Sunday, February 28, 2010

Weekend Update

There is only one thing to focus on from here: where do we close on Monday. The reason I say this is because we have now reached the maximum retracement allowed for the bear count. Not only have we touched the 78.6% retracement with a rejection, but we tested a key trendline, and we are bumping up against the 34 daily SMA. If the market is able to shrug off both of these critical areas, then that means that the market has more buying strength than a wave 2 correction should have. In fact, I believe strongly, that if we close above Friday's high any time next week (the highest probability coming either Monday or Tuesday), then we will likely test and possibly exceed the highs seen earlier in the month. On the otherhand, should we close below Friday's low anytime during the week (again VERY likely Monday but still a possibility Tuesday), then that would signal the trigger for the resumption of the bear move and we should see some real selling for the coming weeks.

Let the market speak.

Thursday, February 25, 2010

Yikes! Keep us guessing...

Isn't it nice when you do your homework, put up your analysis, and then the market grades your paper and hands you back a nice big F. Well, that is what happened today as the market gapped down below key support, chopped for a while, and then bolted right back up.

So where does that leave us? A few NEW options...

Scenario #1: Minute wave 2 still in progress
- Waves 2&4 have symmetry (1:1.382)
- Wave 5 target is just above the current correction high with a stretch target to 1127-1130 area

Scenario #2: Either a leading diagonal or a 1-2, 1-2 count
- A LD allows the market to fully retrace the 1106 high, but pretty much the market should fully drop tomorrow.
- We backtested the broken trendline at today's highs

I think both bulls and bears are feeling a bit frustrated right now with the constant whipsaw. Just remember that the market is trying to condition us for the whipsaw, and then it will make its move.

Wednesday, February 24, 2010

The options expand...

Today's price action elminated the wave 4 scenario quite clearly but gave us a few others to consider. In times like these I think it is important to be more conservative and allow the market to let you know which way its going to go. So here they are:

(1) Subminuette wave 4 completed at yesterday's lows and we will test the minute wave 2 highs tomorrow. Here's what I like about this scenario:
- Waves 2&4 have price symmetry (1:1)
- We essentially tested the AH lows that were put in last Friday
Here's what I don't like: the impulsive count is very messy.

(2) Subminuette wave 2 completed at today's high. Here's what I like about this scenario:
- Micro waves W&Y have price symmetry (1:1)
- This should catch a lot of people on the wrong side with a gap down below 1100 at tomorrow's open.
Here's what I don't like: the micro wave 1 was pitiful.

(3) Subminuette wave 2 completes tomorrow morning with a restest of today's high, possibly an exhaustion gap. Here's what I like: this gives the price action to go a little higher and give us a proper wave 1 down.

Overall, I have to say I prefer scenario 2, but we'll see what the market gives us tomorrow.

Tuesday, February 23, 2010

Wave 2 should be over

The move off of the correction highs was impulsive and that should mean the beginning of minute wave 3. However, there are a couple of ways to look at it from here.

This is my primary count: we are in micro wave 5 of subminuette wave 1. This should bring in a lower low in the a.m. session. Should wave 5 subdivide (quite possible), then for a strong trending day tomorrow.

Initial target range for wave 5: 1086-1091 with a shot at 1082 without subdividing.

This is my secondary count: we finished off subminuette wave 1 and are currently in subminuette wave 2. In this scenario we should see strength in the morning with a retest of the breakdown. This should be the high of the week.

Subminuette wave 2 target: 1104 with a possible stretch to 1108.

Should we close above 1108, then we may be in a situation where primary wave 2 is not complete. I'll address it should it come up tomorrow.

Monday, February 22, 2010

Still no reversal confirmation

Well, today was yet another range consolidation day: 7 points. The only bright spot on the bearish side is the move down in the last 30 minutes to challenge the low of the day; however, there doesn't seem to be much follow through during AH.

So I'll leave you with the updated chart, since there isn't much else to report.

Key resistance: 1112, 1127
Key support: 1100, 1082

Sunday, February 21, 2010

Weekend Update

Well, with options expiration behind us we should see some range expansion come back into the market, which should equate to a resumption of the downtrend. However, what I'm not sure about is if the top was put in on Friday or will come early in the week: Monday/Tuesday.

It appears that we have a five wave completed pattern for our C wave, but it is too early to tell. If the top was in on Friday we should see an acceleration gap to the downside Monday morning. If not, then the most likely scenario is strength in the morning to retest or break the highs. Above Friday's high there is not much resistance until we get to 1127, so watch any potential follow through to the upside to squeeze some more shorts. We still need a close below 1080 to confirm the resumption of the downtrend.

Key resistance: 1110 and then 1128
Key support: 1100, 1092, and then 1082.

Thursday, February 18, 2010

I'm Back and hmmm....

Well, while I enjoyed the time off the market decided to make quite the move to the upside invalidating my 1-2, 1-2 scenario and either making this a large a-b-c correction or an outsized wave 4 correction vs the wave 2 correction. With the triangle count still looking good, at least the move off of the lows looks corrective and should give us either a wave C or wave 3 in the coming days. I'm watching for a close below the 60 min 34 SMA move once again agressively short.

Monday, February 15, 2010

Vacation Time

I just wanted to drop a quick note to let everyone I'm heading out with my family for a little snow trip and won't be back until Wednesday night. Hopefully the bulls won't wait up for me as I'm quite content to come back to Dow 9000 ;-).

Until then...

Friday, February 12, 2010

Friday Update

Yoswers is all I have to say after today's price action got me coming and going. Whenever that happens you know you're in some kind of triangle and it looks like we are in an ED to finish off a flat pattern and finally to be done with this minuette wave 2. The market has pushed and pushed and hasn't gotten much out of the effort but passing time. Since Monday's a holiday, who knows if the 5th wave will finish during market hours. Be sure that the next move below 1070 should be it for the market and the beginning of weeks of selling.

Any close above 1081 and the pattern is something else altogether but still bearish.

Have a great weekend!

Thursday, February 11, 2010

Market is now pushing upper boundry...

First off, I have to let everyone know that based on the price action this morning, I decided to change my corrective count to a B wave triangle consistent with what some of you have suggested and it also lines up nicely with the price action. You see, a zigzag should stay in its channel, and this morning we broke the channel but launched upwards off what would be an 'e' wave in a triangle and the price action was consistent with the move out of a triangle.

Now I know price is now reaching the upward boundries of my primary count, but I will stick with it until the market can get a daily close above 1091.

Otherwise we're in what looks like the last parts of the move. Either our subminuette wave 4 has some more work to do (I think it does) or it finished near the close. I'm looking for wave 4 support at the hourly 8 SMA, but we shouldn't get two consecutive closes below that MA until after our wave 5. We may even work it out during the overnight session around ES 1072/1073.

Overhead resistance is dead ahead from 1081 all the way to 1091. It should be formidable especially with the market as overbought as it is. If the market cuts through it, then you know we have something very different on our hands.

Best of luck!

Wednesday, February 10, 2010

No wave 3...yet

Today's action didn't start with an acceleration gap, but once price started going, I thought maybe this was it. Then the retracement started, and it was way stronger than it should have been and that gave me my doubts. I'm still going to count this as minuette wave 2 unless price can close above 1092. If that happens, then I think we have a minute wave 1 at 1044 and will be looking to have the minute wave 2 finish somewhere in the 1097/1110 area.

Tuesday, February 9, 2010

3rd of 3rd coming?

Well the bulls proved they had more in them than just yesterday. They have now, however, put in as much upside as they should have. All the indicators and the patterns are lined up for a 3rd of 3rd beginning tomorrow. But just because everything is lined up doesn't mean it will be so.

For my 3rd of 3rd scenario, I'm expecting an acceleration gap down tomorrow morning and quick take out of the prior low pivots: 1061 and 1056. From there, 1044 should fall easily and the market should collapse for several days. I am following my game plan from here with both Feb and March options along with an ES position. My wave 3 target is sub 1000.

Should I be wrong and the market put in a higher high tomorrow, then the whole pattern will have to be re-evaluated.

Monday, February 8, 2010

Was that the correction??

Let me just say I'm going to be a bit disappointed if that is all the bulls got. They drove price right to the front side of my wave 2 target, so I dipped my toes in the water with some options, but I fully expected (and still do) a wave B and then a retest. Well, the bulls weren't able to hold any of the key areas going into the close. Price action didn't 'feel' like a wave 3, but sometimes they just get started choppy. If we are going to get a wave C, it needs to start ASAP as price is approaching the level where the bears start piling on.

Key support: 1054.
Key resistance: 1071/1076.

Sunday, February 7, 2010

Weekend Update

Sorry it has been another crazy weekend. Let me first emphasize that there is nothing in the charts showing a completed pattern of any significant size that would justify a major rally at this stage. Any upside from here should be capped in the 1070/1075 area but could reach as high as the hourly 34 SMA (currently in the 1084 range but dropping). Instead, this looks like a classic subdivision of a wave 3 with minuette wave 1 finished on Friday and we're now in minuette wave 2. I know there are a number of oversold indicators, but that is the nature of a minute wave 3. It will continue to push oversold conditions for a long time. So, that is my target for adding to my short position in a big way: 1070-1080 range.

I'm looking for a little weakness tomorrow morning before pushing to higher highs, but you never know what the market will give you. However, too much weakness will likely crack open the dam once again, so be careful on playing any intraday long trades.

Thursday, February 4, 2010

Wave 3 has started!!!

Well, so much for a B wave!! I don't know if any of you took it on the chin for a bit of the morning before reversing, but boy did the market roll. Playing a bounce during a wave 3 is the way to get your head handed to you, so the way I go from here is to add short positions on every bounce. We could have completed a minuette wave 1 at today's low. Key resistance from here is 1070/1076. That is where I'll be adding to shorts if the market gets there.

Once the market gets above the hourly 34 SMA, then I'll be looking to cover on the next low as we should be finishing up our minor wave 1 at that point.

Wednesday, February 3, 2010

Not quite done with our B wave

Today put in a consolidation day with a bit of downward bias. Tomorrow I'm expecting a lower low then today with support coming in strongly around 1087. Then we should see strength through Friday to get us a completed minute wave 2. A close above 1103 before a lower low means our B wave was already over.

Tuesday, February 2, 2010

Wave A complete?

With today's action pushing up strongly, we have the makings of a completed minuette wave A with our subminuette wave c being 1.382x wave a. Tomorrow should see some renewed selling with a wave B target of 1087/1089. Then we should see bullish activity the remainder of the week.

Stay patient and let the bulls push the price to you. Once again I'm looking at beginning my short position around 1110 and Thursday/Friday depending on where we are in the market.

Best to your trading!

Monday, February 1, 2010

Wave 2 has started

Ok, we got a nice move off of the lows of last week without the bulls jumping for the exits with every bit of sell off. We're coming up on significant resistance, so I would expect a minor retracement tomorrow before finishing off a minuette wave A tomorrow or Wednesday. We spent 8 days in the downtrend,so I'm looking for at least 4 days of recovery. Today was one, so we should get a solid rest of the week.

With options expiration now only 2 weeks away after a potential wave 2 top, I will be weighting March options with some just out of the money Feb options. I hate to have the market grind around and lose time premium, so Feb options are definitely more risky at this point in the pattern.

I'll be looking for a wave 2 top in the 1110-1130 area.

Best to your trading.