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Sunday, November 6, 2011

SPX and Dow Update: Sentiment Still Favors the Bears

Sentiment continues to remain bullish, despite the declines in the averages last week. 

Rydex funds are reaching ridiculous extremes.  Rydex funds offer a good proxy for retail investor sentiment; retail investors are small money, and for lack of a better, more politically-correct term, are somewhat considered to be "dumb" money.  Retail investors usually tend to be "late to the party," so to speak.  So what does retail investor sentiment, as indicated by Rydex, look like right now?  Here's a snapshot: 

Rydex bear fund asset flow levels have dropped to readings not seen since at least 2008 (hint: these levels are lower than any seen during the entire bull run, including the March '09 bottom).  Conversely, the Rydex bull fund asset flow has now risen to levels not seen since at least 2008.

That bears repeating:  Rydex bull fund asset flows are now at levels not seen at all during the prior bull market, including at the March '09 bottom.  What does this tell us?

It tells us that retail investors are rabidly bullish right now, more so than they have been in years.  So why does that matter? (Warning: some of the upcoming is stuff my more experienced readers already know.)

These types of extreme readings are generally good contrarian indicators.  Contrarian investing is based on the concept that people act on their beliefs: when the majority of people are bullish, it usually means they've already bought stocks.  Obviously, the stock market is controlled by the same principle as any other free market: prices are determined by supply and demand.  When there are more buyers than sellers, prices rise; when there are more sellers than buyers, prices fall. 

So if the majority of small investors are bullish now (as are the majority of large investors), that means most of those bulls have already placed their bets on the market rallying -- which means the market is losing more buyers by the day.  Eventually, this lack of buyers will leave prices no choice but to respond by heading lower.  When buyers become scarce, prices will fall even if selling doesn't increase.  

As prices fall, more of these former buyers become sellers.  Really strong declines are marked by increasing momentum -- usually the middle of the third wave (at any degree of trend) is when selling pressure really starts to peak, as more and more investors unload their positions into the falling market.  Eventually, as a bottom approaches, people are bearish again, and the whole process starts all over in reverse.

It's the great Circle of Bear and Bull life.

Market psychology seems to reflect the natural cycles of the universe: when the sun reaches its zenith, it can only descend.  Likewise, winter is followed by spring, yet inevitably returns.  A star may be born from the ashes of former stars; years in the distant future, it may explode as a supernova -- and from its remains, new stars are born.   Humans go through a similar life-cycle (although few of us actually explode, as far as I know). 

The only constant in the universe is the self-renewing cycle of change.  As a result of the undeniable realities of our existence, these cycles, patterns, and rhythms are deeply etched into our psyches and behaviors; and our markets end up reflecting these patterns.  Or perhaps market waves and cycles are not simply a reflection of us, but are instead part of the cyclical natural order of all things.

What never ceases to amaze me is the way most people project the future in only a linear fashion, despite the obvious cyclical nature of things.  If the market goes up for 10 days, suddenly the average investor believes it's going to go up forever.  Likewise when the market goes down for a time; suddenly people act as if it's going to zero.  Very few things in this world move in a linear fashion.  Everything from our love relationships to our business careers seems to oscillate in waves and cycles.  The understanding of this is what separates the smart-money investor from the average investor (and separates the average investor from his money!). 

Anyway, back to sentiment.  

I don't view contrarian investing as a means in itself, for the simple reason that in bear markets, sentiment can remain depressed for a long time -- just as the reverse is true in bull markets.  So, in my view, sentiment is more of a confirming indicator.  Where sentiment becomes the most valuable is when it reaches extremes; especially when such extremes are disproportionately reversed from the market's primary trend.  High bullish sentiment in a bear market is a very dangerous thing; although, again, it can remain elevated for a time as part of the topping process, and, of itself, doesn't necessarily portend an immediate reversal.

I personally believe we're in a bear market -- so I believe the current bullish sentiment is confirming what the charts seem to be suggesting: we are on the verge of a new leg down.

Anecdotally, most traders I know continue to talk about a year-end rally.  It seems many investors are hoping Santa Claus will come down the chimney and deliver liquidity to all the good boys and girls.  (What should worry everyone is who is actually on Santa Claus's list... remember, he knows who's been naughty and nice!)  But I tend to agree that we might see a year-end rally -- I just think it's going to start from lower levels.

The charts are continuing to suggest that the snap-back rally off the November lows will eventually resolve to the downside.  The exact level from which this resolution will begin is somewhat challenging to nail-down, however.  Below is my best guess chart of the short term count:


If this count is correct, there may or may not be a little bit more upside due on Monday.  My count of the smallest time-frames indicates that Friday might have marked another short-term top, so a gap-down opening on Monday is quite possible.  However, futures are flat as I write this, so it remains to be seen. 

A breach above 1263.21 would negate this blue "1-2?" count, however it would not necessarily negate the potential for more downside.  Under the preferred count, a break of 1263 would only indicate that wave (ii) up is still unfolding -- wave (i) down can only be KO'd with a break of the October highs. 

In the search for other possibilities, I realized that, with a slight shift of viewpoint, it is technically possible that this is still Wave 4 of (i) down.  Below, I have annotated the Dow chart to show how this is possible, and also sketched in some annotations to show how Wave 5 might stair-step lower:


The arguments comparing Wave 4 vs. Wave (ii) are pretty simple:  In favor of Wave (ii), we have the deep retracement of the prior decline (62%); this is an unusually deep retracement for a fourth wave.  In favor of Wave 4, we have the sloppy structure of the retracement; second waves are usually sharper and cleaner.  I am favoring the Wave (ii) scenario by roughly a 60% to 40% margin. 

Also arguing in favor of the entire bear case, are Apple's chart and copper's chart.

There are also, of course, possible bullish interpretations to the current market (there always are, otherwise this would be ridiculously easy and I could have all my charts done in an hour!), but unless the market gives us some reason to start favoring those interpretations, I see no reason to spend too much time worrying about them at the moment.  The key levels to watch are still the October high and the November low.  The chart below shows my main bullish alternate count and the key levels to watch:


These are historic times, and this is a historic market.  There is potentially a lot hinging on what happens to the market over the coming days.  If there's one thing that makes me the most nervous here, it's that my calls have been dead-on hits for a while now -- so these are the times I start to feel "due" for a miss.  If the landscape suddenly seems to be changing dramatically, I will do my best to alert you to the changes, and on how they may impact future projections.  Trade safe!  

The original article, and many more, can be found at http://PretzelCharts.blogspot.com

176 comments:

  1. Pretz, great article. Ominous ending, I hope you aren't wrong this time.

    Also I'm guessing you're happy about daylight savings?

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  2. Yep, definitely. Was the article too long, you think? Or about right? I started to feel like I was going off on a bit of a tangent there, but I left it in anyway. Thoughts, anyone?

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  3. pretz, great article and very well-written! At first I was somewhat confused by all the lines drawn, but quickly grasped their importance in showing the overall trends. I favor your preferred count too, as I showed in my previous post on an earlier thread that the very near short-term looks bullish but the mid to long term looks (very) bearish. I would look for 1285 as KO level for both your preferred count as well as alternate count (seems to be longterm -2011- resistance/support level), which is right in your yellow target zones!

    Normally I think yahoo finance is a bunch of you know what, but this article is pretty interesting and voices many opinions that have been posted here, incl yours: what we are seeing now is almost exactly what we experienced in 2008 right before the first wave-down:

    http://finance.yahoo.com/news/The-Chart-Thats-Forecasted-etfguide-2545144121.html?x=0&.v=1

    If you read the title you'll understand why I don't like yahoo finance, but the similarities between then and now are so similar it's gotta be mentioned.

    Please remember, I am a bull at heart (and as a sign), but to be a good bull one has to understand the bears.

    keep up the good work!!

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  4. Nah it's a good length. I did feel like it was a little longer than usual, but I like the thoroughness of it as opposed to the opposite. haha, maybe Brian is rubbing off on you!

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  5. Arnie, thanks. Re: bulls...

    Personally, I have an interesting conundrum there, psychologically.

    By nature, I am an optimist ("I went and saw the Optimist yesterday... and he says I don't *need* glasses!"), and always look for the best in people, and in bad situations.

    However, I'm also a realist. I've known people who say, "I'm a realist," but it's really just code for "pessimist." I'm definitely not a pessimist. I mean "realist" in the sense of trying to be as objective as possible in assessing situations.

    And when I assess the situation our government, and other gov'ts, have gotten themselves into -- and the situation society as a whole has gotten itself into -- well, I'm just not optimistic about our prospects over the immediate future.

    Where I tend to diverge from the perma-bear camp is that I remain hopeful for the long term future. I firmly believe in the triumph of the human spirit, and that things tend to work out for the best in the long run.

    I think society is just the macro reflection of the individual. In my personal life, things have usually had to come crashing down at some point for me to realize my errors. I think the same is true for society/governements. I simply can't see a way out for us without painful change at this point, but I think that will be a catalyst for more positive things in the future. My father, who's a very wise man, once said to me:

    "People don't change until the pain of *not* changing becomes greater than the pain of changing."

    I think this is true at all levels. So, the realist in me sees huge trouble ahead... but the optimist in me believes that the world will eventually emerge from the pain as a better place.

    Make sense?

    Maybe I should write an article on this, I seem to have more to say about it than I originally anticipated... lol.

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  6. Mav, lol... that thought occured to me. I think I made it longer because: 1) I had the whole weekend; 2) I realize that we who are a bit more seasoned tend to take certain knowledge for granted... so I wanted to expand on some of the basics like Contrarianism.

    Hopefully it didn't bore the veterans!

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  7. Pretz - enjoyed the article and did not think it was too long. I have been following your blog for about a month now and check it daily to hear your thoughts and see what some of the other posters are saying, too. Thank you to you for sharing your skills. Please thanks your wife, too.

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  8. Thanks, anon.

    Actually, my wife was a little miffed at me for spending so much time on articles this weekend. A bit like the old joke:

    "Did you hear about the cannibal who was late for dinner? Yeah, everyone gave him the cold shoulder."

    That's what I got for dinner tonight. :o

    (I didn't say it was a GOOD joke!)

    Need more hours in the day...

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  9. Futures just took a dive... down 9 points. Sitting on the lower trendline of the blue channel right now. IF bears can push through the channel here, we could get that gap-down open I predicted on Friday.

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  10. Down 12 now... next important level for bears to break is about 5 points down; futures basis 1234.50. If bears can take that out, things will be looking real good for 'em.

    Bulls looking like they'll put in a bounce here and back-test the broken channel. Bears need that channel to reject the advance...

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  11. This is a very interesting article comparing now with the Great Depression. Noteworthy points include the sucker punch rally and positive rumblings that took place before the big dip. Some basic chart work too. Worth a read.

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  12. of course i left out the link:
    http://finance.yahoo.com/news/Unique-Historic-Precedents-etfguide-1382828970.html?x=0&.v=1

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  13. lol, was just about to mention that.

    TJ, I know you're more of a contrarian veteran... I hope my article wasn't too long or boring for ya. :)

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  14. By the way, while I am not a pessimist, I am very short in my PF now, so please take my comments with a heavy pinch of salt as I am naturally inclined at this point to look for confirmatory evidences. Behavioral science...

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  15. To be honest, I skipped most of the middle part and went str to the charts. Nothing against your writing (which I think is excellent) but I have learnt over the years to zoom in str to the key points after having mountain loads of research materials to go through

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  16. Yep, we're all prone to that. That's the reason I spend so long trying to find bullish interpretations of the charts. And even now, w/ the futures down 17 pts and my call from intra-day Friday playing out perfectly, I'm studying the charts saying to myself... "Okay, what might I have missed."

    Maybe every now and then I should just allow myself to relax and bask in the moment for a minute, so to speak. :(

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  17. It's always funny how the comments end up totally out of sync sometimes. Obviously, I was replying to your post about behavioral science just there...

    But ty for the honest response. :)

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  18. Hey Prez, been following you for a month now. Your articles are something I look forward to everyday=)

    Was just wondering if you study oil's charts as well. Would love to see some EW analysis on what oil might be hinting at in terms of where we're headed.

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  19. Hi, Dan, thanks and welcome!

    Yeah, I look at crude usually once every few days. Sometimes I just run out of time to annotate charts and write articles. The last article I did on crude was way back in the first week of September:

    http://pretzelcharts.blogspot.com/p/big-picture-oil-time-for-some-crude.html

    The chart has tracked pretty darn well, although I need to update it and tweak a few things. I *have* been meaning to update it, though.

    There's just not enough of me to go around most days. I think I need to get me some clones, like in the movie "Multiplicity" (which, by the way, is where the "I like pizza" option under each post comes from... Number 4 put it there).

    http://www.youtube.com/watch?v=pRtVMLwh6mY

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  20. That's great, Pretz. Looking forward to your next update. But wow, 25 bucks? Oh man...

    One "I love pizza" vote just for #4.

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  21. What on earth just happened? Something set off a monster 14 pt ES rally and the dollar dropped like a rock. Did Ben announce they'd be dropping money out of helicopters?

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  22. LOL - I think someone BRICS spokesperson said China, India etc would help out if things got too crappy. It's just a repeat of what they said at the G20

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  23. Between the Beard and the blather from Europe, its been tough getting any downward pressure as the markets shoot up on any chatter. Funny thing is, the more of it there is, it really underscores how bad things are going to get

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  24. Market's totally schitzo right now. All Ben has to do is wink and nod at the camera, and the shorts panic.

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  25. MarketCrotch has this tidbit of "insight":

    MADRID (MarketWatch) -- European stocks pared losses in early afternoon trading on Monday amid unconfirmed market speculation that embattled Italian Prime Minister Silvio Berlusconi could resign.

    Yeah, 'cause that would certainly fix the world's debt problems. All we need is this stupid Prime Minister to resign, and it's back to the glory days! LOL

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  26. Yep - that's why I'm suspect we can get a huge move in any direction - if things go south there will be QE3 and a global version. Things can't really shoot to a bull run because the economic backdrop is dire. Sort of stuck in no mans land with reality blocking the one side and the threat of intervention blocking the other. I did see Italy's exchange shot up which caused the other Euro markets to turn

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  27. Ah - saw your post. Every day seems to carry another of those type announcements which really only underscore what a mess is out there

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  28. Wow... ES just dropped 9 points in 3 minutes. Volatility? What volatility?

    Yeah, definitely underscoring how sick it's gotten.

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  29. Well, I thought the prose as well as the article's length were perfect, Pretz. But I suppose you know my preferences there. Ha, ha.

    But even more importantly, I thought it was an EXCELLENT article for marketing your prodigious skills and talents to the investment public.

    Is this going to be a Minyanville article? If so, then I think both the subject matter (market psychology and it’s cyclical nature) including the extended explanations are likely to be rather helpful for increasing readership interest at your blog (which I cannot help but believe will continue to increase significantly with time anyway):

    As far as marketing effectiveness goes, there is a subtext to the article's message:

    You don't want to be one of the 'dumb' retail crowd who is 'late to the party' and who is obtuse to the naturally occurring cycles of our markets (and the universe in general) . . . and my work helps you to one of the ones who gets those things, when you otherwise might be one of those still left at the party long after the street pros are winding it down.

    I know you aren't coming out and saying that directly. But it's sub-communicated rather nicely.

    And in my line of work, so much of what we do is ALL about sub-communication. And I'm of the belief that its effects are FAR more powerful than any direct assertions we could make.

    We can't tell a patron directly: we feature one the most intricately constructed decorative environments, best trained staffs, most competitive pricing and ambitious menus in the nation. Even though I KNOW it's true.

    And if we did say such things, the average customer wouldn't accept it. Nor should they. Because you can't TELL someone that directly. It's too sales-pitchy and grasping and arrogant. Even if we do have all of the specifics and particulars and bottom line execution to support that argument.

    Just as you cannot command and argue with an individual that she (or he) should like or love you. It'll backfire (big time) and you'll be found needy, grasping and probably just plain weird. That's not how sincere human affection and desire are fostered.

    Whether its restaurants or love or market insight, there is way to artfully provide all of the cues for an individual to arrive at the desired conclusion on his or her own. And without saying directly what it might be at all.

    In which case, that conclusion becomes their OWN idea and notion, one which they will take responsibility for wanting to continually affirm.

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  30. I think your article fits this structure rather nicely. A thesis is formed and the subtext of the thesis is stated without saying it too overtly: you as a retail investor don't want to be one of the 'dumb' ones. And more specifically: one of those who can only see the world in direct linear fashion.

    And more largely: there are cycles that naturally run through the universe. This is a universal truth that nearly all individuals can identify with, especially with respect to their emotional commitments and experiences. And I don't care what the line of work is, your product or service will do better if your work triggers emotional identification. And if it has an element of human understanding and identification. Investment commentary is no exception.

    You then provide market and investment SPECIFICS, PARTICULARS AND EXECUTION in the form of your charts, counts and likely market movement scenarios that serve to CONFIRM that you are indeed wise, capable and know what you are talking about.

    Since the market is well-timed for a rundown, when your predictions come to eventual fruition, the entire premise of article itself, especially the not being the last to leave the party part, becomes validated to the reader.

    And since your prose and charts were where any newer reader to your work will have read that the bull party was ending soon, where do you think he or she is likely to go looking for cues to future starts and stops to market soirees?

    I think you can feel confident that more and more M-ville readers will be bookmarking Pretzel Charts in their browser favorites and checking from time to time. The article you just wrote certainly should help.

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  31. Brian - hear hear! I admit I am one of those Minyanville readers who chanced upon PL's article, came to this blog out of inquisitiveness, and subsequently never returned to Minyanville again. Oops...

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  32. Pretzel - I think you'll find mixed reviews when you incorporate market psychology in your articles. Some just want the technicals and that's it. I would say that if you venture off the beaten path too often some people will get distracted and lose interest in your articles. IMO, the key is to digress often enough to add value but not so often that people lose interest. It's going to be a different level for everyone. I actually enjoy reading your reviews of sentiment because you do write well and they align well with the market's price action. Full disclosure though, I did look at the charts first, then came back later to read the rest of the article...kinda like a child that only looks at the pictures :)

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  33. yeah, DanC has a point there...I found you on Minyanville but I don't go there anymore for your article. Should we still click it to support you? not sure what your arrangement is with Minyanville, if you need clicks to get paid or whatever.

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  34. Yeah, I saw the futures drop myself. They seem to have risen back up to only a slight drop though. Wonder what's driving that movement?

    The lead story on Bloomberg this morning is about problems with Italy and possible collapse of Burlusconi's coalition and their bond yields.

    Wouldn't be surprised if the Street is already well positioned for a move down (they had to be as of the close on Friday; it would have been wholesale negligence not to be), and now the news will be released to club the bulls into submission. And so the sell off can begin.

    Looks like Italy is the new storyline across the newswires to be the replacement for Greece.

    Or will Italy (or Spain or Portugal or the whole lot of them) be in co-starring roles along with Greece?

    Either way, there are no shortage of crisis and disaster storylines that can be manufactured, literally in a matter of hours, to move the markets lower and whenever it becomes 'necessary'.

    And right now, I think the smart money has everything arranged to profit most from a move down, far more so than a move up.

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  35. Thanks for the feedback guys.

    Regarding Rocky's last question:

    In that sense, the blog does more for support than Minyanville, so your time there could be better spent here. :)

    All Minyanville cares about is popularity, and my articles there seem to be in the top 5 constantly anyway. My Friday article has been #1 most of the weekend. Last weekend, I had two articles in the top 5. So no worries anytime soon.

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  36. to answer your question why it dropped again:
    http://www.bloomberg.com/news/2011-11-07/european-stock-index-futures-decline-ryanair-ubs-shares-may-be-active.html
    apparently Berlusconi Says He Won’t Quit as Prime Minister. there you go.

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  37. Oh, brother... just realized I was calculating backwards. Market opens at 4:30 am here now, not 2:30... LOL. What a "maroon" I am. I've lived here for over 2 years, and I STILL can't get used to the time difference. I'm going to have to figure something out for this, I can't keep killing myself with the hours (not to mention killing my marriage, lol). Wife wants to move back to the mainland to be near her family, so maybe that's the answer. :(

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  38. TJ, classic. Talk about irrational; why does this even matter to traders? It's not like this guy is the source of the world's woes.

    Such an emotional market right now.

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  39. i hate DLS, now i have to stay up one more hour...
    Find it interesting that after the Italian PM denial, the markets are not back to the initial plunge. Feels like there is a lot of bullish tendencies here, -1 + 1 > 0

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  40. Especially gotta figure something out now that the bear is back. In bear markets I day trade (and swing trade) -- but in bulls I mainly swing trade, so the time difference wasn't really an issue during the time I've lived here. Bear market volatility makes day trading fun (and more profitable).

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  41. Yeah, seems a bit buoyant now.

    Where are you located, TJ?

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  42. TJ! We live on the same continent then...

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  43. You guys have a huge advantage, then. In a couple hours, isn't it gonna be tomorrow already over there? Why don't you just tell us what the market's going to do today, save us the trouble of trying to figure it out. :D

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  44. haha. well futures are going ballistic i tell you. how i wish it will open now before some dimwit comes out with some slurpee again.

    DanC i am probably leaving soon though...this place is becoming less friendly to kids

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  45. Interesting insight to your trading patterns during bull and bear markets. I like learning these tidbits from experienced traders. Don't worry, I don't think I'm ready to day-trade.

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  46. Futures have back-tested the underside of this trendline (from the Nov. 2 low) 3 times now. If they're going to let go, "soon" would be a good time.

    http://www.screencast.com/t/5kYtBh0QyT

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  47. Spiker, I LOVE day trading bears. I've had days where the ES futures declined 20 points, but I've made 40-50 points in profit. The intra-day swings are amazing if you can nail the turns... which I usually can, assuming we ever get some kind of trend out of this market.

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  48. Yeah Pretz, totally agreeing with you. It was great fun day trading in August and September! October was frustrating though. The curse of those who over-think? After all, all one had to do was chase the longs, right? Lol...

    Well, once the direction is clear again, we can enjoy ourselves.

    TJ - I'm not in Japan but elsewhere in Asia (wanna take a guess where?), but have lived in Japan before. Why do you say the place is becoming less friendly to kids?

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  49. PL,

    New here, I'm interested in "green" and its how I regard my own charting analysis. Ever since the Oct rally, I've been skeptical about it, esp once it hit 1292. I was convinced from looking at my own charts that it wouldn't hold, so I set out to find some others who could see what seemed rather plain to me, while so many others were talking continued rally. That's how I found you, not quite a week ago and have been hooked ever since.

    FWIW, as amazingly spectacular as Maui is, I can understand your wife's p.o.v. Not exactly the best location for your line of work either - it seems like the highway to rapid burnout. Seems as though you can't enjoy HI as much because of what you do or have as much energy for the markets because of where you are. It just might be one to listen to the wife on ; )

    "Green"

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  50. Pretzel, just out of curiosity, since you are bearish on AAPL, have you looked at RIMM? That company i think is undervalued, and in quite a number of developing countries, BB is still doing very well. wondering if the news catalyst that is going to cause AAPL to drop will help RIMM (e.g. gain in market share for RIMM after new OS or product, etc).

    DanC, Asia is too big to hazard a guess, but if i have to, HK or SIN? Japan because of the radiation mainly. Like the bear market, it is not going to be resolved anytime soon. Can't complain about JPY's strength though :)

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  51. Individual equities I follow are down in pre-market trading about three to one. And most importantly, the ones that are down are the major bellwethers

    All major tech and semis show opening lower. As do most major banks and financials. When I see this, it usually means a lower close around eighty percent of the time.

    Glad the futes aren't suggesting there will be a huge gap down at the open though. I'd like to take short positions with the market above 1,250.

    But after that: Go Wave Three! Is there a cheer for that?

    Also the Italy story seems to pre-sage the next nagative and dramatic news cycle. Just a hint of problems for Burlusconi and Italy sent futures tumbling.

    That story will get resurrected when the need to kill sentiment and start a selling panic reaches crescendo. Which would be rather well timed with the S&P crossing 1,200 to push the whole market down another fifty to seventy points, at which point the story about the 'solution' to the problem is the circulated. And in perfect time for the dramatic recovery.

    And I think Europe rather loves being at the center of the world's news cycle and daily dramas. Maybe the Italians are jealous of the attention Greece has been getting. And now they want their turn . . .

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  52. Futures sure look like they want to go positive. The volatility in the futures the last 5-7 days alone is making my head spin.

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  53. Anon,

    Amazing how many people are bullish right now, bears included. I can see the potential for a slight new high under my "bullish" alternate count, but until the market does something more impressive than it has so far, it's difficult to see the rally as anything other than a correction to the bear market.

    What's interesting is the wave psychology here is correct for a 2nd wave retracement -- in a bear market, 2nd wave retracements are times of hope and bullishness. If this were actually the start of a new bull, it's far more likely that "nobody" would be bullish here. It would be all fear and disillusionment.

    Re: Maui, it was a dream I had to live here, and after doing pretty well in the '08 bear, I decided to make it happen. Didn't anticipate my wife growing to "hate" it here. I still love it, in fact right now, I'm sitting on my back porch about 3000 ft. up Haleakala, overlooking the rest of the island, thinking how I don't want to move back... sigh. But it's probably going to happen sometime fairly soon. She made me promise already, so I doubt I can squeeze more than a year out of it. Plus, I think now that the bear's back (unless we're idiots and it's a new bull!), that will give me a "reason" to move back.

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  54. Apologies if I am being too nosy. Your wife's family is somewhere in the Northwest, isn't it?

    Good that you got to achieve a dream, even if not as long as you would like.

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  55. Guys, my ISP just went down for "maintenance." I'm posting this from my phone, which is a pain, so I'll be afk for awhile. Feel free to talk amongst yourselves. :) bbl

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  56. this doesnt look like the bear's a game... the bears seem to be losing

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  57. It's just the first hour of trading.

    If you remember Thursday we had a waterful decline of 20 points in the first forty-five minutes before the buyers stepped in and took everything back up. The bears were merely allowed an hour in the sun to create a lower entry point for bulls for the session.

    Heading higher today would not surprise me in the least though. If the market wants to have move down soon, then a bit more positive sentiment created on Monday is not a bad idea.

    I'm more curious about what may happen should the S&P fill last weeks gap down from 1,267. I wonder what Pretz or CTP have to offer about that.

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  58. I should have said move down from 1,267. From the last hour of trading last Moday.

    The big gap down was on Tuesday which we've already filled.

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  59. Good morning all!

    Well, cycle top window just has the rest of today's session, so either the top is already in per 11/3 intraday high or we'll see if the bulls can muster one more pop. FWIW I would love to see a tag of 200 DMA resistance at 1275 SPX today but I don't know if the bulls have it in them.

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  60. This might be the start. It looks as though the NDX is leading the way. It went positive for a bit but is the most bearish of all indexes. All of the futures have gone down as well. VIX is climbing.

    If nothing else, looks like a lot of resistance at 1260.

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  61. brian, 1267 wouldn't create any problems with anything. The KO level is 1292.67.

    Also, go look at the short-term chart I posted on Friday (?) in the "Two Possible Counts" update. So far it's playing out *perfectly* for this count:

    http://pretzelcharts.blogspot.com/2011/11/two-possible-counts-of-todays-action.html

    So far, anyway, it quite literally could not follow this chart any better.

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  62. Thanks CTP. That is certainly reassuring. I bought 127 strike puts of SPY this morning with the S&P at trading at 1,257. December expiration.

    At this point it's a smaller position that I'm hoping to eventually get into.

    Perhaps I should have gone in larger, but I wanted to see what happens after the first hour of trading.

    Hmmmm. Looks like the attempt to push down through 1,250 just started.

    With longs not being able to pierce even 1,260 after the open, I wouldn't be betting on the bulls right now.

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  63. "Tech and financials, which respectively represent the two largest sectors by market weight, are dragging on early trade. Both sectors are down 0.1%. DJ30 +39.40 NASDAQ +0.54 SP500 +2.68 NASDAQ Adv/Vol/Dec 960/110 mln/1060 NYSE Adv/Vol/Dec 1640/50 mln/960"

    From the basic Yahoo Market update. I check Yahoo (plus Minyanville and Bloomberg) every morning to gauge general market and retail sentiment. And for what the news is telling people to think.

    Financials and tech are the two sectors I want to see lead the way down.

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  64. New lows after 11:00 today will confirm cycle top.

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  65. Well, then, I'll just go ahead an give myself a pat on the back for that chart. It honestly doesn't get any better than that -- calling the open and reversal within a few pennies is as good as I can do. ;)

    I hope you guys didn't let yourselves get scared out at the open, and took advantage of it instead.

    Got a clean 5-wave move down now. Looking good for the bears so far.

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  66. CTP

    Would that be just any LOD or specifically below 1238.92 from Fri?

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  67. Pretz, Thanks. That count is the one that makes the most sense to me. And certainly is extremely helpful to my understanding.

    Your ability to provide insight to market movements is uncanny. I have to rely more on my sense of: What's most likely given the market incentives and environment of the moment and where we've just come from? And what is the market trying to make the public believe is true, and how will it profit from that perception?

    Sooooo . . . Go Wave 3 down!!! This there E-waver cheer or incantation for that? Ha, ha.

    You (and CTP too) have been quite remarkable in your market insight and calls. My many thanks.

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  68. I love all the anger my Apple articles generate w/ the buy-and-hold Minyanville crowd. It's akin to attacking someone's religion.

    http://www.minyanville.com/businessmarkets/articles/apple-stock-apple-chart-apple-shareholders/11/7/2011/id/37796

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  69. Green,

    That would be today's LOD.

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  70. Well, thanks Brian. You guys forget how hard that call was, with all the rabid bullishness going into the weekend, and the Greek thing, and the massive futures/SPY spikes.

    That's why I try to focus on charts, not news. But even within the charts, it was unclear whether that morning plunge was an extended fifth, or an a-b-c; and most technicians labeled it as an a-b-c.

    So, yeah, I'm pretty happy w/ the call -- it wasn't even close to being an easy one. :)

    A retracement rally here would not be unexpected. We have a complete wave down, so something that retraces 40-60% would be normal.

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  71. Pretz you have me lost. Are you saying we have completed the wave down, and will now rally 40-60% from today's lows from here?

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  72. It looks like we have completed a very small 1st wave down, so it is *possible* we will retrace 40-60% of the move from today's high to today's low... yes. Not guaranteed, though. If this *is* a larger degree third wave down, then momentum can snub retracement rallies and they often fall short of normal targets.

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  73. Which, btw, is why I personally rarely (if ever) counter-trend trade during a nested third wave. But I'm sure your broker would be able to advise you on whether you personally should or not. :D

    Also, I am making the assumption that the larger count is correct, and this IS a nested 3rd. No one else seems willing to make that call yet -- far as I know I'm pretty much the only one favoring it.

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  74. I would look for 1250-1254 on a retracement here.

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  75. Unless the 1250 we got was it already... that would be very bad for bulls. :|

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  76. would you short from 1250-54 then?

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  77. Sorry, not allowed to give trading advice. :)

    Hypothetically, that area is likely to contain any rally... at worst, a rally *should* hold below today's highs. If it breaks today's high, something else is going on.

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  78. I've got a trade trigger if we break the AM low to go 'more' short. Let's see if it happens.

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  79. Hmm. There is the danger here that this is part of a b-wave triangle. I'll post a chart in a second.

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  80. 1238.92 is the area the bears want to see broken.

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  81. what does 1238.92 represent?

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  82. Are the bulls running out of world leaders to quit to spur a rally ?

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  83. lol, good stuff vulture...who is the spanish PM?...next.

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  84. I'm offering up our leader in the US - will start the greatest bull market in history lol

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  85. 1238.92 was the low on Fri.
    I would feel better moving below that mark today, but I have observed that our LOD to this point has happened after 11 AM w.r.t. CTP's count.

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  86. If momentum picks up here on a break of today's low, that would tend to confirm the bearish scenario.

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  87. Be aware of this possibility. It's pretty obvious to spot if it starts happening, but I have to go in a few, and wanted to give you guys something to look out for just in case.

    So if the rest of the day starts to look something like this chart, we might make another run to new highs for this leg.

    http://www.screencast.com/t/ebeWvlyOShtB

    If we take out 1238, we can rule the triangle out.

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  88. Alright, lemme know how it goes. I gotta run for a bit.

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  89. Ha, ha Vulture. Right there with you.

    The guy in the WH doesn't seem particularly fond of grubby, risk taking, profit-seeking, employment-providing, and entrepreneurial types like me.

    All business-owner types are so narrowly focused, selfish and small minded, you know.

    The only dignified work of course being public service that the actual wealth creators in society pay for.

    Certainly doesn't look like trading is looking promising for longs today.

    Will be curious what the after lunch push will look like.

    I'm assuming that per CTP's call of breaking the 11 am low and just heading below 1,245 would mean that we are currently in the nested three of three down.

    Just about every major individual equity that I track is still down and showing no signs of life.

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  90. LOL, might not have to worry about the triangle for more than a few minutes here. This market looks pretty sick right now.

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  91. pretz, I am kinda late to the party here, but it's not looking good for the bulls; closing in on 1238.92 here real quick. Minor 2 (and wave (ii)) is done and over with in my opinion, but I am known to sometimes jump to conclusions ;-)

    As for your earlier response; change is good and necessary and the only change here is a radical change. If we want to change "the system", we need to start a new system. Building upon the old system to get a new system will not work. This is in essence what our gov't, banks etc have been trying to do since '08: create a new system based on the old system. Ain't gonna work.

    Btw, would EWT work on global temperatures? That seems cyclical to me too. It would be really interesting to do.

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  92. I should add: ASSUMING the bears can actually take out 1238. Triangle still in play until that happens.

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  93. Not much downside follow through thus far. Cycle top was a full 2 days ago on 11/3 and yet we have only gone sideways thus far. With it being a news driven tape maybe it is waiting for the next negative shock out of the Eurozone before taking it down hard. But as I noted in my weekend blog posts, the onus is on the bears to knock this market down hard this week. First important milestone would be to take out 1232 SPX.

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  94. New to Elliot wave but on the Euro 1 minute chart today I see a perfect 5 wave down... Followed by abc up... Next another leg down?

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  95. that break of the day's low triggered my short trade...looks like a bit of a fake out to this point. Hopefully 1250-1254 holds as Pretzel said.

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  96. Appears very doubtful that we'll break drop 15 points in the last 90 min's of trading.

    The bullish triangle won't go away.

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  97. doesn't seem like we'll be taking out that 1232 today.

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  98. It almost seems like every time the market is about to tank it would magically lift itself out of trouble...

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  99. exactly what I was thinking Frank. I wonder whats holding the market up. The bears aren't bringing it, or the bulls aren't conceding and had some more bullets to fire

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  100. I use to think that people saying: "The market is rigged blah... blah.. blah... " was for conspiracy theorists. Anyone who watchs this kinda crap however, KNOWS.

    The sad thing is its the same guys that tanked the economy in the first place(and then got bailed out by the government and our tax dollars), still doing it. Even sadder: The fact that the arbitrage away all of Hard working American's 401ks and retirements.

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  101. Frank, I was thinking the same thing.
    The late narrative of the market has been that it overcomes all bad news and seeming setbacks. Which can't go on forever.

    Quite the comeback by longs today. At 1,257 I'm now back at where I took a modest put position against the SPY.

    Now debating whether to go in further. Will wait to see that the end of day action looks like though. Looks like the close may now be HOD.

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  102. Mav,

    Actually I am using the MACD (3, 10, 16) and it works pretty well to explain why the market is going up. At least for today :-)

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  103. It should come down a little soon, but I am expecting it to find support at the 50 period MA, on the 13 min chart. Just for today.

    It looks the Pretzel's dreaded bullish triangle may be in the works.

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  104. Some fundamental analysis to add your TA coffee:

    From John Hussman, PhD economics, Stanford, and money manager: http://www.hussmanfunds.com/wmc/wmc111107.htm

    Here in the U.S., our broadest models (both ensembles and probit models) continue to imply a probability of oncoming recession near 100%. It's important to recognize, though, that there is such a uniformity of recession warnings here (in ECRI head Lakshman Achuthan's words, a "contagion") that even an unsophisticated, unweighted average of evidence indicates a very high likelihood of recession. The following chart presents an unweighted average of 20 binary (1/0) recession flags we follow (e.g. credit spreads widening versus 6 months earlier, S&P 500 lower than 6 months earlier, PMI below 54, ECRI weekly leading index below -5, consumer confidence more than 20 points below its 12-month average, etc, etc). The black brackets represent official recessions. The simple fact is that we've never seen a plurality (>50%) of these measures unfavorable except during or immediately prior to U.S. recessions. Maybe this time is different? We hope so, but we certainly wouldn't invest on that hope.

    Follow the link above for the full article / charts. His weekly market commentaries are excellent and free :).

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  105. It appears so Frank. Financials are still lagging today though and apple is still in the red

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  106. so if this is a triangle forming, we need one more test of the lower trendline before a breakout right?

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  107. Action today not good news for bears. Cycle top so far resulting in only sideways chop. Still an opportunity to take it down hard starting tomorrow, but if instead we see higher highs tomorrow then it would be equivalent in my cycles work or what e-wave would call a running correction. Overbought would be correcting in time via sideways choppy consolidation rather than via a sharp decline in price.

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  108. but then again, a breakout to the upside right here would fit the 65% rule rather well, provide a fakeout and result in a break lower.

    That fake breakout friday after the euro rally got me...Not going to fall for it again unless there is follow through.

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  109. The resistance at 1260 has been tested too many times now that is is unlikely to be a good level for a large decline to start from. The gave the bears to many chances to get short there. The good tops don't give you alot of chances to get short. Best hope for bear now is that we get a quick spike up to 1275 area and reject hard and fast from there.

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  110. that would ruin your cycle count unless the 1275 happens today, any alternate cycle count out there?

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  111. http://ciovaccocapital.com/wordpress/

    this guys last article gives bears like me a little more hope

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  112. Mav,

    Nope... it would not be the first time one of my cycles has been overriden by strong momentum. The cycles work best in trading range markets and worst in strong momentum markets. If this one fails it would be a sign of strong bullish momentum. Even so at the very least I would expect choppy sideways type action between now and the cycle low date 11/11 +/- 1.

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  113. Basically bears defending 1260 and bulls defending 1240. Something has to give soon and one of these levels will be broken.

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  114. Dec crude just broke the upper Donnchian channel line. Last two last times it did it came right back in and went sideways. Let's see if it will do it this time. If not, something more bullish short term may be in the offing? Also gold is marching higher, maybe signaling the dollar to weaken soon? These things are dragging equities higher with them?

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  115. Top is certainly in for today and probably for sometime to come. Kinda playing out as I stated in earlier comment on one of Pretz' post: bullish short-term; bearish inter to long term.

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  116. bears gave up 1260, at 1261.5 now

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  117. so we're now saying wave 1 down was 2 days long and wave 2 back up is taking atleast 4 days? is that possible? this market makes no sense.

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  118. CTP,

    looks like another day of hanging man on the indexes.

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  119. I hate to say it because I know alot here are short and looking for a move lower, but today's tape action does NOT look bearish to me. Tomorrow right out of the gate is pretty much last chance for 11/4 +/- 1 cycle produce some semblance of a decent reversal down. Maybe some calamitous news out of Eurozone overnight would help the bears cause, but otherwise this is starting to look like strong upside momentum taking the cyclical headwinds in stride.

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  120. The is undeniable a strong and persistent bid underneath this market. Some may say it is PPT, or HFT manipulation, but that is neither here nor there. The reality is that so far the bears selling has been unable to overcome this bid, and at least from the standpoint of my cycles work time is quickly running out....

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  121. Yeah CTP - there has been ample opportunity for the bears to bring it amidst the turmoil, and the best they've brought is a sideways chop. Last week we were talking about 1190-1197 and that seems like forever ago. If this consolidation persists another day or two, I think it's building a push up - not down

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  122. Vulture,

    Agree 100%... It appears that the Fund Managers are in performance chasing mode and looking to buy on even the smallest of dips. When the year-end performance numbers are used to calculate bonuses and you are playing with other peoples money then fundamentals be damned because momentum rules especially in the 4th quarter and heading into traditional Santa Rally season. The bears really had a decent set-up with turmoil in Eurozone and cycle forces pushing down, so if that cannot result in any meaningful sell-off then that is a "tell" in regard to the character of the market, one that usually indicates a momentum chasing rally.

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  123. Here's what I've noticed from watching the $DXY at 4PM vs the SPX recently and respectively.

    11/1 77.33 1218
    11/2 77.16 1237
    11/3 76.74 1261
    11/4 76.99 1253
    11/7 76.92 1261

    Cannot seem to hold above 77 for very long. Each of these intra day rallys recently have corresponded to intra day declines of the dollar. Not sure which is the tail and which is the dog, but it looks like the dollar is as much at play.

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  124. CTP,

    Your comments do make a lot of sense, and I will wait to hear more from you and Pretz about what to make of today's trading.

    But today's result does not particularly surprise me. And it still *feels* like a market ripe for a takedown.


    And I still come back to the question: where exactly will they take it to? Past 1,285 again?

    And could the market realistically maintain that into the end of the year?

    Why does that sound so incredibly improbable to me?

    With all of these bull runs after a morning rundown the last week, it seems the market is saying: we can overcome all bear and short attempts.

    Maybe it can.

    This feels like one of those times where the reality being presented is not quite what's real or to be believed though. Meaning I keep trying to picture a sustained S&P above 1,275 and it just doesn't feel probable to me.

    Expecting an HOD close I added more to my put position today at 1,261.

    I've got six weeks until expiration of my puts, and I'll be at least even with any trade below 1,250 for at least the next two weeks, so I'm feeling more than fine at this point.

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  125. I didn't like the action over the last couple of days, so I closed my shorts and went long in RUT near the close.

    Guess I got squeezed. Maybe that will be the trigger you shorts are looking for. You're welcome. :-)

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  126. I've stopped trying to outsmart the market a long time ago. So, I do take tape action like today's at face value. A market that cannot got down in the face of bad news and downward pull of cycles is a market that I do not feel comfortable being short. Now, the week is not over and bears MAY yet redeem themselves by bringing it tomorrow, but to be short here would mean I would be letting my personal bias override the signals the market is sending. And I have learned the hard way not to do that.

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  127. CTP,

    I have to agree with you on this. While the current bearish EW counts denotes long term bearish actions, recently I have been seeing more position action from the indexes and the names that I am monitoring on my watchlist. I am currently in cash until we get a very "firm" confirmation that things are breaking down.

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  128. One thing the bear have in their favor was today closing tick at +1100 is extreme and can often signal buying exhaustion. That coupled with today closing the 11/4 +/- 1 cycle top window, tomorrow becomes make or break day for the bear scenario IMO.

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  129. good write up from Scott Bleier...

    http://ibankcoin.com/scott_bleier/2011/11/07/time-to-chill-out/

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  130. "its time to chill the fuck out"

    haha great write up

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  131. CTP,

    Thanks again for your comments and insight.

    I have stops set (and I don't mind taking small trading losses). I may get stopped out tomorrow, but my positions simply aren't large enough to cause major damage.

    I don't set myself up for major disappointments, mainly by controlling position size and sticking with predetermined stops.

    And yeah, I've learned the hard way myself. Every investor has to go through it.

    The way options trades tends go for me though, I can have around three failed trades stopped out for a minor loss. But one that goes as planned will usually make up for all of those and then some. And I do pick my spots carefully.

    Going short this morning certainly seemed awfully well-timed . . . for about three hours there. Ha, ha.

    I'll also be curious to hear Pretz's and your comments about what to expect tomorrow.

    I assume the bullish triangle is in play and Pretz did make clarify that trade above 1,263 is rather good for the bull argument.

    We may simply be dealing with one of those occasions where all of the best reasoning (or rationalization) and forecasting one can muster are still overwhelmed by the current forces that are driving price action.

    That's the market, especially when exuberance spills over. And certainly confirms my opinion that tops of cycles are always way harder to enter and time than bottoms. Rationality is so much more present near market bottoms.

    If I get stopped out tomorrow and we head up to new highs, I can't imagine not trying to re-enter later. Hard to tell when bull euphoria is at it's zenith though.

    Still looking forward to hearing from Pretz about another improbable afternoon comeback. And what to make of the string of hanging man candles we've been seeing this week and last from the SPY.

    I do wonder if there other similar trading episodes (especially at or near the tops of bear market rallies) that this might correspond to.

    Quiet Monday here at Toulouse, so lots of time to watch the market and mess around on my laptop.

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  132. I realize this might say some things about my mental state, but CTP's quote

    "A market that cannot got down in the face of bad news and downward pull of cycles is a market that I do not feel comfortable being short."

    Made me think of the old bachelor joke about the difficulties of trusting something that bleeds for seven days and doesn't die. It does occur to me that both are erratic and unpredictable.

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  133. In the prior 5 trading days, we have 4 v-bottom waterfall reversals: 2 in the futures, 2 in the cash market. I haven't seen this many great stick-saves since Patrick Roy was playing. :o

    I'm not implying manipulation -- I'm not willing to go there (plus one of the kids sat on my tinfoil hat). I always try to find rational explanations in the charts instead.

    But the market is sure acting weird. Seems like "somethin' coming" down the tracks here.

    I haven't taken a hard look at the charts yet... but one thing I want to remind everyone is that the market never moves as fast as your *mind* does. It's a bit like thinking about flying cross country: you can go from LA to New York in a split-second in your imagination, but out in the real world of action, it takes quite a bit longer -- and may entail screaming babies on the plane, lost luggage, and unforeseen delays at O'Hare. :)

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  134. I agree with you there Pretzel, the market has been acting like it needs Li. Why wouldn't you willing to go to manipulation? It seems like its certainly possible

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  135. Anything is possible, mav.

    But to me, blaming manipulation starts to become an "excuse" of sorts. So I just won't let myself go there, because it's an unproductive thought pattern.

    By the way, you guys have to let me know when I misspell things like "Santa Claus"! I fixed it now. I am my own editor, and don't even use spell check, beecuz eye m generaly a verry gud spellor! So sumtymes eye nyd YORE help frum tyme too tyme. Allways feal free two let me no if ewe spawt un airor. ;)

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  136. lol, that was like a whole different language.
    ironically, I read the article and almost responded that 'bear in mind' looked mispelled...thought maybe it was a wordplay and then I googled it and realized it was right. Decided at that point I shouldn't be spell proofing anybody's work.

    So thinking this triangle could breakout to the upside? are you familiar with this 65% rule thing I've been croaking about? lend it any credence? does it potentially fit here for a fakeout then break lower?

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  137. to avoid posting more confirmatory bearish news, here's a non-technical read for those fundamentally inclined as well:
    http://www.theatlantic.com/international/archive/2011/11/the-only-leader-who-understood-greeces-real-problem-is-resigning/248018/

    I think the author did a great job approaching the Greek mess from the angle of philosophy

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  138. or maybe even a bear flag forming?

    I agree TJN, Papandreou was actually the hero in all of this (other than the referendum call, his last gasp and saving himself politically), but that is what happens to political leaders that stick their necks out there...the masses chop them off. A flaw in our democratic system unfortunately.

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  139. Mornin' TJ, in response to your guess yesterday about my whereabouts, yep, bull's eye. I live in SIN. Maybe you should move here after Japan haha.

    Pretz - wow my eyes almost popped out when I saw your alien language=P

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  140. Big picture first...IF the market wants to rally, the first move will take us up near 1290ish, about 1.5% - 2% from here. If the market wants to waterfall - we are going down 7-10% from here. So 1 up/5 down...great odds fro what i think is the dark horse favorite scenario. If it goes in your face you will have a chance to get to net 0 or long somewhere in or around 1300. Second, the market is definitely being manipulated...but my opinion is that there are so many holes in the dike, that the PPT doesn't have enough fingers which is why R2K was positive today and dollar didn't fall as much as SPX jump would have implied at the end of the day today.


    Credit markets are the leading indicator right now and they are saying things are broken. Italian sovereign yielding greater than single B US domestic high yoeld names. MF global and Jefferies are huge tells in my opinion. Market is crushing any financial with sovereign exposures so the knee jerk reaction is to sell that exposure. BUT if entire market is selling sovereign exposure in fear of being the next Jefferies then WHO is the buyer left.......... Bueller....bueller... This answers the question why the 5billion EFSF ofering was downsized to 3 billion...no buyers..credit markets are speaking-just like they did in 2008.

    I agree with Pretzel...why try and trade counter trend rallies if you have conviction the next move is much lower?

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  141. My thoughts for tomorrow...

    http://ctptrader.blogspot.com/2011/11/turnaround-tuesday.html

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  142. Rock:

    Two quick possibilities:

    1) The triangle is wave (b), which almost perfectly targets the gap fill at 1285; using C = A. I somewhat like this possibility. That would wrap up wave (ii) -- and filling that gap would allow the market to move far far away from it and not look back. Which is exactly what it will do in wave (iii) down. Also, bears aren't going to get a much "safer" entry than just below the recent October highs, so that's a level they can feel safe defending.

    2) Wave (ii) already completed. Market is doing its best to convince me that this is probably not the case, though.

    Keep in mind when looking at the charts:

    It took the bears 3 days on the decline off the top, but it's taken the bulls 5 days to get back 62% of that decline. Everybody getting all bulled up because the market "refuses" to fall here. Market already fell. Now it's trying to get that ground back, and it's obviously really struggling. If it makes it back to 1287, that will probably take another 3 days or so.

    So 8 total days of bull firepower to get back 3 days of collapse.

    Just some early thoughts, haven't done enough charting yet, though.

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  143. Whoops, 1285-1287.

    "220, 221... whatever it takes."

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  144. Remember, it's those key subjective things that make trading so hard.

    The market isn't "refusing" to fall -- as I said, it already fell. It's refusing to collapse immediately and recognize the fact that *you* personally, are now short. Had you been short from 1290, this rally would "feel" a lot different.

    So, subjectively, this rally feels strong to bears who are recently short. If the a-b-c scenario plays out and we rally up to 1285 or so, it will again subjectively feel like it's just never going to end, and most bears will get chased out -- which is what the market wants.

    Try to look at the market as if you don't have any money in it. I know that's almost impossible to do, but otherwise you'll usually end up going long when you should go short, and short when you should go long.

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  145. Scanning through the charts tonight something caught my eye. It may be meaningless but I figured I would just throw it out there and see what you guys think...

    http://ctptrader.blogspot.com/2011/11/this-could-be-nothing-but.html

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  146. Here's what I think might be causing the feeling of "manipulation."

    The decline off the October highs caught virtually everyone, including the market makers, by surprise.

    The MMs are now actively trying to get the market back up to that gap fill so they can take short positions -- that's the "manipulation."

    When we finally get back up to the gap, the market makers can get on board with the move, and the market will collapse in wave (iii).

    How's that? :)

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  147. thanks Pretzel...hadn't thought about it that way. 3 days down and 5 days without making it all up does put it in perspective.

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  148. Thanks CTP and Pretz,

    Looks like I may be getting stopped out tomorrow to wait for a higher entry. Or simply for more clarity concerning market direction.

    This certainly won't bother me. Especially if a 1,280+ entry point presents itself in a few days.

    CTP - I read your blog as well. Do or die time for bears, huh? Sounds good to me.

    One thing that came to mind reading both of your comments:

    Bears are not making the long fight back up for bulls not particularly easy, but they really aren't putting up a vigorous fight at critical junctures either.

    Perhaps the smart money play is simply to wear bulls out on the way back up. While also fostering more bullish sentiment in preparation for the eventual takedown. Just thinking out loud here.

    Since I don't pretend to really know at this point and todays move up on NO real news truly confounded me, I will probably head back the sidelines if the morning session trades significantly higher.

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  149. Not to be a naysayer but that type of price action is typical of sideways basing patterns where it seems that price is laboring to move higher (taking 5 days to regain a 1-2 day sharp decline) only to see it rocket higher once the basing pattern completes. In fact just about every triangle displays this characteristic. I am not saying that we will see a bullish outcome just that the slope of the climb relative to the prior decline is not necessarily indicative of whether the market is bullish or bearish.

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  150. brian,

    I think what we are really looking at is a stalemate. Bears aggressively sell at key resistance BUT are thus far unwilling to sell into weakness, so they back off and bulls come in buying the dips, but bulls are also not yet aggressively buying into strength. So, we are stuck in a sideways congestion phase. My cycle work said the resolution would be down, but needs to happen pronto if it's gonna happen at all IMO.

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  151. CTP,

    Just randomly speculating. ;) Honestly haven't spent much time looking at charts. Kids are more important today, gonna do charts after everyone else is in bed.

    Been feeling the bullish vibes myself, though. But usually when I start feeling these bullish vibes, a big move down is right around the corner.

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  152. Pretzel,

    I agree, the market "feels" bullish but it may still be a trap. The main thing for me is my cycles are pointing hard down now so I need to see price respond by tomorrow or else that tells me the market is just too strong to be dragged down by the cyclical pull.

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  153. Hey guys,

    I am going to be traveling on business tomorrow so it is highly unlikely that I will be able to post anything on my blog and/or comment here intraday, and I may not even be able to do so until much later in the evening. But I think you all know what I am looking for tomorrow. Trade Safe!

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  154. CTP

    Stalemate and tepid action from both longs and shorts sounds right. Bulls aren't exactly aggressive at key resistance junctures either. Lots of just trading the support and resistance ranges (so far).

    This clearly can't go on much longer though.

    Your comments that this pattern generally results in an eventual 'rocket' to the upside are well-noted. That possibility is definitely top of mind for me at this point.

    Since my average entry is now equivalent to about 1,259, I'm in pretty good shape to exit with minimal losses or even get out at even if there is a morning decline.

    Unless of course the market gaps up big in the morning, which right now *appears* unlikely. Or if it makes a move down, which also now *feels* less likely as well.

    Pretz - Your comment that bullish vibes tends to mean a big move down is 'right around the corner' is duly noted as well.

    And MM's wanting to move up to short at higher levels (and distribute on the way up) makes TOTAL sense.

    The central questions that comes to mind then are:

    Realistic timeline for an 'around the corner' move down is what?

    And bullish possibilities with what upside potential? The 200 dma certainly comes to mind. And I saw you mention 1,285 to 1,287.

    Not asking you to supply concrete or written answers to those questions, though I'm sure you will. And I will simply wait for your next post and chart. Just wondering aloud.

    And lastly this tortuous 'rally' does not really feel troublesome to me in the least, whether I have a position in the market or not.

    The notion that we could sustain any levels above 1,275 for any length of time sounds beyond ridiculouse to me. In today's environment? You've got to be f-ing kidding me. But stranger things have happened, I suppose.

    I choose wouldn't hold a position through a big run up . . . but if I HAD to, I'm pretty sure I'd sleep soundly with the belief that we'll be back here in a few weeks at most.

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  155. Have a safe trip CTP! And thanks again for your insights.

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  156. btw, William posted a good link to an article, which went directly into the blog spam box, so I have a feeling people missed it. Here it is reposted:

    http://www.hussmanfunds.com/wmc/wmc111107.htm

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  157. Hmm. Finally starting to dig into the charts a bit. I have an interesting indicator I track periodically to share w/ you guys in tomorrow's update... it's pretty reliable at calling tops within a percent or so. And it seems to be suggesting we're not going much higher right now.

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  158. Nope, not ready to turn into a bull just yet. ;)

    Despite all the wetting of bear pants today, I'm really thinking this all ends soon.

    We'll see what you guys think when you see some of these charts.

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  159. Actually, after looking at the charts and indicators in a bit more detail, I'm inclined to think yesteraday's drop was 1, then yesterday's rally was A; today's drop was B; and today's rally was C for 2 of (iii).

    Take THAT, bully!

    All by my lonesome again, making another gutsy call... so close to the KO level too. This one could get knocked out first thing in the morning if I'm wrong.

    To be fair, it's still preliminary... but I like what I'm seeing so far. I'll probably draw up a bull chart too, b/c there *is* bull potential here, and that'll make it official for the market to head down hard. Usually that's what happens when I draw a bull chart, lol.

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  160. Actually, it's more likely 2 of i of (iii). So far, I'm inclined to still think we're at a top. Got another 3-5 hours of charting left to do, though.

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  161. This comment has been removed by the author.

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  162. Me too. Tired of having to work so hard charting these do-nothing, messed-up, ugly, rangebound corrective waves!

    I'm starting to enjoy being the only one making some of these "way out-there" calls. Makes me a little uncomfortable sometimes -- but 4 out of 5 times, I end up being right.

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  163. On a +note Pretzel, if you do nail the top and the subsequent down legs, you will become very famous:-)

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  164. I thought Pretzel was already very famous=)

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  165. Frank, are you somehow implying...

    are you suggesting...

    that I'm NOT famous? :o

    Frank, perhaps I haven't gone into detail regarding my lifestyle and how I can barely make it out of the local Home Depot without being literally SWAMPED with men wanting autographs and women practically throwing themselves at my feet. Or the paparazzi who, even as I type this, are trying to sneak photographs of my charts and... hang on... GO AWAY, YOU DAMN PAPARAZZI!!! I TOLD YOU THIS IS PRIVATE PROPERTY!!!

    Sorry for the interruption, Frank, but this is just how my life is now. As I was saying, I know it's hard for an outsider to comprehend my life, what with its fast boats and loose women, but more fame at this point would probably be more of a blessing than a curse.

    I'll be back a little later, gotta go deal with something...

    I'VE TOLD YOU THREE TIMES NOW, THIS IS PRIVATE PROPERTY!

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  166. "More of a curse than a blessing," is what I meant to say. Damn, ruined a perfectly good silly rant! :D

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  167. Doing gobs of charts fer tomorrow. Market is a big pain in da derriere right now.

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  168. Hey Pretz, looks like we're the only ones awake=D

    Asian markets did the same 180 degree reversal today. Evil! But totally expected.

    Looking forward to your updated charts as usual.

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  169. Oh boy, another celebrity and modern Casanova in the making. It must be the labeling on those charts that makes the girls fall all over you at Home Depots and leave their men standing hoping to just get a signature on the latest $SPX count. Ha, ha.

    Will look forward to seeing your ABC for 2 of iii count. Out there on a limb again. That's cool.

    Let's get this 3 of iii party started.

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  170. I see Europe started high working sideways lower while SA started lower and worked its way up... What does the NY futures market look like at this stage?

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  171. Futures up about .4-.5%

    Dollar flat... looks like it's coiling for a big move.

    Man, these charts... ugh.

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  172. Just a quick post on my blog before I head out the door on my business travel.

    http://ctptrader.blogspot.com/2011/11/strike-3.html

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  173. Well put Brian: "Let's get this 3 of iii party started."

    Love the rant Pretz. Your just livin' the dream.

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