Tuesday, June 30, 2009
If the H&S pattern formed (good chance it will) the contrarian stance would be to play the long side. The H&S downside target would likely be in the 820's somewhere. 821 would be a 1.618 Fib expansion target of the zigzag from 956 to 888.
I have already stated that if P2 is not yet peaked, then it would likely require another zigzag up in a triple zigzag pattern. I have also stated that it doesn't make much sense for a third zigzag to start beneath where the second one started as would be the case if a H&S pattern played out and its downside target were met.
So therefore I don't like the H&S. Its too obvious. Once a pattern becomes so obvious, so early, by the time it is ready to "break" and follow through, everyone has already taken positions long prior to the "break" point. So therefore instead of following through on the pattern, it does the opposite because everyone was already positioned for the move well ahead of time. That's one theory anyway on why chart patterns sometimes fail miserably.
Bearishness is already getting lower on the $SPXBP chart (again assuming 956 is not P2 peak).
What is instructive though is if the market is tracing a Y wave, it could hold above the H&S neckline (or a false break under that recovers) by tracing a triangle or a flat pattern for the Blue Y wave. So indeed I'll be watching closely.
In conclusion, if P2 topped at 956, then a move down to 821 will eventually have to occur, that much I admit and am ready for. But I suppose if P2 is not topped. I lean toward a new high this summer based on what appears to be a zigzag down from 956 to 888 and subsequent X wave back up. Also I pay EWI a lot of money for their services and they say P2 likely has one more rally this summer based on their expert sentiment readings ans experience) so I blame them LOL! So then the 820 range, in my estimation, would have to wait a while longer.
But one subwave at a time. Again, I am way ahead of myself and if the market wants to bust lower through 875, who am I to say that shouldn't have happened?
So the most bearish form I can make for the Blue Y wave would be another 5-3-5 zigzag down which would break lower than 888 recent low. I show this bearish option on my chart. I have 862 as the low. I achieve that target with a simple Y = W.
But like I said, one subwave at a time. But I want you to see what my top count is at the moment. And that is a blue Y wave playing out as part of a double three (or double zigzag) down from 956 peak.
Going to keep playting this one little wave at a time. Today moved just as I mapped: peaked between 929-931, retrace back to 914 area. The hard drop surprised even me it looked like a waterfall.
So the retrace back up from 912.86 is probably almost peaked unless a more complex corrective unfolds. The waves up look corrective so another move down in either a (c) wave or a wave (iii) should be coming. Downside targets are 902 for starters then 892, just above 888.
So either a small zigzag is tracing out down from today's 930 peak or something more bearish. I won't try and guess what it will be other than I will play this one subwave at a time.
So far its working pretty good. I'll throw in the squiggles later.
Monday, June 29, 2009
pretty much followed through with upside. I really wasn't sure which way it was going to go. I guess it was a wave  leading diagonal versus an ending diagonal as I speculated on the NASDAQ. DOW up today 1.08% SPX up .91% and NASDAQ up only .32%. So the DOW was lagging and catching a bit of a bid and the NASDAQ is waning and the SPX somewhere in the middle. Still looking for the initial rally peak from 888 low. Could be tomorrow with one more squeaker up. End of quarter window dressing I guess.
There exists some nice Fib relationships coming up and I show this on the chart. 929 stands out along with 931. So maybe a peak tomorrow and then its starts heading back in some kind of retrace move.
There are numerous possible counts going on and they all steer corrective as if this is just another big consolidation for the market prior to making one more zigzag (should be at least a 100 pointer) for P2 peak.
I will look for a move back to at least 914 support after the market hits 929-931 range tomorrow (if it does) That would be a 38% spot and also a good support area. After that we gotta keep playing this one wave at a time until it reveals some more of whats going on.
Sunday, June 28, 2009
Saturday, June 27, 2009
The NASDAQ appears to have ended Friday in an ending diagonal move on the squiggle chart. Which likely means that the SPX also will not be heading up much further if it does and 922 may have been its corrective high.
Friday, June 26, 2009
Thursday, June 25, 2009
For instance today was a simple 5 wave move, a very good structure. The corrective waves since today's high therefore appear to be complex including a possible [B] red wave expanded flat.
I look for a backtest of 908-911 support. Then a move toward 927 resistance area. A push above could occcur and then of course my count calls for the double zigzag peak. If this pattern played out and the market pushed to 931 or so, look for a downward corrective move of the entire push up from 888.
This all supposes that 956 is not P2 peak. If 956 is the P2 peak, than just the opposite will happen. 927 will not be broken and a big bear wave down is coming (I do not completely rule out the alternative until the waves cancel that option). And 927 is the keystone.
See how simple that logic is? We can afford that luxury at the moment.
Should be a fun day tomorrow.
Counting wave patterns is like building a puzzle. It based on logic. Wave structures build and form bigger wave structures.
In review of what has happened since the 666 low, it appears the market traced a double zigzag from 666 to 956. That "qualifies" as a valid corrective for P2, yet since P1 was such a long (17 months) decline and in points, P2 logically should rally a certain percentage. Simply put, if 956 was not enough of a point retrace (or June 11th high was not enough time) the market will trace higher at some point.
Logic also states that since this is a wave 2 correction of large magnitude, if 2 zigzags cannot achieve an acceptable price retrace high than the theory allows for a triple zigzag. That would be the limit.
The connecting waves between each zigzag is an (X) wave of intermediate size (red letters on my charts). So if 956 was the high of a double zigzag, and we assume that the market needs to trace a triple zigzag, logic tells us that the second (X) wave low should not fall too heavily in price. Afterall, why would the last zigzag start its move from the same place or even lower than where the second zigzag started its move? That would defeat the logic of a triple zigzag (to achieve a high price). A low starting point for the final zigzag would force the last zigzag to be a powerful one which normally the first zigzag would be (as it was here). That's asking for a lot.
The start point of the second zigzag was either 835 or 847 depending on where one places the first orthodox (X). So using logic, if we take 847 as the start of the second zigzag to 956 peak, 888 is exactly a .62% retrace back toward that 847 mark. Should we expect more of a retrace back toward 847 before the launch of a third and final zigzag to P2 peak?
I suppose it could trace more backwards however, remember the logic: If one expects P2 is not over, than one must expect a triple zigzag to peak. And one must expect that the last zigzag will not start from a low spot as compared to where the second zigzag started.
Based on that logic, 888.86, being an exact retrace of .62 back toward 847, makes a good spot for an (X) wave price low.
Once again building on logic, the move down from 956 to 888 was a nice 5-3-5 zigzag which qualifies as a corrective pattern for an (X) wave. The question is: was this enough retrace in time? Are the bulls ready to stomp on the gas pedal yet again so soon? That is something the waves will reveal soon enough.
The (X) wave could carry on for a few more weeks or longer, yet not move below 888.86 (or perhaps just a little dip). For instance an (X) wave flat could carry prices back toward at least 950 and then a bearish C wave take them back toward 888 before ending. Or perhaps the market will start to triangulate and go sideways in yet another triangle move for a few weeks until a breakout move comes later.
Today's waves broke up and over the down channel and was a 5 wave move up. Is this the start of a new move to P2 peak? I honestly do not know just yet. The 10day $tick average had dropped to a very low spot and as Kenny showed, was at a spot that could be a market turning point. In addition, the VIX shows no fear. It appears to have triangulated recently itself as I showed a few days ago and now may be breaking lower.
Like I said, either P2 has peaked or it hasn't. Simple logic. And if it hasn't peaked, at some time the market must turn back up. And that last move up should be a zigzag up (probably about 100 points in size or more I suppose). And the start point of that last zigzag should occur from a decent price point that is not at the same level or near where the second zigzag started.
I never favored the end of P2 at only 956. I favored a move higher toward 1000. It didn't happen when I thought it might, but it may be happening now or will happen in few weeks or so after a sideways consolidation. I suppose the market, in addition to needing more price retrace, needs more time for P2.
The bearish count of some kind of giant 5 wave move down, which of course implied that P2 had peaked at 956, has almost been totally eliminated by today's move up. If 927 gets taken out to the high side, it will be confirmed. So again we wait for some final clues.
So that's the logic. P2 ended at 956 or not. There is no "in between" option. EW theory favors a higher price retrace and/or time for P2. There is no hard rule of course.
My logic and today's wave moves, (including all the TA and bearish sentiment) steers me toward another zigzag to peak will occur. When? When the (X) wave ends. Did the (X) wave end? Not sure just yet.
Is there still a chance for a giant 5 wave move down and that P2 topped at 956? Yes but only if 927 does not get taken out to the high side and the market moves down in one more 90% down day in the next few trading days.
The market is now well above the golden cross of the 50/200 DMA. A 90% up day from this configuration, will turn traders and fund managers and technicians and market letters bullish. And that's the way a P2 should end, on a very high bullish state of things.
Wednesday, June 24, 2009
Tuesday, June 23, 2009
Last night I threw some charts up with a bullish count with the thought in mind that P2 was not yet topped and that at some point, the market will have to rebound for the final leg of P2 in a triple zigzag to P2 peak.
However, the waves have yet to cooperate. Every bounce since the 956 high has been of the dead cat variety and today was no exception.
Tonight I take a different slant and show the waves from a permabear perspective (which I am by the way). I show you the wave degree labels that would most likely fit into a P3 scenario. The initial 53 point move down from 956 peak would only be Minute wave [i] of Minor wave 1 of Intermediate wave (1) of Primary wave . The rebound to 927 would be Minute wave [ii]. That would mean the market is in the midst of a Minute wave [iii] lower.
There really would be no other way to interpret the structures if 956 was the true P2 top. You could change the degree labels and bump them up one level, but regardless the market has reached the point where a "point of recognition" is coming at a small-scale level (if this is the true count)....the meat of a wave [iii] move lower. This would of course most likely bust down through 878 support lower.
So what do I think? It doesn't matter what I think. What only matters is what the waves are tracing out so far. And so far the market is impulsing down in very bearish 5 wave moves and correcting in scraggly ABC's. Today was no different.
We will know soon enough and I have to show you both scenarios.
I'll add that yes the 50/200DMA crossed today yet on the hourly chart, the 50/200 crossed today in a bearish manner. I will also say that the market is "oversold" but that doesn't matter much if this is a wave [iii] lower. We seen in P1, how "oversold" gets even more oversold until you lose all your money.
In the long run, P3 will kill a lot of people basing bounces on basic TA but a wave 3 of any size will crush bounce expectations. I must not fall into that trap and must stay in tune with the waves. And so far, they ain't a pretty picture if your a bull.
Its this simple folks: Either P2 topped or it ain't. There ain't no "in between". I'd say within a week or less I'll chart which one it likely is. But for now, the market is teetering on the edge of a break much lower in the meat of a wave [iii] move (or even the meat of a wave C move if you desire).
The bulls still have time to recover, but they better get their act together quickly or risk losing 875 support, a key level, altogether.
So I certainly recognize that the setup is far from ideal. All I am suggesting is that it is worth noting as every other trader and fund manager in the land will also have noted. The NASDAQ had its cross a few weeks ago. The DOW is lagging and has some serious work cut out for it to have a crossover moment. So the market is certainly fractured on this TA event, which in itself is bearish.
The key thing for the bulls today would be to close above both after they have crossed. That would be a first step in repairing the bear rally.
The second step down the road would be to have a 90% up day while above the golden cross.
So in simpler TA terms, that is what has to happen for P2 to make a final run to a new price high if it is to be.
Will it happen? I lean obviously toward one last upside surprise and that P2 is not over. But I am certainly not married to that idea. I am just waiting for the wave evidence to continue to pile up to support one side or another.
Another 90% down day while the market is under this golden cross will certainly help drive the 50 DMA back under the 200DMA so it would be a false cross.
So one more 90% down day would be very bad for the market indeed. Indeed P2 itself.
Monday, June 22, 2009
Technicals though don't favor this. But if it was P3, technicals can get trampled as we saw in P1.
However the market is kind of short term oversold. Bullishness has plunged and bearishness is back in vogue....That of course would be a perfect setup for a reversal higher somwhere along the way. However you need buyers of course.
I expected today to be a down day and it did not disappoint. The move next is the hard part in this count.
Friday, June 19, 2009
Granted this is e-minis and not the cash index but its a good indicator since today's quad witching day brought out more SPX volume. So the e-minis may be a good sentiment indicator for the past few days. And its shows that there are (were) more sellers than buyers for the moment. That is bearish for the short term. And today was even less than yesterday. These last 2 days are textbook low volume patterns of a corrective move back up which signals that buyers aren't yet interested in buying at these prices.
Bullish sentiment on this chart has finally broken down and moved beneath the 50RSI mark. Its still above a typical "bounce" point. So this chart supports a further move down to more bearishness.
As my notes on the chart say, the SPX has fallen only 30-some points from its high (today's prices not the recent 903 low) yet this chart shows bearishness is getting lower. Yet prices are not too bad in the overall scheme of things. Just might be a nice clue that this setback is just an ABC correction that will turn back to bullishness soon enough.
EWI shows the Daily Sentiment Index (DSI) is back down from 86 to 68 so that has started to correct. No telling where that needs to go for a turn back up in a P2 wave.
Question is again, how much will price retrace? Well, sentiment on this chart went way down and price is still above the 50 and 200 DMA.
So its a matter of total volume (particularly to the downside) and support. So far everything seems in line for a bit more of a bearish pullback to get to that bearishness that allows a bullish turn. How much and how extreme? I'd guess the market finds its ultimate support at yet again at 875 or above. Its a logical guess. Why? Well the market is about ready to have a 50/200 crossover and I cannot see it getting too far out of hand to the downside if that's going to come in play for the rest of the move of P2 to final peak this summer which I think it will.
PS - I had favored a bullish extreme over the last few weeks to happen sooner rather than later and a move toward 1000 that never quite made it obviously. I can live with 956 being a P2 top, but I cannot say it is so at this point. Obviously more of a price retrace toward at least a 38% target 1014 would be more satisfying for P2. The market left us hanging and wondering, which of course, it likes to do just when we think we have it nailed down.
Thursday, June 18, 2009
A bunch of zigzags that are struggling to gain altitude. 38% retrace has yet to be hit on the SPX. I favor one more zigzag up to finish off a wedge move and a proper Fibonacci retrace of at least 38%-50%. The market cannot seem to attain a price retrace so I have the 1 minute chart as a double zigzag so far and a triple is max.
Wednesday, June 17, 2009
Tuesday, June 16, 2009
A day late (its one of his free samples) but this guy always sums up the technical situation in a simple, straightforward way.
In a nutshell here are some key points he makes:
1) Since breaking above the 200DMA, the SPX has failed to have a 9 -1 up day. (90% up day is a "standard" and is one reason why Kenny called P2 earlier than most and why I too suspected P2 had started - because 2 of those 9-1 up days occurred early in P2) Its had 2 weeks to do so and failed.
2) If the bears manage a 9-1 down day (Monday was a 15-1 down day) while the S&P500 is below its 200 DMA (at 909) than that is technically very bearish.
He does make the point and recognizes that 908 - 914 area is a "key" spot for the bulls short term. If this is a "B" wave low in a final ABC move to peak, then this area must hold.
This also matches up perfectly with Kenny's support chart showing the same thing
We shall soon find out.
There were 5 waves down from 956. I am not sure if this is a 5 wave move or perhaps an unfinished double zigzag such as the one in early May that traced from 930 peak down to 878. If it was a 5 wave move, your looking at a potential retrace to the 928 area.
Monday, June 15, 2009
The hourly MACD and stochs on the e-mini hourly both are near the "floor" as I show in this recent snapshot taken a few minutes ago. This is all hours of course.
Another wave move lower may likely result in these indicators developing positive divergence and often signals the bottom of a 5 wave move or the bottom of an ABC structure of some sort. Then the positive divergence on the MACD often results in a nice bullish bounce at the least. You can see the 3-4 times on this chart when that happened, an up move was not too far around the corner.
Of course if this is P3 already, you can start to throw that kind of thinking right out the window LOL!! But P3 has not yet reared its ugly head I suspect.
After that breakout support at 914 and a little below that the 200DMA.
900-904 offers a zone as well. Ultimately 875 - 878 is the bedrock support for P2 at this stage.
At this point EWI's primary count that this was a 4th wave triangle (a distributive kind of triangle I suppose) and the 956 push was a 5th wave top is looking pretty good at this stage. Indeed if their count is correct, than the gap at 920-923 may be filled today or tomorrow. For if their count is correct then any decline today would be a 3rd wave down and Friday's goofy action was just a pause in the decline. I guess all of Friday's ABC structures were just that - correctives.
Ultimately though, I still am looking at 910 - 914 support as a key to the whole wave structure. Thats a key EW marker for now. If 910-914 maintains, then any decline might be considered an ABC pullback from 956. If 910-914 breaks lower, then you're looking at a potential significant decline and a signifcant impact to the overall wave structure with larger impulsing patterns down.
Sunday, June 14, 2009
UPDATE Monday 6:20 AM: Never mind this post. Its not a leading diagonal. Futures already made a new low.
EDIT 6pm: added some info and corrected paragraph spacing
Friday, June 12, 2009
I met Kenny on the Yahoo SKF message board and he put out just awesome charts. He actually inspired me to charting a year ago and particularly Elliott Wave Theory. He started a superb website http://kennystechnicalanalysisblog.blogspot.com/ and has a daily market conversation of course that draws a lot of commenters. I of course have a day job and occasionally can squeak in a post or on a day off I might be active. But Kenny's intraday conversation is always lively; sometimes I lurk (when I have some free time).
His website inspired me to make my own website. He was pimping for Elliott Wave International (EWI) and now so am I (we are both hardcore members).
We often refer to each other on our charts and blog posts about wave stuff cause its a light hearted rivalry almost. Actually its more of a collaboration because we are always bouncing stuff off each other at least wave stuff. And we both like to rip Steven Hochberg (he does 3 updates a week for EWI) whenever we get the chance. (even though I always eagerly await Hochberg's updates every Mon - Wed - Fri) Kenny's TA skills and experience vastly outweigh mine but I have learned a heck of a lot from Kenny and am grateful. He has a zillion public charts and they are constructed in an excellent way.
But ironically as the "junior" member, I always had more Google followers and now I see he has been actively trolling for followers in his posts (specifically to beat me!) and he shot up some 30 members in a day!
This cannot stand of course now I truly do feel inferior so this post is my first troll for followers so I can make Kenny squirm about it again. At least I'd like to close the gap a bit!
So if you like my work and wish to stop in from time to time, become a Google follower. That'll keep Kenny working hard for our great benefit! (thanks Kenny)