Monday, December 27, 2010
...I hope everyone has had some this special time of year. Even if you're not a Christian it is a special time of year to think of others and spread some cheer.
I've been pretty quiet this past week, but so has the market. Today put in a nice subminuette wave 4, and I expect our 5th wave to top out some time this week. Look for a move below the 55 hourly SMA to confirm it.
Posted by Rich at 10:22 PM
Tuesday, December 21, 2010
Sorry for the lack of posts. My previous post should tell you where I'm at on this: 5th wave extention. The market bias for a year-end rally has kicked in and we have our next 5th wave target right over head. This should be an ED 5th, but we'll see how it plays out.
Confirmation is a break below our subminuette wave 2.
Best of luck!
Posted by Rich at 9:55 PM
Friday, December 17, 2010
We had a confirmed completed wave 5 pattern on Wed. Yesterday gave us a rally back to the 786 retracement, and it looks like the market is rolling over from here. We need a complete bar below the 8 SMA to confirm.
Now, this doesn't mean the bears are in control...yet. If the bulls can hold the 1220 area, then they are in a great position to really push this market higher. If the market drops to the 1200, then the bulls are hanging on a cliff with the bears ready to snap their fingers. A close below 1170, and we should have a more prolonged down move if not the return of the bear.
Best of luck!
Posted by Rich at 7:05 AM
Wednesday, December 15, 2010
Sorry, busy times....
The run down is this. We got our first full hourly bar below the 8 SMA, and we hit our first wave 5 target and tested it. I'm expecting, at a minimum, a move to the 1220 zone. If this gets bigger, and moves to 1200, then this should be the last stand for the bulls. Otherwise, we're looking at a much larger correction if not the return of the bear.
Posted by Rich at 7:23 AM
Monday, December 13, 2010
With the strong showing last week, the RSI(5) being in sell off territory and our wave 5 target directly overhead, I'm expecting a strong selling reaction to that level this morning. But until price gets below 1220, we can have a subdivision, so that is the 1st level that needs to fall for the bears.
Other than that, let's see where the market takes us.
Posted by Rich at 6:21 AM
Friday, December 10, 2010
Sorry for no post last night...busy times...
There are 3 wave 5 targets. The first one is obtainable without a 5th wave subdivision. The others are not. Due to the gap up this morning, the RSI resistance line will likely be broken unless we get another sell off at the opening bell. So where do I start on a subdivision? The hourly 8 SMA. A full bar under that, means we've reached the end of a wave structure. Any short can use the high of that structure as a stop. I would not short except on a pullback once prices move that far.
Posted by Rich at 5:56 AM
Wednesday, December 8, 2010
The move off the highs doesn't look impulsive. In addition, it is the same length as our minuette wave 2 and tested nicely our 34 SMA. That makes it the most likely candidate for a minuette wave 4. This means we should see one more test of the highs before we complete our 5 waves. The overnight futures appear to be supporting this count. Be prepared for a potential gap up accompanied by a reversal.
Posted by Rich at 9:40 PM
Tuesday, December 7, 2010
So far we got the reaction we would expect at the completion of a 5th wave. While it popped higher out of the gate, it died right in my target zone of spx 1234 (the high was 1235.22), which was based on a 5:1*.786 relationship. Of course to get really excited we'll need an impulsive move down that takes out some key pivots.
Ideally, we start tomorrow with a gap down that runs. Regardless, as long as prices don't move above 1233 tomorrow, bears should be able to take this to the next key buy zone.
Here are the key zones to watch:
- 1220/1224 (the breakout of consolidation pivot)
- 1198/1202 (the middle of the last consolidation)
- 1172/1176 (the bottom of the consolidation range)
If the middle pivot falls, then the bulls likely face a very steep retracement (assuming primary wave 3 hasn't begun).
Posted by Rich at 9:30 PM
Monday, December 6, 2010
We'll we got our sell signal, but the market didn't want to follow through. From the looks of the divergence and the waves, another small 4th wave does fit into the pattern, so I'll go with that. The only other option is a larger subdivision, which means another nasty breakout is coming...
Posted by Rich at 10:08 PM
Sunday, December 5, 2010
We have a potential 5 wave completion pattern with Friday's price action. The RSI(5) is in a vulnerable position, so if Monday morning's price action pushes it back below 70, then that would be a confirmation that we've completed a wave structure. Now if it is just a bullish wave 1, then we'll see price hold in the 1200 zone. Much more than that and the bears will come hungry and should get their fill with prices breaking down to the 1120 area. This would be the next bullish support area. If prices move below 1100 then look out.
My Automated System
On an unrelated note, I've been working on a fully automated system for many months now. I just finished it at the end of November and back tested it from 5/15 - 11/22. Because of the changes in the futures contract, it made it difficult to get good data before then. I'm excited with the results as you can see, but I know it is only 50 trades, and that is not enough to get solid statistics on it. I'm testing it in a simulated account through the end of the year before I put real money into it.
Here's what it has done since. It seems to average 7 trades a month. Hopefully it is even half as good as those back test results...
Thursday, December 2, 2010
...to the area they need to. The wave pattern is setting up that wave 5 should not subdivide. With that said, we are currently in subminuette wave 3. Once this wave is over, I would expect a consolidation wave 4 and a pop and drop wave 5. This will complete a minor wave. It will either be wave 1 of primary wave 3 (if this is a bull market) or wave C of primary wave 2 (if this is a bear market). You know how I lean, but the market should make things clear enough for us.
Posted by Rich at 11:19 PM
Wednesday, December 1, 2010
...if they want this move to stick. Any drop below the 34 SMA at this point will likely keep minute wave 4 in play: either a triangle or complex zigzag. If, however, the bulls can keep the pressure on until we get to the 1220 zone, then we will have a confirmed minute wave 5. Targets for this wave are:
Be aware that if we reach any of those targets on this first impulsive wave, then we may have a fully complete 5 minute waves and will be ready for either another minor wave correction or the return of the bear.
Tuesday, November 30, 2010
...but will it be up or down. Price continues to be within the down channel, so my bias is still for a test of the 1150 area. Should we open above 1190 then bulls should run it up and our wave 4 should be over. We open near today's lows and that should be good enough to send the bulls over the edge.
Monday, November 29, 2010
The charts say maybe as we got a nice rally today off of our 1170 support area. It would be something like an a-b-c-x-a-b-c with the 2nd abc being a flat pattern. Definitely doable and a bit of a mixup. But until we take out the 1210 area, we may still be in for some more consolidation or a test of 1150. Let's see what the market has tomorrow.
Posted by Rich at 11:06 PM
Sunday, November 28, 2010
...I hope everyone enjoyed a nice happy thanksgiving. I'm still trying to recover from a game of football on Thursday and paintball on Friday. I'm not as young as I used to be and my body is reminding me now more than ever.
The short-term trend is still down, and I'm expecting a test of the 1150 area this week. This will determine if we're in a wave 4 or the start of something nastier for the bulls. Should we take out last week's high tomorrow, then I'll be looking for one of my original wave 4 scenarios: a flat or a triangle.
Best of luck!
Posted by Rich at 9:48 PM
Tuesday, November 23, 2010
It appears the wave 4 I've been charting is still on schedule. However, the triangle/flat I was looking for doesn't look like it will come. In addition, a zigzag here is dangerous for the bulls because (a) we weren't expecting one (b) we will be close to an overlap on wave 1 and (c) it could easily morph into an impulsive pattern if it extends below 1150.
I'd be surprised if the bulls didn't make some attempt to close the opening gap. This is the chance to exit longs and get short.
Posted by Rich at 6:04 AM
Sunday, November 21, 2010
Friday's move down stopped right where it should have and reversed. That makes this current move impulsive, but should we get long??
Here are the different count possibilities:
- In Wave 4, looking for a flat or a triangle
- In Wave 5, looking for a test of the previous high
The best long trade right now would be for this small wave up to retrace some tomorrow (1185 zone) and put in a bullish reversal bar. This would be good for another run at the top.
The best short trade right now would be to short the previous high and run it back down to 1170 area.
Otherwise be patient.
Posted by Rich at 10:46 PM
Friday, November 19, 2010
Yesterday certainly counts as a solid test of the 34 SMA. So much so, that we may have already put in the low. This morning we're getting weakness. Is it the continuation of our pattern and a wave C, or is it just a minuette or smaller degree wave 4. If it is a wave 4, price should stay above 1187.
Posted by Rich at 6:43 AM
Thursday, November 18, 2010
The move into 1170 support was unable to really breakout in an impulsive wave. So either we have a long series of 1-2 subdividing waves (unlikely) or we are setting up a minute wave 4. Now, wave 2 was 90 points. We've only traveled about 55 points so far. Wave 2 was a zigzag wave, so using the rule of alternation I would expect either a flat (unlikely), a triangle (very likely), or a complex (i.e. zigzag - x - flat) wave (likely). The market can extend this wave 4 as low as 1150 and still be in the game (no wave 1 overlap). We should be testing the 34 SMA this morning. Let's see how it goes.
Posted by Rich at 6:00 AM
Tuesday, November 16, 2010
Sorry for the lack of postings. Work and kids' sports are keeping me very booked (my son just made the freshman BB team, yeah!). But here is a quick update.
Prices tried to rally yesterday, but the market was unable to get a full test of the 34 SMA. As a result, the market gapped down below a key area (previous breakout pivot high) this morning and kept on going. The market has yet to have a finished impulsive wave, so either this isn't done yet or we're in the finishing touches of a corrective wave (wave 4).
I'm looking to cover my short positions on any of the following events:
- a test of the 34 SMA, then I'll get out on the next test of the previous low pivot
- significance divergence showing up on the hourly chart
- hitting my 1150 target
Sunday, November 14, 2010
We all know the talk that is going on everywhere about us being in a new bull market or primary wave 2. This next down wave is important for solidifying the bull or the bear. Our move down so far has stayed within our 25 pt symmetry (2 of them). So, the bears have yet to prove themselves by breaking down. Should we rally tomorrow expect selling to come in at the 34 SMA (60 min). This would most likely count as a subminuette wave b. Our wave c should close out in the 1170 area, which would never give us a confirmed weekly reversal.
If price continues to break down before testing the hourly 34 SMA, then we will be looking much more impulsive to the downside.
Friday, November 12, 2010
...Sorry for the lack of attention here. I've been busy working on an automated program, my regular job, and helping to manage these 8 kids!
But, I've still been watching the charts, and here is what I have:
- Bears need a weekly reversal: soon! This comes in at a move to 1165.
- Volatility continues to bottom, which is bad for the bulls.
- A reversal of the USD in the face of QE2 would kill this market
- Key levels were breached overnight - I expect a retest of those levels today
- A test of those levels would breach my 1202 line in the sand showing this wave structure to be completed.
Take it easy and enjoy the weekend!
Posted by Rich at 6:34 AM
Wednesday, November 10, 2010
Monday, November 8, 2010
25 appears to be the magic number. The magic number of what you may ask? Since Aug 27th, there have been 5 pullbacks. Guess how many points...that's right 25. My point is that these pullbacks have all been part of the same wave structure. Once we pullback more than that, we'll know that this wave structure is finally over. Right now, the support level is 1202.
Posted by Rich at 9:46 PM
Sunday, November 7, 2010
So, if you are on board with the Fed and believe that they can magically wave their wands and all the trillions of bad mortgage loans will no longer have any impact on the economy, that we have entered the next bull market, that earnings will only get better from here, then you'll be wanting to get long in a bad way.
Okay, assuming you are correct, then I would wait for the next pullback, because right now we are in a spot on the weekly charts that have historically marked good sized pullbacks. The difference, of course, comes from being in a bull market or a bear market. Being with the overall trend is critical in what happens next.
You see, when you are with the trend, the market gives you lots of divergence before the next temporary reversal. Being against the trend, however, leaves you with little warning before the market suddenly reverses. Don't believe me, just try and capture the tail of any of the last corrections since the March 2009 low. The drops have been reversed quickly before any divergence could ever set in.
So, if we ARE in a BULL market, then the next drop will be shallow as the market will setup solid divergence over several weeks, and likely even through the end of the year. In other words, look for more consolidation as the next drop instead of a scary drop of the cliff for weeks kind of move.
However, if we ARE in a BEAR market, we are in the last stages of primary wave 2, and the market will reverse soon with no divergence warning coming on the weekly chart. The next move down will be furious. Let us see what clues the market gives us this next week.
One thing to keep in mind: when the market historically topped in October 2007 it was on a grinding retest of the July top. Deja vu?
Posted by Rich at 10:25 PM
Wednesday, November 3, 2010
Looks like it wasn't the elections but Bernanke's QE2 program that got the market to move a bit. It looks like we're still in the range for an ED to end tomorrow or Friday around the 1200 mark. If it moves past the 1208 mark, then this some other crazy non-countable pattern.
Hang in there...
Posted by Rich at 9:27 PM
Monday, November 1, 2010
Well, apparently our potential breakdown last week never materialized. You can see from the hourly chart there have been a ton of subdivided waves in the current wave structure, and that is on an hourly chart!
With the # of waves and the choppiness of the market, I moved some numbers, so that the ED has one more high to make. With the election tomorrow, I guess it makes sense. Based on price action, the market will sell off after the election, but will be temporary (wave 2) or longer term (primary wave 3). I guess we'll know in a couple of weeks.
Posted by Rich at 6:42 AM
Wednesday, October 27, 2010
Price action today put in what appears to be a completed 5 wave pattern. Whether it is wave 1 of a larger bearish impulse wave or wave a of a larger bullish corrective wave, we have yet to know. I've mapped out a couple of price patterns that I'll be watching for over the next couple of days.
Best of luck!
Posted by Rich at 7:38 PM
Tuesday, October 26, 2010
Monday, October 25, 2010
Well, the market did make one more new high (as was allowed) and has now exhausted the ED scenario with this extended count.
The bullish scenario is that we have just finished wave minuette wave 1. Expect a minuette wave 2 to test the 1100 area.
The bearish scenario is that we had a failed 5th / C wave, and are about to have the first impulsive move of Primary wave 3.
Let's just say that the price patterns from these two scenarios should be easily recognized. Time to call your hand Ms. Market...
Posted by Rich at 10:48 PM
Sunday, October 24, 2010
So here I am reviewing the charts for the week and there is really little to say. The market has been in a slight upwards sideways action now for 8 days. Volatility is bottoming. New highs is diverging from price action, and volume is increasing on the down days. Now, we may have a new high before this next down wave begins as shown on my charts, but it is not necessary.
We should see a test of 1150 this week. If this is a bullish move, that could be it. However, there is a much larger support area at 1100 where the bulls would be able to stage a major rally from.
The bears need to get price below 1100 to take control of the charts once again.
Posted by Rich at 5:50 PM
Thursday, October 21, 2010
Well, our test of the 89 SMA and the symmetrical a-b-c turned out enough to eek out a new high. But the market is still caught in the topping pattern I mentioned before. The REAL test of the market will be how it handles the next decent sell off. Until, then it is struggling upstream with what appears a never ending line of sellers above 1180.
Tuesday, October 19, 2010
The market confirmed our completed 5 waves this morning with a great gap down at the open. Our wedge trendline was backtested in the early hours, and then the sellers kicked in. We got a nice little bounce off the 89 SMA, which may provide for a sideways day tomorrow. I'm looking for a test of the 1150 zone tomorrow or Thursday. If there is good divergence on the hourly chart, we may get another bounce. So far, we are still in one wave down structure on the hourly chart, so I'm not going to start labeling until we have some data to work with. Strictly speaking, the 15 min chart is showing a nice A-B-C corrective wave right now. Regardless, this structure would likely be the front wave of a larger 3-3-5 corrective wave. Let's see how it unfolds...
Posted by Rich at 9:34 PM
Monday, October 18, 2010
The back and forth of three waves continue to keep me looking for an ED. With a new high today, we have the setup for a 5th wave. Investor's reaction to Apple's earnings could be the catalyst we need to get some real selling going. The market will show us tomorrow. I continue to look for a test of 1150. I'll be closely watching how the pattern looks going into that price support. If it is a 5 wave, that means we should be able to at least get a test of 1100. If not, then we'll watch the bounce.
Best of luck!
Posted by Rich at 9:22 PM
Sunday, October 17, 2010
Not much more to say except that the bull case keeps on dwindling with a growing divergence between the market and the Nasdaq. If Apple's earnings disappoints for the first time in a long while....
The S&P chart is screaming pullback. With tests of the 34 SMA coming 3x in the last week. When an SMA gets tested so often is such a short period of time it generally bodes well for a reversal. With the RSI(5) in overbought territory on the daily chart, this should be a good opportunity to move the charts lower tomorrow in an attempt to test the 1150 area. I would expect much more, but we'll start there.
Posted by Rich at 10:03 PM