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Thursday, April 30, 2009

Bearish Microsquiggles

This intraday chart is one reason I think 888 is THE top (for now). The microsquiggle waves are just pure bear waves down and when you can see each impulse 1, 3 and 5 wave each have a sub 5 wave inside it and even a sub sub 5 wave...well its why I do what I do.

And thats why you all come back to see this stuff. Admit it the microsquiggles fascinates doesn't it?

These look like the old bear waves back in September and October. Pure and true and unmanipulated. Tomorrow and Monday will be key days obviously.

666...888...222 point rise

Just too weird. Market is going down

The Market Is Goin' Down

There I made a commitment. The sideways slash of April and then the burst up to 888 I think is all she got left in her. The NASDAQ has just been relentless. But even that is showing signs of cracking. It was supposed to correct 38% but it didn't. Now it hangs up at this ridiculous level in such a short time. April was a near record gaining month in like the last 60 years or so.

Potential topping candles on all the indexes, shooting stars, etc. Some of the bear ETF's such as QID have been what seems like a bottoming process. Its MACD line is curving upwards. Its rounding. Most indexes' Bollinger Bands were punched into hard today. Its just stupid.

I would say the VIX flashed a buy signal today and it came back and tested the buy signal trendline. The VIX continues to show multi-month positive divergence. It is near to testing a breakout of its long term bear trendline. Also recently its holding positive divergence versus the market. Market keeps making new highs, VIX is stubborn.
Financials are also either lagging or showing the true path of the next move: down.
Little cracks in the armor. I like a big [e] wave down to wherever it must go fulfilling the X wave pullback. Lets fill some of them lower gaps huh? I actually would like to see the market test 800 and then just head on up and keep rallying. I want to see a 38% pullback. The test doesn't have to be a long drawn out affair. A quick selloff and then a turn at some point. I don't want to chase the market without a pullback. I already bought long at sub 700, I wouldn't mind buying more longs at 800 or so. I really think P2 will run through the end of August at least and breech its 200DMA which is dropping everyday.
I don't look forward to P3. The carnage will be horrible.
But for now I think we have an X wave correction come due. I don't like the bullish count because it would mean it just keeps rolling over all the bearish technicals that *should* pan out.
Breakout today...fakeout today. We shall see. Futures are up a little, I hope they shake out the low MACD and stochs on teh e-minis overnight. I think the market is going to go down Friday and then some more Monday and maybe some more next week too.
Monday would be a big gapper down. That way the least amount would profit. It would figure. I should sell futures, I think it would be more profitable and I think I could do it very well at all hours of the night. I see the patterns form every night. They seem easy enough to trade. The e-minis don't always translate very well over to the SPX cash index the next trading day.
I have been fuddling the last 4 weeks hemming and hawing not sure of where the market was going. I was justified. It was 845 on April 2nd and 847 on April 29th. The patterns didn't pan out and kept fooling the bears mostly. Longs probably weren't too sure either lets face it.
So lets get it on: Market goes down 1st and 2nd of May. Take some profits longs, its still a horrible economy out there.
I was ready to roll over as a bear...its a sign....all permabears must be squeezed to the point of capitulation if they try swing trading this far they have been squeezed relentlessly. Market has not had 3 down days in a row since early March. Today was like a capitulation day for the bears. That's what it seemed like. I didn't capitulate my short term QID holdings for 2 reasons: 1) It wasn't too bad underwater, I mean its not like I held since $50.. 2) Its May 1st tomorrow. Wait and see what the new month brings.
But I'll commit: This market is going down and WILL get its 38% pullback starting with 888 as the top.

Elliott Wave Update ~ 30 April

First, all that stuff about ending diagonals and leading diagonals, both big and small, and all the targets and discussion based on it is completely out the window. Today's up move constituted a sub wave 5 so that eliminates all the diagonal talk.

And there has been a breakout. The breakout has backtested the trendline once and is close to testing it a second time. My 5 minute chart shows the apex very well. In the old bear market of last year, moves above like this would have been a fakeout move and then the market comes crashing back down through the tip of the apex and to the lower side. It has a very good chance of this happening tomorrow.

So wipe the slate clean a bit. There is now some more key pieces to the EW puzzle. A big chunk of April has been one big sideways hack and slash and every time the patterns show a potential move, it has done the opposite almost. Ending diagonal? Nah, market will just wipe it out! zig zag? Nah how about another move up! Gaps up uncovered. Tomorrow is the 1st of May.

What we have are 2 potential patterns as the top counts. EWI has the running triangle pattern and that matches what I was showing on the DOW the other night.

So don't let it be said I am using their stuff (which I never try to do). But the breakout did happen and how it is handled from here is what matters. This running triangle count basically started at the recent 847 low and you can clearly count 5 waves to 888 peak from that spot. If this count is correct the next move, after the retrace wave [ii] - which occurred today - is a bullish wave [iii] that powers the market to 900 and more.

The other count is pure mine and it allows the market to be both bullish and bearish for now. Its an expanding triangle X wave and either the [d] leg has peaked today at 888 or will peak at a higher spot that hits the upper trendline. So this count is more ambiguous. Triangles always are. If the market crashes down through the apex Friday and breaks the lower trendline, then 888 was the peak of a [d] wave. If the market powers up and hits the upper trendline, then THAT could be the peak of a [d] wave. This is a rare pattern so....I am not convinced yet it does fit into the structure nicely. But overall, if the market flops big time tomorrow and Monday, this expanding triangle is the only explanation I have for the wave action.

So that's it in a nutshell. The market has given us several key trendlines and important wave markers to determine what may be happening. The EWI count has the market impulsing upwards in bullish waves from a triangle breakout. Today's pullback would have just been a wave [ii] retrace. My expanding triangle count still has us in a triangle and therefore the counts and moves can be more ambiguous as triangle waves can zig and zag all over the place. However my count would account for some bad down days to happen soon. So how you want to play it is up to you.

I held my doubled up QID through some pain today and almost let myself get stopped out but I figure I'll wait to see what the 1st of May brings. It paid off so far, as the QQQQ's backed off from their high. I of course am holding long funds in my 401K until the 200DMA is hit at least. I have a 15% hedge in my 401K with SDS for now. I am looking to cover that, as I hate hedging anyways.

Wednesday, April 29, 2009

Some Bearish Tidbits

I have been trying to anticipate and indeed call a 38% correction for quite a few weeks. But why? I'll tell you. After a valid ABC pattern from 666 has played out (which I certainly think it has), normally an X wave (or B wave) experiences a 38% correction. So hence, the wave patterns and technicals at times have supported the notion of a move lower. It hasn't happened to the tune of 38% although a 50 point drop did ocurr which is perhaps the most the market will get at this stage. There is no rule on this just merely past precedence and guidelines.
One good indicator of a top is negative divergence from the everyday indicators as compared to another recent market top. A week or 2 spread between the tops is a stronger indicator than if it only happened a day or so apart.
The SPX shows a bit of this negative divergence. Also volume was certainly less than impressive particularly the DOW. But again, its nothing to bet the farm on.
The VIX continues to show positive divergence. New market highs yet the VIX is stubbornly holding higher. Its noteworthy.
The last chart is the banks. Banks have certainly not wanted to participate in the latest up moves. The leading bear sector always points the way downward. One interesting thing about the banks is that EWI contends that April was a big market corrective period. But if you look at the banks, April has been one big catch-up as it was lagging in the beginning. Are the banks merely lagging yet again?
Perhaps. Monday is a big bank stress test day. If they are lagging a bit again, they will surely rally hard if the market is indeed breaking upwards and out from a month-long correction.
But I'll wait until Monday.

The Counts are Difficult. This is P2

I 'll just say that Elliott Wave International just issued an update that the whole month of April was a correction in the form of running triangle. I have suggested several times over the last few updates (indeed my last night's update on the DOW seemed to be mirrored in EWI's update tonight verbatim - I think they read my blog) that these appear to be triangle waves and indeed I have offered a few variations on what that triangle could be.

The yeast keeps rising.

Permabears want that nice pullback. They want affirmation that they aren't somehow "screwy in the head". There is no way to do a 3 day settlement short swing trade as the market has not had 3 down days in a row since the 666 low.

If April was a big triangle, then the next moves are upwards and onwards to 900 and above. Indeed the SPX was only 18 points shy of 900 and once 875 breaks up for good, whats to stop a run to 950-960 and the 200DMA? Someone said the 200DMA just keeps acting like a magnet on the markets. I agree, but even I expected a brief moment of pullback, sprinkled with a bit of doubt, of fear. Will it come? or will it only come after the 200DMA is hit?

Regardless I am 80% long. So I am profiting nicely and won't think of selling until the 200DMA on the SPX is hit. I have a couple of short term shorts but I'm thinking of bailing after doubling up today on QID. I bailed on FAZ at $9. Small profit but the market wasn't behaving correctly so I dumped the poison. QID is more tamer.

The short term waves are just nothing but higher highs even the damn triangle was a "running" type which means higher triangle waves to begin with.

Overall I'll wait til Monday to completely jump on the bull bandwagon. I want to see what a new month brings and if Friday will be bullish or bearish.

A break above today's high of 882 confirms EWI's count. A break below 845 confirms a bearish pullback. How deep and how far I don;t have a good read just yet. Just educated guesses.

Its a difficult count on the short term. But stepping back, I have no doubt this is a Primary wave 2 and the ultimate targets are much higher and that all the 200DMA's will be hit. The SPX 200DMA is residing around 969 at the moment. It is still dropping which means this is still a bear market.

I will however wait until May comes. No need to get long on the last day of the month.

This Is the Bullish Count

I haven't fit anything better together at the moment. What seems somewhat certain is that a diagonal pattern has played out from 825 to 882. This chart shows it as a leading (which is bullish) diagonal in a first wave position. These usally retrace somewhat, at least half so a dip into the lower 850's, high 840's could be expected. So after that retrace, the market will bust upwards in the next phase of the rally, likely onward to meet the 200DMA's in the mid 900's.
Perhaps these humps are series of 1's and 2's, but again, I dunno. The emini chart I showed certainly looks like ABCs using all hours...and that means a diagonal of some sort.
I'm betting its an ending diagonal.
This count has some flaws. The X wave seems short for one thing.

Elliott Wave Update ~ 29 April

Primary Count: An ending diagonal has traced out in the final wave [v] of a larger ending diagonal. The next move is an X wave and the corrective could go sub 800.
Alternate Count: An expanding diagonal is playing out in the X wave position. This implies the correction back will retrace less and not go sub 800.
Second Alternate: A leading diagonal in the first wave postion of the next corrective structure is playing out. After a retrace back to the 840's or so, the market will get bullish and begin the next corrective phase upwards in Primary wave 2. I do not like this bullish alternate because it does not make a good fit at this stage. I merely mention it because the market has been tracing ABC's since the 825 SPX recent low. I don't show a chart for this overall count.
I show an e-mini chart that clearly shows a diagonal pattern. It makes sense as an "ending diagonal" and not a leading. Sell in May and go away may self fulfill this year indeed, at least for a little bit.
The 882.06 high today marks an exact .236 retrace of the entire bear market from 1576.09 to 666.79. .236 is a Fibonnaci ratio table number that is next in line from .382. So that is generally creepy and would make a good spot to retrace.
The market has "proved" it can break the 875 barrier. Also the DOW had a break above the bear trendline. These were good things to prove and get out of the way. Next time the market treads up that way, shorts will not stand in the way so much. The hardcap resistance has melted just a bit more....
Also the QQQQ's have rallied to their 200DMA, first time since summer 2008. Another nice milestone for an index. There is no reason to keep pushing the QQQQ's at this stage, as that near -term target has been met.
So pullback makes sense and "Sell in May" may be the way. I will offer this much: It may actually be "contrarian" to actually sell in May! Seems retarded yes, but everything has been backwards on this rally. Bad news gets bought. So the natural contrarian play is to BUY in May. But since this is a flipped market right now, I offer the contrarian play this year is to ACTUALLY FOLLOW the DAMN SAYING....and sell come May 1st.
Hehe make sense? Anyways since there was a new makret highs today, there are many examples of negative divergence on the technical indicators.

Tuesday, April 28, 2009

What Would Cause a Primary Wave 3 Down?

In this post I showed how the Great Bear wants it all back.

There is a certain "minimum" for a Primary wave 2. There are no "hard rules" on this, but there are strong guidelines. A wave 2 is normally a deep retrace. Considering the market dropped from 1576 to 666 for Primary wave 1, a retrace to 1044 is not out of the question for P2 although in the midst of a depression its seems insane.

What is the minimum for P2? Well a valid ABC correction for starters. I have shown that the market has traced that with 875 being the peak of a C wave. Also usually at least more than a .236 Fibonacci retrace, which at 881 the market will meet that so its very close in that regard for the "minimum" but a 50% retrace is normal. Also a "time" retrace. The market took 18 months to drop so a retrace of 6 months can be expected. Also this rally was to be the greatest bear rally since the start of the drop in 2007. That indeed has been the case. So in EW theory, Primary wave 3 can happen tomorrow. So all in all, some "minimums" have occurred but they are unsatisfying from an EW standpoint

But also in EW theory, bearishness on a Primary wave 2 should be shaken out to the point where the entire bear market is in doubt. Perhaps that would require a retrace to 1000 SPX, or about 10000 DOW and then people would indeed doubt the bear market.

But what if things have become too sophisticated? What if we have outsmarted ourselves in market analysis? What if Primary wave 3 was to start next week? What would be the "spark" for the greatest bear wave we have seen in our modern lives? Walmart earning 10% less profit ain't gonna do that...

What if EW theory predicts a catastrophe? Swine flu? Mega deaths? Real and measurable economic impact resulting from a worldwide spread of a nasty virus?

I usually assumed that the main media issue of a Primary wave 3 down to sub 600 SPX and then sub 500 SPX would be Government debt getting out of hand to the point that the whole system is on the verge of collapse. Indeed we are on the fast track to that happening. I still think that will be a theme of P3 but this recent swine flu thing makes me wonder if EW theory actually predicts an event that is unpredictable in general.

These are just musings of course. But shutting down travel and stopping economic activity in the event of a real pandemic has an impact on world economics. I kind of poo-pooed the situation at first (thinking of the past bird flu scares turned out to be nothing) but I have reconsidered.

A world unable to pay its debts coupled with a "curve ball" situation could trigger the devastating Primary wave 3 down. It only makes sense. Will the swine flu be a contributing trigger? My charts tell me no, at least not at this time. Its not yet in the charts. The market is ripe for a pullback and saying that the swine flu caused it all is convenient but maybe just an excuse.

However, a real pandemic that cause real deaths and national emergencies and a blunting of economic activity is something other to consider. But for now, I am not focused on swine flu and its impact on the markets. As an Elliottician, I generally look for social mood indicators. But a real pandemic definately may have an immediate impact on social mood.

The question is: Could it result in an abrupt, early triggering of a P3 mood?

Things to consider as many have.

All Eyes on the DOW

The DOW is of course what Middle America and everyone else quotes, tracks and pays attention to. It does not look particularly bearish. It is very much in a contracting pattern beneath a key Primary wave 1 bear trendline.
I have discussed many times the theme of Primary wave 2 wanting to breakout of these bearish P1 trendlines. This would be the last major index to do so.
It could pull back some more first to 7825 or so to complete a clean contracting triangle pattern before a big break above the trendline, but it certainly doesn't have to. I have showed you a pattern on the SPX that supports a big move to 881 and the NASDAQ is still in bullish shape (the QQQQ's are within striking distance of its 200DMA) running ahead of the pack so the other indexes support a move up.
I guess you could say the path of least resistance is actually higher not lower.

Elliott Wave Update ~ 28 April

Short term the market may have one last push up. Look at it like end of month window dressing. The market is coming to a small apex point. How it breaks is anyone's guess. The short term wave stucture actually favors the move up.

Regardless even if it moves in a last fit upwards, it should correct backwards to the 820's SPX at the least.

Look at the chart of December that I provided. It shows the market tracing 5 strange little waves up after a very steep decline from 895 SPX. After that 5 strange waves up, it retraced back deeply. I think there is a good chance for the pattern to somewhat repeat here. 5 waves up in a strange humping pattern following a steep 50 point loss.

But even if another push does not come, a retrace back to the 820's looks inevitable.

S&P E-Minis Show ABC's since 823

Since the 823 low last week, the e-minis, all hours, have been tracing out what appears to be a bunch of ABC's and they are configuring themselves as an ending diagonal. This would mean a move up to "5" and perhaps a new cash index high.

Is the market playing rope-a-dope for end-of-month window dressing? If your not into waves, then that can explain it. Ending diagonals are, again, supposed to break down hard at the end of the pattern.

What if this is some kind of leading diagonal in a new wave up? A leading diagonal basically looks like an ending diagonal but must occur in some kind of a 1st wave position. That would mean that 823 would be the "low" of the recent market pullback. It would mean that the market, after tracing the leading diagonal where I have marked the "5", would pull back in some kind of wave 2 and then explode upwards in a wave 3 after the wave 2 retrace. That would likely happen sometime next week.

So there ya have it. An interesting e-mini pattern with a potential move up to "5". That would make it either a leading diagonal or an ending diagonal. I prefer the ending diagonal at this time because it fits very well with the rest of the overall wave structure.

But lets just see if the move to "5" comes or not. Then we'll talk some more. If no move to "5" then the SPX is indeed headed down. Thats expert analysis folks. If it ain't goin up, its going down! LOL. Any break under today's low (where I have the "4" marked) would invalidate this pattern and just refer to my count I showed last night as still the primary count.

Monday, April 27, 2009

SPX Top Alternate Count

As I suggested in my update tonight, the markets could be tracing some kind of "X" wave triangle pattern. Though in the long run, its not much different in scope to what I have currently labled but it does allow the markets to make new highs and make unusual moves. Thats the nature of triangle waves. They tend to trace complex corrective patterns.

And they can take longer than a straightforward corrective or impulse.

Elliott Wave Update ~ 27 April

I am not particularly enamored with my Primary Count. I haven't changed it yet to something better but the market is not behaving in a way that suggests that an ending diagonal has played out.
The QQQQ's keep making higher highs. Indeed, the QQQQ's seem on a mission to be the first index to hit its 200DMA on this rally. Remember the last time the 200 DMA was hit, your talking a LONG time ago back in summer of 2008. One more push and it will hit.
The DOW is also still trapped under an important Primary wave 1 bear trendline. It seems to be contracting underneath that trendline and could very well be ready to burst over and run up to 8400 DOW or so. I think this is an important theme: Don't get wrapped back into P1 bearish trendlines.
The wave structures seem to be tracing what I like to call "triangle" waves. Although there is no standout obvious triangle pattern, there never usually is.
So I stick with my primary SPX count until proven otherwise. But I am not particularly enthused about it. As far as the psychology of the market it seems everyone has bearish doubts including the media. They keep plastering bearish slants (swine flu scaring the markets? - c'mon!) I have been on the lookout for stories that tell how this rally has strength, but all I still find is mostly stories that try and convey a message of doubt. I encourage any readers of this to search for stories that suggest unbridled enthusiasm, not just extreme caution with a jaded outlook that it is all doomed to failure.
So bottom line: The SPX pattern suggests a drop back toward at least 815- 824. If this is some kind of triangle, then there is a chance that higher supports will hold and it does not pull back that far.

Sunday, April 26, 2009

$DJUSFN and FAZ Charts

One of the reasons I bought FAZ at $8.12 was the clear EW patterns that have developed in the banking index and hence the $DJUSFN off the early March low. It sure looks like a 5-3-5 zig zag.

The correction off the top looks like a 3-3-5 flat (just like the SPX). The "five", or C leg has yet to play out and it holds the possibility of being a nasty little C wave down. Perhaps FAZ has a chance of doubling. I would certainly sell it at $16.
Huge volume in FAZ and positive divergence going on. But boy does the decay kill it if its not moving up...but then again, it works the other way around too.

Long Term Apple

I have changed my counts on Apple based its long-term wave structure. The steep unabated rise to its peak in 2007 just screams "3rd wave". Therefore its gyrations since its $202 Oct 2007 peak seem more like giant ABC corrections.
Its hard not to argue that Apple is in some kind of giant Primary 4th wave correction that will last a few years just as its Primary wave 2 took a few years to complete. Its of course at the mercy of the market in general.
It seems to be headed up to its Primary [B] wave and then a nasty [C] wave should ensue. This [C] will coincide with the SPX Primary wave [3] down due to start perhaps later this year.
Don't fret over where I exactly put the projected pathing lines. I have no firm timelines just general assumptions. I only mean to show the approx levels and form that the structure may or may not take.

Saturday, April 25, 2009

VIX Wave Structure

From a peak of 89.53 the VIX has worked its way downward. The best pattern I can make is a double 5-3-5 zig zag with a Triangle (X) wave in between the 2.
What is interesting is that in both zig zags, C almost perfectly equals A.
I showed in yesterday's post where the VIX diverged from the market. So perhaps I have this waveform correct. Obviously if the market explodes upward in some surprise move, the VIX will morph and continue to develop its pattern. But as it stands right now, the VIX structure very much supports a pullback period for the market.

Friday, April 24, 2009

VIX Divergence, E -minis again

Not much to get overly excited about if your counting on shorting this market, but the VIX failed to make new lows while the SPX made new highs as compared to a few days ago. That is bearish divergence for the SPX which reveals an underlying weakness perhaps.

The extreme overlapping zig zag I mapped on my daily update is not a bullish structure in the overall scheme of things when you step back and look at the overall wave structure from a bigger perspective. rope-a-dope is more like it.

But I got to hand it to the bulls, this market refuses to retrace back to the 810 level let alone the sub 800 level. Perhaps this year "sell in May and go away" will truly be in play. Maybe 4 more days of hard scrabble and then next Friday, May 1st, the market has a nasty bear day.

Doubletop at 870-875 so far with VIX divergence, intra-market divergence, E-mini futures MACD rolling over and SPX daily rolling over along with waning upward momentum = bearish next few weeks. If not then upside surprise for P2......I am long in my mutual funds in my 401k and will remain so at least until the 200DMA on the SPX is hit...and even then i may only shave back 1/2 depending on what the wave structure is showing at that time.

The market does not like anyone profiting. Going short on Friday is never a popular option for very short term traders. So a big gap down Monday would not surprise me at all, meaning you won't be able to max profit unless you went short late today. Disclosure: I bought a chunk of FAZ at $8.12 this afternoon figuring Monday will be just such a day. I still hold QID and SDS as a long 401K hedge and they are a small bit underwater so no big deal I'll see what shakes out Monday.

The e-mini chart is a sort-of an expanding triangle so I labeled it as such.

Elliott Wave Update ~ 24 April

Primary Count: SPX is tracing a flat from the 875 high. The C wave should end beneath 826 SPX filling whats left of the 825 gap.

Alternate Count: Haven't spent enough time analyzing a good alternate count.

Commentary: Its amazing that the NASDAQ was up 44 points and the VIX was almost green today and formed a doji and is holding above 36. That to me is bearish divergence. The pattern looks like a clear 5-3-5 zig zag from the 826 low. So thats how I have it labeled.

It suggests that a C wave downside is coming and the market should work its way beneath 826 and completely fill the 825 gap that is still half open. The upper gap is now closed of course. We also have intra-market divergence. NASDAQ again stumbled to a new near term high today and the SPX and DOW did not. Advance/decline volume was 3.4 today which is nothing to get the bears scared about for now considering we had a 6.9 up day ratio just a few days ago. This also is a bit bearish considering the market powered back to 870.

Also the bulls left another open chart gap up today. Just another bear target for the MM's next week.

I'll have more this weekend.

Thursday, April 23, 2009

Competing Channels

I always keep an eye on the e-minis. Often when the cash index gets a bit unclear, the 24 hour trading of the minis gives clues.

I wanted to make tonight's update a complicated affair showing all the possible counts but I erased it all deciding its just best to keep a simpler theme and stick to my guns. This chart shows why I had many possibilities in a nutshell. There exists competing channels and one will win out shortly in A/H's.

You can really see a nice 5 wave down move from 872 to 823. Since then you can see the sideways chop action. One more rise to the upper green channel would represent a flat and a flirt with filling the gap at 865, and possibly create a doubletop or so and I would have to change my count on this chart and consider other possibilities. But until it does that, I won't change my Primary count. But I wanted to show you the patterns anyway.

So if you have e-mini futures, keep an eye on how this plays out overnight. Which channel will win out for now?

Reducing Chart Size

I have a 1920-1200 24" monitor which is why I always use the 1600 pixel size for my charts. It allows a lot of fine detail but you have to scroll on smaller screen resolutions. However I have had a few requests to reduce. Obviously these charts are being viewed on a variety of screen sizes.

So I will be reducing my chart size to 1024. I think Kenny uses 1280, I am not sure. Sometimes he uses smaller sizes. I think 1024 x 768 is a good middle of the road screen size yet detailed enough to convey what I want to convey.

Basically my options with stockcharts are 900, 1024, 1280 and 1600. I could use custom sizes too but I want to keep it simpler. I have been using 1600.

So I'll start posting in 1024. I hope this helps and doesn not hinder any detail. I don't think it would. Feedback is welcome. I want to find a good middle ground.

23 April ~ Elliott Wave Update

I haven't changed my primary outlook that the market will retrace to sub 800 with 875 being a near term top. However the manner in which it gets there is somewhat challenging.
A few days ago I suggested the SPX may experience some complicated sideways chop waves in an effort to keep from being pushed back into Primary wave 1 trendlines. I show a 60 minute chart with an example of this.
My 30 minute chart shows the simple path to a sub 800 move. However, I have a feeling the move will be much more complicated. The "E" wave in the Intermediate wave (4) triangle of P1 is just such an example. I show that reminder on my 60 minute chart.
I actually do not rule out a flat scenario occuring where the market makes a doubletop in the 870's. That is my alternate count. My 30 minute chart shows a zig zag form.
PS: Bearish crossoverof the 50/200 MA on my 30 minute chart is about to happen. That hasn't happened in many many weeks. The hourly chart still needs time for that to happen.

Wednesday, April 22, 2009

2-4 Backtest?

The market looked like it was "bumping" into some invisible line at the peak tops today. I think this constituted a "2-4 line" backtest. It certainly failed for now.
Remember I was saying that P2 may eventually backtest Primary wave 1's 2-4 line? Well this is sort of the same thing. A near term top sets in at 875 and the market falls down. It then backtests the previous 5 wave structure channel lines, or, what we call the 2-4 line. Today looked like a test of that.

Elliott Wave Update ~ 22 April

Primary Count: I am sticking with the ending diagonal near term top at 875. These are supposed to retrace deep back toward the beginning 779 so like last night, I will repeat myself . I look for at least a gap close at 810 for starters.
Retrace back up went past the 857 mark (62% retrace) which of course threw a lot of doubt into the bears as a wave 2 or B wave should. The end of day selloff was just sick.
Disclosure: I didn't do any trading today still hold QID and SDS from 870+ levels for downside protection. Still hold my core mutual fund longs in my 401k.
Sorry I dont have more at the moment.
EDIT: Volume was higher today and the daily candle painted a big fat red shooting star. Combined those are bearish.

Tuesday, April 21, 2009

Intraday Count Options

Lots of possibilities. The obvious count is that it is a 5 wave structure from 826 low to today's high. It follows all the rules can you fight it?

So since the bullish is rather obvious, I have the bearish case labeled on this chart...a fancy double zig zag....ala Kenny's count although this may differ slightly in the detail. Lots of sub wave, 5-wave counts....
Lots of wedges and triangles in the subwaves. Very interesting structure today.

It certainly looks bullish like a straightforward 5 wave count....but don't the market like to fool us? A double zig zag would fool the bulls indeed because that implies more downside after the correction up is over. I have good reasons to label it as a double zig zag. There are some oddities with a straightforward 5 wave count.

But...I have no super strong conviction either way (But I am sticking with my overall primary count that 875 was a near term top and market will correct further back from here) . Maybe the market does not yet know which way it wants to break so it traces these hybrid waves....a little bullishness....a little bearishiness.......reflects the overall sentiment yes?

Elliott Wave Update ~ 21 April

I don't have a good read on the intraday waves. It looks like a slam-dunk 5 wave move up which suggest more up moves to come. However the end of day has overlapping waves and one can make the argument that the wave down to 828 ended in a truncation early this morning which means todays rally *wasn't* a 5-wave up move but merely a bullish ABC correction. Very goofy day, only half the open chart gap filled in the 820's. Its not so much the correction back up that was surprising, afterall the market went from 875 to 826 in a very short time. And the correction back up is only now hitting the 50% retrace mark which is *normal* for a wave 2 or a B wave of some sort.

However, the market internals were solidly bullish. 6.92 advance/decline volume seems more than your typical "B" wave. Solid volume on both the SP500 cash index and e-minis. It appears, once again, they are buying the dip. But the DOW was a bit weak today and a 1.62% Dow up day is nice but nothing to call home about. The NASDAQ and S&P were 2.2 and 2.1%.

But all in all, there is no reason to change my primary count that a further correction will eventually shake out lower and that 875 is a near term top. We had what appears to be a clear ending C wave diagonal and those are supposed to retrace deeper than what it has so far. So until it proves otherwise, I won't try and outsmart the wave structure. However I won't fight the tape either.

The market may again be "buying time" to keep from getting trapped back into Primary Bear wave 1 parameters. So a sideways chop may ensue for some complicated corrective waves in the next day or so. I have my eye on the 62% retrace level which is 857. Any move higher than that will definately be catching my eye.

Disclosure: Sold all FAZ today for nice profits (I learn to take them when they come easy like that). Held onto my QID and still have my SDS in my long 401k account as a hedge against S&P indexed mutual fund longs. I have no strong urge to make further bets on downside moves at the moment other than what I have in play.

Can there be no doubt this is a Primary wave 2 and not some weird monster wave 4 flat still continuing from late 2008?

Monday, April 20, 2009

Elliott Wave Update ~ 20 April

Primary Count: Market is tracing an Intermediate (X) wave back toward the start point area of the ending diagonal which is 779.
Today reminded me a lot like this past December 1st. Hard morning drop with a steady drizzle all day. What we are missing though is the last subwave "c" wave down to zig zag bottom. So I have speculated a bit that this first zig zag down will bottom at 810 closing the gap or if it bounces to resistance at 840-845, then it will find support above the gap at around 815.
There is a huge gap in the 820's and those usually get filled.
The ending diagonal that we were discussing all weekend collapsed as per Elliott Wave theory in rather dramatic fashion. All that debate about what is the "uncle" point in case the market had one last spurt left was all for naught. Monday following OPEX...I should of guessed immediate selling was the order of the day since last week was up. I had forgotten about OPEX I usually don't.
As far as the bottom of the (X) wave, I have no timeline. I can only go by Elliott Wave theory and in the Elliott Wave Principle, page 38 states: "A rising ending diagonal is usually followed by a sharp decline retracing at least back to the level where it began (779) and typically much further."
So there ya have it.

Sunday, April 19, 2009

881 is the .236 retrace spot

I apologize if someone already posted this somewhere I haven't seen it mentioned. But I hadn't realized the market was coming up on its .236 retrace spot. .236 is a Fibonacci ratio table number. It lies between .382 and .1458. .236 is often considered the acceptable minimum retrace spot for a wave of any degree big or micro. The 875.63 mark on Friday was exactly .230. 881 would be .236.

So what we have on this rally so far is this: Primary wave 2 has traced a valid ABC correction and has retraced the acceptable "minimum" Fibonacci sequence number. For you bears out there who feel the market will collapse to new lows from this spot, this will be your smoking gun evidence.

I however don't see that happening at this time. Nothing is guaranteed of course, but I'll play the odds that the market wants to revisit some higher numbers eventually. This trend change needs much more time to shake out.

I do however see this spot as a good spot for a nice pullback filling at least some of those lower gaps. 810 is a spot I am eyeing for starters. It may not be a massive bear wave like we are used to. So if it does pull back, it definitely might be a good spot to go long a bit.

As a guideline, ending diagonals retrace the entire move up from whence they started. That was 779 in this case. Even if this is a "leading diagonal" in a wave 3 position (not even sure if that is allowed at this point in the structure) they also retrace deeply but not back to 779.

Friday, April 17, 2009

Banking Index Again

It very much looks like a 5 wave structure has played upwards from the triangle. Also it is hitting under stiff resistance. And the 5 wave structure I labeled in pink from the triangle area has very nice Fibonnaci relationships.

The Hyper-Bullish Wave 3 Scenario

First, let me say I think this chart is crap and I think it ain't going to happen. I went short in my trading account (still long in my crappy 401K) so I must not believe it. However I cannot figure out a decent alternate count other than the market goes up if this is not an ending diagonal.

This would definately be an "upside surprise". One thing this move would do is capture the public's attention which, so far, has likely remain uninterested in this 6-week win streak rally. Afterall, the market was much higher only in January. However 6 straight up weeks may garner some attention this weekend.

But maybe this is a C wave and it doesn't go to 1000...say only to where C = A at 936. Regardless, the upside potential is above 900 if this is the true count or a larger ABC structure. We have come to the point in the structure where there would be a spot where there wouldn't be "overlap" in the waves for a bit like we have been seeing in the past few weeks.

That spot would mark the "point of recognition". You have heard me use that term on the bear side of things when the bulls have that "deer-in-the-headlights" look and realize that all is going to hell and some gap down occurs that gets the ball rolling. Well, this would be the spot to the upside where that occurs. And if you think about it, its right at key 875 resistance, right at the previous Intermediate wave (4) triangle apex and right at key bearish trendlines. For if that breaks, you're looking at a run at least to 900-920 for starters I think.

Monday/Tuesday will be a game-changer either way. Straight up TA favors the shortside. But Primary wave 2 is all about upside surprise. 887 is another deal-breaker for the bears. Just like 804 was.

I don't favor this at all. The short and medium term waves don't seem to support it. The TA doesn't favor it. However remember the path of least resistance is still to the upside. 875 breaks (and holds) and the door is wide open to higher marks. That would be a "point of recognition" spot indeed.

So if 887 breaks to the upside, count on a move 936 which is the lip of the previous island top gap. That would be at least an ABC move from 666 where C = A.

SPX Daily Chart

This is my favorite chart. I keep this on my public list. It captures it all. I updated some things and made some spiffy comments.

Ending Diagonal to End the Ending Diagonal

I've been trying to get a decent read on the intraday waves for this final subwave 5 move from the 835 low. Its kind of difficult. If this is an ending diagonal from 779, then each leg should be a "three" preferably a zig zag. That's a guideline of Elliott Waves. So I am trying to count a "three" from the 835 low and it dawned on me that this may be an ending diagonal playing out within the larger ending diagonal. And that means we have another top coming shortly on Monday. But it shouldn't be much higher than 875. Maybe we do get some overthrow to 880. Its certainly gonna push my stop loss limit to the max although I am not really down in my trade so I will place my stop loss at 887 to allow for "wiggle room".
I think the key is that tiny expanding triangle that showed up. I thought it was some kind of wave 4 and the market kept going higher. So now it only makes sense as a B wave.
That silly little expanding triangle is in almost every index so it is an eye catcher. At it just may have betrayed the last death throes of this move up. I think its a B wave. And that means an ending diagonal within the last tiny C wave within the larger ending diagonal.
It would only make sense.
I'll sure look silly if this doesn't pan out. But no worries mate! Keep counting!

Quick Look at The VIX

The VIX, or the "fear gauge" has closed its long standing gap from September. Also the 50 DMA is getting ready to crossover the 200 DMA in a bearish move. But I don't think that matters much with the VIX. The last time it did this, the VIX bottomed within 5 trading days.

The stochs are pretty much bottomed. They could of course flatline or embed under 20, but its getting awful far away from its 20 DMA for my liking. But the stochs very much support that the VIX is short term oversold on the daily no less. And this still is a bear market so thats meaningful.

What does catch my eye is we now have some positive divergence occuring in more than a few indicators and over a span of 4 months hold some significane. The MACD is the most obvious. The RSI is barely confirming this divergence but it is nonetheless as of Friday's close.

Overall, a hard bounce in the VIX would equate with a collapse of the SPX. Maybe social mood needs a little fear reminder that not all is well with the world. It would be ironic if the VIX produced an unclosed gap up Monday at exact same spot it did in September.

Elliott Wave Update ~ 17 April

The only thing that DOES bother me is that this ending diagonal is a near perfect structure. The perfect trendline touches almost look contrived. But if it looks like a duck....quacks like a duck....regardless 885 would invalidate the structure.

So until that is hit, we have to treat it like an ending diagonal. Which, in theory, often retraces the entire move from where it started and maybe even more. It started at 779.

I'll have more this weekend.

885.36 Must Not Be Breeched...

...for this to be a valid ending diagonal. Wave 3 can never be the shortest even in an ending diagonal. In theory it shouldn't really be challenging 885 and flirting with breaking EW hard rules.
I went short yesterday but it feels like fighting the tape. I've been itching to trade more than I have (extremely busy at work with an important project) and I won't chase the longside as long as this is a valid ending diagonal formation. I'll stick with my plan on adding more shorts at 876 if it is reached. But my stop losses will be set at around 880 or so.
I imagine a lot of traders have similar plans including the big boys. This is a huge squeeze opportunity for bulls if they can trigger stop losses by heading to 885. This indeed would run the tape up likely to 900-920 and eventually higher and a confirmed wave 3 would be playing out and not an ending diagonal.
So a lot is at stake in the next few trading days. The fate of this entire Elliott Wave structure. Turning it from a "sure thing" ending diagonal to a bullish wave 3 in disguise would be a brilliant bull plan if they can pull it off.
So just wanted to get that out there that this is a key area and bulls won't lie down and die I don't think....they have the "ball" and the bears are the ones who have been playing defense for 6 weeks. 845 is a key level as are all the trendlines you can see on various timecharts.
As a technician, the path of least resistance is still up and the market is still trending up no doubt. But as an Elliott Wave technician, a true ending diagonal often retraces the entire move from where it started which would be 779. Right now that interpretation is the top count. That will be nullified the second 885.36 is breeched. No emotion in that. Just hard numbers.
I don't have to work today, so I'll be monitoring the tape unless I'm out mowing the yard.

Thursday, April 16, 2009

S&P E-mini Futures Chart

What I'd like to show is take a look at the bottom study graph on the chart, the combined MACD and Stochastics. See how they are both screaming high as compared to the last 3 years or so and probably since the 2000 high if I could go back that far. The MACD is not quite as high as the 2007 top, but its catching. My point is they are due for a pullback I suppose.

Yet there is still no bearish MACD crossover so in theory you could go broke trying just to play by this indicator alone. But we do not use this alone do we? We have an ending diagonal situation and we have other indicators telling us that a 204 point runup without a 38% correction....well we are due.