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Sunday, July 18, 2010

Weekend Charts and Stuff [Update Sat 3:51PM]

[Update 5PM: The GDOW's best count is a Minor 2 flat of some kind is playing out.  If its an ordinary (or even slightly running) flat then it likely found its peak. A regular flat implies that the GDOW could only manage to retrace 38% of the decline which is a bit short for a "normal" wave 2.

If its an expanded flat, then [c] should be higher than [a].  And if [c] expands 1.618 times [a] then using the 2 targeting methods yields a 1928-1934 range.

So again we have choices. Notice there really is no downtrend line problem for the GDOW.  The problem is simply overhead resistance.
[Update 3:51PM: Yes I put a count on most everything. The TED spread chart should work on fear. In other words, like commodities, its likely to rise on extended fifth wave events such as I charted below.  Time-wise if the recent pullback was a "low" then it was pretty short in time for (1) compared to (2).

So we'll see. Tying everything together is tricky indeed.
[Update 2:35PM: Since we are looking at internals lets look at them from an hourly standpoint that I happen to have attached to this COMP chart.  As I said in the last update to this post, if this is Minor 3 down then it should be clear(er) to us soon enough.

The downsloping trendlines on the red downside internals decliners and volume ratio indicators are very interesting.  If this is Minor 3 down, look for a possible dramatic break above these indicator trendlines to occur sometime early this week.

[Update 1:55PM:]
Elliott wave logic: Either we are in Minute [iii] of Minor 3 down or we are not.  Sometimes its easier to view things from a logic stance that makes you go "yeah no shit Sherlock".   But in this case, it likely a useful way of looking at things because a Minute [iii] of Minor 3 is supposed to be earmarked as a very bearish wave in this instance. My point? If we don't get the bearish downside this week, that hurts the Minor 3 down count case.

The market has produced some historic market internals since the April 2010 high.  I have discussed this at length in various posts and updates and have shown that the market has produced some key "mass market" decision sell points. The latest mass market decision sell point occurred on June 29th.

I have also said that conquering this decision point is what a bull requires to do prior to any move higher. I have also suggested that the market will stay within range of this decision point with some minor closes over it and any attempt to "escape" from it will induce selling.  Thats about the jest of it. Basically I am describing good old support and resistance just in a more psychological way.

The chart below is a basically breaking the tape down in a way that I view it short term.  We have two top competing counts. The first is that Minor 1 low finished at the 1010 SPX bottom in a leading diagonal and that Minor 2 will retrace deep back up. This count requires that the main down-sloping bearish trend line must be broken over in a [c] wave of 2.   

The close alternate count is that the market has merely retraced Minute [ii] of Minor 3 down and that some big downside is staring us right in our faces. So what to do? Well we have to let the market tell us. The Minute [b] of Minor 2 case is still intact but it requires that support hold more or less.

If its Minor 3, indeed there should be even bigger selling coming right at us.

RUNNING OUT OF WIGGLE ROOM FOR THE COUNTS
There really is not much wiggle room here. Either the market is now turning down in bigger selling representative of a Minor-sized bear wave 3 or its not.  At this very moment, I cannot say that this is happening.
Again here is the internals mapping of the last 3 months or so.  The big swings in either direction to me is very  bearish.  It shows herding and how the algos are having a tough time here. Eventually this schizophrenic activity could easily produce a mini crash and likely will or even a series of mini-crashes.


SENTIMENT AND FEAR
But for now, we could see that it might want "one last shot at upside". The key is sentiment. Is it ready for bigger selling "events"? Or does it require a move back toward a more appropriate bullish level that only higher prices can induce?

Also note that Friday's big bear candle had some decent downside numbers, yet the decliners were certainly not "too bad" considering some of the other days we have had. It was also OPEX.
First up is the German DAX.  Like everyone else, I am not sure what to make of it.  The best I can do is compare to how it performed at other major peaks to see what is possible.


Ironically, it actually could be that the DAX is signalling that the markets are done here and Minor 3 down is indeed playing out. After all, if the DAX is not in a big bullish triangle, then (eventually) some nasty downside may be in store. Many wavers are pointing to the DAX as a reason for more world market upside when actually it could be making the case for the exact opposite!

From a daily perspective the 2007 top was pretty much the same mess that also formed an apparent triangle thereby suggesting that higher highs were coming. Yet thats exactly when it ripped to the downside.

I rather think technically the DAX is actually weak. I'll go with technicals in this case as labeling the entire run-up from 2009 low is obviously an overlapping mess and we can get no clear edge for the moment on an overall count other to say that the entire rise from 2009 lows looks corrective. Surely there are a number of zigzags and possibly flats at play.

This is one case where technicals would trump for a possible edge.
The weekly shows some technical weakness.
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