Wednesday, June 30, 2010

Potential 5 wave completion straight ahead...

...well another rally faded to new lows today, and it looks like we may be at the end of our wave 1. Key support begins at 1008, and I would look for a wave 1 low somewhere between there and 1000. I really don't think the market will get to 980 since it appears that our wave 4 was put in higher on the price charts than I thought it would.

Anyway, here are some charts. Wave 2 should break the hourly 34 SMA (currently at 1063 and falling about 1.5 pts an hour) to confirm that wave 2 has begun.

Tuesday, June 29, 2010

We're extending...

Based on the price action, I don't believe we've finished our minute wave 1 of minor wave 3. The bottom line is I'm expecting this wave 1 to finish in the 980/1000 area before we have a retest of the 1040 support line in a wave 2. I'm looking for continued downward prices (possibly choppy) on the way to that area to create plenty of divergences on the daily chart.

Best of luck!

Monday, June 28, 2010

Tomorrow should be the high...

Today's price action appears to be consistent with a B wave triangle, which means tomorrow should be wave C of 2. My target for the high was modified slightly based on the triangle pattern, but it is still sitting in the same spot.

An open below today's end of day low would mean that we are in something more bearish, and I would expect follow through to the downside on any gap down. I wouldn't be surprised to see a gap up though, a failure to close the gap (wave 2 of C), and then a push to the wave 2 target throughout the remainder of the day.

Best of luck!

Sunday, June 27, 2010

Weekend Update

Friday brought prices right to the front edge of my wave 1 target zone. There are a few different ways to count the price action on its way down depending on how much you consider the globex session etc. In the end though, we should have a wave 1 low (I'm labeling it as minute) and we should be in the wave c of 2 tomorrow (assuming the selloff on Friday holds).

This gives us a wave 2 target beginning at the 38.2% retracement (1092) and all the way up to the 50% retracement (1099). However, the energy that is being built up could be released at any time and there is no guarantee of an easy short entry.

The support line on the chart is where prices will accelerate to the downside once that support line has a confirmed break. From there it should be a quick drop to 1040 where some buyers will try and catch the knife, and after bouncing around a bit, price should really go.

Friday, June 25, 2010

Market continues lower...

Sorry about the late post...but here is what I see for today.

We got our first acceleration gap of this move down and it happened at a great spot as the market opened below the trendline, which was one of the confirmations I was looking for. Let's take a look at this 15 min chart:

On my previous 5 min chart (yesterday's post), I had already marked my subminuette (green) wave 4 based on the move that happened during the globex session. But looking at the cash chart and especially the 15 min chart, that 4th wave never registered. So I moved that wave 4 to Wednesday's high and my minuette wave 4 to yesterday's mid day rally. According to this updated count, that would put us in our final minuette wave 5 that has a target of 1060.

Those who have been following me for a while know that I like to use the 34 SMA to distinguish between wave structures of higher degrees of trend. In other words, a wave can continue to subdivide until you get confirmed close above the 34 SMA of the chart you are using. Right now, I'm tracking this wave on the 15 min chart. You can see that the 34 SMA was challenged a couple of times but rejected each time. We'll know we've started minute wave 2 once we get a confirmed (multiple bars) price close above that.

Once we get our wave 2 confirmation, here is what I'll be watching going forward:

- A wave 2 target in the 1090/1095 area. There is the open gap from yesterday that should get closed.

- I'm expecting this minute wave 3 to subdivide significantly. I may modify degrees of trend based on future price action.

- If we're going to get trend change on a Friday it should happen early in the day.

- Just as the 34 SMA on the 15 min chart has shown resilent on the way down, I expect our 34 SMA on the hourly chart to hold the wave 2.

Best of luck!

Wednesday, June 23, 2010

So far we are in an impulse...

...and I'll go ahead and keep that count until proven otherwise. Right now we only count 3 waves down, but a lower low tomorrow would put in 5 waves. We have good ratios between each wave at the appropriate degree, so that also gives me confidence in the count.

Since we haven't had an acceleration gap down yet, I would love to see one tomorrow. Let this run down to at ~1070, and then that gives the market a perfect target for a wave 2 before this thing really gets going. I know there are lots of counts out there calling this a B wave, and I mentioned today that I needed to see some more price action to the downside to start filling in the rest of the needed boxes to count this as an impulse. We are now only one more lower low to complete that requirement.

Should we move above the 34 SMA (hourly) before hitting a lower low, then we finished a B wave. Currently that SMA is at 1109.25 and falling about 1/2 pt per hour at the current slope.

Best of luck!

Tuesday, June 22, 2010

Tomorrow is critical...

...and you may ask why. Well, today's price action may have signaled that we just finished a wave B instead of in the beginning of minor wave 3.

First, I'll show you the 5 min chart.

#1 - we have what appears to be a very obvious triangle pattern that formed and completed today.

#2 - the size of the triangle does not match any of the other corrective waves we've had, so I cannot match it with a previous 2nd wave.

#3 - triangles that are not 4th waves are B waves.

#4 - today's price action ended at critical support: ~1090. The market has consistently shown us over the past weeks that this is a key level.

#5 - if today's price was the low for this move, then waves a & c would be equal.

Now, does this mean that there can't be a bear count here? Something potentially more bearish? Sure, and some times what appears to be an obvious triangle later appears to be a series of 1-2 counts. So this chart shows that potential.

#6 - we have yet to have an acceleration gap during this whole move down off of the top. If we are in an impulse move, tomorrow would be the perfect day to gap down and not look back until we at least get to the 1070 area where the market would want to work off some of the move before heading lower.

Best of luck out there. Be ready to get long if the market tips that way.

Monday, June 21, 2010

Wow, the train is running on schedule...

it is always nice to at least lead off the week with a dead-on market forecast. I won't get too excited until I see further price confirmation, but no need to doubt my own work until proven otherwise.

So I'll throw up a couple charts. This one is a 5 min chart, which clearly shows impulsive price action going on. There is no guarantee that a minuette wave 1 is finished at today's low, but once price makes it back to the other side of the hourly 8 SMA, then I can call it complete. If our minor wave 3 has started, then we should see continued and consistent selling intermixed with sporadic and sharp rallies.

Let's do this!

Sunday, June 20, 2010

Weekend Analysis

Well, after reviewing the charts over and over here is my conclusion:

- The Minute wave 2 flat is out and the minor wave 2 triple zigzag is in.

Look over the following chart, and I'll show you how I came to my conclusion:

Looking at the 30 min RSI(5) you can clearly see that there is the lack of a 5th wave before RSI(5) swings from high to low. In a 5th wave you will see divergence build up with a lower high on the RSI(5) and a higher high on the price chart. That does not happen at all (except maybe at a lower time frame).

The next thing you should note is that each 'B' wave is about 12 points. The first 'X' wave was 25 points and the 2nd 'X' wave was 16 points. In addition you should not that we are in the final 'C' wave of our larger 'Z' wave of minor wave 2.

The price target for minor wave 2 is as follows:
- The 50% retracement is directly overhead at 1130. In addition, c=a*.786 at this same level.
- There are some other fib relationships starting at 1126 and move to 1139.
- Heavy resistance starts at 1145/1148
- There is an open gap at 1160
- Price in this final C wave could attempt an overthrow of the channel, but it is not likely.
- Any drop below 1107 should begin minor wave 3.
- It appears that 85-90 is key on the RSI(5) to trigger a reversal. I do not expect any divergence to show up on this chart.

Now let's see how the market behaves...

Best of luck!

Thursday, June 17, 2010

Tomorrow or Monday we move down...

...all I can say is there must be a whole lot of open interest in puts that the market makers are doing all they can to make sure they expire worthless. So I'm not going to get too much into the minute charts. Unfortunately the sell signal we got yesterday never really got going although we did drop through yesterday's EOD sell off low.

But here is where we are:

- daily charts have now hit a level on the RSI(5) that sellers should be coming in
- we're at key resistance and losing momentum

Now, if we are in a minor wave 2 and not a minute wave 2 (flat), then we should move down but the 1090 area should hold. I don't think it will, but let's see what the market is going to do. Since it is options expiration tomorrow, I'm not holding my breath for a major move down. There's nothing in the price action to say we aren't going to try and poke our heads out above the week's high tomorrow, so I'll wait for price action to get me excited.

Best of luck!

Wednesday, June 16, 2010

Downside risk is elevated...

Today we finally got some hourly sell signals with significant divergence being confirmed at the close. Tomorrow we should see a drop below 1110 with our immediate target of 1090/1095 for either a wave 1 of the start of our minute 3rd wave or another wave B on the market's path for 1145. Should be interesting...

Best of luck!

Here's the chart

Ok, so I'm feeling a bit more rested now, so here's a 15 min chart. No rules broken here in the 5 wave move off the bottom. We either have a minute wave 2 flat here (shown), or the A leg of an A-B-C. If it is an A leg, then I expect the market to hold the 1090 area and keep price in the channel for an eventual move to 1145 and potentially challenge the 1160 gap.

Best in your trading!

Tuesday, June 15, 2010

Quick update

I'll try and post a chart tomorrow, but I'm exhausted and am off to bed.

The only thing I want to say right now, is that yesterday's correction was not big enough for me to push the scenario that we are ready to go to 1145 or even challenge the gap at 1160. Today, we closed a gap and closed at key resistance. Although the waves are sloppy, it appears that we now could have had 5 waves up completing a 2nd wave flat at today's high. Tomorrow's price action will be very important as it provides additional clues about future market direction.

I continue to maintain my stance that lower prices are ahead. The market still needs to get to 1125 for a weekly reversal to the upside. Since it is very overbought, I expect significant weakness tomorrow. Let's see what it brings. I believe Monday's low was an important one for future market direction. A move to 1070 could be enough to start the next wave of selling.

We will see...

Monday, June 14, 2010

Monday update

Well, the market opened up green and closed red, so the market has so far responded to over head resistance. My alternate count of a minute wave 2 flat could have happened at today's high, but to be honest, a flat is supposed to be a 3-3-5 structure, and unless I really push the waves around, I get a 5-3-3. So while I would personally like to see this market drop like a rock, I can't forecast it as my primary count.

Instead, looking at the daily chart things could go with a leading diagonal, although with that count we have a truncated 5th wave, which isn't supposed to happen. So here I am with two counts I don't really like.

I've given you the charts, but instead I will focus on support and resistance.

Key support for more upside appears to be 1070-1075 area. Certainly today's high is key resistance for more downside. This week is options expiration, so my gut tells me to expect wild swings with an upward bias. Let's see what tomorrow brings.

Sunday, June 13, 2010

Weekend Analysis

Friday's low volume was a perfect setup for those who wanted to push the index higher. Friday's close came in right at key resistance, and while Monday can open green for the bears it should not close there if we're still tracking a bearish count. In fact, if we close above 1090 tomorrow (and especially 1105), then I give high odds for a run to 1145 before any significant selling comes in.

I've looked over the charts at several time frames, so let's review:

Here is the 15 min chart. Everything looks corrective off of the 1040 rise. We have key fib relationships working on the down waves, which means that they are still part of one larger up wave. Fib relationships target the 1092/1095 area as heavy resistance. If none comes, then that would be bad for this count.

Here is the 60 min chart. It is telling us that we currently have 7 overlapping waves (closes above / below the 8 SMA) along with significant divergence showing up on the RSI(5). If this divergence is not respected tomorrow, the market will likely BLAST higher the rest of the week.

Here is the daily chart. Although we currently have an uptrend on the daily chart we are at a point on the RSI(5) where sellers have consistently sold the rallies since the April top. Once again I state that if sellers don't show up now, then the bulls should be able to take it significantly higher (target 1145).

Here is the weekly chart. We are still in a downtrend and we continue to be until the market gets above 1125. Will it get there? Tomorrow should be key to the forecast.

Best of luck!

Thursday, June 10, 2010


...well it should have been fairly obvious to any of my readers that when the market opened this morning none of the scenarios I laid out yesterday were going to work for today. So in light of today's price action, there are two new scenarios for tomorrow that still work as part of our overall bearish count.

Primary Count: Still in minuette wave 2 but it will top tomorrow a.m. if not already. 1090 is the maximum allowed here and the reversal should be fast and furious.

Secondary Count: Minute wave 2 still has not ended and we're working on a flat correction with a target somewhere between 1115 and 1120. We should see additional follow through strength tomorrow taking out 1090 and backtesting 1090 in an 8-10 pt correction before moving to the target by the end of the week. There are lots of things I don't like about this scenario. First it provides even greater bullish structure to the daily charts along with looking at a weekly reversal to the upside. This would then have the opportunity for further follow through putting the market back in an uptrend. The 15 min 34 SMA should act as very strong support from here on up for this scenario to work.

Best of luck

Wednesday, June 9, 2010

Wave 2 over, where do we go from here...

The market pushed prices over my target by several points (1072 was my high target and today's high was 1078), but was unable to hit my upside target of 1085. Prices reversed from there and is now setting up for our next move. The problem lies in where we are in the count. Here are my alternatives:

Super Bearish (Primary Count): We are about to begin the massive 3rd of 3rd of 3rd. Looking for a minute wave 3 low around 920.

Bearish with a retracement coming (Alternate Count): We are about to finish a leading diagonal with a 5th wave target at 1000. This will also backtest the multimonth trendline that was originally taken out. The reversal from here should be significant.

I'm looking for a minor wave 3 low at the 786 retracement from the March 2009 low.

Best of luck!

Tuesday, June 8, 2010

Wave 5 target hit...

...with the market pretty much splitting my target of 1037-1045 with the low coming in at 1042. We have completed 'a' of 2 and 'b' of 2 and are now working on the final leg of minuette wave 2. This wave should top tomorrow with a price target of 1064-1072. There is an upside target in the mid 1080s, but the bulls have yet to hit one upside target and the surprises seem to be on the downside.

I will be looking to add to my short position in the 1070 area and again when we get a confirmed reversal (60 min reversal of the previous bar + 3 pts once we are in the target zone).

Monday, June 7, 2010

Market continues lower...

...and the premarket gave the bears an opportunity to get in at 1070, which appears to now be the key swing level going forward. Based on price action right now, here are my forecasts:

- Primary Count (I know I have it backwards on the charts): Wave 4 flat (BTW did you notice that the wave 4 hit my correction target of 10 pts?) and we're currently working on wave 5 of minuette wave 1. Price target is 1037-1045. Minuette wave 2 should be about 35 pts and end somewhere in the neighborhood of 1170.

- Alternate Count: Wave 4 zigzag and we're currently working on a subdivided wave 5 with micro wave 3 of subminuette wave 5. Under this scenario price should not touch 1160 before finishing the pattern.

- Bullish Count: All economic woes have been fixed with easy money and the market bottoms somewhere between here and 1040 and then overtakes 1120 turning the charts bullish.

Best of luck!

Sunday, June 6, 2010

Weekend Update

During the Globex session Thursday night, futures hit their correction high at 1108 before getting reversed. The market was already treading water in the red when the payroll numbers came out, and the buyers ran for the hills. It wasn't until price made its way to the 786 retracement at 1074 did the buyers come in and try to reverse the trend. I have to admit, that when I left to work I felt like they were going to close it green again, but that didn't happen. Instead that rallied failed and the market never looked back again.

Since price took out our x wave low at 1070, there is no other bearish option to consider except the start of minute wave 3.

Some observations:

- I think the market is tracing out a minuette wave 1 right now that will bottom some where between 1035 and 1055. We still have a subminuette wave 4 to finish (looking for 8-10 pts) before we'll finally see some buyers. By then I expect the divergence on the hourly chart to be massive and we'll be coming into a sweet spot on the charts for the buyers to take a stab. 1065 is the key support area, and that should be retested one final time before the bottom falls out. This will give the hourly charts a chance to work off their oversold nature and hopefully get some people on the wrong side of the next big move down.

- Now I would not cover any shorts and buy the house in this area (1035-1055) expecting a quick profit and a jump to the other side. I can't tell you how many times the market, when fragile, can just defy all indicators and go hard in one direction. This means that IF we do not get substantial buying in this area, THEN the market COULD go right off the cliff. I'm just saying if you can get in near 1065 AT ANY POINT tomorrow take it. There is no guarantee it will be back for 2nds.

- Once this low pivot (1040) is substantially defeated (by 10-20 pts), there isn't much between there and the low 900s. I see next big support in 920 area and this is where I would expect a minute wave 3 to end. From there minor wave 1 could end anywere from the high 800s to the March 2009 low. Look for minor wave 1 to end when the monthly RSI(5) is below 15 (currently at 43).

- From a time perspective, minute wave 3 could take 8-13 days.

- The RSI(5) on the weekly charts has lots of room before we are substantially oversold on the weekly charts (currently at 24 and could got to the low single digits)

Best of luck!

Thursday, June 3, 2010

Still working the correction... a long-term top. Tomorrow makes a lot of sense on a top. A gap up on the open and a run toward 1115 with a reversal should be our signal that our minute 2 has topped. I'm ready...

A drop below 1065 is our confirmation. The market could break tomorrow's low without a problem as long as it doesn't go higher first.

Best of luck!

Wednesday, June 2, 2010

Alternate count it is...

Today's open was the big give away on where the market wanted to go. It tried to close the gap and failed (as predicted), and then took out the daily high and steadily moved up from there to put in a a big up day. From here we have a few different options:

Primary Count:
We are currently in wave A of Y. Forecasted target is somewhere between where we closed and 1107. From there we get wave B of Y that should be a 20-25 pt correction. And then wave C of Y to finish up minute wave 2 in the 1120-1130 range with an upside target of 1145.

Secondary Count:
We are currently in wave 1 of C. Instead of a zigzag we're going to get a standard 3-3-5 correction. Wave 1 should top like wave A, but the difference is that there is a better chance of hitting the upside target.

Bullish Alternate Count:
This whole move off of the flash crash low was "THE" correction and after the bulls take out 1145, 1181 will fall and we'll get several more weeks of buying. The world is once again a happy place, and the economy has pretty much recovered. If you're not working, well, then we'll just not count you in the statistics...

Tuesday, June 1, 2010

Which way will cause the most pain??

Boy this market is going to do its best to get the most people on the wrong side of this next move. There are certainly plenty of bear blogs out there calling for higher prices. If this is in deed the start of the 3rd wave down, then the market may not really care about higher prices.

At the start of the day the market found support at the 1178 level as predicted. From there it rallied really hard - in 3 waves...Then we had a nice 3 wave correction and then a c wave failure on the retest of the daily highs (in the SPX) and the sellers took over the ship dropping the index down to 1070 at the close. Here is where the market put us:

Bearish Case (Primary count):
We are in a 1-2, 1-2 count with a massive 3rd of 3rd of 3rd coming tomorrow. Confirmation is a gap down and an impulsing day to close below 1040. I would expect massively oversold conditions on the hourly charts with all kinds of divergence over the next several days as we make our way to the low 900s. All the bears waiting for higher prices never get it and are forced to chase the market, but most of them won't as they will watch in disbelief as the market finally crashes. Bulls of course will run for the hills with whatever capital they were able to salvage (assuming of course they sell and do not stay on the titanic).

Bullish Case (Alternate count):
We likely gap up at the open and possibly retest the gap, but find support at 1070 once again. Once the daily highs are taken out the shorts will be squeezed hard as we enter the next leg of this zigzag. We should have buying the rest of the week up until we find mega resistance in the 1120-1130 range. Bears get their wish and the bulls get suckered some more.