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Pop and Drop. No, Wait!
The sell off last week looks motive and complete. I'm expecting a day of consolidation before another motive sell off. This morning's pop and drop is part of that consolidation. I doubt the pop was all the consolidation there is.
SPY 123 Strike.
The price typically hits the center of the bollinger band before going lower. The last couple of days have been calmer after the sharp bottom. Next day or two there could very well be a 2-4% rally.
The recent head and shoulders pattern.
Elliott Wave International has a tease-promo regarding the recent head and shoulders over the last 8 to 10 months.
http://www.elliottwave.com/freeupdates/archives/2011/08/15/A-BIGGER-Head-and-Shoulders-Formation-What-s-Next-in-THIS-Pattern.aspx
"Sometimes a short-to-intermediate-term target can be derived by taking the number of points between the head and the neckline and subtracting that total from where prices break the neckline..."
They also go on to say that there is a MULTI YEAR head and shoulder pattern in play. I did my research, all 5 seconds of it, and conclude the dotCom bubble formed the left shoulder, the housing bubble formed the head, and the sovereign debt bubble is forming the right shoulder.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=Index&symb=spx&time=20&startdate=1%2F4%2F1999&enddate=8%2F15%2F2011&freq=3&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1&lf2=0&lf3=0&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=9&x=35&y=21
Applying the proposed general formula, the SPX should drop below the 200 point level. I'd say sooner that 2 years.
SPX Relative Strength Bearish Divergence.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=11&dy=0&id=p32189679772
Over the past 10 months the daily chart for the SPX RSI formed a telling bearich divergence. As the market advanced the RSI was showing less strength.
Let's look at the SPX highs.
In November 2010, the Market made a recovery high and generated an extremely strong reading on the RSI for a few days. In January and February 2011 the markets continued making new highs and the RSI spent quite a lot of time at extremely strong readings. This would be expected in the middle of a long rally. Now look at the February and May 2011 RSI highs. The May 2011 RSI high was lower than the February RSI high, yet the May SPX was higher than the February SPX high. These three RSI and SPX reading form a bearish divergence. The May 2011 and July 2011 RSI highs and SPX highs were flat to slightly down, a strong indicator of a top. Both conditions were warnings.
Let's look at the SPX lows.
The November 2010, March 2011, and July 2011 SPX lows are all increasing, yet their RSI values are decreasing. This is also a bearish divergenge.
After the July August 2011 selloff, the RSI generated an extreme low reading, confirming the bearish divergences of the previous 10 months. If this recent selloff is a correction of 12+ month rally, then I would expect a bullish divergence of sorts. Unfortunately I see a bearish divergence of SPX price increase with decreasing volume.
SPX is in Fibonacci Window
This would be an ideal turning point, but the corrective bounce may need more time and length. Play wave b down and see if it turns out to be a new wave 1 of 3.
Bliss "Melt-up" then "Melt-down"
I agree with you that after any announcement of short selling ban that the market should move up due to the required buying to cover short positions. Over the long term, I believe the markets will go down because longs exiting positions will have even fewer people to sell their shares. Even if the short selling ban is for a month, or two, the sudden change of rules of the game will sideline shorts. That's why it's the long's exiting positions which ultimately drive down share prices, not shorts.
US Markets Heading Lower
The SPX intraday chart shows a complete zigzag.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=spx&time=&freq=
The SPX futures chart shows a complete double zigzag.
http://charts.insidestocks.com/chart.asp?sym=SPU1&data=Z30&date=051406&den=HIGH&divd=Y&evnt=ADV&grid=Y&jav=ADV&size=D&sky=Y&sly=N&vol=Y&late=Y&ch1=011&arga=&argb=&argc=&ov1=&argd=&arge=&argf=&ch2=&argg=&argh=&argi=&ov2=&argj=&argk=&argl=&code=BSTKIC&org=stk
Both charts are telling the same story: A 5% or more selloff is in the works. I'm considering either a corrective wave (wave b or x) down, indicating another week or two of consolidation (5% - 7% drop), or a motive wave (10% or more drop) ending below recent lows.
Smoot, Social Gage and some E-wave.
I agree with you that the government reactive in solving problems and proactive in creating them. The last time short sales were prohibited was in 2008, well after the selloff had been established. Maybe the government thinks it is trying to learn from past mistakes and pre-empt a selloff, much like stimulus spending. I also forgot to use the evening news as a similar barometer of social mood. It was only after the markets lost over 15% that the evening made the global financial selloff its featured story. These are contrarian. Another sentiment gage is the Investor's Intelligence. The bullish reading ticked up and the bears ticked down on August 10 despite the huge swings over the last week. This one is coincidental.
http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx
As I pointed out in SPX vs DAX vs FTSE, the SPX made a waterfall selloff, which is tough to count e-waves as wave 5 exends multiple times. The DAX and FTSE were easier to call a bottom because wave 3 extended.
The SPX futures shows a nearly double zigzag, which started August 8th. A 5% to 10% selloff is in the works. I'm considering either a corrective wave down, indicating another week of consolidation (5% - 7% drop), or a motive wave (7% to 10% drop)ending below recent lows.
http://charts.insidestocks.com/chart.asp?sym=SPU1&data=Z30&date=051406&den=HIGH&divd=Y&evnt=ADV&grid=Y&jav=ADV&size=D&sky=Y&sly=N&vol=Y&late=Y&ch1=011&arga=&argb=&argc=&ov1=&argd=&arge=&argf=&ch2=&argg=&argh=&argi=&ov2=&argj=&argk=&argl=&code=BSTKIC&org=stk
Evil Shorts, Beware (LOL)
France, Italy, Spain, Turkey and Belgium have instituted short sale bans. We all know what that means, the shares will fall even faster since no on will be in a position of having to buy shares. Doesn't that imply put options won't be available since writing a call is usually hedged by selling short?
US Markets are definitely in a corrective rally.
The past 3 days of trading broke to the right of the waterfall channel. The SPX needs 4 to 6 days of sideways movement for a Fibonacci time ratio, and retracement to 1200 - 1250 for Fibonacci price ratio.
SPX vs DAX vs FTSE
Of the three charts, the FTSE has the best wave shape. The top rounds over. The middle has a steep slope and little day to day overlap. The bottom rounds up. It sort of looks like a ski jump. Looking at the FTSE I would say a multi day corrective rally is due.
http://stockcharts.com/h-sc/ui?s=$FTSE&p=D&yr=0&mn=2&dy=0&id=p28996037708
The DAX has a straight channel selloff. There are two wel defined pullbacks, each for waves 2 and 4. Wave 5 is under way.
http://stockcharts.com/h-sc/ui?s=$DAX&p=D&yr=0&mn=2&dy=0&id=p27650192626
The SPX is a classic waterfall selloff. I'm finding it very difficult to call a pullback a wave 2 or 4, even on the 60 minute charts. The last two days have been very volatile sideways movement, so some kind of multi-day corrective move might be under way. But, WOW the market is strong.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=2&dy=0&id=p97971588095
Zig Zag Truncation.
As I typed my last comment, the markets were just finishing wave c of a zigzag. I expected wave c to end at or higher than wave a, yesterday's close. wave c truncated by a measurable amount. The next down wave is waterfalling. These observations tell me:
1.) The market is extremely strong
2.) The market is not going to bottom soon.
3.) This bounce was more likely wave 2 of something, not wave 4 as I anticipated.
Tomorrow my call for a gap down and sell will likely occur, placing the wave count in the 3 of 3 category.
Markets in Red Now, But...
there is some rally left.
The rally off late yesterday's lows was motive (wave a).
Today's opening into the noon hour was a triangle (wave b).
Presently the second, and last, motive wave of the bounce is left (wave c). And by the looks of things, wave c is 1/2 complete.
We're in wave 4-5 territory.
The drop after the Fed Open Mouth statements was relatively short, and makes the chart look like a bottom is starting to form. The late day rally was the largest bounce in the last couple weeks. It shows some confidence is coming back to the markets. I'm looking for a choppy slow downward path the next couple of days to complete a near term bottom.
Today Was Flat Wave
The morining rally can be counted as a zigzag (wave a of flat). The noon selloff can also be counted as a zigzag (wave b). The rally out of this afternoon's low is textbook motive (wave c). WOW, a 5% move!!! This flat could be wave 2 or 4 depending how strong the market is. Either way, look for movement back to SPX 1100.
Today's rally looks weak.
The serieas of tops are rolling over instead of making nice peaks. The series of tops is also rolling over. It's a fractal.
Bounce Over. More Trounce
Bernanke won't know what hit him.
I'm looking for a bottom sometime after a day or two of gapping down, and staying gapped the rest of the day before occurs.
I'm also expecting to see within the next 6 months:
1.) Trading is halte due to circuit breakers.
2.) Short Selling Ban
WOW!!! Huge volatile moves.
A 1.5% up, 1.5% down, and 2% up would be nice swings to catch. It's just too difficult when they all happen within 30 minutes.
The best wave count I see is a flat which started yesterday afternoon and is in wave 4 of c right now. The rally has not broken the upper waterfall (curved) channels.
Double ZigZag Done, Next Motive Wave Going Down!!!
The trajectory is for SPX INDU 8% to 10% down tomorrow. Gap down almost certain.
Double ZigZag Starting wave c
11:00 AM to 12:30 PM was a triangle. Only one more UP wave to go in the corrective sequence.
While the waves are coming faster, the last 2-3 weeks of counting has been easier than the 2 previous years. I think one of the "reasons" is a greater percentage of real people are making the buy/sell trades compared to the automated trading. It's a stronger emotional signal to measure.
Corrective Bounce This Morning
I don't know if the zigzag is part of a double zigzag, flat, or a a completed correction. Multi day rally is not ready to start.
And the carnage continues
The futures markets continue to make a waterfall pattern. There is no indication the rate of decline is slowing. Until then it's all waves 1-2 of many degrees, with 3-3-3... still to occur. There have been 10 days closing outside the bollinger bands. The probability of this happening are less than 1 in 25000. It's not a black swan, but it shows how using probability as a technical indicator.
Oil Enters a Bear Market
Oil broke below the support line of the rally which began in early 2009.
http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&yr=3&mn=0&dy=0&id=p94379168783
Today was Wave 3 of 3 ...
It could be worse. the markets could still be making even more degrees of wave 1-2...
At best this is a wave 5 and it's "Major Rally Time".
OOPS, I was a day early on 40 pt drop.
If a wave 5 is complete, then it is larger than wave 3 of the larger, waterfall motive wave from the June 22 highs. A sharp multiday rally could start any hour.
Triangle or...
Ending diagonal wave c of corrective flat. The edges of today's "bearish wedge" are textbook. Who was working the joystick today? ;)
There is no relief in the media from the "bad news". The market went up; however, the pom-poms are motionless. The last couple weeks of US debt ceiling drama have stolen the bad news spotlight from Greece. Today the spotlight is redirected on Italy and Spain. This observation signals a much stronger bearish trend is underway. Little rallies are getting squashed. Um... cycles are getting severely left-translated?
Today Was Corrective
It looks like a triangle advance out of the low of the day. Sharp drop at tomorrows opening, then a multiday rally. This could just as easily happen overnight.
SPX loses 40 pts today at minimum.
Markets are accelerating to the downside. The "wonder to behold" waves 3-3-3.. are unfolding.
Big gap down tomorrow.
I See the Fat Lady.
She is clearing her throat and about to play TAPS on a bugle.
Futurs Down Hard AGAIN!!!
The futures chart shows there is still a small chance the corrective rally out of July 29 lows is a flat instead of a completed zigzag, despite wave a and wave b being disproportional in time.
Can't Rule Out Wave 2 Flat. eom
Falling Off a Cliff! eom
Look for the SPX to find support in the 1100 to 1150 area.
SPX Futures up HUGE!!!
This coincides nicely with the announcement of a debt ceiling deal. The duration of wave 2 is too short. Either wave 2 takes more time forming a double zigzag, or the markets really fall off a cliff.
Why just a wave 2 or another corrective wave?
1.) The wave down from July 21 highs looks motive on both the futures and open market.
2.) The wave up from the July 29 low is a zigzag on both the futures and open market.
http://charts.insidestocks.com/chart.asp?sym=SPU1&data=Z05&date=051406&den=HIGH&divd=Y&evnt=ADV&grid=Y&jav=ADV&size=D&sky=Y&sly=N&vol=Y&late=Y&ch1=011&arga=&argb=&argc=&ov1=&argd=&arge=&argf=&ch2=&argg=&argh=&argi=&ov2=&argj=&argk=&argl=&code=BSTKIC&org=stk
Short Term Bounce Fitting Perfectly.
According to Prechter, wave 2 rallies in a bear market are based on false hopes. With the passage of a bill raising the US debt ceiling in the House (wave a of 2), the bill now goes to the Senate for debate (wave b of 2), and finally is scheduled for a vote on late Monday or Tuesday (wave c of 2).
The timing is would also be Fibonacci. The time ratio of wave 2 to wave 1 will be 50%, to 66%.
I have an SPX target range 1310 - 1315.
GULP!!!
The futures market still shows support and a completed Wave 1 which has lasted about a week. The price tagged the lower channel.
This morning's INDU SPX opening bottomed well below the lower channel line. The rate of change to the downside increased instead of slowing. This changes the SPX downside target to 1245 if today was a wave 3 of 3.
The futures market looks stronger than the open market.
I'm still going to stick my wallet out and say Wave 2 should start today. The headlines at the end of the day will be "stocks recover early selloff DESPITE lower GDP", and "Investors Optimistic the Debt Ceiling will be Raised."
SPX Opens Lower, But...
Overnight futures look like they found support. A corrective rally lasting a couple days should take place.
SPX bounce to 1315 over.
Going to the 1300 area to complete the last wave 5 of Wave 1.
Then larger Wave 2 takes SPX to the 1320 area or higher over the next 2 days.
SPX Sideways Movement Today in 1305 - 1315 Range
SkidStreet
The same line of reasoning can be applied to the housing markets in the US. As with the Baltic Dry Index, the housing excess supply is holding back price appreciation. The housing market has another factor holding back prices, demand. And I think lower demand is starting to impact the BDI as the global economy advances at a slower pace. Without having the numbers of tonnage shipped, I would infer that since the BDI has not been able to maintain the 2-3 year rally along with every other market in the world, demand for shipping really is dropping.
Dow Utilities - 5 Yr Chart
In Sol Palha's article, he shows a 5 yr chart of the Dow Jones Utilites. There are soome very clear e-wave patterns.
http://www.safehaven.com/article/21913/interesting-charts
1.) The 2008- 2009 plunge is clearly a motive wave (WAVE A).
2.) Wave 4 of the 2008- 2009 plunge is clearly a triangle
3.) The rise out of the 2009 bottom the rest of th year is motive (Wave A of WAVE B).
Wave B of WAVE B is more challenging. Did the wave end in May 2010, or somewhere else. If Wave B ended in May 2010 then Wave C is very difficult to count as motive. Chosing the end point for Wave B as March 2011 makes a flat, and Wave C now counts as an ending diagonal in wave 4.