Wednesday, October 27, 2010

First wave complete...

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!

Tuesday, October 26, 2010

Stay on target...

...nothing new to report, yet. Let's see where we go tomorrow.

Monday, October 25, 2010

Stay on target...

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...

Sunday, October 24, 2010

Not much to say...

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.

Thursday, October 21, 2010

Still topping...

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

So far so good...

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...

Monday, October 18, 2010

5 waves complete

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!

Sunday, October 17, 2010

Weekend Update

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.

Thursday, October 14, 2010

Tomorrow we grade the test

Well the bulls had a perfect setup and couldn't hold it. The bears took price down to the key area of support: 34 SMA and rising trendline. A nice bounce, so far, has come off that area. Google announced great news after the close. Simply put, the news is upbeat, the charts need a strong up move, so if it doesn't come tomorrow, then sellers will pile in and take the ship down. When a market doesn't move the way you would think, it is because it is getting ready to move violently in the opposite direction. Tomorrow is options expiration, so it will be interesting to watch what the market players do. There have been plenty of times in the past where they have sold the market hard. Which will it be tomorrow?

Looks bullish until proven otherwise...

With a market that just won't stop and the NDX testing our previously labeled primary wave 2 highs, it appears that primary wave 2 is not over. However, this is a dicey place to be getting long since a failure here should be significant with one index hitting a new high and the others not confirming that high. We would essentially have a failed 5th wave and the maximum of our ED from yesterday would be in play.

Take Care.


Wednesday, October 13, 2010

Today is it for the bears

Here is my quick update. Today is the last day for the ED scenario to work for the bears. Based on market symmetry and resistance levels, price should be held in the 1177 - 1180 range. If it does not, then primary wave 2 never likely ended.

Stick to your rules!

Monday, October 11, 2010

Which way, which way...

With the light volume of Columbus day came another doji candle. Tomorrow marks what I am counting as Minor wave 2 being 1.5x the length of minor wave 1. One thing is for certain, if this is a 3rd wave for a bull market, price action is taking its sweet time. We still sit below the dreaded 786 retracement at 1174. We could still be in our final a-b-c of the 5th wave of an ED having finished the 'a' wave today and the 'b' wave tomorrow. The wave structure won't be over until price can get below these key levels:

- 1150 (the micro 4th wave low & the hourly 89 SMA, which has provided support since the 1040 low)
- 1130 (the breakout pivot)
- 1100 (the daily 89 SMA and another key daily pivot)
- 1040 (the last key support - tested 3x)

However, if price can get below the breakout pivot, then odds are VERY high that the rest will follow with the start of Minor wave 3.

Sunday, October 10, 2010

Weekend Update

Last week, the market thwarted several attempts to get anything going on the downside. At the end of the week, price left us on the edge of a potential bear channel ready to break out. Through all of this though, the market has been making several 3 patterns, which led me to attempt different triangle patterns. I first mentioned a potential ED pattern, although it didn't quite look right. Then I mentioned a wave 4 triangle, but the reversal pattern did play out right.

Where does that leave me now? I'm back to another ED count with the 786 retracement and a potential overthrow of the channel coming in to play tomorrow. In addition, we have a time relationship coming in on Tuesday where minor wave 2 = minor wave 1 * 1.5. This is the last of the minor wave 2 bear counts we've been tracking. If the bulls close this above 1175, then primary wave 2 is VERY likely not over. So this is a very critical juncture.

Best of luck!

Thursday, October 7, 2010

Looks like jobs will do it...

Well, in the end the market does what it is going to do...Today it made a brief high at the open giving us a potential 5 wave setup and erasing my failed 5th wave theory yesterday. Tomorrow morning is the jobs report, and it appears as though the market players are waiting for the market to give them a clue before they make their move. So we'll wait and see what goes on. I like the follow through potential of a gap down move. I'd wait to see if a gap up move has legs. I would definitely not short the open until I see the sellers overwhelming the bulls.

Best of luck!

Wednesday, October 6, 2010

Nothing convincing yet...

Price got rejected at the high again today, so where does that leave us. Here's the 15 min chart, and I want to zoom in to this orange box and look at the 5 min chart up close.

If you've been following me for some time you know I'm a big believer in market symmetry. Here is what the market is telling me with this move off the latest attempt at a new high.

Our wave 4 should have a fib relationship with wave 2. Generally this is 1:1 or 1:1.382. You'll notice that buyers came in when the market corrected to each of these levels. However, in both cases, buying dried up BEFORE making a new high. Price was then able to move down even further than both of these levels now making our wave 4 / wave 2 relationship out of whack. This is telling me that somewhere in this mix is VERY likely a failed 5th wave.

Now EW tells us that failed 5th waves result in swift price moves in the opposite direction. So, if this is the correct interpretation, we should see consistent selling the rest of the week. 1130 should come up soon and eventually the 1095/1100 level that I've been watching so closely.

Let us see...

Completed pattern?

Well, my call for an 'x' wave was right on as the market rocketed off of that low with a gap yesterday. However, the bulls aren't out of the woods yet. From a time perspective they are still within the minor wave 1 * 1.382 time sequence (currently at +1 days) and the a = c zig zag potential minor wave 2. This isn't a time to get overly bearish, but a solid move below 1150 would definitely get me interested.

Monday, October 4, 2010

Cautiously bearish...

Today's price action dropped us bears right in the middle of a potentially bullish setup. Corrective patterns have a tendency to repeat themselves during a prolonged impulsive move. When I marked subminuette wave 2, it was with a 22 pt pullback. Wave 4 also was a 22 pt pullback. And today's low marked yet another 22 pt pullback. In addition, it did it within 7 pts of a 786 retracement. One more failed attempt at the 1129 area would provide the market with the divergence it needs to get a strong bullish rally going.

So, the bears need to push through this area tomorrow and the next day. Only then will we get to our real test area of 1095/1100.

Sunday, October 3, 2010

Sunday night...

Friday's price action just looked like a subdivided wave 2. Maybe some end of week price painting. I'm still holding short with a stop at 1159 and a short term target of 1100. Other than that, nothing new to report.

Friday, October 1, 2010

Major Top?

Ok, I've only put up a couple of daily charts here, because we have in the making (finally) the top of minor wave 2 yesterday.

Confirmation will come with a daily close below the daily 89 SMA. Significant support is comes in at 1095/1100, which will likely be where this SMA is at the time price gets to this level. I would anticipate that would be a minuette wave 1.

Now, this chart I've used in the past to identify times when the market is going to accelerate to the downside. It has given us a couple of false signals over the last few months. Yesterday, it gave us another signal. I believe the take away from this is that the false signals came after steep corrections.

Look for some strength this morning as we work on a subminuette wave 2.

Best of luck!