’ Thus, WE TRUST, and regard as conclusive any price break (by a decisive margin) down through the neckline of a H&S Top even though it occurs on light turnover, but **WE DO NOT TRUST a breakout from a H&S Bottom unless it is definitely attended by high volume.**
    As clarification, a neckline break is confirmed as a “decisive break” only when the neckline is penetrated by 3% of the price (per E&M although Jesse Livermore had a lot to say about trendline breaks and support/resistance). Hence, the recent H&S top broke the neckline but not by 3%. That H&S was never confirmed, much to the bear penguin’s chagrin.
    As for this inverse H&S, the volume pattern indicates IT IS NOT A TRUE H&S BOTTOM PATTERN in the classic definition. If your analyst (which might be YOU) thinks it is, then you’ve got to consider whether they’ve evolved to a level of expertness that trumps the life’s work of the masters, E&M.
    Okay, say you accept the epistemic superiority of your analyst vis a vis E&M, then you still need a 3% neckline break. Recent experience the supposed failed (I say unconfirmed) H&S Top indicates the 3% rule is hardly a frivolous criterion. That’s prima facie.
    Good luck, Jim

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  10. As a TRADER, I've never paid much attention to volume. My clearing firm pays me in PRICE, not volume. +300 points off the SPX low is a most tradeable rally. If one places an emphasis on volume, they miss out on a huge move. - - - Not my cup of tea.

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  11. V.Jim, i've said this before about head & shoulders patterns true H&S patterns are 5 wave moves low or high is the head wave 2 the shoulder 3 breaks the neck line 4 retests but does not break 5 pulls away, most of us here think the move from the low is an "A" so "C" can break but it should fail just like the recent H&S top (unless it's a "1")

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  12. so wags you still think this has legs eh? doesn't look like it.

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  13. WaveTrader,

    I wouldn't rule out Minute v yet, as subminuette v never really played out for Dan. My primary counti s still expanded flat and we are experiencing a 5 retracing down to 962-965 area before a bounce to 985 to finish minute v.

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  14. that's a good pt onechi. i caught that as well. looks like 4 of c (if it's an exp flat) is playing out now.

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  15. WaveTrader,

    I if this C wave of an expanded flat goes under 960, it will seriously hurt the rally and I might have to relabel to your count to have Minute v finishing yesterday.

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  16. what i'm not sure of though is that wave c then would trace out close to 4.23x a. is that possible in ew principle?

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  17. i guess i should say "likely" because anything is possible :)

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  18. Aaron, as I posted yesterday I think that we are simply doing a (c) of [iv] here. No big deal. Where do you believe we are in the short-term count?

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  19. WaveTrader,

    What I have a problem is labeling the last wave up for subminuette v of minutette v of minute v (the way you have it labeled). This wave doesn't look impulsive, it looks corrective to me (might be wrong) but the waves are overlapping a lot.

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  20. I AGREE with you OneChi.

    I think we just finished subminuette 3 of 5 yesterday and we are now consolidating in subminuette 4 of 5 to finally finish Minor A.

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  21. i would say my labeling (if remotely correct) would have iv as a running flat and v as some form of a diagonal. i think dan did mention something about the final thrust and not showing a iv and v at all...but, what will mr wave tell us :)

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  22. I am going out on a limb here but i think yesterday was 1 up today 2 down anything below 962 would cancel it



    http://stockcharts.com/h-sc/ui?s=$SPX&p=5&yr=0&mn=0&dy=5&id=p74035223692&a=170665840&listNum=12

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  23. ok, is this the completion of iv (exp flat). a move above 979.42 will confirm that

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  24. WaveTrader,

    It's starting to look less like an expanding flat and more like a complex correction. The end result should be the same.

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  25. So far, the SPX has reached the 38.2% retracement at 968.85 and almost got to the 50% at 965.61

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  26. indeed this has been complex. my head hurts! and of course i still have an alt count going down further with this to complete 5 down.

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  27. and of course mr triangle may come out to play for iv...

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  28. Market is trying to build a strong floor of 970 no less. Now we are 973. Direction please. I feel lost.

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  29. if we do not break above 973.81, i may have 5 down interpretation. this would be wave ii right now

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  30. Following most wave counts, we will see a rally through today for wave 5 of 5. Targets would be 975, 982, 992.

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  31. please disregard my last. lets just go with, if we break below 965.95, i have a 5 down interpretation. but a break above 979.42 and then i will interpret it as minute v in progress.

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  32. From 11pm to 11:35 it looks like a 5 for subminuette 1, followed by subminuette 2, but subminuette 3 seems to be lacking strength.

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  33. Market is going up. DOW wants to go to 10,000.

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  34. I really would like to see some correction to build a stronger and safer investing market. MM is trying to make a fool of all of us.

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  35. thoughts anyone? http://waveprinciple.blogspot.com/2009/07/my-interpretation-as-of-915-pst.html

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  36. if this move from today's low just completed a zz. my label for c makes c=61.8xa. and c can go higher of course because this looks like subminuette iii of c and submiuette iv of c is tracing out an exp flat.

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  37. or by onechi's count, micro iv of subminuette iii

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  38. macd is indicating some more downside though.

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  39. wavetrader i see just the opposite your iv is my A your v my "B" than abcxabc down to the 11:00 hr. . your II is my 1 up looking at the move from 2pm yesterday it looks like a falling wedge

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  40. i can see that too :) good to have multiple eyes/interprets here.

    would you at least agree with the following levels determining the outcome?:

    below 965.95 = further downside
    above 979.42 = min v in progress?

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  41. Yes below todays low and i will get sick to my stomach,not really but.. above 979.42 to me would be starting a wave 3, i have a different count than Dan or Kenny i think wave 1 or A started july 13 and topped july 21 on the open, yesterday was the start of a 3 or C up

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  42. So we are directionless if we are stuck at 970 to 973?

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  43. the direction will be determined by yesterdays high or todays low

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  44. mandy, i wouldn't say directionless but more so about determining what we have:

    i believe the majority of folks here believe we are nearing the completion of minor wave A (starting from july 8) before minor wave B starts for the correction.

    so the question is:

    has wave A been put in? if so, we are seeing wave B (down) forming now..

    or is wave A still in progress, with minute v wrapping it up near 980

    i think these two levels will let us know:

    below 965.95 = further downside
    above 979.42 = min v in progress?

    i believe we should find out today.

    and Max has a different count that takes us higher.

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  45. There's no selling pressure.

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  46. based on nate's count, if yesterday's move to 979.42 was a wave iii, today's action is starting to lo

    http://natesmarketanalysis.blogspot.com/2009/07/wednesday-7809-thursday-72309-5m.htmlok potentially like a wave iv flat.

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  47. WaveTrader,

    I am sticking by my count so far, looks like an expanding flat/complex correction thats played itself out. Micro 3 of subminuette 3 seems to be playing out. Minuette v could actually trucate or end in an Ending diagonal (too early to call) the market has lost a lot of momentum.

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  48. sorry about that..

    based on nate's count, if yesterday's move to 979.42 was a wave iii, today's action is starting to look potentially like a wave iv flat (or another triangle; of course too early to tell here).

    http://natesmarketanalysis.blogspot.com/2009/07/wednesday-7809-thursday-72309-5m.html

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  49. It looks like Micro 3 of Subminuette iii is finishing or finishing up now.

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  50. Based on my count Minuette i was 16.61 points, so taking the expanding flat/complex correction low of 965.95 gives us a minuette v target of 982.56 to finish off Minor A.

    What are your thoughts?

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  51. I agree with that mark OneChi. An extension of v would bring it to 992-993, but it doesn't look like there is the volume so far for this to happen. I will be looking to sell at 982 unless a stronger push starts up.

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  52. Crude oil continues to be an excellent indicator for the SPX. It called the rally off the lows once again. Is anyone trading today?

    :)

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  53. An alternative view is that we topped yesterday, we got an A to 965 and currently on B, in which case yesterday's high might not be taken out. There was a nice abc and then 5w down yesterday and that was either A or IV.

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  54. I can see that count EWT. Would you be expecting to still see a wave v coming next week then?

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  55. Sorry, to be more clear a wave 5 of v?

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  56. No, if it's an ABC move then V was yesterday. But that's just an alternate view.

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  57. ewt, my primary count is that minute v completed yesterday.


    http://waveprinciple.blogspot.com/2009/07/my-interpretation-as-of-915-pst.html

    however, looking at nate's count, if wave iii ended yesterday, we could be seeing a wave iv flat in progress now.

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  58. WT, the question is what ended yesterday. Could have been a III or a V. So we had IV or A this morning. I guess we will see if the peak breaks and how it breaks.

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  59. yes. i agree with ur question about what ended yesterday. the structure for the past week has been a huge blur to me.

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  60. Appears to be no selling pressure the whole day.

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  61. Seems to be a double Z after a 5 minuette peak.

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  62. The last 30 minutes should be interesting. We'll probably be able to tell if it's a B or a V, so far is looking like it topping.

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  63. For a period of about a month the market was very clear and I was able to make good money. But these last 10 days have been unpredictable, I've stopped out of my shorts at least 5 times. But we will get a sell off sooner than later.

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  64. so any ideas on how low it can go once she does turn?

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  65. Very solid rotation again which is the hallmark of a bull move...Out of tech, and into energy names, coal, steel, etc.

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  66. Aaron, what did you trade today?

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  67. *If* today ends the top of A, my targets would be:
    958.6 MINIMUM
    947.4
    --> 938.2 Most likely
    925
    911

    I am sure Dan will have some good ideas on this as well.

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  68. i think this is a flat for minute iv

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  69. or v of v. let's see what the pros have to say...

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  70. I guess the pros will say some upside left on Monday

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  71. The market left us hanging. We could see more upside on Monday and then head down or open with a gap down to surprise the ones that bought at 979. I going into the weekend with heavy short positions but I'm comfortable about it.

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  72. Agreed EWT. Anymore upside will be limited. I got out of all positions (was long) at the close today to protect from a gap down. I am trying not to call the top, and rather waiting for it to turn before going short.

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