Tuesday, August 31, 2010

How many tests will it take?!!

Unbelievable...one more retests, and it appears that the line to buy at 1040 goes out and around the block, down the street, and into the next town. Today marks the 3rd test of 1040 in 5 days. Certainly the charts now have yet another reason to be bullish, but until we get a solid close above 1060, I'm holding my short position that I opened today at the open ;-(. Oh well, this has been a tough one to trade...

Monday, August 30, 2010

Tomorrow shows us the way...

Wow, I was totally expecting the bulls to come in at the open and run this up. Instead, price just kind of drifted lower all day with every little rally being dumped on. We ended the day right at the 786 retracement. This leaves us with two very obvious primary counts:

1. ST/MT/LT Bearish ;-). Wave 1 of 3 subdivided as I explained in my morning post, and we have now entered wave 3 of 3. Today was a drift but tomorrow and Wednesday starts the pain, and we see the bulls crying uncle all the way to 950. Price just get a little bounce in the neighborhood of 1040, but not much more than 38.2% retracement. Then the wheels fall off the bus.

2. ST/MT Bullish. We gap up tomorrow and maybe back test, but shouldn't. Once the market gets above 1060, it should really pop as the market enters wave 3 of 1 of C.

Quick update

Sorry for the lack of a weekend post, but we were swamped with soccer seeding tournaments, high school football, and a Boy Scout Court of Honor. So, here are my quick thoughts before the market opens...

The main bear count had to be shelved on Friday as the market reversed on a retest of the lows on Friday. This was the key buying area that I pointed out last week, and the buyers certainly were there in mass. The move Friday should not get much above 1070 if the bear is going to continue. Any higher, and it puts my next bear count into play, which this sell off was all part of a wave B, and we are now entering a wave C that will take out the highs 1120 highs and possibly the April highs.

We should get some kind of pull back off of the 1070 area. In fact, the futures tested the 1070 area last night have already pulled back 10pts. The bulls should be able to keep this in the 1055/1060 area for a wave 2. If not, then we may see some very intense selling.

Best of luck!

Thursday, August 26, 2010

A solid backtest...

I mentioned in my post last night about the importance of the 1060 level. The market respected that level and had a nice reversal back (so far) to the 786 retracement of the move off of 1040. Wave 2s are notorious backtesting waves, so I decided the chart made most sense going with a subdivision wave 1 and 2. Tomorrow would mark a 3rd of 3rd of 3rd, so it should be pretty easy to spot if this count is correct: a 30-40 pt move to the downside. Any move above 1060 should be considered bullish.

Wednesday, August 25, 2010

So far the knife catchers have it...

Well, the buy zone I identified in last night's post was certainly bought with a fury. Will it last though is the big question. So far it was worth 15+ ES points, but will it be a homerun? The current charts are pointing to more selling beginning tomorrow. So if the market doesn't, then look out. I'll be getting bullish if the market can get a close above 1070.

As for the bear count, I have two possibilities:

(1) A subminuette wave 4 with a 5 down coming tomorrow with at least a slightly lower low
(2) We are currently in a subdivided wave 2. I actually like this count better because we have yet to experience a 30-40 pt true range day to the downside, which is what I would expect to see during this wave down. I don't see it happening in my first scenario unless wave 5 subdivides.

Continue to watch the hourly 34 SMA. If we touch it tomorrow, we should get a strong sell reaction. If we don't, then prepare to go long.

Tuesday, August 24, 2010

Bears still have the ball...

I'd first like to note that the market gave us the signal I was looking for: a gap at or below Friday's low. After that, buyers came in strong near the 1040 pivot and the rest of the day was spent in consolidation. While the daily charts show consistent selling, we have yet to have a fully impulsive down move, where the market moves 30+ points down. We've had them in the previous waves, so if this is truly a minuette wave 3, then we should see at least one 30-40 pt move in one day (measured from the close of day 1 to the low of day 2). Tomorrow would work nicely for it. Let's see what the market gives us.

If the buyers step up here and can get a close back above 1070, then I'll move towards a short-term bullish bias.

Best of luck!

Monday, August 23, 2010

Bears push Bulls toward the edge...

Price action was consistent with a wave 2 flat, so that is how I'm labeling it. Based on my primary count, I would really like to see an acceleration gap down tomorrow at or below Friday's low (1063) to get the ball rolling. For the bulls, they need to get price above the hourly 34 SMA (currently 1080). If you went short on a 5 min reversal, then you got short near the high of the day ;-).

Best of luck!

Sunday, August 22, 2010

Weekend Update

I decided to go ahead and post the charts at different time frames. The market has a bunch of pent up energy that should be released to the downside starting this week. It will be quite disappointing if the bears decide to not show up in mass and get their job done. We shall see.

Let's start with the 15 min chart. You have to take option expiration not too seriously as other motives are at work. With that being said, I expect either a solid move down Monday morning at the open or a bit of continuation to the upside to finish off a wave 2 flat. Either one is valid. If the market gaps down, then I'll short the open. If it gaps up, I'll short a 5 min reversal bar.

The hourly chart shows us the major line in the sand for the bears: the 34 SMA. Currently at 1083 and dropping, it should hold any upwards price action. If the bulls can get a solid breakout, then I'll have to change my short term bias to bull.

The daily chart shows divergence forming on the RSI(5). If it doesn't hold, then that will support a capitulation move on the part of the bulls. A close below Friday's low should do it.

A quick look at the weekly chart clearly shows the amount of downside potential (with major support at 955). The RSI(5) has plenty of room to run to the downside should the bulls throw in the towel.

Best of luck!

Thursday, August 19, 2010

Bears are looking good...

We got what we wanted: an acceleration gap. I'm looking for the next possible bounce to come in at the 1035/1040 area for a potential subdivision. Since we need to get down to 950 area for my minute wave 1 target, we should get at least one subdivision to get there. Tomorrow is options expiration, so anything can happen. It will be interesting to see if Israel decides to spice things up with Iran's nuclear facility potentially getting fueled up this weekend. It would certainly 'fit' the wave pattern.

Best of luck!

Wednesday, August 18, 2010

Fireworks tomorrow??

Here's where we are. Price did NOT hold the key level I identified in yesterday's post. I mentioned that if price did not hold, then it had to be a subdivided wave 2; however, I should have also mentioned that it could have been a B wave. Since price did not launch to the moon in a 3rd wave, I have to side with a B wave label.

Of course, from here I had to relabel some of my prior areas like my failed 5th wave to end minor wave 2. With that change, we have a much better 5 wave move down as the wave 2 flat scenario is out. Since we have currently retraced 50% of wave 1 and have taken 61.8% of wave 1 in terms of time to do it, we have met all criteria to start wave 3 down. Our early confirmation is to take out our wave B low (1088), which looking at the futures could happen pretty easily at the open tomorrow.

Best of luck!

Tuesday, August 17, 2010

Bears are on the ropes...

Today's price action pushed the limits of my resistance zone (earlier identified as 1088 - 1095. Price did, however, close below key resistance (1096) while being rejected (at least so far) at the 50% fib (1098) plus a couple of points. The RSI has reached a level which has been consistent with past rallies in the downtrend that took over the market in late April.

So is it 3 waves up or will it be 5? The move down the last part of the day has reached a level which equals the down move that would make up a potential wave 2. Should price hold this level tomorrow, then look for at a minimum a 5th wave (assuming no subdivisions). This would put our minor wave 2 count in jeopardy and likely the April top.

A move to 1082 should have enough selling behind it to confirm our minor wave 3 scenario.

Best of luck!

Quick update

Sorry about the late post, but I spent several hours with my son in the emergency room after he hurt is ankle during football practice. The good news is that there was no visible break. We'll get the final word on a re-examination this Thursday. Oh the joy of kids...

As for the charts, my primary count is that we are in a wave 2 flat that should finish somewhere between 1088 and 1095. Much more than that, and the bulls may have taken back the charts.

Sunday, August 15, 2010

Not much to say...

Friday's price action didn't do much to lean the market for Monday's open. I'm looking for price to confirm the count this week even with options expiration coming up on Friday.

Key area for the Bulls: 1096. If price can get to 1102, then the Bears should be toast.

Key area for the Bears: 1060. If price can get to 1055, then the Bulls should be toast.

I'm expecting the high / low for the week to be Monday. I will, of course, be rooting for the Bears!

Friday, August 13, 2010

Bearish count continues...

Sorry for the late post, things were crazy last night...

Yesterday's low was just 4pts shy of my wave 1 target. It is unclear at this point if wave 1 actually finished at yesterday's low because the retracement has been shallow; however, we have eclipsed 23.6%, which is the minimum wave 2. Should price find support today in the 1070 area and close above the hourly 8 SMA, then I'll be looking for a minuette wave 2 completion at least in the 1090 area.

Wednesday, August 11, 2010

Minor Wave 2 should be in...

The breakout attempt was firmly rejected today at key resistance. I expect full sell mode until the 950-970 area. Time to get this party started!

The hourly 34 SMA should act as resistance all the way down. Let's see how this plays out.

Monday, August 9, 2010

On the edge, but which way??

Well, the market got me for a couple of losses today as I took my own advice and got stopped out in two different trades in the morning session. While not a launcher out of the gate, the market did shrug off that first 30 min of selling pressure and grinded higher the rest of the day. The market closed right at resistance and is overbought with significant divergences.

We should know shortly which way the market is going to go, but unfortunately, I'll be out of town the next couple of days. Here are the daily and hourly charts.

Good luck!

I'm Back and Ready...

We had a great time up in the Redwoods of California near the Oregon coast, and now we're back with the on rush of school (yes school starts today!), sports, and life.

Now to the charts. After reviewing last week's action, here's what I have.

1. Drawing a support line from the lows of the past few months and then creating a parallel line to form the upper channel off of the high lets us see that price is nearing a very important area. If this channel is not going to hold, I would expect price to bust through this based on the hourly EW counts.

2. Here is the hourly chart with a bullish count. The three dotted lines on the chart are a regression channel with the solid line showing an extension of the channel into Friday's low. Currently the regression channel will break down with a price move below Friday's low, so it is important that price move up now for a bullish scenario. Today should be a breakout day (gap up and go) if this is the count. Price needs to get above last week's high and give a solid break out from here. Price target of a break out from here is a new rally high (above April's high).

3. On the other hand I have been charting that the top is in that we are in minor wave 2. This area is a perfect place for minor wave 2 to end, so a gap up that fails to accelerate is a perfect low risk / high reward bearish trade. Let's see if it comes this morning (go short after the first 15 min if it is a down candle with a stop 1 pt above the bar).

Best of luck!

Monday, August 2, 2010

Sorry I'm out for the week...

I was hoping to find the time to put together one last post before heading out on our last vacation for the summer, but I was never able to get there. Preparing for a week long camping trip for 8 kids is a lot of work! Enjoy the week, I know we will, and I'll catch up with you on where the market might be heading when I come back.