Sunday, May 30, 2010

Weekend Update

Well, Fridays before a long weekend are usually bullish, but it didn't seem to keep the sellers off the sidelines this time around. While the bears did push price below 1095, the price action (at this point) did not appear impulsive, so I'm marking it as another x-wave.

Should Friday's low hold, here is what I have
- our 2 x waves have a relationship of 1:.786
- our y and w waves have a relationship of y=w*.786
- using those relationships we have a price target of 1114/1115 with z=y*.786. It is interesting to note that this would also close the gap.
- After 8 days of selling, tomorrow marks the 5th day of buying giving us a nice fib ratio for the round trip cycle: 13 days (8/5) should tomorrow mark the top.
- We have yet to really see intense consistent selling since the flash low (when the hourly RSI(5) hit 2.96). We would expect a 3rd wave to beat this level on the hourly chart.

Should Friday's low not hold, then 1078 should hold if we are in a double zigzag. Should 1078 not hold, then we probably already started the next move down.

Should price some how make its way above 1181, then that would turn the chart bullish.

Let the market lead the way...

Thursday, May 27, 2010

Alternate count it is...

...with the market opening above 1180 this morning it was pretty clear that we have started minute wave 2. So here are my counts:

- We're currently in subminuette wave 3 of minuette wave C of minute wave 2. Target for this count is 1120 with an upside target of 1145. I realize that is a big upside, but it is totally within a sharp rally. Minimum target is 1113. I expect this wave to top Friday/Tuesday with Tuesday (Monday is a holiday) being the most likely. This wave is over when price crosses the hourly 34 SMA (closed today at 1080)and below 1090.

- We're currently in subminuette wave C of minuette wave Y of minute wave 2. Target for this count is 1115 with a possible upside to 1120. I expect this wave to top Friday. This wave is over when price crosses the hourly 8 SMA (closed today at 1092) and below 1090.

Bullish Count
- We just finished a corrective wave of significance, and have resumed the bull market. We are currently in wave 3 of minuette wave 3 of minute wave 1. Price should easily take out 1145. Price confirmation is a move above 1180. Price cannot move below 1065 in any bullish scenario.

Happy trading

Wednesday, May 26, 2010

Primary count on track

So far the primary count of a wave 4 irregular flat is working out nicely. Here is what I'm watching to confirm the end of minute wave 1 of minor wave 3 (I have changed the degrees of trend).

- A move above 1080 from here means that we are in my alternate count
- Should we move down to the 1010-1030 zone and have another hammer candle on the hourly chart, then that is likely the end of minute 1 and should be confirmed with a close above 1050.
- Should we drop below 1010, then I would expect the market to accelerate to the downside and reach my 930 target in short order with an extended wave 5 and the completion of minor wave 3.

Tuesday, May 25, 2010

The bulls are playing with spirit...

Not willing to give up the game even though the opponent appears to crush every rally, the Bulls gave it another go this morning when the market opened below Friday's low as a reward to all the late day buyers on Monday. There are several different bearish possibilities with the one bullish option on the table that today's low was the bottom of the correction, and we go straight up from here.

My primary count is that we are in a minuette wave 4 irregular flat with the highs coming in tomorrow.

My secondary count is that we finished a minute wave 1 at today's low and we'll now rally the rest of the week in minute wave 2 closing a number of open gaps. If the market can get past 1100, then the odds are high we are in minute wave 2.

Monday, May 24, 2010

Bulls are still playing defense...

The globex session had the market down, but the bulls were able to salvage the open and race to retest Friday's high. After a few failed attempts of trying to get past 1090, the Bears took over and pushed the stocks over the edge late in the day.

Here are my observations:
- We had our RSI(5) extreme oversold condition at the end of Minute wave 1, and we have yet to exceed that level. Since I fully expect to exceed that leve during Minute wave 3, then we have either:
- not hit the 3rd of 3rd (subminuette wave 3)
- the big one will come during the 5th of 3 (minuette wave 5)
- We are either in a minuette wave 4 triangle and will continue to bounce back and forth tomorrow and Wednesday or we are hitting subminuette wave 3 tomorrow and should see Friday's low removed in the morning.
- We have plenty of room left on the weekly RSI before we hit a significant oversold condition and even more for divergence to form
- I'm looking for a minute wave 3 low around spx 930.

Best of luck!

Sunday, May 23, 2010

Sorry for the late post...

...well all I have to offer for an excuse is this:

- we had 3 birthdays last week (and twins turning 16 is no small matter)
- we had various trackmeet finals
- we had one banquet
- we're trying to find a cheap 3rd car (for the 16 yr olds)
- our 2 yr old has not been sleeping much...

So, essentially I had no energy left to put up a post Thursday night (although I did get half of one ready ;-), but it never got finalized. Now it is nearly 11:30pm Sunday night, and I'm still really tired, but here is what I have.

Friday's move off the low has nothing behind it (as of yet), since it occured without significant volume (relative to the prior 2 bars), and it happened on options expiration week. There is essentially one bullish count and a few bearish counts. Here are my top three:

- Minuette wave 3 is over and we're heading into a minuette wave 4 triangle that should finish up by Tuesday. From where we get a 5th wave extention that takes us down to at least the 930 area to finish off a Minuette wave 3. Finalizing the degree of trends is of course subject to change.
- Subminuette wave 1 is over and we're heading into a subminuette wave 2 zigzag that will finish up Monday or Tuesday morning.
- The bottom is now in and we move up strongly from here on out as yet another intermediate correction is behind us.

Now, with those counts on the table, here are the facts that the Bulls need to be aware of:

- We have our first monthly reversal since the March 2009 low. The medium term is now down until we get a monthly reversal to the upside. From here the market would have to turn around and go straight to new highs. I'm not putting high odds on that occurring.
- The weekly trend channel support from the March 2009 low and the July 2009 low has been broken.
- The weekly trend is now down, and will continue to be until a weekly reversal occurs. This happens with a move above 1180.
- There is very little support under the market if and when 1030 falls to the bears. The next strong support from there is 930 and then 880.

Take care and best of luck!

Wednesday, May 19, 2010

The fear is building...

I still maintain my primary count as wave 2 irregular flat going into Thursday and Friday; however, the bulls are just leaning on the edge here. The market has not been able to put together much of anything resembling a rally since Tuesday's opening gap up and while the market has not accelerated to the downside it has consistently trickled. This is where the wave counts can really throw you because we're not seeing any acceleration to the downside, but at the same time we're not seeing any response from the bulls. So either we get a decent size rally tomorrow or it fizzes out again in the 1130 area. If price drops below 1095 from here, we should see some massive acceleration to the downside.

Primary count: Wave C of 2 of minute 1.
Secondary count: Wave 2 of minuette 3 of minute 1.
Bull count: Wave 3 of some degree tomorrow with a major correction low established at today's low.

Tuesday, May 18, 2010

Was that all the bulls have???

The bulls were able to ramp it up during the Globex session but ran into stiff resistance at the hourly 34 SMA and my key resistance area at 1146-1150. From there the market steadily went down the rest of the day, but it wasn't the kind of impulsive move I'd like to see in a 3rd of 3rd, so I am putting my primary count as a minuette wave 2 flat with the a & b waves complete and tomorrow we see a c wave that pushes back to the 1150 - 1160 area. If we see weakness below 1105 tomorrow morning, then the market should really start selling off, so I'll be watching any market reaction to that area.

Best of luck!

Monday, May 17, 2010

Minuette Wave 2....

Minuette Wave 1 finished less than 2 pts from my target of 1113 at today's lows. We have now started a corrective wave 2 that should take us to the gap created during our 3rd of 3rd in the 1151-1157 area. The .786 retracement is right over that at 1161, and that is what I see as the maximum retracement for this scenario. I would expect a wave 2 top coming in Wednesday, so we'll see what the market has in store.

Best of luck!

Sunday, May 16, 2010

Weekend Update

When Friday's rally from the bell died a quick death, it became obvious that we didn't have a 5th wave exhaution gap on our hands. The market sold off from there and kept going until finding support in the 1130/1135 area.

Based on the price action, here is what I'm seeing for Monday morning:

- We have either ended or are in the process of ending a subminuette wave 4.
- A non-subdivided wave 5 appears to target the 1113 area
- Next week is options expiration week, which is generally bullish
- The .786 retracement support comes in at 1087. I expect an extended wave 5 to not be able to make it past this zone without a significant bounce
- There will likely be a lot of volatility around this area where the bulls think they have survived the crash and the bears don't. I expect the hourly 34 SMA to provide resistance on any bounce. If the bulls get through that, then I draw the line at 1160. Any move over that and the bulls have earned a new rally high. If the bulls can't hold .786, then we should get a 3rd of 3rd move down starting either at the end of next week or the beginning of the following week.

Best of luck, and let's see if this bull's back will finally be broken...

Friday, May 14, 2010

Options for this morning...

I looked over the 5 min charts this morning and put together a more detailed count with some options this morning based on the over night futures. If the bulls run the gap closed, don't get discouraged as it is pretty likely.

Thursday, May 13, 2010

So far it looks like 3 kicked off...

Of course we still need price confirmation (initial move below 1146) and of course further impulsive price action taking out the crash lows and then a lot more, but we have all the fixings for a minute wave 2 top and the start of minute wave 3. We should see a nice gap down tomorrow as further confirmation. I'm expecting this one to really subdivide, so we may get some bounces with a minuette wave 1/2 combo before the fun really starts.

A move above 1171 means that wave 2 is subdividing and we should see a test of at least 1180/1185.

Wednesday, May 12, 2010

No official start of minute 3...

Sorry about yesterday, but my family has been hit with a sick bug, and it finally caught up to me. I'm feeling close to 100%, so here I am with my update.

Based on what has transpired so far, it looks like we are very, very close to the end of minute 2. Today's price action had ending diagonal written all over it, so unless price subdivides on us, when it breaks, it should break hard. I'm watching the 15 min 34 SMA along with Tuesday's low. That should be our confirmation that minute 3 has begun.

We are also tracking nicely with respect to our time ratios. Wave 1 was 10 trading days, and we are currently at 5 trading days for our wave 2. Based on time, we should see a wave 2 top if not tomorrow, then Friday. Key resistance is also right overhead coming in at 1175 and 1181.

Hang in there and get ready to either add to or start a serious short position.

Monday, May 10, 2010

Minute wave 2 in progress ?

It's always nice when the market wipes out your forecast before the opening bell. I hope it was obvious to everyone that the triangle scenario was off the table from the get go.

With that said, I've made some revisions to the primary count:

- Minute Wave 1/a ended on the Thursday spike low. Should the market shrug off 1185/1195, then we will see new uptrend highs and the spike low was just a wave b. I'm not getting too caught up in the identification of the waves because it all happened so quickly. Time will tell us for sure what it was.

- Minute Wave 2/b is currently in progress with strong resistance starting at 1175 and ending at 1195. We are currently in the 5th wave of wave C. If this is a bullish move, then we are in the 5th wave of wave 3.

- Some had conjectured that the retest of the lows was a failed 5th wave. Well, it doesn't fit well in the pattern as such. In addition, it only retraced ~62% of the move down, which is consistent with a wave 2 and not a failed 5th wave (I look for at least a 78.6% retracement).

I'll be watching time parity between waves 1 & 2. Wave 1 took 10 trading days, and we are currently in day 3 of wave 2. We could see wave 2 bounce around here for the rest of the week.

Best of luck!

Sunday, May 9, 2010

Wave 4 almost over...

So far the price action is setting up a nice wave 4 triangle, which means that a real test of the panic lows is coming Monday/Tuesday. While a wave 5 extention could happen with price really falling apart, I have a hard time believing the bulls are going to give it up so easily. I have so far taken off about 1/2 my short position. I'll be utilizing the below targets to remove the final position in 1/3 increments.

So here's my primary count with key targets:

Wave d of 4 complete on Friday with wave e of 4 to complete near the open on Monday. I'm looking for a wave e completion anywhere between 1121 and 1132. I realize that is a wide target, but the volatility is such that is what we have to work with. The conservative entry is to go short with a break of 1103. The aggressive entry is go short on an intraday reversal bar: 5/15/60 min with 5 min being the most aggressive.

Wave 5 targets:
- conservative target: 1080
- likely target: 1055-1060
- aggressive target: 1035-1040

This forecast is invalidated with a move above 1138.

Thursday, May 6, 2010

Yikes...that was a scary few minutes...

Today more than a few traders got smacked around hard as the computers took over and drove the market down and then back up in the space of about 30 min. Fortunately or unfortunately I was at work minding my own business when someone said the DOW was down nearly a 1,000 points. Looks like the market hit one of those airpockets and dropped like a rock for a few minutes before stabilizing and ending the day ONLY down 3%+. Well, I guess the sad thing is I never set my sell trigger (on my May calls) at 1080 (my initial target) because, to be honest, I figured we had several more days to go.

So, where does the market go from here. There is no apparent impulsive pattern at today's lows, so if we go up from here, then that would be very bullish. We have yet to have anything but zigzag corrections, so what I would like to see is a nice triangle form over the next couple days between 1140 and 1080 before testing those lows and finishing the pattern. We technically got a monthly reversal today when the market went below 1077, but I would like to see it for more than just the time it takes to cross the street, so let's see where it goes from here.

Wednesday, May 5, 2010

Still selling...

Well, we didn't get our push down but we did get a lower low, which puts us most likely in wave 4 of 3. Going for waves of alternation between 2 and 4, I'm forecasting a triangle here with a nice thrust down starting late Thursday or Friday. Since our wave 3 turned out to not be so strong, I'm looking for an extended wave 5 of 3 to really get some strong selling.

A break of the wave b low negates this forecast and either puts us in a wave 4 flat (should today's low hold) or puts us in a subdividing wave 3 with wave 2 coming at today's high.

A break of today's high puts us in a zigzag correction or yet another 1-2 subdivision. Monday's must not be exceeded otherwise the correction is over and we should see immediate new highs.

Best of luck!

Tuesday, May 4, 2010

The bulls select door #2 and the market crashes...

The futures made it pretty simple for us as Monday's low was broken in the first 5 min of trading. That move eliminated a triangle and put the bearish option at the front of the line. Shortly after, goldend support at 1183 fell, and we now have a confirmed weekly reversal with the touch (actually was a bit more than a touch) of 1173.

Looking at hourly chart, we have not hit an oversold condition yet that is equivalent to a 3rd of 3rd wave, so I'm expecting further selling that will push the index somewhere in the neighborhood of the weekly support line of 1150 tomorrow for our 3rd of 3rd.

The 15 min chart shows we could have a little more bounce tomorrow morning before more selling should kick in. A close above 1183 would not be good for the bears and even if we get continued selling would put us more in a zigzag pattern than impulsive.

Monday, May 3, 2010

Start over...

It was pretty obvious Sunday night that we weren't going to get a gap down Monday morning with the futures enjoying the drug of yet another bailout. So where do we go from here.

Well, I've tried to narrow down the options. Two of them are part of a triangle and a 3rd is big time bearish. The reasoning with the triangle is that we have back-to-back .786 retracements. I always go to a triangle when this happens, but here is my ranking:

#1 Bullish Triangle: we have a-b-c-d complete with e to come tomorrow. We thrust out of the triangle to new highs and then finally collapse.

#2 Outright Bearish: we have a 1-2, 1-2 count going and tomorrow morning we collapse. This would definitely catch most of the players off guard, but I still rank it as low based on the price action we have had so far. I would look for a gap down tomorrow morning that keeps on going. A filled gap down would point to #1.

#3 Bearish Triangle: we have a-b-c with d and e to come. We thrust out of the triangle to head lower before the bulls find the buying power once again and we retest the highs. I would really hate this scenario because I'm very ready for this market to rolloever ;-).

Best in trading tomorrow!

Saturday, May 1, 2010

Weekend Analysis

The bulls certainly put the pressure on Thursday and Friday morning running the index all the way backup to the left shoulder pivot before rolling backover. We now have a situation where we should get a sell confirmation with a weekly reversal next week (at 1173) and hopefully a lot lot more with a monthly reversal (1077) and eventually the start of new trend should the key weekly pivot at 1044 fall.

Also of note is the ATR sell signal that we got back on 4/16 never went back to buy, and hopefully it will stay that way for some time.

Let's look at some projections. We have major weekly support coming in around 1135/1140 next week. The way I come up with that figure is essentially drawing a trendline from the high of two weeks ago to the low of last week to get an extreme projection for this week. Seeing that we should be in a 3rd of 3rd, we should be able to make it to the extreme. The weekly ATR is at 30pts, so a powerful 3rd wave move should be able to muster up 45-50pts. As my current short position consists of May and June FAZ calls, I'll look at taking off 1/2 of my May calls should we get to that level. The other 1/2 is targeting 1080. My June calls will have a trailing stop, and my target will be the 3rd wave low once a 4th wave is confirmed. I'll be trailing my stop above the weekly highs.

A gap down Monday is not required but preferred. The count could change if there is a little rally in the morning before putting in new lows. Any move above Friday's high would stop me out.