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Wednesday, July 29, 2009

Weekly RSI Channel


Quite a rally indeed for Primary Wave 2. Sentiment is shifting back toward bullishness. I expect bullishness to challenge the highest highs of the 2003-2007 rally. But sentiment cannot mark the top, it only helps confirm where you are at in the wave count.

One thing I regularly tracked toward the final months of P1 was the P1 RSI down channel. I predicted it would diverge and indeed it did by quite a lot.

P2 has now rallied long enough to form its own RSI up channel and it is tighter than P1's down channel. To me that is not unexpected and confirms the sharpness of the rally. As much as I was rushing p2 early in June, I must admit, I was wrong to rush things. If P3 is to come, it should start from a proper RSI mark that is high enough not only on the daily and weekly, but monthly as well. I suppose its a basic TA tenet that all major turns display negative or positive divergence in some form or another at the weekly level at least. If there is one turn over the last 100 years that doesn't its just that I haven't looked hehe.

From an EW standpoint that totally makes sense as the subwaves or wave 5's are supposed to be weaker than previous subwaves in strength. That weakness that often marks tops are reflected in the RSI.

So I have thrown together my first P2 RSI up channel chart. What will mark the top of P2? When we start to see negative divergence on the weekly. I am convinced now we will. I shouldn't have ignored this suspicion but I will no longer.

It may be that the negative divergence is very small but it will be noticeable nonetheless. If your a fund manager or just a trader, and you see a small smidgen (yet clear) of weekly negative divergence on this total disbelief rally with fundamentals and the state of national debt in such precarious shape, what would you do? Bet on more upside? Or get the hell out?

104 comments:

  1. Dano Joe has worked every derivative he could muster and comes up with the same time frame you do on his kress cycle calculations.....

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  2. Yeah its all starting to take shape now. Just honing in on the targets and timeframes.

    Its even starting to look like a "three" from long distance view.

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  3. Something to be aware of - Fair value is returning next year to the banks.

    http://www.stockstop.org/viewtopic.php?f=2&p=10901#p10901

    I encourage asking fly about this as he knows tons more about the banking industry.

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  4. How much of a donation do i need to throw ya dano...? (i mean it)

    to do your mastery on the $NDX

    you got the skills bro, you know this....
    trust me man...the NDX is the key, the heck w/ the spx (toooo many people watch it!)...

    just like when you saw the COMP wave violation preceed the spx by a LONG shot signaling p2 was in effect...the ndx was even earlier than the COMP

    Love to read some wave intpretations and/or your overall sentiment on the NDX here as a intermediate, longer term instrument in the cycle.

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  5. I support Erik's request and suggestion. It would be nice to know if the $NDX can give us all early warning of the big turn.

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  6. i have blogged extensivly in regards to the NDX here over the past 2 weeks, not that that means anything. But i think the charts ESPECIALLY the weekly and monthly are a sign here...


    http://erikmarketview.blogspot.com/2009/07/nasdaq-100-ndx-gets-no-respect.html

    but i dont have the wave counting eye, like you EWT boys do

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  7. Thanks Dan, for alerting us to watch for negative divergences as an early indicator of P2's end.

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  8. Another one to keep an eye on is the SOX, its holding firm around the 300 level so I think it has one last leg up before the tech sector gives in...Dan you nailed it with your financials leading the last leg as XLF has been strong. Interestingly, commodities are already rolling over.

    Keep up the great work.

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  9. what do you guys think as an alternate count should minute iv not be complete?

    http://waveprinciple.blogspot.com/2009/07/alternate-count-for-wave-iv.html

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  10. Erik I will do it this weekend, promise!

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  11. Daneric,

    Prechter thought that a severe depression caused by deleveraging would happen in 1987. He thought it would happen in 2002. He thinks it will happen now. Why should anyone believe him, EWI, Elliot Wave theory and any of its practitioners at this stage? Debt levels in 87 and 02 were the largest seen ever at the time.

    I have difficulties to see a large wave 3 down. The Fed and government puts have been manifested the last two years. And if/when those two institutions go bankrupt stocks will be a safe haven for inflation.

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  12. i think we are starting wave 3 of an ending diagonal started on the 07/22 which should move above 1000 by the time its done


    http://stockcharts.com/h-sc/ui?s=$SPX&p=60&yr=0&mn=0&dy=20&id=p19494629367&a=174161092&listNum=12

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  13. I guess we're headed straight to 1000. That fw yesterday worked perfectly.

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  14. EWT, is 1000 be the end today?

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  15. If 1020 to 1050 is the target for late aug/mid sept then we'll need a decent sized pullback soon. you might want to sell out of all long positions EOD. GDP could be a surprise to the downside for the markets.

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  16. this is a crazy wave iii of v. massive gap on spy.

    anyone seeing 5 subwaves in? the question is, is it enough or is this just wave i of subminuette of minuette v?

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  17. I don't know what wave this is but the $ADD and $VOLD are both shooting to the moon.

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  18. a possible leading diagonal for micro v for to complete this minuette v?

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  19. Yesterday's formation was a neat little set-up to get LONG off of heading into the close after 3 days of consolidation. 25 handles in the SPX is certainly a most profitable move for any TRADER.

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  20. Johan - You should check out Marc Faber's comments and video from earlier this week in which one of the biggest "Doom & Gloomers" is now hedging himself by anticipating yet another "bubble" in equities because of the Fed's actions. And his perma-bear forecast gets yet again, postponed.

    1987, 1998, 2002, and now ???

    :)

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  21. i agree wags. that was a great setup.

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  22. WT,

    Do you mean ending diagonal for micro v?

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  23. yes. sorry. either micro or subminuette but i think that is out.

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  24. at 3 and 5 minute there was a triangle for a iv (submin/mirco) and the thrust for a v (submin/micro). question now, is this complete or just the end of subminuette i?

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  25. or just the completion of submin iii?

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  26. WAGS when P3 starts which tune will you be singing?

    You obviously dont believe there is any kind of wave down coming because the TREND and CYCLICALS all say something else.

    I still dont know why you are here as I dont think you believe in EW at all.

    Its not surprising that a 'permabull' overlooks the fundemental mess out there to see a couple of doctored green shoots and everyone is certainly entitled to their opinion but trying to convince others of this POV is just wrong.

    We can all watch CNBC for this kind of information if we really wanted to put the blinders on

    For the record, I am not a bull or bear, just a realist

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  27. Also, overlooking the obvious manipulation in the market is another mistake. July has been pretty tame but if you think that when the open jumps up 10 points and then within seconds jumps down 10 points is "normal" market activity, wow.

    This is a perfectly designed scheme to knock people of of their positions and trigger their stops while they go off to work. The close is the exact same malarkey, you have been inthe markets how long? It is SO OBVIOUS.

    Yeah you could point to something else to account for it, but I'll never buy into it

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  28. we all just 5 points away... come on

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  29. i think i have subminutte iii of minuette v of minute v completing now.

    this is off a micro iv that triangle once again. micro v should be on tap to thrust up to complete subminuette iii

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  30. This comment has been removed by the author.

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  31. Dave_S - Wags opinions have shown to have been money makers. Trading/investing is about coming out ahead and making money. You know the saying, "you can go broke before being proven right". Well manipulation or not, it's about trying to make money. Putting someone else down won't make you money. That's what makes it a market. One person thinks one thing and another person thinks something different.

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  32. anna, not sure yet. still trying to figure out the degrees of waves. somehow, i think there may be more but given that we touched 996, that could be it. that would minute v more than = to minute i and pretty close to 1.618 x minute i.

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  33. http://farm4.static.flickr.com/3513/3771659923_64028cc503_o.jpg

    We are here - IMO

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  34. i want to say there are 5 minuette subwaves in place , with the possibility that the 5th of 5th minuette possibly may still be in the works.

    and it is possible that may 5th minuette could just be the top of minuette iii. that is what i'm trying to figure out.

    onechi? ur thoughts?

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  35. Head & Shoulders on the SPX now.

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  36. FT - agreed. I just dont like seeing the same thing 'flogged' over and over as if to try and convince others, thats what CNBC is for. Like I mentioned, everyone is entitled to their OP and I never put him down. Sure he might have made money going long or 'scalping' as he calls it with the recent uptrends as would have anyone that did, I caught some myself, that does not mean his opinions are correct. I just wonder when the next BIG downtrend starts if he will accept it and trade with it and stop bantering on about the CYCLICALS and such.

    As well, following ANY Analysts opinions is pretty silly, permabull, permabear, whats the point? There is no use in even mentioning any of them since 50% of them are ALWAYS wrong. CHARTS are the only thing to follow.

    Of course these are just my opinions, and I dont expect everyone to agree with them, and I dont come on Blogs bantering about my opinions either, especially blogs geared towards Elliot Wave.

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  37. WT,

    This is hard to count since we had the gap up, The wave does not look complete, and the a flat top doesn't quite fit EW form. None the less, when one impulse retraces another we might have a reversal.

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  38. geno, that looks good to me as well because minuette v of minute v would equal minuette i at 1k and i do see that potential triangle forming for minuette iv

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  39. Psychological resistance @ 1000 chart resistance ~1005-07

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  40. But...resistance line drawn from top @ May 11 - June 12 puts the top around 996

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  41. i think the final thrust may be coming

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  42. Dave_S:

    I think that I have been observing the trend CORRECTLY and trading accordingly. I have not been "anticipating" or trying to "pick a top" as so many of the people that have missed this rally tend to do.

    Thank you for your concern regarding whether or not I will be able to TRADE the next change in trend, but you will just have to be patient and wait and see how I react. Better yet, why don't you be more concerned about YOUR ability to make money, and not that of my own?

    You seem to be puzzled as to why there is so much buying (short-covering) towards the close of every day, and you continue to fall into the trap of basing much of the price action during this trend as "manipulation".

    I'm sorry, but fighting the trend and making excuses for PRICE movement does not help a TRADER make money successfully over time. That's not just my opinon, that's a fact.

    Tell me... if "CHARTS are the only thing that (you) follow" why is it that you were quoted and warning me week before last that "the trend is about to come to a screeching HALT shortly". If I am not mistaken, that quote came from you and it has nothing to do with looking at charts.

    Again, I am at a loss as to why you seem to have focused so much of your attention on a TRADER who is simply reacting to current price action.

    I'm flattered that you are "concerned" about how I will react in the upcoming "P3", but it really isn't a key to helping you make money, that is, unless you actually believe that I know what I am doing and have some credibility based on my 28 years of trading experience.

    :)

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  43. WT,

    969 is the real marker for B wave now.

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  44. For anyone into using fibs, I believe that 1.618% of (1) gets you up to 1006 on the ES.

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  45. Wags, Dave,

    Can we just chart the Elliott Waves? This is why this blog is here. Its not a trading blog, no one gives out calls to go long or short, we are just here to chart.

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  46. Anyone want to offer their count now?
    Thanks.

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  47. SRS, either subminutte iv of minutette v of minutet v or Minor B.

    We won't know until 969 is broken, or 997 is broken.

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  48. OneChiOnly,

    Thank you for your rapid reply!

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  49. OCC Thank you.

    There are plenty of other blogs for things that do not concern Elliot Wave, you said it much simply than I did.

    WAGS, no one here is making any excuses, its just some observe things differently than others and react accordingly.

    WAGS, I'll leave it at that, I said my peace, you said yours. Lets try to stick to EW, since thats what Blog were in, and keep biased opinions OUT of the equation.

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  50. WT,

    We can clearly count a 5 wave impulse down from the top, with wave 1 as a LD and 3 extending. Still no confirmation until e wave low is broken.

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  51. Onechi, can you say that we are in iv of v of V of C of A. That is no ABC correction in C of A?

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  52. this can also look like a zz to me. if so possibly only subminuette wave ii?

    maybe pullback to 986 before continuing higher? difficult to read. it appear subminuette iii is in though, but the current correction looks like a zz.

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  53. if iv is in and we are now working on v, i may be keeping an eye on a truncation of v of minute V.

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  54. I vote for truncation, I think 997 was K's target. Lets see if the Bond auction at 1pm has any effect at all.

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  55. 2.63 bid-to-cover ratio on today's auction. Results just out at 1PM Eastern. Very successful.

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  56. spy is showing me potential zz. INDU is showing a potential flat and spx is potentially a zz.

    given that minuette iii may be in, this minuette iv could be tracing out a flat prior to minuette v of V is in?

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  57. WT,

    I'm charting this as subminutte ii of Minor B or minuette ii of Minute V. The nature of the corrective waves moving up only tells me that its consolidating for another drop down.

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  58. onechi, i agree, the correction appears to be a zz or flat for subminuette ii or iv of V. but good to count an alt if the top was in and we are in B. if a zz i see price near 987 to complete this corrective leg if c = a

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  59. and i am leaning more towards the completion of minute V in progress vs a new B leg down because the moves down so far are more corrective in nature than impulsive

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  60. Anna,

    "Onechi, can you say that we are in iv of v of V of C of A. That is no ABC correction in C of A?"

    I meant to saw iv of v of V of A. I am assuming B didn't start yet, but now we don't know the waves now are just starting to get choppy again.

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  61. WT,

    The move from 10:30am to 12 could be viewed as a 5. The moves up from 12 to now look choppy and not impulsive but its direction is up. I am viewing this as either subminuette ii or minor B.

    The corrective waves moving up now has just hit the 61.8% retracement and bounced off. I guess another way of looking at this is minuette V that will trucate or form an ED?

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  62. WT,

    Just want to clarify I meant I am viewing this as either subminuette ii of minuette i of minute A of minor B or some more complex structure for Minor B either double or triple zigzag.

    Just want to clarify when I said "minuette V that will trucate or form an ED?" I meant to say Minutette V of minute V of Minor A

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  63. This comment has been removed by the author.

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  64. A thought:

    The 2007 top and the P1 wave 2 top stopped at the weekly BB, which now is 990. Might be tough sledding to squeeze much more.

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  65. Schweizer,

    Minor A has been treading the top of the BB for about a week now. BB's are expanding. I think the RSI like dan said, is very telling. Today will mark another entry into the OB zone of the RSI on the daily charts.

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  66. The weekly already has neg div on the MACD histogram and the weekly RSI is at the same level it was at the 2007 top(~60), so a few other things to watch. I'm not sure weekly RSI diveregences always show up on "P2" type corrective waves, so the MACD histogram divergence might be more telling.

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  67. the move down so far from today's top of 996.66 still looks corrective to me. And it looks like a ZZ, which would indicate a possible wave ii.

    using a line chart smooths out some of the noise and i see a potential 5-3-5 in the works.

    i have wave 'a' from today's top to 990.34. wave 'b' from 990.34 to 994.77 and 'c' in progress now.

    of course i still question it because minuette iii of v of V looks like it is in.

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  68. i will add though that i am using a tiny little laptop. the waves may not be as clear as when i am on my desktop so the choppiness could be distorted.

    so far, my wave c has made .618 x a. lets see what happens

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  69. I am all cash and I am waiting to see where this wave peaks. Usually the best way to tell is the a wave after a peak but so far I can't see a clear top yet. So it remains to be seen, I wouldn't short just yet.

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  70. i think it is looking to wedge. that would make sense for for iv

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  71. if it is a wedge, i have v in at 997.

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  72. WT,

    Could be triangle also for a final push up.

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  73. definitely looking more like it now. i have wave e in progress with a final thrust into the close most likely to complete minute V (of course i am assuming minute V will be done, but who kjnows)

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  74. Guys, seem to top out at 997, lingering between 992 to 994. It is time to short yet?

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  75. WT,

    well that throws the triangle out lol.

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  76. WT,

    the triangle probably a 1-2-1-2? GDP don't think its goign to meet.

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  77. Schweizer, what do you mean? Do you mean that peak is done, we are going down? Time to short?

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  78. Let’s close lower than the open on the SPY to get a nice scary black topping candle. 98.83 was the open.

    The techs already painted theirs. Good night Irene!

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  79. this will just give buyer a chance to push the market up again tomorrow

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  80. ABC corrections (we are in 2 of A)

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  81. Look at that topping candle on the Qs on the daily.

    I have to frame that one.

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  82. Chart so I can see what you're talking about. Think we have different counts

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  83. Forget the SPX. The NDX has been the leader and it just rang the bell ending the bear market rally today by tagging the upper channel line on the weekly chart plus painted a topping candle on the daily and weekly charts:

    $NDX Weekly

    The plot thickens.

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  84. Thanks for the chart Schweizer

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  85. Schweizer - If you take the peak on 10/31/07 at 2239 and trendline it down to the peak on 8/15/08 at 1973 that extends out to approximately 1644 in the next day or two of trading. You might be right buy I wouldn't put it past them.

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  86. Hi Schweizer,

    Are you offering your opinion that the rally of the past two weeks has topped -- or that P2 has topped?

    How low do you think we go now? Thanks.

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  87. It certainly has been quite a STIMULUS plan since the March 9th lows... The capitalization of the S&P 500 has increased $2.7 TRILLION so far!

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  88. FTLOG - good point. The 50% fib from the top on the $NDX "was" 1629 and we nailed that too right at the trendline. Hmmm ...

    It pays to look at more than one index. With the dollar and the VIX in uptrends off of major support 4 days ago, it could be something to consider.

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  89. SRS - I think what the NDX did today could be telling. The NDX could slide sideways and buy time for the SPX to run a bit higher but we are arguing over a few points here.

    As for where the bottom is? Ultimately when the GAAP PE<10 we will have a bottom. This has been the case for all 5 of this centuries major bear market bottoms. As on now, the SPX has a flat $7/Q GAAP earnings = $28/yr = PE=35. This suggests SPX well under 500 (Price drops a ton while EPS improves fractionally.)

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  90. Can I buy my ticket now for a ride on that train? I'll even take 3rd class seating if I can get 400+ points out of it.

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  91. Dan's prediction of SPX 997 hit today. What's next? Do we go down here to test 968 or 950 or we zoom up some more? The way that DOW behaved today from over 160 points to close less than 90 points leaves mm to give the market one more squeeze in the morning unless our GDP comes in less than expected.

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  92. onechi, great call once again. i had to bail near the close so i couldn't quite keep up with it all. that was funny when 'that triangle' broke down. i decided to pick up some puts and set a stop at today's high just in case this is still a zz. i'm gonna say most likely not, but who knows.

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