Tuesday, November 30, 2010

Breakout is coming...

...but will it be up or down. Price continues to be within the down channel, so my bias is still for a test of the 1150 area. Should we open above 1190 then bulls should run it up and our wave 4 should be over. We open near today's lows and that should be good enough to send the bulls over the edge.

Monday, November 29, 2010

Is wave 4 complete?

The charts say maybe as we got a nice rally today off of our 1170 support area. It would be something like an a-b-c-x-a-b-c with the 2nd abc being a flat pattern. Definitely doable and a bit of a mixup. But until we take out the 1210 area, we may still be in for some more consolidation or a test of 1150. Let's see what the market has tomorrow.

Sunday, November 28, 2010

Long weekend update...

...I hope everyone enjoyed a nice happy thanksgiving. I'm still trying to recover from a game of football on Thursday and paintball on Friday. I'm not as young as I used to be and my body is reminding me now more than ever.

The short-term trend is still down, and I'm expecting a test of the 1150 area this week. This will determine if we're in a wave 4 or the start of something nastier for the bulls. Should we take out last week's high tomorrow, then I'll be looking for one of my original wave 4 scenarios: a flat or a triangle.

Best of luck!

Tuesday, November 23, 2010

Not a good opening for the bulls...

It appears the wave 4 I've been charting is still on schedule. However, the triangle/flat I was looking for doesn't look like it will come. In addition, a zigzag here is dangerous for the bulls because (a) we weren't expecting one (b) we will be close to an overlap on wave 1 and (c) it could easily morph into an impulsive pattern if it extends below 1150.

I'd be surprised if the bulls didn't make some attempt to close the opening gap. This is the chance to exit longs and get short.

Sunday, November 21, 2010

Lots of downside risk in the current range

Friday's move down stopped right where it should have and reversed. That makes this current move impulsive, but should we get long??

Here are the different count possibilities:

- In Wave 4, looking for a flat or a triangle
- In Wave 5, looking for a test of the previous high

The best long trade right now would be for this small wave up to retrace some tomorrow (1185 zone) and put in a bullish reversal bar. This would be good for another run at the top.

The best short trade right now would be to short the previous high and run it back down to 1170 area.

Otherwise be patient.

Friday, November 19, 2010

Quick update

Yesterday certainly counts as a solid test of the 34 SMA. So much so, that we may have already put in the low. This morning we're getting weakness. Is it the continuation of our pattern and a wave C, or is it just a minuette or smaller degree wave 4. If it is a wave 4, price should stay above 1187.

Thursday, November 18, 2010

So far looking corrective...

The move into 1170 support was unable to really breakout in an impulsive wave. So either we have a long series of 1-2 subdividing waves (unlikely) or we are setting up a minute wave 4. Now, wave 2 was 90 points. We've only traveled about 55 points so far. Wave 2 was a zigzag wave, so using the rule of alternation I would expect either a flat (unlikely), a triangle (very likely), or a complex (i.e. zigzag - x - flat) wave (likely). The market can extend this wave 4 as low as 1150 and still be in the game (no wave 1 overlap). We should be testing the 34 SMA this morning. Let's see how it goes.

Tuesday, November 16, 2010

We're in the critical zone

Sorry for the lack of postings. Work and kids' sports are keeping me very booked (my son just made the freshman BB team, yeah!). But here is a quick update.

Prices tried to rally yesterday, but the market was unable to get a full test of the 34 SMA. As a result, the market gapped down below a key area (previous breakout pivot high) this morning and kept on going. The market has yet to have a finished impulsive wave, so either this isn't done yet or we're in the finishing touches of a corrective wave (wave 4).

I'm looking to cover my short positions on any of the following events:
- a test of the 34 SMA, then I'll get out on the next test of the previous low pivot
- significance divergence showing up on the hourly chart
- hitting my 1150 target

Go Bears!

Sunday, November 14, 2010

The next down wave

We all know the talk that is going on everywhere about us being in a new bull market or primary wave 2. This next down wave is important for solidifying the bull or the bear. Our move down so far has stayed within our 25 pt symmetry (2 of them). So, the bears have yet to prove themselves by breaking down. Should we rally tomorrow expect selling to come in at the 34 SMA (60 min). This would most likely count as a subminuette wave b. Our wave c should close out in the 1170 area, which would never give us a confirmed weekly reversal.

If price continues to break down before testing the hourly 34 SMA, then we will be looking much more impulsive to the downside.

Friday, November 12, 2010

Busy times...

...Sorry for the lack of attention here. I've been busy working on an automated program, my regular job, and helping to manage these 8 kids!

But, I've still been watching the charts, and here is what I have:

- Bears need a weekly reversal: soon! This comes in at a move to 1165.
- Volatility continues to bottom, which is bad for the bulls.
- A reversal of the USD in the face of QE2 would kill this market
- Key levels were breached overnight - I expect a retest of those levels today
- A test of those levels would breach my 1202 line in the sand showing this wave structure to be completed.

Take it easy and enjoy the weekend!

Wednesday, November 10, 2010

So far a nice start...

...to what could be something big. If we can get to 1202 before crossing the hourly 8 SMA, then I'll be more excited about this moving into something more.

Monday, November 8, 2010

Looking for more than 25...

25 appears to be the magic number. The magic number of what you may ask? Since Aug 27th, there have been 5 pullbacks. Guess how many points...that's right 25. My point is that these pullbacks have all been part of the same wave structure. Once we pullback more than that, we'll know that this wave structure is finally over. Right now, the support level is 1202.

Sunday, November 7, 2010

Still looking bullish, but next pullback is key

So, if you are on board with the Fed and believe that they can magically wave their wands and all the trillions of bad mortgage loans will no longer have any impact on the economy, that we have entered the next bull market, that earnings will only get better from here, then you'll be wanting to get long in a bad way.

Okay, assuming you are correct, then I would wait for the next pullback, because right now we are in a spot on the weekly charts that have historically marked good sized pullbacks. The difference, of course, comes from being in a bull market or a bear market. Being with the overall trend is critical in what happens next.

You see, when you are with the trend, the market gives you lots of divergence before the next temporary reversal. Being against the trend, however, leaves you with little warning before the market suddenly reverses. Don't believe me, just try and capture the tail of any of the last corrections since the March 2009 low. The drops have been reversed quickly before any divergence could ever set in.

So, if we ARE in a BULL market, then the next drop will be shallow as the market will setup solid divergence over several weeks, and likely even through the end of the year. In other words, look for more consolidation as the next drop instead of a scary drop of the cliff for weeks kind of move.

However, if we ARE in a BEAR market, we are in the last stages of primary wave 2, and the market will reverse soon with no divergence warning coming on the weekly chart. The next move down will be furious. Let us see what clues the market gives us this next week.

One thing to keep in mind: when the market historically topped in October 2007 it was on a grinding retest of the July top. Deja vu?

Wednesday, November 3, 2010


Looks like it wasn't the elections but Bernanke's QE2 program that got the market to move a bit. It looks like we're still in the range for an ED to end tomorrow or Friday around the 1200 mark. If it moves past the 1208 mark, then this some other crazy non-countable pattern.

Hang in there...

Monday, November 1, 2010

Elections tomorrow, and then a breakout

This back and forth is really getting old. No new counts without a significant move; however the move down (so far) certainly isn't anything too exciting. As long as America takes out the trash tomorrow, I'll be content.

One more wave to go...

Well, apparently our potential breakdown last week never materialized. You can see from the hourly chart there have been a ton of subdivided waves in the current wave structure, and that is on an hourly chart!

With the # of waves and the choppiness of the market, I moved some numbers, so that the ED has one more high to make. With the election tomorrow, I guess it makes sense. Based on price action, the market will sell off after the election, but will be temporary (wave 2) or longer term (primary wave 3). I guess we'll know in a couple of weeks.