Thursday, July 29, 2010

A bear window has opened...

The bullishness may have come to an end with today's move. We had an impulsive wave to the downside breaking the hourly 34 SMA and key support. The market rallied and back tested the 34 SMA and is setup for an acceleration move to the downside. If the bulls are still in charge, then tomorrow will be an up close.

Wednesday, July 28, 2010

Still looking bullish...

Well, it took price awhile to get there but sure enough it did. Price has now tested 1106 (the low was 1103) and has done so in the look of a zigzag (abc-x-abc). While price can start it's wave 5 at the open tomorrow, we will likely see one more back test before the longs start to party. I would look for a reversal price action tomorrow in the neighborhood of the 786 retracement on what ever move up we get all the way down to 1102 area.

To recap the trade entry, I never got long. There was a technical buy signal as marked on the chart, but I let it go because I didn't like the price action that preceded it, so I was waiting on a push through the 34 SMA, which never happened.

As for tomorrow, I'll be watching for a reversal on the 1st backtest on the 5 min chart.

Best of luck!

Tuesday, July 27, 2010

No bearish price action...yet

As much as I would like to see a bearish impulsive move to the downside, I have yet to see it. The first move down off the highs was 8pts, so I am labeling that our subminuette wave 4. Then we got the spike back up to retest the highs, and I am labeling that minuette wave 3. We then got a move down (11.5pts) followed by a consolidation triangle for the remainder of the day.

So where do we go from here. Here are my scenarios:

Primary Count: we are finishing up a B/X wave triangle and will break to the downside. Buyers should step it up around the 1106 area. The hourly 34 SMA is likely to be tested (currently at 1099.5) during this move. A move that closes below 1083 would be highly bearish. How would I trade this scenario? I would enter the first 15 min reversal bar to the upside after a break of the triangle. However, if no reversal bar comes before 1090 I would break off the trade or go with a reduced position. My stop is 1 pt below the entry bar.

Secondary Count: we finished a skewed subminuette wave 4 in the triangle, and we will break to the upside to finish off minuette wave 3. If you wanted an aggressive long trade, then I would go long on a move above 1117 with a profit target at a new high. I would, however, look for the short trade on this count to the downside looking for the first 15 min bar reversal after hitting new highs.

Monday, July 26, 2010

Bulls still have it...

...while today's price action did not contain an acceleration gap, the trade setup still worked on the long side, but if you managed your stops as I did (see chart), then you only ended up with a 4 pt profit. I have to admit that while price continued higher, the momentum for a 3rd of 3rd was anything but impressive. So, while I still show the bullish count as my primary count, the bulls should be concerned over the lack of breakaway price action.

Looking at the 15 min chart, it appears that we may have completed subminuette wave 3 at today's high. This would lead to a subminuette wave 4 tomorrow morning with a correction being contained to 8-10 pts (with an extreme move being 13 pts). If price moves more than that, then be on the look out for a potential bearish wave 1 and the possibility of shorting on a wave 3 confirmation. The potential for the start of wave 3 should always be in the back of your mind if price breaks any key pivots from here on out.

Sunday, July 25, 2010

Weekend Analysis

After looking over the charts this weekend, we have the potential for a very good trade setup coming on Monday.

The market has continued to stay in the bottom half of the channel creating a single bullish outcome tomorrow: a break away gap (that does not fill).

This is the bullish trade setup:

1. If the market opens above 1106, then go long at the open with a stop at 1102. The price target is 1130, so this is still a very good risk/reward setup. If you have ways to limit your risk or time your entry even better, that will help the trade.

2. If the market opens below 1106, then I would wait for at least a 5 min reversal candle (at least a 1pt move above the last down candle's high). Then I would go long with a stop 1 pt below the entry candle.

3. Any move below 1096 negates the bullish setup.

The bearish scenario, however, can also have a gap up at the open, but it will be an exhaustion gap.

This is the bearish trade setup:

1. If the market opens above 1106, then I would wait for a move to 1102 to enter. If you have ways to time your entry even better, then that should improve your risk mitiagation. The stop should be 1 pt above the high of the day.

2. If the market opens below 1106, then you can either be aggressive and short the open and manage your own stop, or you could wait for the first 5 min reversal bar to the downside. The minimum target is 1070, but my target of course is more like 950, so the risk / reward ratio could be huge depending on how you manage the trade.

Thursday, July 22, 2010

Bullish stance for now until proven otherwise

As the market only paused for a few minutes at the key trendline for the triangle case I put in this morning's post, that scenario was quickly put to rest as the market burst higher to key resistance at 1096. Based, on the recent market action, we must assume a bullish stance preference for the market until price is able to break below key areas and resume the bear.

So, here is the 60 min chart. I know it is busy, but it has lots of key information on it. Mainly:

- Key resistance at 1096 and 1106 (not only an hourly pivot resistance line, but it is also the 786 retracement of the last move down and very important if the market is going to keep a series of lower highs / lower lows). If buyers can't get past this area, then the bear may resume, so I'll be watching closely for signs of significant selling.
- Key support is at 1083 (for a subminuette wave 2). Critical support at 1070 to keep the market in an uptrend.
- We have a subminuette wave 3 target coming in at the 1131 area.

Morning Update

Well, the count was wrong as the gap is going to occur in the opposite direction. My next alternate count is displayed here. Ignore any squiggle counts that don't match up as I haven't updated the whole chart yet, but you get the big picture: we're in a wave B triangle that (if confirmed) could easily take us to 1145. Should we take out yesterday's high this morning, then it might even be worse, but I'll wait and see what the price action is and where it projects future price action.

If for some reason price drops to 1060, then we should quickly see 1040 (but I'm not counting on it).

Best of luck!

Wednesday, July 21, 2010

Stuck in the middle...

After a strong showing yesterday, the bulls ran out of steam and lost it on the gap up at the open. Once Ben opened his mouth, the buyers ran for the exits, and the market dropped to key support at the close.

While I'm still showing the bear count as my primary count, I'm very much aware that a break above today's highs should send the markets much much higher. Instead, I'm anticpating a continuation move tomorrow with a gap below key support with some help from the job numbers. The market likes to gap above key resistance and below key support when accelerating, and a 3rd of 3rd is a great place to get the party started.

Tuesday, July 20, 2010

Not looking so good any more...

...with today's reversal off of the gap down comes the high probability of a revised count and potentially a more bullish outlook. I really hate when I put all that hard work in and the market is looking to take it away (and it hasn't yet), but price action is king.

So here is the 5 min chart with a potential bullish count. Clearly we have what appears to be an impulsive move coming off today's low. But if this is just another sucker's rally, then we should see a big time reversal tomorrow that takes out the 5 min 34 SMA and eventually closes back below 1070. Otherwise, Minor 2 was not done (or some count even more bullish).

The hourly chart shows the apparent strength of the move (short covering rally), but how price interacts with 8 SMA once it drops will be telling how much strength is really there. That is where I'll make the decision to possibly exit short positions.

Monday, July 19, 2010

Bears just working the bulls

Well from the look of things we have the finish of a wave 1 at some degree. I'm marking it minuette wave 1; however, if the rally dies right here, then it would work better as a subminuette wave 1 as we haven't retraced much on this rally (38.2%). We haven't even gotten close to the hourly 34 SMA, which would be a common test for a wave 2 of the right degree.

Not much else to say, so I'll pick it up tomorrow.

Sunday, July 18, 2010

Weekend Analysis

Well I hope the information I'm going to share with you today proves useful. After reviewing the charts and the various indicators I use to help map elliott waves, I came up with a few items that have made me change my count. I'm going to lay out my bear count for you because it fits with my overall view and opinion of the stock market. I will lay out where price needs to go to invalidate my work. If that happens, then I'll see where the price action is going and provide my best forecast based on the data. So while there are alternate counts, what I'm presenting here is my primary count.

Key findings:

- The rally from 7/1 - 7/14 was stronger than the rally from 6/8 - 6/21; as measured on the RSI(5).
- The 2 above mentioned rallies were almost identical in terms of time, BUT were identical in terms of price (~87 pts VERY close to a fib 89)
- The 2nd rally was able to break price away from the daily 34 SMA
- Both rallies were turned away at the daily 50 SMA

Based on the above information, I determined that it makes most sense to count the 2nd rally as either wave C of minor wave 2 (irregular flat) or wave 1/A of a bullish move. Because of the bearishness of the charts coupled with what we know to be foolish notions of an economic recovery, I have put the bearish scenario as my primary count. Price needs to break away from the 34 daily SMA (currently at 1077) to lean me towards the bullish count.

With that said, I'm looking for a minuette wave 1 finish early next week with a 1 day rally to retest the 1070-1075 area for minuette wave 2.

My forecast from here is as follows (hopefully this will be valid for many months!):

- Minute wave 1 finishes in the 955 zone in 3-4 weeks (Mid August).
- Minute wave 2 finishes in the 1010 zone in 2-3 weeks (Late Aug / Early Sept).
- Minute wave 3 finishes in the 800 zone in 4-5 weeks (Mid October).
- Minute wave 4 finishes in the 850 zone in 3 weeks (Early November).
- Minor wave 3 finishes in the 650 zone in 5-6 weeks (Mid December).
- Minor wave 4 finishes in the 800 zone in 4-5 weeks (late January).
- Intermediate wave 1 finishes in the sub 600 zone in 6-7 weeks (late March).

Thursday, July 15, 2010

Bears patience is being tried...


Or Bearish??

Don't you hate it when you get days like today when the market takes away your gains by the end of the day. How the waves are counted at this point will be easier once we're out of the congestion, so I leave it here with the technicals:

- overnight futures have hit in the ~1000 area several times and have been rejected each time
- we are way overbought on the daily chart
- overhead resistance (1105) is significant and will likely get sold hard with either the start of minute wave 3 or wave B of minor 2. Once again the key will be how the market reacts to the 1070 zone.
- overnight futures have been weak so far; an omen??

The market is keeping us guessing. Let's see how we close out the week.

Wednesday, July 14, 2010

Nothing solid yet for the bears...

...well after reviewing the charts I see another push up tomorrow as very likely with 1105 providing key resistance and our likely selling point. But like I said before, if the market holds on to the 1070 area, then the structure is very bullish, and the market should at least try and test 1160 if not the previous highs. The momentum indicators have been pushed significantly higher than I expected based on this count, which means this is either a massive head fake or just the appetizer for what is about to come.

I've put up the daily chart to show the doji candle for today's action. A move below today's low should ignite selling, but like I said, a higher push is likely tomorrow.

The hourly chart shows the wave 4 flat today with overhead resistance straight ahead tomorrow. Should be interesting.

Last, I put this chart up to show how you would have faired following my wave 3 entry technique based on today's prices. It would have kept you out of the many near breakdowns the market made on its way up to test the highs. It is interesting to note that the double top was also a 786 retracement of the overnight highs.

Best of luck tomorrow. I still have my stop at 1110, and I'll see how much I get out of this trade once the market drops below today's low (hopefully before it stops me out).

Tuesday, July 13, 2010

Market continues to impulse higher...

...well all you aggressive traders are under water based on my trade setup and conservative traders are still on the sidelines. With the price action moving like it is, the market will likely keep everyone out of their positions. So here is what I'm seeing on the technical front:

Current price structure is bullish (so far) as price pushed out of the potential ending diagonal this morning. I'm expecting at least a 20-25 pt correction starting tomorrow as either the start of minute wave 3 (minuette wave 1) that will take us to the 1070 area and test the hourly 34 SMA. If price can get close below 1060, then that should be our signal that the bear is back.

For those conservative traders out there who are anxious to get short, I would look to go short below 1090 with a stop at whatever the high was when price gets to that level. Otherwise I would wait for a wave 3 setup on at least the 5 min chart (15 or 60 min chart the more conservative you want to be) to trigger a short entry as illustrated.

Best of luck!

Best trade for the remainder of the year

I'm back, and I've done a quick review of the charts, and it appears that the market is setting up for what could be the best trade for the year. So, looking at the chart, and where the market will likely open, here are the setups:

- Aggressive: entry at the open with a stop at 1110.
- Conservative: entry at a move below 1077 with a stop 2 pts above today's high.

Best of luck!

Wednesday, July 7, 2010

Quick post and then off to bed...

We're heading out for a family reunion early tomorrow (4am for me), so I'll make this quick, and then you won't see me again until Tuesday of next week.

This will hopefully be pretty simple. We're in minute wave 2 and should see a top by Friday. Looking for the 1071 gap to be filled (or at least a strong attempt). I'm expecting weakness tomorrow to bring price near the 1040 area before pushing up to the target zone on Friday. Next week should be resumption of the bear.

Enjoy the market!!

Sorry for the late start...

...another busy night as our family is getting ready to head out on vacation Thursday morning. I just wanted to put out a quick chart, and let you know that price action is telling us that minute wave 1 has finished and we're now in minute wave 2.

Best of luck!

Tuesday, July 6, 2010

Morning Update

I just wanted to put up a quick update based on the overnight futures activity. During the Globex session, the market put in a lower low and since that move, the market has been impulsing. We certainly have an important move coming, so here's what I suggest:

- Is this bullish? It is possible that our minute wave 1 finished during the globex session (I never like it, but it does happen sometimes). If this is an A or 1st wave, then we will undoubtedly get a B or 2nd wave. This price action will be bullish if we correct in a 3 wave pattern and begin to impulse. That is the long signal. It should come up with immediate weakness at the open (within 30 min) and then after a ~50% retracement reverse long. Once we take out the opening high, the market should really go.

- Is this bearish? Well, we could be in a wave 4 flat, so what will happen here is we will get selling near Friday's high in an impulsive fashion. From here, the morning high will not be breached until after we see the finish of minute wave 1.

Monday, July 5, 2010

Weekend Analysis

I hope everyone is enjoying the long weekend and celebrating the birth of this great country. I know I don't usually drop in any of my political opinions, but I feel strongly about the freedoms we enjoy here in the U.S. of A, and I'm very concerned at the reckless attack we have on our freedoms and the rule of law with the current administration. To name a few:

- the tax payers get put on the hook for mass fraud facilitated by the gov't (fannie mae and freddie mac)
- the senior bond holders get pushed back in line with the sale and gov't bailout of Chrysler Corp...
- back room deals and obscure senate procedures get healthcare passed against the will of the people...
- the student loan industry gets nationalized for no better reason than that they can
- the oil industry gets shut down in the Gulf because the regulators failed to do their jobs, but ALL the blame goes towards the greedy oil industry in attempt to make energy more expensive for everyone (cap & trade); note I absolutely believe there is no way BP would get away with not settling its bills with the people, but the $20 billion fund is only another opportunity for gov't to inefficiently settle the claims...
- Arizona gets attacked for trying to solve its own immigration problem while the gov't continues to refuse to secure the borders (one of the few actual jobs of the gov't)

Why do I bring all this up? Well, I strongly believe that supercycle wave 3 will test the very fiber of this country. I'm hoping that the market's downward spiral will finally push the people to remember that $$$ is not the most important thing in this world, but instead come to realize that what made our country great was freedom, personal responsibility, and moral values grounded in a belief in God. I'm hoping that once again the people will take the gov't back from the career politicians and full-time lobbyists and return it to themselves. I believe that is what is needed to create the environment for the next supercycle bull market.

Now, on to the charts....

Let's start with the 60 min chart. Based on the price action since the top, I believe Thursday - Friday count best as a 4th wave with the 5th wave starting tomorrow. I'd like to see an acceleration gap down to support a subminuette wave 3. I know we're already oversold on a number of indicators, but sometimes that is when we get our best price movement as market participants realize that price is not responding to the condition and switch sides. Based on ratios and trendlines, I'd like see minute wave 1 take us all the way to 955 this week, but I realize that buying may come in as early as 980. Stops should be positioned at Friday's high.

When we finally do bounce, I'll be looking for the 8 SMA on the daily chart for a minimum minute wave 2 target. If we can get down to major support for minute 1, then we can expect a 70-120 pt wave 2 pushing us back to the broken trendline. If we can't get that far, then I expect a smaller wave 2. Either way prices should get significant push back by the daily 34 SMA.

Looking at a bigger picture, we should have continued selling on the weekly chart staying comfortably below the 34 weekly SMA until intermediate wave 1 is complete, which should be near the 666 low.

Best of luck!

Thursday, July 1, 2010

It's late and I'm tired... I'll make it short and sweet. We may have finished off minute wave 1 at today's lows (1011), but I will be very disappointed that we weren't even able to make it to even the top of my zone (1008) and definitely not in the target area (980/1000). I guess we'll see tomorrow based on how the market reacts to the job numbers.

We didn't even get divergence on the hourly charts, so that would be one more vote for another attempt at a slightly lower low (1000-1008) to get some nice divergence setting up. But in the end, the market goes where it is going to go and doesn't seem to care too much about what I want ;-).

Should we be in wave 2, then expect a green close tomorrow, and follow through next week. 1040 is the minimum target, but 1060-1080 looks ripe.