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Saturday, January 9, 2010

Weekend Charts (Update Sun 10:50pmEST)

[Update 10:50pm EST:  My vision for the NASDAQ really is a simple a-b-c supercycle 5-3-5 zigzag. But Dan that can never happen doh! Oh yeah? Look at the chart underneath it.]

The Nasdaq is now overbought on the weekly for the second time this rally.

Of course the Nikkei's first big bear waves resembled a big zizgag. Notice how the time span matches very well with the current Nasdaq.

[Update 8:30pm EST: E-minis are almost at the top of this 14 day trading hourly channel.]

[Update Sun 8pm: Apple's chart is looking creaky to me.  The big thing that catches your eye is the accumulation and money flow. At its new high, both were anemic and accum is a negative divergence.  Apple, I think, represents the trajectory of asset mania over the last 10 years. I have this as a cycle wave peak and sentiment-wise, it seems like Apple can do no wrong.  Apple also represents modern corporate greed in a way that will eventually earn the ire of the public.  They sell expensive products and yet their stock gives no dividend.  The iphone runs on a crappy network and you pay too much for the service. Why buy Apple at $215? So you can sell to someone else. But the accum line suggests those "someone elses" are waning.

I think of Apple as like Sony of the 1980's....and how are they faring?]

Determining when the last waves will top is the tricky part. But I think we are not too far off...

[Update Sun 5:45pm: Karl Denniger sums up why I am so bearish on the markets and economy from a fundamental standpoint  From a sentimental standpoint, Americans are transforming from being debt splurgers to more frugal. A generational transformation brought on by the need for society to correct its excesses of a Grand Supercycle blowoff of greed and corruption.  The government is a lagging "herd" and will eventually fall in line with society's frugalness.   It may have some final spending moments this year, but I guarantee once the 2010 election ensures that Congress becomes "gridlocked" (thank goodness) the government will follow.  And thus the Fed. As Prechter likes to say, this will all be very deflationary.  Nature will win out in the end one way or another.]

[Update Sun 12:40pm: I forgot to add bollinger band info to the weekly Wilshire chart below. Its parked outside the upper band. Wilshire ended at 11889.31 and upper band ended the week at 11853.12. Considering it may have reached its triangle breakout target ]

[Update Sun 12:21pm: Even if the market continues as a whole, certainly certain sectors will experience "buying climaxes". The RUT should be feeling some resistance unless of course Monday just pops right over and runs. But that is expecting a lot at this stage. Fair question: would you be buying this chart, or waiting for the next consolidation period particularly since the sub waves may show a wave [v] peak soon  For you wave bashers, tell me how you play the RUT from here on out.  If you were smart to play it until this high would you take profits or let 'er ride? Just asking, I think its a fair question.]

[Update Sun 12:00pm: It is of my opinion that the rally has reached the "hyper" stage. The rising trendline from March 2009 is steep.  There will be a resistance area that stops the rise in its tracks (if it has much further to run). From exactly where is just a guess. Using the Wilshire, since its a huge portion of the entire market, there exists a band of resistance above that will require a pause and consolidation considering the near overbought conditions that exist on weeklies.   What bull is so sure that a break of the rising trendline will not be bad for the markets?  It cannot continue on this trajectory much longer. It is ok to be bullish until this condition relieves itself but as you can see, its a matter of time.

If an investor or a mom and pop retail, who has limited options in his/her 401K with 30/90 day "hold" rules with limited transfer options, were to gamble and "go long" at this stage, wouldn't you agree its a bit risky? At least until we see how it handles coming resistance and a sure trendline break.

I must say the fact that the "chatter" and the disdain for wavers is increasing just as I thought it would.  A few more hundred points on the Wilshire will have this disdain at a peak level. No I cannot predict when it will all end, but I will say, we are on the final hyper stage legs. I am as confident as ever. I'll count what unfolds in front of me and if this C leg wants to extend on upwards until its so damn stretched its like a bungee cord, then thats what it will do. I can only keep counting. The higher it rises the more energy it gathers for a downward move in my opinion.]

[Update Sun 11:30AM: I was just driving through town and listening to a popular news station in my area listened to by 10's of thousands of people. A news item came up quoting a New York Times piece on bank bonuses.  It reported GS employees averaged $660K and JPM getting an average of $466K and some bonuses reaching "eight figures".  It was a tough news piece that dripped with disdain for bankers.  This is an example of what is helping to fan the public ire about the big banks.  Americans are seething underneath.  Now with all the massive budget problems, how do you think the reaction will be when the middle class is milked even more?

The handouts continue and there is such an extent of moral hazard created over the last 2 years that everyone that owes money is pretty quickly figuring out that it doesn't pay to be the honorable person anymore.  Why would anyone pay their debts any more? The banks' actions will have an undesirable effect when people no longer wish to do business with them nor feel like paying back their credit cards which have been just jacked up in rates.]

[Update Sun 11:10AM: A proposed squiggle count for the RUT. Yes I know its hopelessly biased to end, but it sure looks like a bunch of ABC zigzags struggling to advance. How else shall it be labeled?]

[Upate Sun 11:00AM: Hrmm, I screwed up my Wilshire 1 min squiggles from Saturday  I like this chart better that I posted Friday:  ]

Very interesting long term chart of the DJIA and SPX.  Supercycle wave (V) channel in blue from the 1942 low. Notice that the current rally looks like a giant backtest? Previously I surmised it was a Grand Supercycle channel backtest but this looks pretty good.

And here is a closeup and showing potential horizontal and channel line resistance if a surge comes early this week.  Its tough to say what resistance would stop the DJIA, but the horizontal line I drew is 10706.

Here is the S & P 500. I only drew a trendline and its subjective of course but it aligns very nice also.  A hit on this 75+ year trendline would be about 1158 early this week or 1160. Of course with a trendline that long, its impossible to tell.  The next horizontal resistance is probably at 1151-1153 and then of course at around 1158-1160 is a bunch.

And a close up of the SPX trendline in the 1980's.  Notice how it hugged this line before breaking out in mid 1995.  Also notice that the 1987 crash can be said to have occurred from an early attempt to get above this trendline it failed and crashed.

For those wondering how Alcoa is going to do on Monday, well, they just had a nice earnings run and technicals and wave patterns and channeling suggest they will sell off.

[EDIT: Sun 11:00AM: I removed this squiggle count and reposted my one from Friday. I screwed it up and it didn't look right.] A proposed squiggle count for the Wilshire5000.  Its drawn with the idea that the Friday ending was "overthrow" that may or may not be quite finished.  For instance I hear talk of a big gap up Monday.  Perhaps its a flat opening and the bid is jumped on to the sell side. Maybe a lot of people had second thoughts over the weekend and decided that taking a little Monday morning profit at 1145 SPX is not so bad an idea.

But even a gap down in this case that retraces into price (i) terrritory and then chugs out yet another a-b-c strained move higher would actually constitute an ED also.

Another alt is that Monday is a hyper up gap and it runs a bit higher and traces out the upper waves of [v] of C.  Maybe 1158 is a target as that is considered (A) = (C) or (W) = (Y) for those that do not have a triple intermediate zigzag count for P2. Any big gap up I will assume is an exhaustion-type gap (unless conditions dictate otherwise) that will not stand for more than 1 day.

So actually any big gap up is to be faded in my opinion as is any gap down perhaps for the alt (iii) scenario of the ED I laid out above. But buying a gap down is more riskier than fading a gap up. We'll see at any rate.

A gap up or down is a big deal at this stage of the wave game considering this rally wave up since Christmas seems to be on its upper traces.  It matters at this spot come Monday.

Also this week is the .618/.382 ratio week for P1/P2.  Or in other words, P2 = .618 x P1 in trading time and calendar time. I believe Thursday is the exact trading day.

Monday will be interesting.

I'll be posting charts and maybe some commentary here this weekend. I need to get in the habit of more consolidation for posts so any conversation is not as scattershot over several posts. Any updates and I'll update the heading with a timestamp.   I am also running out of Google server space so I may from time to time delete redundant charts.

The other day I posted a FTSE100 that has a very nice contracting triangle.

Since the SPX might be in a contracting triangle pattern, I thought it would be interesting to do the same.

Here is a revamp of the RUT. I would say it looks pretty good and has all the signatures of a very good impulse wave.

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