Wednesday, March 31, 2010

It's definitely a triangle..

..well one thing is for certain and that is we appear to have finished off the last stages of a triangle. Today was a perfect demonstration on how the market is going to do what it is going to do regardless of information. A bad employment #, and nothing. With the market closed Friday, it should be interesting how this ends. Either with an explosive gap up Monday or a 5/C wave failure with a massive gap down. I exited a majority of my short positions this morning when the market found buyers and started to rally. The rest are some minor april puts that won't cost me much if the market moves higher, and I'll be happy to add to them if the market can get below 1163 and 1154. Until then, it's upwards and onwards.

Tuesday, March 30, 2010

Little clues for tomorrow...

Well, the market made a 5 wave move higher but stumbled at key resistance (the high was actually 1177.94 while I had 1176/1177 as key resistance but hey). The market made what looked like an impulsive move to the downside, but the buyers were there in the area of the previous 4th wave, and that was the low for the day.

However, the move off of the low also lacks impulsive nature, so we're at another crossroads for tomorrow with not much more than a coin toss for direction.

Here's what I'm looking for:

(1) A move above 1176 tomorrow morning, and I'll expect a strong trending day to the upside.

(2) A move below 1168 tomorrow morning, and I'll expect a strong trending day to the downside. Any failure to push below 1164/1165, and I'll count it as a larger B wave.

(3) Continued congestion between these pivots, and I'll be expecting some kind of triangle to be forming.

Monday, March 29, 2010

Bullish developments so far...

...well, the bearish potential was crushed with an opening gap that never got filled. Price has once again regained the bullish channel, and we have so far what looks like a solid bullish structure. I've left out the bear counts for now, as I think it is best to focus on the current price action and key levels before committing to any particular EW count.

Based on the bullish structure, we should see a continued move up tomorrow possibly with another gap open. Key to the bullish case is to (1) stay above 1169 and (2) not stumble at the 786 retracement at 1176/1177 as that would be considered a failed 5th wave and would provide a strong reversal.

Friday, March 26, 2010

Friday Update

Well, the market is once again making things difficult on the bears. The price pattern we have right now needs to immediately sell off on Monday otherwise it looks like just another on going correction. We have a price channel formed and today's action kept things nice and tidy within that channel. Friday's are notorious for keeping with the week's momentum and in the end all we got was a doji. But are there things that should also keep the bulls anxious? Of course, and here you go:

- Big rally in Europe and Asia, but nothing on Friday for the U.S.
- Friday's tend to keep the momentum of the week. When they don't, then that is a warning sign of a potential short term change in trend. Since the Feb low, 5 of the 8 Friday's closed green. The last three Friday's...all red.
- The trend channel since the Feb low was broken to the downside on Friday and was never able to recapture it during the session.
- Treasury yields are rallying.
- The Dollar broke out of its trading range to the upside. When will the market re-align with the Euro? If it does, then that would spell doom for the market.

Here are the charts. Key to the bear scenario is a sustained move below Friday's low. If the bulls can get above 1170, then the odds increase for a retest of the highs.

Thursday, March 25, 2010

I'm all in short...

Well, today ran to a new top as expected, stalled and reversed in what is looking (so far) as a nice impulsive pattern. The sell signal on the daily MACD was once again confirmed with an outside reversal bar on the daily chart. In addition, we got our 10 day ATR sell signal to trigger today. If price cooperates, we'll see an acceleration gap down tomorrow.

While I am charting the price action as a subminuette wave 1 in progress, we'll have to see if we are just getting a 5th wave extention (micro wave 5.3) or are truly in subminuette wave 1.3. Certainly we have the technical indicators lined up for a big move, but we'll see if we get it on a Friday. Look for market to find lots of support around 1152.

My initial target for this sell signal is the 786 retracement of this last wave at 1074. I would expect significant resistance at this area before any lasting move lower. Of course as in all trades, nothing is a guarantee. We still have to clear a lot of other hurdles to even get to 1074, so moving stops down will be important until we have a very clear impulsive move to the downside.

Wednesday, March 24, 2010

Still waiting...

While Portugal's debt got downgraded, the market (other than currencies) were able to shrug it off and keep the downside action contained. The market appears to be tracing out a nice triangle that should resolve to the upside tomorrow; however, if we get a move below today's low tomorrow morning (without a quick reversal), then we could be looking at a 1-2, 1-2 wind up to the downside. That's the trouble with triangles, they look perfect until they aren't!!

Should we resolve to the upside, then I'm looking for an initial target of 1176/1177 with a potential to get near 1200 if the big boys can get a squeeze going (are there even enough bears left to squeeze??).

So, here are the charts, still waiting for some price action to confirm the next down move.

Tuesday, March 23, 2010

The market is putting up the setup...

...but will it deliver?? We now are extended on the daily chart with the potential of a confirmed divergence sell signal. We have the ATR just sitting on the edge of a confirmed sell signal. We have the Nas sitting at the 786 retracement from the sell off, but will the market deliver? I wish I knew the answer to that question. This market has done nothing but reward the buy and hold and punish any bears who dare put show their face.

Based on this count I'm expecting more upside tomorrow morning.

Price action has been contained pretty much to the middle of the channel leading me in the direction of a triple zz instead of an impulsive 3.

So here we are. I'm looking for a move below 1163 to get short with a stop above the highs and an initial target at the 1090/1105 area.

Monday, March 22, 2010

Monday update

Well, President Obama got his wish for Healthcare (at least so far as we'll see what happens when it is challenged in the Supreme Court), and I wouldn't be surprised if he had the fed make sure there was no market collapse on the morning after that might reflect badly on his policy decisions. So, overnight weakness was once again bought and the market rallied. Unless 1169 holds tomorrow, we're looking for addiitional strength for the remainder of the week.

On the old reliable 10 day ATR, we are nearing a potential confirmed sell signal. One more volatile day should do it.

Saturday, March 20, 2010

Weekend Update

After looking over the charts from Option Expiration Friday, the market didn't give us any clear direction. Was the Friday high an important top? Well, without better downside price action it could just as easily be another correction on its march to higher highs.

So, I've put out two different counts:

The bull count should see another strong week and higher highs. We should easily close above the weekly high. Monday's can often set the tone for the week, so another strong up close on Monday would be the first clear sign.

The bear count should see a nice daily reversal bar on Monday. Possible strength in the morning to be wiped out with additional selling. If the market can get above 1160 and stay there during the morning the bears are in trouble. We should see a daily close below Friday's low and a weekly low at least to 1126. If we spend much time below 1126 this week, then things could fall apart fast.

Thursday, March 18, 2010

It looks like just another correction...

The futures bounced around during the Globex session and then tested those levels during the day session. Well there doesn't appear to be any bearish pattern forming at this point, so I went ahead and lowered the degree of trend of my last night's post and am looking for more upside in what tends to be a mildly bullish options expiration day.

Wednesday, March 17, 2010

Potential reversal setting up...

Well, the market got rejected at the channel high as it attempted to breakout. Is it just a temporary knock back or will there be follow through to the downside? I'm still not interested in anything but a daytrade short until we get past the first key hurdle: the week low that was made on Monday. Things will look a little more interesting if we can move below the late day selloff immediately tomorrow in an impulsive fashion. If not, then it is just one more failed reversal in the constant move up.

Tuesday, March 16, 2010

Take a look at this count...

With the incredible price action we've had since the Feb low, I went through it once again and came up with the plausible count. This count would correlate with a several different market characteristics:

- The market has a tendency to reverse the gains/losses made during a fed day over the course of the following two days
- The market has an annual tendency to make a key high/low during the month of March and often during the 3rd week
- Key S&P sectors are not confirming the up move (XLV 61.8% retracement from high, XLK just over 78.6%, XLF currently at 100%, XLE under 78.6%)
- Market is overbought on all timeframes
- We are at a 21 week cycle high/low pivot time frame
- Volatility is once again at signaling a major down move is in the works

Now, that doesn't mean we don't trade what we see, so price needs to confirm the count. I have yet to see any confirmed sell signal in price action. Here are the levels I'm watching:

#1 - a drop below 1154 will peak my interest
#2 - I'm starting to get excited with a drop below 1141
#3 - When 1134 goes I hope I'm seeing impulsive action
#4 - It should be just a matter of time once 1116 falls that the Feb lows goes with it.

Monday, March 15, 2010

Today was a head scratcher....

Well the market found a 3rd option. I did, however, state that a closing of the gap would limit the bearish potential, and boy did it. I got worried as the day wore on and no more selling came back into the market, but even with that said, I still got my fingers burned on the end of day reversal. Boy do I hate those.

To be honest the only logical way to label the move so far is the beginning leg of a corrective move. The correction off of the top was too shallow to make it a subdivision off of such a large move (from 2/25 low), but on the other hand the strength of the move at the end of the day was clearly impulsive (so far). We went down too far to call it a 5th wave subdivision unless the triangle is labeled incorrectly, but if you do it any other way you only get 3 waves out of the triangle, so that doesn't make sense either.

So with that said, be cautious. While we did break the 34 hourly SMA, the market kind of shrugged it off at the end of the day. Tomorrow is another fed day, so we probably won't have much bearish movement until after the announcement (if any). Key support remains 1132 and critical support at 1116.

Sunday, March 14, 2010

Weekend Update

Well here it is Sunday evening, and I finally have some time to put a few thoughts together.

First off, Thursday saw a breakout of the triangle to a new high. The globex session high (approx. 1157 in the SPX cash) was never seen during the session and the high of 1154.5 that printed at the open was the high for the day. However, selling abated in the 1148 area (wed's high) and consolidated there until a rally in to the close. While the move off the high in the cash market only sported 3 waves, the 5 min chart in the globex session does show a 5 wave move down. So, I think that only leaves us 2 possibilities for Monday's options (although I'm sure the market will prove me wrong and come up with a 3rd one), and that is this:

5 waves complete. The thrust off the triangle has completed and we will begin at least a corrective move off of rally from the 2/25 low. Confirmation for this count would be an acceleration gap down tomorrow and a close below 1140 with 1134 to quickly follow. If the move is impulsive, then I'll look for a much larger move, even the possibility of the initiation of p3. If not, look for the move to run out of steam in the 1115 area before moving to new highs. Should the gap down occur below Friday's low and close, then that would lessen the strength of a bearish move.

5th wave extention. We saw the completion of the 1st and 2nd subwaves. The 3rd wave should be in full force on Monday with a gap to the upside and close above 1155 in short order.

With the market as overbought as it is and the rejection at the rally highs on Friday, I'm looking for scenario #1 to play out. Weakness in the Globex session appears to also be pointing that way. How far it will go is the more important question as it will determine the market's direction for the next several weeks.

Thursday, March 11, 2010

We finally have a recognized pattern...

Well if you give the market enough time, it eventually has to make some sense. Today the market let us know it was working on a 4/B wave triangle. One thing is for certain and that is p3 has not yet begun and the irregular looking impulse wave down was indeed corrective. We always thought the wave relationships between 2&4 were too different, but as there was no overlap, that is the way we kept it. Now it is clear that we will have new rally highs tomorrow barring some 5th wave failure during the globex session.

I'll be watching the pullbacks here closely to ensure we are not part of a larger impulsive move. 1115 should not be broken if we are going to keep this bull move going. I've updated some charts, but I'm leaving some of the larger counts rough for now until we have confirmation one way or another.

Wednesday, March 10, 2010

More chop another test of the highs...

Did we finally get enough selling at the top to discourage the bulls and get some pullback tomorrow? I'm not going to add much to the charts here. The market has yet to show any weakness that would encourage aggressive short selling. We have the hourly 34 SMA moving up to 1136. Key support remains at 1127 and 1115/1116. When these fall, then it will be time to start putting on some serious short positions.

Tuesday, March 9, 2010

Another subdivision or are we going down?

Can I just state up front that charting these price moves has been so incredibly frustrating. I have now gone back and changed some degrees of trend. This is the end of the line of the bearish count. I have kept it this way strictly based on the placement of triangles and corrections within the move since the 2/25 low. The late
day sell off is either the beginning of p3 or yet another subdivision.

Key support is now:
- 60 min 34 SMA at 1132 (also very near the Globex low)
- Gap at 1127
- The very critical 1116 level, which if falls, should initiate all kinds of selling

Key resistance continues to be the 1140 area. The market was not able to close above it.

Monday, March 8, 2010

Today was a real sleeper...

Yes, it was a challenge to keep my eyes open during today's S&P day session's incredible 4.5 pt range that pretty much ended where it began. The momentum indicators appear to have rolled over on the hourly chart, so that could mean a test of 1127 coming up tomorrow. But all that could change with a solid 60 min up bar with some follow through, so I'll just see how price reacts to that level should we get there tomorrow.

Sunday, March 7, 2010

Weekend Update

Okay, so it is time to take a step back take a breather. Consider these facts:

- The market completely ignored all resistance levels yesterday and grinded through them.
- Volume was uninspiring, but that didn't seem to matter.
- Price action was completely one sided (max pullback in the 3pt range and not considered healthy).
- Even with all of that ATR on the day was only 17/18 pts, hardly the 20-30 pt range expansion day the market should be moving towards after such tight consolidation.
- The market is highly overbought on every time frame from dailies on down.
- We have new highs on the Russel, will the other markets follow?
- Of the four key S&P sectors (XLE, XLF, XLK, and XLV), two are at their 61.8% retracement, one is in between 61.8% and 78.6%, and one is at 78.6% while the S&P itself closed above the 78.6% retracement. Clearly this latest move is driven by the minor sectors (which explains the new high in the Russel) and isn't what we would expect in a strong bullish move.

Now, we can anticipate a bearish move until we're all broke, but without confirmation on price action, then we will all be broke. So, here is what we need to confirm that p3 has indeed begun:

1. Close below the 60 min 34 SMA (currently at 1122).
2. Close below 1115.
3. Close below 1085.
4. Close below 1040.

Anyone looking to trade this, here is what I suggest. Start with a conservative position once #1 has been achieved with a stop above the current high. Add to the short once #2 has been achieved. Add on when #3 has been achieved and then again when #4 has been achieved. Certainly your own entry and stop techniques should be employed.

I also decided to go out and put together what a bullish chart might look like if I was completely wrong on this. Here is where it would start. Of course, it will need one more rally on every index and then a 3 wave move down on the weekly charts to confirm a new bull market. Until that happens, I'll still be a bear of Grand Super Cycle degree ;-).

Best to your trading!