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Barron's cover is a strong contrarian indicator.
And the graphics are very funny.
SPX INDU top on Monday or Tuesday.
Wave 5 of the ending diagonal is about half way done. Look for last week's highs to be tested.
Buzz - Ewave and Hurst Alternate Counts
No trading method is going to produce purely profitable trades. All data used in calculations or assessments has measurement error. What Ewave and Hurst offer is a significant reduction of risk.
I'm working on a spectral analysis approach, motivated by Hurst's findings of periodic trends in the market. One of the studies will include backtests to determine the probability and quantity of profit X number of days, weeks, and months in the future. I fully expect imperfection. When the odds are not in my favor, I'll park cash on the sidelines.
Ending Diagonal at Some Degree
This morning's selloff pattern does not look very motive. It is more likely wave 4 of the larger degree ending diagonal. Wave 5 should be choppy into election day / Fed open mounth committee (FMOC) meeting.
TNX - yield gaps twice
The yield on the 10 yr yreasury bond gapped up 2 days in a row. Over the last month the yield has moved sideways and broken the multimonth upper downtrend channel. A bottom is at hand, and a multiweek increase in yield is to follow. Bond investors are showing more doubt about the QE2 than the media is acknowledging.
SPX double Ending Diagonal
The larger ED in play is from the middle of September 2010.
The smaller ED started last Wednesday and is in wave 5.
I thought the markets would rally right up to election day and then "Sell the News". The markets are looking to sell off the rest of the week and "buy the news" early next week in a corrective bounce.
TNX yield takes a pause.
Look at the intraday chart. There is a lot of overlap. It looks like a triangle; however, Tuesday could be a flat. Near the tip of the triangle the yield is hugging the upper edge, hinting an upward move after the yirld moves out of the converging edging.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=tnx&time=&freq=
WTIC whipsaw.
This is beautiful to look at. In terms of e-waves, it's the last consolidation before the last rally, or it's a bunch of waves 1-2-1-2...
http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&yr=0&mn=6&dy=0&id=p99682036594
SPX Futures Lower, But...
Since Thursday 14 October 2010 the SPZ0 (december SPX futures) have traced out a textbook triangle. Look for a sharp rally to the 1180 area today. Since triangles are found at the next to last position in an e-wave, the sharp rally will be the end of a larger degree wave. The rest of the week should have downward bias.
AAA ABX Mortgage index followup comments.
I've only been keeping an eye this one index, so I am surprised AA and riskier indices were less volatile. I keep and eye on the AAA index because I believe it represent the cream of the crap and trades more like the major US stock markets. Since there was a huge rally and equally strong selloff, I see greater underlying weakness in the morgtgage market, and possible major top and reversal taking place.
Friday 15 October 2010 the 10 yr US treasury bond yield broke the upper declining channel. The buying mania is at least taking a little rest for the next week or two.
The Subprime Mortgage Index Crash
The subprime mortgage index I've been following dropped for a 3rd or 4th day in a row and erased nearly all the progress since early July 2010.
ABX.HE.AAA.06-1
http://www.markit.com/en/products/data/indices/structured-finance-indices/abx/abx-prices.page?
Subprime Mortgage Pop and Drop
This mortgage index had a huge run just as the mortgage moratorium and attorney general investigation were annouonced. Now the mortgages have retraced the pop with an equally volatile drop. WOW!
ABX.HE.AAA.06-1
http://www.markit.com/en/products/data/indices/structured-finance-indices/abx/abx-prices.page?
POP and DROP - Stocks, Gold, Oil
The opening rally was a head fake. Top is in.
If today's rtally continues significantly into tomorrow/ Thursday, then the ending diagonal e-wave count will be in jeopardy.
Welcome to Wave 5 of the ending diagonal.
SPX triangle and ending diagonal.
This morning's selloff looks good for the completion of wave 4 of an ending diagonal. The mid day action has not moved off the lows convincingly. I would have liked to see a sharp bottom instead of the dull sideways movement. If the SPX falls below the 1123 level, I would favor a multiweek e-wave count to the downside.
Deer In the Headlights.
By the close of today's markets, the SPX shows a triangle formed over the last 2 days. To what degree leaves me frozen. The selloff from Thursday's highs looks motive, so maybe the triangle is separating wave 4a and 4c with a lower open and rally the rest of the day on Monday. If the selloff from Thursday's high was not motive, then Monday could be a pop (wave 5 of ending diagonal) and drop.
Chuck's ED
I'm thinking ED too. Possibly started mid September. wave 3 completed today. wave 4 a and b today. wave 5 c on monday. next week wave 5. The market MUST scare as many potential bears as possible for shorting early.
RUT Signals Deeper Decline
From today's opening to the mid day lows, RUT formed a classic triangle pattern. This signals one more advance before the larger wave is complete, which happened. RUT should test Friday's lows in the next 3-4 days.
"Mom and Pop" Investors.
THese investors may be in a position where they are forced to liquidate. More of the population is tapping into 401k's to pay off debt or because unemployment benefits have been exhausted. The reasons to sell have shifted from greed to need.
New alternative E-wave count
I'm considering the April-July 2010 pullback in the SPX and INDU to be Wave B of the corrective bounce out of the March 2009 lows. Such a count would top out with the November elections. So a little more rally, a small pullback, One final rally then the market rolls over.
One comment about social mood this weekend- the significance of the NYC mosque protests shows an increasing divisiveness among society. This means underlying mood is accelerating in the negative direction. The financial markets shouldn't be too far behind.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=2&mn=0&dy=0&id=p83315217820
WTIC Consolidation Near Completion
WTIC had a motive wave selloff the first 2/3 of August 2010. The bounce the last 2 to 3 weeks has a triangle separating 2 advances, so the second advnace is the last of larger trend. The bounce has retraced a fibonacci 50% price and 78% time. Stochastics are overbought. bollinger bands are starting to widen, indicating a rapid price change.
http://stockcharts.com/h-sc/ui?s=$WTIC&p=D&yr=0&mn=2&dy=0&id=p42318025596
SPX Chart Symmetry
The selloff since August 2010 is nearly a mirror image of the rally out of the July 2010 lows. Each high and low on the way down is lower than the coresponding highs and lows on the way up. This indicates a stronger bias to the downside than the upside. The bottom that happened a couple of days ago matches up with the July 19th low. Today's highs is a hair more than the selloff into July 19, so I think there is a good chance his rally is nearly over and the retest of the July lows is about to continue.
http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=3&dy=0&id=p00090641938
And What A Rally
The power of today's rally has narrowed the e-wave count to wave 2 correction of wave that which started at the August 2010 highs. With that as the reference, this correction has retraced to the first fibonacci area of 38-40%. The duration of this coutertrend rally is relatively short, and would look better with a 3-4 day choppy selloff followed by another 3-4 day rally to the 50% fibonacci area.
More Rally.
After the last post, I thought I made a terrible call. Now that the SPX futures are up quite a bit this evening, and above the day's highs, I don't feel so bad.
The futures have eliminated a wave 4 triangle correction. There are two equally valid counts: a lesser degree wave 2 zigzag/flat, or a larger degree wave 4 zigzag / complex. What amazes me is the selloff from the August highs has not been sharper in the INDU and SPX.
More Rally To Come in INDU, SPX, NDX
It looks like early Friday August 27 a multiday motive wave ended. Since then the market rallied in wave a. wave b ended this morning. wave c continues to rally this afternoon and possibly into tomorrow. I would like to see a more time correcting and more retracement before giving another multiday sell signal.
The RUT and TRAN do not showing the clear ewaves the other markets are showing.
Wave c of 2 is a Flat on SPX INDU NDX
RUT is complex or zigzag.
The rally off the morning's lows is near completion. Since wave 2 is a flat, wave 3 should be powerful to the downside, very gappy.
In a small wave 4 or larger wave 2.
The rally off today's bottom has advanced too much to be a smaller wave 2. A larger wave 2 or a small wave 4 are now the most likely outcomes.
Ken, I disagree.
I count 5 degrees of wave 1-2 combinations in the SPX from the August 2010 highs. That means the falling knife of wave 3-3-3-3-3 is about to slice portfolios.
Bounce Off Morning Lows Is Corrective
There was some choppiness. The SPX chart patterns after the midday top look motive with a couple more degrees of wave 1-2 combinations unfolding.
Selloff into close AND gap down tomorrow.
Gap Down Tomorrow
And it just keeps going down in a wave 3 of 3.
Pop and Drop Open
The opening looks to cmoplete wave 5 of c of 2 flat. Wave 1 was last week's big move down. At this point there are a couple degrees of wave 1-2 combinations, increasing the potential for stronger downside moves.
BlissBull Divergences.
Maybe I got excited and inverted my logic. The indicators are moving UP while the 10 yr Yield chart is moving DOWN. That would be a positive divergence of indicators with respect to the price chart under evaluation.
The direction of the yield I'm calling for will change from down to up very shortly.
Confirmed Hindenburg Omen
Odds favor a market selloff. No market crash has occurred without one.
http://www.safehaven.com/article/17915/we-get-an-official-confirmed-hindenburg-omen-on-august-20th-2010
TNX Rally Coming?
The RSI and stochastics are making negative divergence with the yield. The MACD difference has been slowing down. These often happens near long term trend reversals.
Uncle-Chubbie - Link to initial Unemployment
From Sept 2008 to late January 2010 the downtrend in initial claims was motive, (wave a). Until late June 2010 a textbook triangle appears (wave b). July to early august 2010 was motive (wave c).
Since then, the initial claims number has risen above the wave c starting point. This is the confirmation of the next bull market in massive layoffs.
http://www.safehaven.com/article/17895/cue-the-panic
Initial Unemploymet Claims
The initial unemployment claims number today comfirmed a new round of massive layoffs on the way. Expect the initial unemployment claims to test the 700k/week level within a year.
Chuck - agree.
The rally off yesterday's lows is a nearly complete Zigzag / double zigzag. The duration is too short, IMHO. Another bit of selling into the close and choppy lower trading tomorrow. This corrective rally is forming the right shoulder of a monthlong Head n Shoulders pattern.
SPX Futures down 4 pts
This takes the futures index down to the levels of initial support. The duration of consolidation has been pretty short. The e-wave pattern for the consolidation would be better with one more UP leg. Both zigzag or flat corrections are in play.
Bounce May Be Over
The SPX futures closed the gap down at Thursday's open. The double zigzag looks complete. The futures topped out at 1089, slightly less than a 33% retracement of Wednesday and Thursday's selloff. Wait for more reliable set-up / pattern before taking a position long or short.