Monday, November 30, 2009

More consolidation....

While we did test Friday's high and fail, we ended up testing Friday's higher low pivot, which the bulls were able to hold. We then rallied into the close. Stepping back and looking at the big picture tells us one very important thing: we have been consolidating below key support for the last two days after a swing high failure on the daily chart. Time is ticking for the bulls.

As for the near term picture, things don't change much from yesterday's post except that we now have a very definitive expectation for tomorrow.

Bullish picture:
We gap close to or above 1100 at the open and rally the rest of the day to close near the highs. As you can see in the last wave 3s, this same pattern has worked over and over with a break away gap above resistance.

Bearish picture:
We have one more failure somewhere between where we closed and 1105. Any gap up that closes tomorrow would be a bad sign for the bulls and should immediately push the indices down the rest of the day.

Sunday, November 29, 2009

So much for a quiet holiday...

While most of America was getting ready for the Thanksgiving holiday, Dubai was letting the world know that it was going to suspend payments on some $60 billion in debt held by its chief investment arm Dubai World. That sent futures crashing to somewhere in the neighborhood of 1069 (cash index equivalent) while the US markets were closed. By the time the markets opened on Friday, the buyers were ready and pretty much ran it straight up until the end of the day where we saw a bit of a sell off into the close.

However, the selloff doesn't have an impulsive look to it at this juncture, so my best guess is for a test of Friday's high (1105 is a VERY key area) tomorrow morning. Of course the test will reveal where we are in the count:

Bulls: beginning of wave 3 of C and should see a strong trending day all day UP with consolidation in the 1100-1105 area before exploding higher.

Bears: finishing of wave 2 of 1 of Primary wave 3 and should see a strong reversal after a failure test of the 1100-1105 area.

Should get interesting.

Wednesday, November 25, 2009

Happy Thanksgiving Everyone!

I don't want to spend too much time on the markets outside of a brief update of the charts. The dollar sold off hard today, but the market did not confirm the move with a new high. Was it an exhaustion move? Look for a move back above 75 to get the dollar bears skittish.

The market needs to keep 1104 / 1100 / 1097. If those are broken, then we likely see 1070 - 1080 very quickly. If those are broken, well, you know how it plays out.

Swing high target is still 1118. So far the futures are selling off, but you never know what the holidays will bring on Friday.

I hope everyone takes time to step away from the markets and be thankful for the great blessing of life. I am so grateful for a wonderful family, health, and a relationship with my God. May we all look for ways to help those who are alone during the holidays and less fortunate than ourselves.

Tuesday, November 24, 2009

A test of the highs should be coming

While the extent of the next move up is still in question, it appears that we should have at least a test of the highs if not new rally highs. The .786 retracement counts as a test of the prior pivot and that comes in around 1109/1110. This should be hit tomorrow morning.

The swing high target is 1118, so the bulls keep it going then we should see a strong trending day all day tomorrow with light traffic.

On the downside, the bears need to retake 1100 and 1098. A break of the first should pretty much break the 2nd. The gap did not fill today, so right now my bias is up.

The EUR/USD continues to bounce back and forth. Whatever way it breaks should bring the market with it.

Monday, November 23, 2009 much for starting the week cautious...

1100 came and went and is now back on the table acting as support this time. The continuation move we got this morning fits best as one complete wave. The move off of the highs was too deep to try and line it up with any kind of a 2nd wave. So there we have it. Either it was our last C wave with a non-confirmation double top (looking across the indices) or it was a wave 1, and we are now in a wave 2. The gap that was left open should not fill if we are going higher. So tomorrow should be interesting.

Saturday, November 21, 2009

1100 / 1086 are key levels next week

Friday's option expiration got us choppy action, but it wasn't until late in the day that any of the buyers got a hold of the direction. There are a few different counts, but my two favored counts call for a test of 1100 on Monday.

My favorite of course is the more bearish count. If, 1100 holds, then that would be the most bearish scenario calling for a wave 3 to unfold for the next several weeks. Confirmation for this scenario wouldn't come until a confirmed break of 1080, but I think it would be highly likely that this move would correspond to a USD breakout.

The other scenario calls for either a direct move to new highs over the coming weeks with a wave 3 up coming on Monday. The other option would be to put another lower low in around 1080 that holds, and then kicks off weeks of bullish action likely through most of December.

Next week is a holiday week, so look for lower volume coming in especially on Wednesday.

Thursday, November 19, 2009

B wave or primary wave 3???

The bulls couldn't hold it together and boy did the selling start when 1100 was cut like a hot knife through butter. The pattern right now fits two ways:

1 - primary wave 2 top is in with a failed wave 5. We have a number of non-confirmed new highs in other sectors and indices: wilshire, russel2000, financials, and energy. We finished our wave 1 down and are in the process of putting in a wave 2, and this is very important, SHOULD BE VERY SHALLOW!!! 50% tops and only to test the breakdown at 1100.

2 - our first wave 'A' finished and we are in a wave 'B' that should bottom somewhere in the neighborhood of 1080.

The dollar continues to bounce around. Whichever way it breaks will be our answer. I don't expect any fireworks tomorrow with opex, but some back and forth with a slight upwards bias. A solid break of today's low would change that picture and could catch a lot of bulls and bears off guard.

Wednesday, November 18, 2009

Looks like it is a wave 4 triangle...

Remember what I say. Back-to-back .786 retracements often are your tip of a forming triangle. Today's action certainly played out that way the rest of the week. Of course it also fits nicely with the back and forth usually seen during opex week. So either we finished the triangle in today's late push down or we will finish it tomorrow morning somewhere between 1102 - 1105. The projection out of the triangle isn't looking very impressive as it pratically coincides with the wave 3 top. A breakout of the dollar will of course end the rise, and it should be interesting to see what happens in the eur/usd tomorrow.

Key level on the downside to hold for the bulls: 1100
Upside resistance for the bulls begins at 1111 and goes to 1118. Wave 5 target based on the daily swing high is 1128, but it is looking like it will not get there (at least so far).

Tuesday, November 17, 2009

We should be in 3 of 5 of A (or primary wave 2 top)

Key support held today, and while the wave 4 ended up not being a running flat, it did put in a nice wave B triangle, thrust, and reversal. With that said, the best scenario for the bears is that we are in the last small leg of either primary wave 2 or another wave 'A' with another 'B' wave coming (to 1080).

The thing that makes me the most perplexed is that the USD rallied today and the market held its ground. Maybe that is why our wave 5 is looking so weak as it is really swimming up stream against the strength in the USD. The SPX should be sitting closer to 1080 right now based on where the USD is trading, so something is going to give and likely soon. Either the USD drops and supports the markets rise, or the USD takes off and the market really tanks -- hard.

Watch any move below 1106 tomorrow as it could trigger lots of selling. We have overhead resistance starting at 1111 and goes all the way up to 1118 (hourly swing target). Right now I have little confidence that the market will make it to its daily swing target (1128).

Monday, November 16, 2009

My preferred scenario played out quite well

In my weekend analysis I said that my preferred scenario was "A gap higher with follow through to new rally highs (wave 3 of 5)." While the market trended nicely for most of the day, it did hit some serious selling pretty early if it is going to reach its daily swing high price target (1128).

Now looking at the hourly chart, we are currently in wave 4. Looking at the 15 min chart; however, there are a couple of different interpretations to be aware of, and the top could be in.

Scenario 1
This is really the best interpretation for what we are seeing on the hourly charts: a running flat for wave 4. This gets the wave 4 into a better fib relationship with wave 2 (1:.786), and accounts for the steep selloff we experienced near the end of the day session. We should be near the bottom, and work our way higher tomorrow to a new high (or subdivide so we can get to our 1128 target by trending up the rest of the week).

Scenario 2
We have completed 5 waves already with an expanding triangle in our wave 4 position. While this shows up on the 15 min chart it gives no warning on the hourly chart. Tomorrow will be another sell off day as the market either makes its way to a wave B target (1080) or crashes through that target as we are currently in wave 1 of primary wave 3.

These last three charts show the possible progression for one last zigzag should the market hold support in the 1080 area. Like I said before, though, we have a lot of divergences show up and a dollar rally from here will blow 1080 right out of the water.

Saturday, November 14, 2009

Should I switch to Disqus for comments?

I've added a poll to see if there is an opinion on using Disqus to manage comments. The nice thing would be that I could respond to comments from email instead of logging into the site.

Let me know what you think?


Friday, November 13, 2009

Our wave 4 low played out well, but...

I'm still concerned about the ability for this market to reach it's target. Monday SHOULD be a telling day. Why? Because if we are in a 3rd of 5th wave, then a gap up is likely a strong trending day to new rally highs is in order. But if we got a failed 5th wave today, then Monday will likely give us a gap down and strong trending day in the opposite direction. Of course, maybe we are looking at a complext wave 4, and if that is the case Monday will be pingpong ;-).

But here is why I'm concerned.

- Today's move off of the wave 4 looked good until just after 9:30 PST when the market hit a massive air pocket and dropped like a rock. Was it impulsive? Monday will tell.

- We have weakness in the strong sectors (xlv-healthcare and xlk-technology) with their breakouts possibly being 'failed' if we have a strong move below today's low
- A move below last week's low would in effect confirm the non-confirmed highs in some of the indices creating A LOT of selling.

- the USD/EUR pair looks like it may have put in an impulsive move to the downside. Any follow through next week would send the markets lower...a lot lower.

But until price confirms the possibilities, here is what I'm looking for on Monday (in order)

- A gap higher with follow through to new rally highs (wave 3 of 5).
- A ping pong day consolidation in a complex wave 4
- A gap down with follow through to the downside (wave 3 of 1 of primary wave 3).

Thursday, November 12, 2009

Today, the USD got some legs...

...and the market didn't like it one bit. Since my previous wave 4 target didn't hold back the sellers today, I had to relabel my waves to show that we have now completed our wave 4 (or are near completion with a possibility of one slightly lower low or retest). However, there is a problem brewing for the market: the USD. So far the price action is looking very impulsive although we still have some work to do on confirmations. You can see from my 30 min EUR/USD chart that we have the makings of a very impulsive move. We'll have to see what happens in the next retracement, but if it doesn't overlap wave 1 before getting to a new low, then that would spell trouble for the market. Here are a couple scenarios to consider:

1 - the USD finishes its wave 1 with the SPX finishing its wave 4. While the USD retraces, the SPX puts in a failed wave 5 and the market tanks once the USD gets going again.

2 - the market already topped, and we are going to see a breakdown if the SPX drops below 1080.

3 - the USD just finished an A-B-C and the bull market in liquidity continues to initial target of 1128.

Best of luck!

Wednesday, November 11, 2009

Dollar tried again, and failed...

The dollar once again made a go at it, but got kicked back down the stairs again to close near its open. From the look of the price action on the SPX, we likely completed a small wave 4 today and are geared up for a wave 3 of 5 tomorrow that will finish off a larger wave 3 structure. If this is the case, then look for a gap at the open that doesn't get closed until we hit a higher high (currently at 1105). This has been the signature wave 3. If there is more to go on a wave 4, then any open will be sold, and I would look for a wave 4 completion target somewhere between 1088 and 1092.

We shouldn't have a move down to the hourly 34 SMA until we complete the current wave 3 at a higher high. The hourly is currently sitting at 1082. Should the USD get a confirmed breakout above the 34 daily SMA (currently at 76), then we may have seen the top in the stock market.

Tuesday, November 10, 2009

The dollar tried to rally but failed

Today the US Dollar tried to make a stand. It even had what looked like a successful breakout on the 30 min charts (at least my monitoring of the EUR/USD pair), but it eventually succumbed to selling pressure and closed near the open. Tomorrow is a light trading day with the US Holiday, and I believe the bond markets are closed drying up what has been this week little trading volume. Look for the bulls to take advantage and push the markets higher.

Unless, we see a close below today's low, I'm expecting the markets to make their way to the new sell target: 1128. There should be some sellers at 1100 tomorrow, it will be interesting to see if it is just a dip or something bigger. If we do get some selling in the 1100 area, then the next buy area would be 1090-1092.