Monday, August 31, 2009

So much for Monday...

In my weekend post, I mentioned that today should clear up the ST count. Well, I guess I was wrong. After re-looking at the charts I realized that what I had previously labeled a-b-c or 1-2, 1-2 did not qualify as such based on my moving averages and other indicators. I have now put up a much better labeling of the move. Either a 1-2, 1-2 (see top chart) or a-b-c with c = a (bottom chart). Now, I for one lean toward the bearish count, but that likely doesn't come as a surprise to any of my readers. I realize that the big boys didn't want to give too much of their August gains back, and tomorrow starts a new month and more volume should be coming back into the market. However, it is also important to note that the last time we had a gap down and a near break of the trendline, the bulls recaptured the both. If they don't this time, then the charts are absolutely setup for a 3rd of 3rd wave and the beginning of primary wave 3!

Sunday, August 30, 2009

My latest update...

I decided to post my weekend look over at Boston Wealth this time. You can read it here:

Best to your trading!

Friday, August 28, 2009

Quick Morning Update

The move off of the morning highs so far looks impulsive. If the bears get a clean break out below 1028, then I lean towards a primary wave 2 top. Otherwise the bulls need to close near the highs to push towards 1050 next week.

New Highs Coming...

Sorry for the late post. Between my day job and back to school night for my highschoolers, I was too tired to put up a post once the kids were finally in bed. We're essentially following the Most Bullish scenario from yesterday's post. The move off of the low has been very impulsive. Watch the 15 min 34 SMA for key support until we get to new highs. Once we get there, the 60 min 34 SMA will likely only be broken to the downside once the move is over.

Wednesday, August 26, 2009

A rather disappointing day...

Wednesday's have been great range expansion days lately. Unfortunately, while today had lots of movement up and down, there was not a directional bias to be had. And since we were unable to take out Tuesday's high or Monday's low, we go into Thursday with little to work on.

The move off of the high has not been awe inspiring if you are a bear. While there were quick bursts of selling, it seem to dry up as quickly as it started. That leaves us with a few different patterns to consider:

Most Bullish
This gives us an A move down, B triangle, and C move down to end at our trendline. This pattern gives the bulls the greatest upside and most likely to attack 1050 next week.

Bearish with Another High
This pattern works out to one large 4th wave triangle that should finish with a high in the 1040 area before it reverses.

Immediately Bearish
This is where you get the most creative with the waves. It is a series of 1-2s with irregular flats in between. While sometimes these creative patterns end up working out, the odds always favor the simpler patterns. Under this scenario, we should blow right through the support trendline and move to 1000 tomorrow.

Where do I lean? I like the Bearish with Another High the best only because it seems to give us all the ingredients for a primary wave 2 top. Otherwise, I think we go to the Immediately Bearish scenario because I don't think there is enough bullish strength left to get to one more high, but we'll see. Best to your trading!

Tuesday, August 25, 2009

So far according to plan...

I love it when the market follows the targets the way it should. Not to say it does very often, but every once in awhile. Of course, how it gets there can sometimes throw you off. Now, all I need is for price to break the lower trendline, and we should have confirmation that this bear rally is finally over. But if it holds, then the market should have a shot at 1050 before rolling over. A gap down tomorrow should kick off selling, and I would expect the gap not to be filled. A break of Monday's lows will give us a bearish bias the rest of the week, so let's see it happen tomorrow morning.

A test of the highs...

Sorry I'm so late on getting this post up. Family responsibilities and little sleep kept me away. Here's the quick and dirty on what I want to point out:

- my minor wave 4/5s that I had listed before appear to have been put in during the overnight market Sunday-Monday, and so we went straight to the larger wave 3 completion yesterday at the highs right at my target.

- Yesterday's move down did sport an impulsive look to it. To keep the price action bullish, the wave 4 should not have moved lower than 1018. During last night's price action, ES moved right to that zone before reversing.

- Today's wave 5 can be any of the following:
- A wave 5 failure at the .786 retracement
- A double top
- A slightly higher high (shouldn't go over 1040).

If price breaks above 1040, then there is a different pattern in place, I will look for resistance in the 1050-1060 area.

Saturday, August 22, 2009

Bulls took control and more upside to follow...

Looking back at Wednesday's post, I put together a bullish scenario and also noted that with a break out above the high put in on Monday we would have a bullish bias the rest of the week - especially with options expiration on Friday. Too bad I didn't throw the other charts out, because that is exactly what we got. When I went to bed with the futures down 10 points I was obviously thinking something quite different. And that is the nature of the markets -- get you to take your guard down, so it can hit you hard in the kisser!!

With most of the punishment dealt, what's left of the wave structure? Looking at the 15 min chart it appears that we had a small wave 5 completion at Friday's high to finish off a slighter larger wave 3. Since wave 2s and 4s often show symmetry and wave 4s often finish at the wave 4 of the next smaller degree, I'm looking at a retracement target of 1019 - 1023 before we move to new highs with a target in the 1030 - 1035 zone to finish off an even larger wave 3. This should lead to a test of our breakout and a retracement back to the 1019 - 1023 area before we retest the wave 3 highs in our wave 5. I'm expecting our wave 5 to a double top to wave 3. That means either a slightly lower high (failed wave 5), equal wave 5 (exact double top), or a nominally higher high (same was wave 3 +/- 5 pts). At this point we're looking at c=a*.382.

Should we have a confirmed break of 1019 before any of those targets are hit, then the something more bearish is likely already in the cards.

Now, if the bulls can hold on to the retracement that follows keeping it in the bearish wedge channel that is forming, then they should have a shot at SPX 1050 for the end of primary wave 2. A break of the bearish wedge would likely kick off more selling and a break of 980 would surely kills the bulls once and for all putting the end of primary wave 2 at the 1035 +/- top.

Thursday, August 20, 2009

Not a bear to be found...

Today's price action was missing a key participant: the bear. From the open, the bulls once again took control and never let go. Rising with only a stall at my key zone before pushing higher. However, the push didn't have much in it, and after piercing the upper trend line, price began to fall into the close. Today's top could be significant. Not only did price stop at a .786 retracement from the last move down, but it also stopped where c=a.786 to form our a-b-c wave off of the low.

Judging from how the futures are trading during the Asia market, things could get ugly tomorrow, while all out sell off is unlikely on an options expiration Friday, prices could spend most of the day in the cellar after an attempt to fill the gap.

Wednesday, August 19, 2009

What will it be...

With a nice gap down, the bulls took over once again pushing the market higher for the rest of the day. As the market has a tendency to put the high/low for the week on Monday/Tuesday, we now have a bullish bias the rest of the week. Combining that with a generally bullish options expiration Friday, and that would lean me towards a bullish or mildly bearish scenario. While there is still a fully bearish scenario on the table, I'm no longer giving it much weight.

Bullish Scenario:
We are currently in a wave 3, we should see a constant bid under the market all of tomorrow. We should break or test the highs by Friday. However, looking at the 5 min chart (below), The pattern currently is sporting a corrective look with a triangle in the wave 2 position (which doesn't happen) making it a 'b' wave.

Mildly Bearish Scenario:
We are topping in a B wave, and should top tomorrow with higher prices than today's close. I'm looking in the 1002-1004 area for a reversal.

Fully Bearish Scenario:
We will begin a wave 3 of 3 tomorrow when prices reverse. The top could still be in the same area as the mildly bearish scenario. The difference should be a stronger selloff into the rest of the week with a break of today's lows by Friday.

Tuesday, August 18, 2009

Crossroads once again...

The market certainly doesn't like to make things easy. Stretching the possibilities of where things could go just enough to make everyone doubt their positions. Well today's price action did just that for the bears. The rally off of the lows has now reached a 50% retracement, which I would consider to be the maximum allowed in a wave 4. While my bias is still to lower prices, the bulls need to be watched closely tomorrow. Prices do need to get above 1004 to change my bias back to a new high as even with a little more rally this could still turn into a larger a-b-c correction. For where we are in the price action, the correction (if it is that) is still too shallow to be considered complete.

Monday, August 17, 2009

Next stop: corrective or impulsive?

Today's gap down below yesterday's low should have cleared up which scenario we were in from the get go. The price action today definitely had a wave 3 feel to it. What we'll need to keep in mind as the price pattern matures is whether or not we are looking at a larger impulsive move or another corrective wave.

So far everything is looking impulsive. Of course, all the bears know that one day's sell off can be reversed the next. What I would like to see is this sell off end in a nice clean 5 wave pattern. Certainly the breakaway gap is a nice way to get it going.

I'll be watching both the 8 SMA and 34 SMA on the hourly chart. I don't expect the 34 SMA to be solidly broken until this current wave structure is over. What I would really like to see is the selling pressure to continue tomorrow at the open and push this to the SPX 970 area. That would be a very nice place to end a wave 3 and allow for a normal wave 4 retracement before heading lower.

Friday, August 14, 2009

Monday is a critical piece to the puzzle

Today began to unfold just as my bearish scenario layed it out. A top at the open and a very strong down move. Once again, the bears walked away from a wounded bull without the finishing blow. How often have we seen this: the bull nearly dead after a couple of hours of trading, then a lull sets in and by the afternoon session the bull is back alive like nothing happened. From here I see two most probable scenarios:

The Bull Dies on Monday
In this scenario we likely gap down Monday morning and never look back. Although the market could still test the 78.6% retracement around 1009. The key to this move will be a confirmed break of today's lows and then Monday's lows. This will be a 3rd of 3rd wave and these are always very powerful.

The Bear Tries and Fails on Monday
In this scenario the price action should make its way up the 1009 area and sell off once again. The selling should dry up once again somewhere around 1000 and reverse very strongly. This price pattern is a wave b triangle and it will be quick and powerful to the upside. Price, however, should terminate somewhere around 1020-1030 based on the triangle's structure. The other thing to remember about a triangle is that once it finishes the reverse is also a very quick and powerful move. This should be the very end of this bull run and should lead to sharply lower prices if not new market lows.

Thursday, August 13, 2009

The battle continues...

The bears seem to wake up everytime the price gets to the 1015 area and then go to sleep as soon as it leaves. The bulls hold the line and push the market up whenever they can. You had to love how the big boys crushed the open and then turned it right around. The whipsaws seem to be increasing, which can be topping sign if we don't breakout to the upside on solid volume.

Where we stand now is more in the bullish camp. Of course, that is only because the price action appears to be heading to a higher high. However, there is still significant risk at these levels for the bulls. I have put together my three best counts.

The most bullish count would put us in a 3rd wave tomorrow and we would blow through overhead resistance with a solid up day. This should be recognizable from the start. A likely gap open possibly right at or above resistance with just a little bit of give during the first 10-15 min. Then it would be off to the races for the rest of the day.

The next bullish (relatively) count puts us in a double top situation. Price likely ends in the 1020 area. Should we gap above 1016 and immediately sell off, then I would lean toward this count. Of course this would only be bullish if you're holding longs overnight and sell at the open.

Immediately bearish is that we top somewhere between where we close and less than 1016 and we have a very rough down move tomorrow killing all of the bulls.

So there you have it. Tomorrow should show some solid volatility during the morning session. The trend will hopefully stick the whole day making day trades fairly straight forward. A break of 1004 would be bearish. 1000 more so and 992 VERY VERY bearish. Let's see what the market brings.

Wednesday, August 12, 2009

The bulls came out

It was a fed day for sure. After a lower low in the overnight session, the bulls took it higher from the start. They took it so much higher that I had to re-evaluate my count to provide for a higher high. Looking at the patterns, everything points to at least another move down to my previous target. The move off the high doesn't fit in the previous price patterns and so points to a new wave pattern. The move down was hardly enough to make a complete pattern, so there's the quandry.

For the Bears
Today's rally took us right to the .786 retracement on the cash index and sold off. A very good potential reversal signal to the downside.

For the Bulls
The selloff at the .786 retracement did not make a lower low (yet), so if price immediately turns up from here, then the Bulls should get the market up into my previous bullish targets (1025+ zone).

Tuesday, August 11, 2009

The market tipped its hand, a little...

Although overnight futures appeared to have some buying, all that was gone at the open and the market made a new low with some significant volume. At this point it is safe to throw out my bullish scenario from yesterday. That leaves us with both bear scenarios with a normally bullish fed announcement tomorrow.

Essentially from here, my bear targets are on the table. How we get there is still unclear, so I'm leaving the price pattern as either an a-b-c with a=c (when including the 24hr data) or a 1-2, 1-2. Either scenario gives some room for some upside tomorrow, but both should see a continuation of selling the rest of the week and possibly starting as soon as the Fed announcement.

Monday, August 10, 2009

The price pattern hedged today...

The market rarely makes it easy on the technician and today is no exception. The top charts go from most bullish to most bearish. Let's look at the bull/bear facts:

- The move down could be impulsive, but it wasn't widly so
- We had our biggest correction since we started this rally a month ago
- Add to that all of the factors in my last post

- The move down just penetrated the 61.8% retracement of the last move before turning up
- The move down could be labeled an a-b-c correction where c=a*.618
- Price has yet to get a confirmed break of the channel

You know my targets if this is a bear setup (see yesterday's post). If this is a bull setup, then I'm looking at the 1025 - 1035 area (top of the channel). I won't have confidence in the bull target until we get a confirmed break of 1015. The bear case needs a confirmed break of today's low.

Sunday, August 9, 2009

A new rally high, and now what?

It's always nice to see the market hand you all of your analysis with just enough time to drop it in the trash can. Of course that is what happened when the market opened on Friday right at my upper limit. It gave a head fake down, and then moved up to my original 1016 target zone. As I put a lot of analysis into my next post, I decided to put it over at Boston Wealth this time. You can read it here:

Happy trading.

Thursday, August 6, 2009

A down move has started

Looks like my call for one more nominal high was the right one to make. Today's move was able to keep the bulls on the defensive for most of the day and well enough into the close. The question right now is how to label the move. In all cases it means lower prices ahead, but it will help in determining where prices might end. Essentially the three counts are:

(1) a-b-c with c=a*.786 to complete our first 'a' wave. This is the simplist way to measure the move down, and so it will be my preferred count until price action proves otherwise. In this scenario we are currently in a 'b' wave that can end pretty much anywhere. Where it shouldn't go is higher than 1005.

(2) 1-2, 1-2. This of course means that tomorrow should be a doosy to the downside. Upside from here should be limited to 999.

(3) 1-2 with wave 2 being made up of an irregular flat. From here upside should be limited to about 1002.

So no matter how you look at it prices should get considerably weaker by Friday afternoon if not earlier and continue all of next week. Should prices go beyond 1005, then we likely finished a minor wave B and will be in our last leg of this bear rally. For my own positions, I added some more FAZ (25.50) and XLF Aug puts (.41). I'll be adding to other positions tomorrow hopefully between where we closed and 1002.

Wednesday, August 5, 2009

Was today the IT top?

Today opened up and immediately lost ground as sellers overwhelmed the buyers. Then once again buyers stepped in and started to bring the market back nearly to the previous highs. I've repeatedly brought up the fibonacci turn date was last week (+/- one week), so that is still on the table. The nasdaq has already been showing relative weakness and that is a big danger sign for the bulls. The financials, however, held very strong today, so it will be interesting to see if we get some additional upside tomorrow and Friday. I'll be watching today's lows with interest because a confirmed break of those lows should send the indices to an even bigger selloff. The wildcards will be the market's reaction to the unemployment report out due this Friday. Today's private sector report shouldn't be too encouraging to the bulls.

One other thing was encouraging to the bears is that the move off of today's lows was a near perfect .786 retracement off of the 24hour market. Selling came in hard at that level with a lot of volume to boot. In addition, no one was willing to ramp up prices into the close like so many have beforehand. I did dip my toes in the water with some FAZ purchases and some Aug 14 puts (avg price .42), but I'll be looking to add to that position Thursday and Friday depending on what I see as one more nominal high is still possible (see chart below).

Tuesday, August 4, 2009

Target is now 1016

Today's action looked like we may have topped out until the selling stopped and the buying resumed. Today's low actually fits the pattern better because it makes a stronger trendline off of the previous pivots and now clearly gives the index a chance at the 38.2% retracement at 1016. There are a few other projections that line up nicely in that number. You add in the fibonacci turn date last week (+/- one week) and that leaves this week open to make this a top of some kind. We should get a nice correction if not more off of this move. I'm looking for at least 950-960. If we break 930, then we are likely in either primary wave 3 or intermediate wave B (which would have me changing my counts by one degree). Should we break today's lows before getting to 1016 then the move down has already started.

Monday, August 3, 2009

Looks like an ED for our wave C

The topping process looks like it has a little more to go before we get to a completed price structure. We should see some weakness tomorrow to the 990-997 area for our 4th wave and then a final push up to at least 1004, but my target is 1008-1016 to end the move. Should we break 982, then the move is likely over and we'll watch the correction action to see if it truly is the beginning of the primary wave 3/C or if we we will only be in intermediate wave B. The action should be impulsive for it to be primary wave 3/C.

Sunday, August 2, 2009

I'm Back and trying to figure this one out

Well, I'm back from enjoying great weather at California's north coast and re-energized to take on this market. From the looks of things, we got a very very shallow wave B. It really is hard to put a solid label on it though because it is so shallow; however, it does not match up with any other wave formation. So for now, I'll leave it at that.

Price since the wave b end was fast and furious. It looks like sellers came in hard that first day (7/30). Since then it has been a back and forth battle. There is nothing definitive to the downside action that would make me confident that this bull is dead, so we'll have to see what clues the market gives us this week. Risk of a major pull back is increasing daily as long as this market doesn't give anything back. I'll quickly hit a few items now:

- The monthly RSI(5) is now sitting near 60. The highest level since the bear market began and a prime area to get turned away. It can certainly go higher, but the winds get more fierce from here on out.
- The weekly RSI(5) is showing divergences with the intermediate A wave.
- The daily RSI(5) is showing divergences with the minor A wave.
- The hourly indicators have already turned over, so any immediate upside will add to divergences on the hourly chart.
- The 38.2% retracement of the first bear move is sitting overhead at 1016. We may or may not get there but certainly we are close.
- We've already hit my minimum target for this wave C. My original turn dates of 8/8 - 9/8 are just around the corner. There is no guarantee we make it that far since we never got a good pull back.

Pull backs build the foundation for higher levels. When the market keeps pushing in one direction w/o one, then when the pullback comes it is a whopper. A whopper at this stage would like put us back into the downtrend, so that is why I'm extra cautious at this stage.