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QQQQ Options - Max Pain Point
I've heard the term "maximum pain point" used when referring to options. I think it means the price at which in the money calls balance out in the money puts. If that is the case, the max pain point for QQQQ expiring next week is $41.89. So there is downward pressure on the price. The December options don't really come into play since the market has another 4 weeks to play with those option holders.
Waves A and B of Flat
One wave count for markets is a flat where waves a and b have finished. The drop from yesterday's highs to early afternoon today look very much like a triangle. This signals one wave remaining. This afternoon completed a motive wave very quickly to fulfill the requirement.
I'm looking for a motive wave for wave c. Downside target for the DOW is 12000. SPX around 1365. NDX at 1700.
Assuming this is a flat. Ther should be another rally making new highs in the Nov 17th timeframe so many people are forecasting. The market has to trick investors the elections will have absolutely no effect on the economy. According to socionomics, political change signals mood change. The rally was positive mood, so anticipate negative mood and a bearish market.
NDX Ewave Sell Signal
The rally that started Friday had wave 1 longer than wave 3 longer than wave 5. This indicates a greater waning bullishness in the market as sequential advances are approached with hesitation. Todays opening rally was wave 3. The following sideways trading for most of the morning into early afternoon was a textbook triangle. The following wave 5 was very quick. It may have truncated.
The NDX made a 3 month high, but not a 52 week high as the dow did. Therefore, the Dow is not confirmed. The SPX did not make a new 52 week high today, and indicates weakness in the markets.
I got out with profits a few points after todays top, and bought puts for whatever consolidation is at hand. I just don't know to which degree. Open interest in puts clearly outweigh calls. Moves to the downside would greatly reward puts. Contrarian view is the rally continues with a slight pause.
Airedale: Hurst Letter
Don't forget Hurst worked for a Military-Dept of Defense contractor. Any signal processing algorithm used to analyze stocks could be used in a military capacity. It could very well be Hurst was too close to divulging secret military techology. Also, anything he produced on their computers is technically theirs, not his. At that time he did not personaly own a computer. It would be considered theft of services for him to use their computers for his personal profit. Freedom for keeping quiet is generally a good deal. If Hurst didn't pioneer frequency analysis of the stck markets, someone else with a strong math background would have.
Elliott waves is pretty accurate too. I wonder how Prechter was able to pound his chest proudly and promote e-waves all these years without show stopping threats from the SEC or another entity. Prechter was part of the Wall Street crowd, but not the Mil-DoD. Prechter did not need a computer to do his analysis. He did commission Lockheed to impliment e-waves in software. His conclusion is humans are still better at fractal pattern recognition than software.
NDX, Dow Rallies Begins
Dow: Looks like a wave 4 triangle completed today fron the top last week. Wave d barely overlapped wave a, which indicates bearishness. But wave e hardly broke the lower edge of the triangle, which indicates bullishness.
http://charts.barchart.com/chart.asp?sym=$INDU&data=Z15&date=072106&den=HIGH&divd=Y&...
NDX: Either the correction from the 52 week highs last week was a triangle, or it was an ending diagonal of a wave 4 flat. Either way, the forecast is for a sharp rally over the next week or two.
http://charts.barchart.com/chart.asp?sym=$Iuxx&data=Z60&date=072106&den=HIGH&divd=Y&...
OT: Interest rate cuts
The housing market is so saturated that even if loans were 0% interest, the remaining people still could not afford the payments. Home ownership is near 70%, there is little upside from there when layoffs are happening as stock markets make multi-year highs.
QQQQ, DIA, SPY Options
Bears are buying puts as a "sure thing", especially DIA puts. Calls were bought, but not as agressively. Any rise in price would not reward as many call holders as a drop in price will reward put holders. Contrarian approaches indicate a strong rally is about to take off.
SPX Churns
The pullback in the SPX from the 52 week highs either conpleted a zigzag, and is now rallying to new highs, OR completing wave e of a triangle. My guess is triangle. This implies a retest of the 1370 area. The 1370 support level is estimatedd by noticing wave c and wave d are nearly the same length. That means wave e is limited.
The other technical item hinting at support is a rush to but SPY 137 puts. That makes another top in the open interest of November SPY puts. Rapid build ups of puts occurred in areas of consolidations before rallies.
SPX/SPY drop at the opening, then race higher is my forecast.
Peg, I agree A-B Finished
Tomorrow C.
It looks like a double zigzag in the SPX will play out. It will be a nice bounce to catch.
SPY Options Observations
I was bored the other day and started plotting the open interest in SPY options. I was saw bell shaped curves for Calls and Puts as expected. What surprised me was they were not centered around the 138 area. The peak in Puts is SPY = 125. The peak in Calls is SPY = 141. Amazingly the Put/Call ratio of in the money options is 0.03. This is completely unbalanced and represents complacency. A P/C ratio of 0.5 would mean a drop in SPY to the 135 area. The chart shows a little support at the 126 area.
I would love to have decades of this kind of data to see if there is any corelation with options open interest distribution and future market moves.
GOOG to Break $500.
That will bring a lot of hoopla and excitement by the media. The media attention more so than GOOG's price will signal a top.
Lexus: GOOG, Yes!!!
GOOG is finishing up WAVE 5, which was preceeded by a triangle. The triangle confirms only WAVE 5 is left before prices fall back to the $380-$400 area IF longs are lucky. The timingis perfect for GOOG and the rest of the market to top out over the next week and enter a nasty bear market.
Fundamentals such as housing, personal debt, unemployment or difficulty switching jobs have topped out and the market will play catchdown.
For now, Let it ride another week or two.
GOOG ERUPTS
In general:
Wave 3's are known for their gappy charts.
Wave 5's following Wave 4 triangles are known to shoot quickly the width of the triangle.
That's what makes me believe GOOG is more than half way done with its WAVE 5 rally to new highs. I'm going to wait o couple days for consolidation at this level before buying calls for Wave 5 of WAVE 5 to start. Only a few more weeks to go before GOOG's WAVE A correction begins. Puts should be a bargain. As a major tech stock, GOOG indicates the NDX has a few more weeks of upside left. NDX looks parabolic.
Peg: I agree.
I was trying to count a triangle wave count for this correction, and it seams to have taken longer to complete. Possibly today the triangle completed and the next motive wave has begun. I'm looking at 15 to 20 point gain in the SPX next week.
Uncle_Chubbie: GOOG
GOOG's post Wave 4 triangle advance looks like it will ultimately advance to make new all time highs by the end of the year. After that it makes a return to the $400 area either as a larger degree WAVE 4 or the start of a bubble pop correction.
The Book To Billing for September looks to be confirming the contraction in August which came in less than 1.00. The overall trend has been down for the last 3-4 months. I think you are onto something.
GOOG to test highs.
GOOG is still in an uptrend that will test the all time highs. for the next week or two I'm looking for a base to form, and then the last rally. I'm tracking this stock closely. Since the rally off the $400 level followed a wave 4 triangle, it is tough for me to determine exactly which low te rally technically started from. I'll look for lower channel lines to be broken sharply as the price approaches the all time highs.
GOOG in last rally to new highs.
The typical post Wave 4 triangle behavior is happening with GOOG. Wave 5 is rallying and should reach new all time highs. Now is the time to track GOOG closely for a short opportunity in the next two or three weeks. GOOG puts will be attractive as the rally has gone on that much longer.
http://stockcharts.com/h-sc/ui?s=goog&p=D&yr=0&mn=6&dy=0&id=p73352205656
Tempted To Buy GOLD.
The price over the last couple days looks to be wave e of a triangle. Wave e dropped below the lower edge of the triangle in typical fashion.
http://stockcharts.com/h-sc/ui?s=$gold&p=D&yr=0&mn=6&dy=0&id=p73352205656
GOOG Continues Higher
Google finished an Elliott Wave 4 Triangle that lasted from Jan '06 highs to Aug '06 Lows. Wave 5 has one of more smaller wave 5's to finish before a major top and downtrend takes place. The smaller wave 5's should come close to making new all-time highs. If the price drops below $390 / $380 before challenging all-time highs, then there is a good / great chance the rally is over, and a crash is unfolding. If those levels are penetrated, the remaining bull case is an ending diagonal characterized by a choppy advance. The smaller wave 5's should finish up sometime in Oct '06.
http://stockcharts.com/h-sc/ui?s=GOOG&p=D&yr=1&mn=0&dy=0&id=p34862272358
2 triangles GOOG and GOLD
GOOG is actually in a post triangle thrust and should barely set new all time highs.
GOLD is in an incomplete Wave D triangle rally, to be followed by a Wave E sell off. The massive fear induced price spike following the wave 4 triangle should take gold above $800 before returning to the $600 area.
Trusircle: Modulation and Algorithms
Modulation is one of the phenomena I plan on studying. With enough bandpass filters, I should be able to see very clearly how a cycle modulates. Since all classic filters are a sort of correlation technique, it is difficult to extract the exact cycle and the correct phase. I'll use classic filter techniques as a coarse adjustment and then experiment with new approaches to get the accuracy I want.
Trucircle- Cycle chart
I've been using Excel to test some cycle algorithms. I don't use a simple moving average because of the time shift and several cycle can get through. I don't use fourier series because of Gibb's phenomena makes it have little predictive value.
The major difference between our results is my cycles periods vary in time, while yours don't. Over one cycle the period can shift by 20%. There are dead spots in the spectrum at times. This is just as important as it forms a boundary to separate the fundamental cycles. I have yet to add cycles up and back test them. Enough of the multi year cycles are topped and on their way down. The 3 yr cycle is starting to get out of phase with the 4.5 yr cycle to the point where they may cancel each other in a year or two.
Feds and rates
The last time I tried to solve a math problem with 2 equations and 3 unknowns, it couldn't be done unless one of the unknowns was 0 or and integer multiple of one of the other variables. This is a mathematical law. What the Feds have desperately tried to do is break this law, and get the general population to believe this law can be broken without consequences.
The Fed cannot mathematically control more than 1 element of the economy with the interest rate alone, if at all; therefore, society controls the economy and investments.
SP500, Maybe ending diagonal?
The movement of te July lows looks like and ending diagonal of some degree so far.
http://stockcharts.com/h-sc/ui?s=$spx&p=D&yr=0&mn=6&dy=0&id=p73352205656
FTSE Does Not Confirm DOW, NAZ, SPX, DAX
The FTSE did not make new monthly highs as the others in the list did, yet still has the same seneral shape as the DAX, and SPX. The intensity of the 2 day rally feels like a wave extension as euphoria pervades. The markets are close to being near term overbought.
I'm considering as a second wave count the SPX and DAX are finishing Wave 3 of an ending diagonal instead of finishing Wave 5.
http://stockcharts.com/h-sc/ui?s=$ftse&p=D&yr=0&mn=6&dy=0&id=p73352205656
Gold on Launch Pad
The last 4 months gold has traced out a rather large triangle. Wave e of the triangle is very close to completion. spike past $800 / oz by end of year.
http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&yr=0&mn=4&dy=0&id=p73119672529
Euro markets are nearly done rallying.
A little consolidation tomorrow and one final push into Friday's close.
http://stockcharts.com/h-sc/ui?s=$DAX&p=D&yr=0&mn=3&dy=0&id=p77098834580
http://stockcharts.com/h-sc/ui?s=$ftse&p=D&yr=0&mn=3&dy=0&id=p77098834580
The FTSE and DAX are giving the clearest indication of what is to come. Since the May '06 lows the markets look to be tracing out an ending diagonal (ED). Wave 3 of the ED is smaller than wave 1. This implies wave 5 will be smaller than wave 3. The DAX looks like it has finished with a false breakout above the 3 month highs. The duration of wave 5 looks too short. The FTSE wave 5 has good time and structure qualities, yet is not confirming the DAX 3 month highs. Wave 5 should terminate (truncate) well short of 52 week highs. An ED and truncation signal very sharp reversals following their completion.
It is interesting to note the timeframe for the turning point coincides with Iran's Aug 22 promise to respond to the UN regarding their nuclear energy roadmap. There is a religous significance to this date. Google "Iran" and "August 22nd". Look for the author named Spencer. Iran could be using the description of fire in the sky as a metaphore for launching missiles or something else destructive. Iran does not make threats; it keeps promises.
Been Lurking, Dog Days Of Summer.
This was a wide ranging day. The fizzled rally is not very promising for the bears.
Markets Rolling Over
The Stochastics and MACD are warning of a near term trend change for most of the markets. I think the elliott wave count for the Dow and SPX are in wave 5 of an ending diagonal that's truncating, so technically they have not topped. The NAZ has topped and is in some sort of wave 2 bounce. This rally out of the June lows has been too choppy for too long conpared with the wave 1 and wave 3 rallies of the ending diagonal.
Nikkei and DAX 2
The overnight trading is showing no mercy. After 2 days of consolidation the DAX showed motive movement at the opening. The Nikkei closed at its lows of the day. The waterfall continues. When investor finally realize the US markets are not only lagging, but the odd man out, they will join the global herd of investors.
Nikkei and DAX
These markets are waterfalling. Down hard and slight bounces. Waves are 1-2-1-2-1-2. Wave 3 should be here any day now.
Today's pause in the US markets was a gentleman's exit.
None of the markets are offering hope for middle east peace. In fact the markets are forecasting much worse before getting better.
Friday and Today Were Choppy
Under the microscope it looks like a double zigzag consolidation. Neither Dow or SPX have retraced 1/3 yet. This should happen tomorrow, and maybe finish up into Wednesday.
Then we get wave 3 of 3 of 3 where profits are to be made.
Bollinger Bands.
NDX and NAZ Composite closed below the lower band. Bands are widening which means continued downtrending
Dow closed below the lower band on Friday. Bands are justing starting to open.
SPX bounced off the lower band. Bands have just begun to open.
RUT is crossed below the middle of the bands and is moving toward the lower band. Only the lower band has begum to open.
The DOW and NDX are leading the selloff. SPX and RUT have some catching down to do. Indications are for a possible bounce of a day or two before strong selling continues in an ewave 3 of 3. Chances are good at least one day gaps down this week.
WMT in wave 3 0f 3
http://stockcharts.com/h-sc/ui?s=wmt&p=D&yr=0&mn=6&dy=0&id=p21297398669
Wave c a Wave 2 flat truncated. The sharp sell off is typical behavior there is still several $$$ of downside before support is found.
No More Wave 2 Flat
The Dow now joins the NDX in eliminating the wave c of wave 2 flat, and starting a much larger Wave 3.
The SPX and RUT have not eliminated their wave c of wave 2 flat counts, but the fibonacci pull back from the June 28 rally is more than the last fibonacci ratio of 78%.
It looks like wave 5 of 5 of wave c in wave 2 flat truncated near the close of July 11 for all four of those indecies.
Possible e-wave Truncation
The wave 2 flat wave count which I have for SPX, DOW, RUT, DAX, FTSE, CAC is struggling to finish its wave c. Since the NDX make 2 consecutive 52 week lows, the NDX the flat wave count was invalid; a more bearish count is in play.
Many of the markets which had what would have been a motive wave c in the wave 2 flat are now facing ending diagonals and even truncation. This creates a favorable opportunity to short.
Dow in Ending Diagonal
Zig of wave 5 of 5 of flat 2c started from today's lows
Top on Thursday or Friday. Monday should be bloodbath as ending diagonals are known to return to the levels they started very quickly.
SPX and RUT are in a motive wave 5 of 5 of flat 2c.
NDX made a new 2 month low. It's probably in the lead one the down side count with this weakness.
Hurst Question:
Did Hurst only use moving averages in his analysis? I recall seeing only moving averages of odd number of days in his book Profit Magic.