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Sunday, November 20, 2011

SPX, NDX, XLE Updates: SPX 1000 Here We Come (Right Back Where We Started From)

I believe this initial crash wave could move a lot faster than most are expecting.

Before going further, let me first state that I continue to be quite bearish both long-term and short-term.  The question I'm trying to answer now is whether this wave will start off a bit "slow" from here and bounce around for a few days, or whether the markets will breakdown extremely quickly.  I believe this leg will turn into a waterfall decline at some point; I'm just trying to determine whether that point is "now" or not.

I'm really just splitting hairs, because the preliminary medium-term target is 1000-1050 (SPX) under my preferred count (possibly as low as 800), no matter how we get there.

But the short term wave structure leaves a bit to interpretation, so I have prepared two short term counts: one is simply very bearish, the other suggests a waterfall almost immediately.  I'll let readers decide which makes more sense to them.  After studying more charts than you can shake a stick at (believe me, I tried, and the stick wasn't having it), I'm favoring the waterfall short term count by a slim 55% margin.  I should stress that it's far from clear-cut, and I've gone back and forth on this half a dozen times.  This is one of those cases when another puzzle piece or two from the market would be really helpful.

Again, note that the larger count remains the same for both charts, this is just an attempt to nit-pick the tiniest waves.

The first count I'd like to present is the conservative count.  This is probably the one being favored by most technicians, because it has the market doing what "typical" markets do; namely, retesting the breakdown point.  I have used the S&P 500 to illustrate this count:


There are a couple issues I have with the blue "conservative" count.  The first is that the two corrections called out in the chart annotation are both sharp corrections; Elliott guidelines dictate that the corrections between second and fourth waves should alternate: from flat to sharp, or vice versa.  The fact that they are both sharps argues that they are both second waves.  Several markets are also suggesting that Friday was yet another second wave.  We may not even have seen an internal third wave on this leg yet; and if that's the case, the decline will be brutal. 

Assuming my preferred count is correct, the second issue is that this is not a "typical" market.  This is a nested third wave decline, within a much larger third wave decline.  Expected bounces will probably go MIA (turning into nothing more than sideways grinds) and oversold indicators will become severely stretched to the downside.  As my friend Lee Adler likes to say, "There's no such thing as support in a bear market."

The second chart shows the more aggressive count, using the Energy Sector ETF (symbol: XLE).  This is the resolution I'm favoring, but the next couple sessions should shed some light on which resolution is unfolding.  It's also possible that this sector may decline faster than the SPX, under either short term count.


One thing going against the aggressive immediate decline is Thanksgiving week.  The seasonality this week is traditionally quite bullish.

The one thing I'm uncertain of, in both cases, is whether the current corrective wave, which started on Thursday, is complete yet or not.  I suspect it is, in which case we may see a gap-down open on Monday -- but I'm genuinely not sure.  Any further upside on Monday is probably a gift to anyone who takes advantage of it.  If we did get some form of rally, I would expect the 1236 +/- zone to contain it.

I'd also like to share another chart which supports the big picture preferred count.  This is a weekly chart of the SPX, and uses two indicators to confirm the market's bearish position.  The top panel shows stocks which are trading above their 200 dma; the bottom panel shows weekly MACD.  The chart explains the rest:


The chart above references QE1/QE2 "Party Time," and shows where the Fed's printing press artificially supported the market.  Since QE3 has been a hot topic lately, I want to share another chart, this one from my friend Lee Adler at the Wall Street Examiner.  One of the many helpful pieces of info that Lee tracks is Fed cash flow to the Primary Dealers (among many other things; this chart is from his 89 page report).  I want to share this to emphasize just how much liquidity the Fed had to pump into the system to support the two-year rally off the March '09 lows.  It's somewhat shocking when seen graphically, and serves to underscore how little "fundamental" support the rally actually had. 

Below are Lee's comments (and chart) regarding current conditions:

Fed cash to Primary Dealers remains flat. The slow growth, or no growth, of cash injections via the Primary Dealer route is as opposed to during QE1 and QE2 when the Fed was adding massive amounts of liquidity by purchasing large amounts of various securities, mostly Treasuries, from the PDs. The MBS purchases will begin to settle within the next couple of weeks. That should give the line a minor uptilt, which based on current conditions should not be enough to keep stocks in an uptrend without a lot of help from other inputs.






We can see on the chart, the Fed had to pump massive amounts of liquidity to the market just to keep stocks afloat below the 2007 lows.  Without QE3, it's hard to imagine where the fuel for continued rallies could come from.

I'm going to make another prediction right now: I predict that when this current wave down is close to bottoming (in the 1000-1050 range -- although it could extend down towards 800), the Fed will announce QE3.  Here's my reasoning behind that prediction:

1.  There's a decent bounce near the bottom of this wave "baked in" to the chart equation; QE3 could fuel it.

2.  Oil and commodities will be "crashing" right alongside the indices, so inflation fears will die down fairly soon.

3.  In 2010, when they announced QE2, the Fed demonstrated that they have a pain threshold relative to the stock market -- and they showed us right where that level is.  The Fed's pain threshold equates to the SPX 1000 mark, give or take fifty cents.

So that's my prediction for QE3.  Remember: you heard it here first.  ;)

The last chart I'd like to share shows the Nasdaq 100 (NDX).  The  NDX just completed a major top formation.  On Thursday, the support level of this top was broken, and on Friday, the NDX spent all day unable to rally back above it.  The chart also has some helpful hints on how to "get rich quick" in a bear market -- assuming you have enough capital to move the market, that is.


The final chart I should mention is the short term bullish alternate count.  If you aren't familiar with it, the chart can be found in Friday's article.  I'm keeping this count at 15% odds, although I've considered dropping it to 10%.  In any case, I'm not going to waste any space posting the chart; it's pretty much the same as it was on Friday. 

In conclusion, as I've said for weeks, I continue to believe that October 27 was a major top, and the markets are now in the early beginnings of a waterfall decline to new lows.  Personally, I generally make it a rule not to counter-trend trade during nested third waves, unless I see an amazing setup.  It's going to get ugly soon (for bulls, anyway); trade safe. 

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

256 comments:

  1. I'm reposting this from the prior thread, to see if anyone can help:

    Does anyone have any good long-term silver charts? The stuff I've been able to track down on the internet isn't LT enough. Ideally something 100 years or longer; log scale if possible.I know everyone said don't work on it and all that, but I've gotten this far -- so now I just need to finish it. But I need to understand where silver is at cycle degree (and supercycle degree if possible), and to do that, I need a lot more data than I have. 

    I actually have a feeling this could be an important chart relative to equities, based on a few theories I've developed while charting the bigger picture -- but I'm stuck without more complete data.

    Any help would be appreciated! 

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  2. Wow, Pretzel! Fantastic article and analysis. Can't wait for tomorrow and the rest of the week to see how all of this plays out. Your explanations you have kept simple and easy to understand - easy to follow your thought process. Well, I am ready.

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  3. Thanks!     :)

    I'm ready too.  

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  4. morning  from VT...I will keep looking...the update is an impressive piece of work
    rob


    http://www.sharelynx.com/chartsfixed/SI.gif
    http://www.sharelynx.com/chartsfixed/600yearsilver.gif

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  5. Thanks.

    Those seem like they might help... but I can't access them!  It says forbidden, you don't have permission, yada yada.  Maybe you could d/l them to your computer, then upload them to the blog image attachment?

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  6. can't seem to figure the upload thing...try this link to gt you to the main site
    http://chartsrus.com/
    thanks
    rob

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  7. Thanks, that worked.  Funny, I checked that site last night, but didn't see the 600 year chart.  TY for pointing it out.

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  8. Thanks for your excellent work once again.

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  9. Nice work pretz! I like how you have the balls to call the crash. Do you have a timeframe this would would happen/ low would be reached?

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  10. I would expect late December, if the count's right.  Interestingly, 11/23 is a Bradley turn date, as is 12/28.  So maybe we decline Monday/Tuesday, rally Wednesday, then straight down into late December. 
     
    Bradley dates do occasionally work (see attachment).  I've never been a huge fan of "timing" in that sense, though, because it's too vague.  Is it a major top?  Minor top?  Minor turn, major turn?  What?  Too many possible interpretations, and a bit like one of those things that "can't" really be wrong ever.   Look at the SPX chart, you could call any day in there a "top" or a "bottom" of *some* type.
     
    That's why I think price has to trump time -- price is concrete, and can stop me out of a trade.     

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  11. Beautiful analysis!  I admire you.  It looks like the market may have the third wave extension, which is long and strong bearish.

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  12. It would be great if I could upload images on IE.  Annoying.

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  13. Thanks, Ray! 

    Now we see if the market obliges.  Or not.  :) 

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  14. Thanks, Martin.

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  15. I think we need CTP to answer that question or is he pleading the fifth?

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  16. Pretz you are awesome!  Your analysis is top-notch and I admire your passion for charting the market.  It's one thing to be very good at what you do, but you also teach it well and make it easy for everyone to understand.  Too often I find people who are very good at something cannot teach their work to an avg Joe.  Again, great job!

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  17. Just a quick shout out to Tom for his *second* donation:

    Thanks, Tom, you're clearly a fantastic person!  :)

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  18. He decided to take a break.

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  19. Although, I can take a crack at it if it helps: 

    I think Wednesday will be a turn +/- 1 day.  So either Tuesday, Wednesday, or Friday (market's closed Thanksgiving).  Hopefully, that makes you feel better.  :) 

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  20. Thanks, blackjak! 

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  21. I would just like to add my thanks along with the others for your clear, cogent analysis.  It's so rare to find someone who can explain in detail why they have whatever prediction they're making, as well as predict the timeframe they expect it to play out in.  When I cash out of my puts at spx ~1000 I will gladly share a percentage of my after-tax profits with you.

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  22. Can't thank enough. There is wave at the end of marketunnel. You are the 'gold standard' in today's world of phoney analysts that give any crappy explanation that comes to their mind just to keep their 24/7 channels running. Well, can't blame them. After all they don't hold any positions, they don't 'trade' and being a good samaritan they always ask us to consult our financial advisor(s) because none of it is trading advice!

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  23. PL,
     
    Your long term bearish view is consistent with ECRI's (Economical Cycle Research Insitute) US recession call since September.  ECRI recession and recovery calls have been excellent for decades and their track record can be checked from
     
    http://www.businesscycle.com/
     

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  24. Cojones in the air
    I say it crashes
    you want to take a wack
    come and  try ;biatchez

    chorus:cojones in the air
                   cojones in the air
                                      
                                dark glasses,hand signs,backward cap your choice ;-)
                                                                                                                                                                                               

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  25. Pretz:excellent work again,you make it look so easy it belies all the time and analysis behind the scenes

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  26. Ray,did tou see the last interview Achutan did at cnbc?they treated him like a red headed stepchild

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  27. Pretzel - excellent analysis and explanation of the markets over the last few years. Quality stuff. Thanks for sharing. 

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  28. betoq,

    Yes, I saw it but I think the future outcome should prove the recession call right.

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  29. Pretzel,

    Just made a donation. I have been following your messages for the last month. Truly amazing. I do not post because I am not as smart as you of course and most of your bloggers.   I have just one question.  When FED comes in with QE3, wil that be enough to stop the horrible decline that will come?? Your long term forecast for the S&P is 400-500, I think.   In any event, please keep your posts coming and God Bless you.

    Daniel

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  30. As usual, great stuff.  Thanks...and I'm glad I went short into the weekend.

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  31. Anon,

    I read this twice. A few comments:

    'Panic' usually does not start at the start/top of a wave down. That sense of hopeless realization comes later when there is a sense that it's too late.

    Also, the sense bull/bear that all is fine and okay was just here less than one week ago. Why would that need to be restored? It's simply too late to restore that sense of hope, even with a three day rally. The pros who move markets see the writing on the wall already.

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  32.  Anon,

    You are correct.  The devastation that will come will be horrible for bulls & bears alike.  However, to profit by it is not wrong or distasteful. The reason being no one can stop it.  The excesses of the last decade were awful and now everything will adjust.  Hopefully, we can all survive this and see better days.  The work of Pretzel Logic is to be very much appreciated.

    Daniel

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  33. Daniel, I never said there was anything wrong in making a profit in anything, and I am a diehard laissez faire capitalist, and I will make a profit off my parents' grave, if I friggin' feel like it, for the pleasure of it.
    What I am saying, is that NONE of you fully comprehend, and not even PL, IMO, what can happen.  Example---have you ever considered a breakdown in the world system of 30-day normal credit payments?  Do you even know what that is?  Or of your broker paying you back?  All of you are so naive, it's I as if I communicated with sheep,.

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  34. thanks. Just wondering how much turkey im gonna eat lol. hope all is well with the inlaws!

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  35. I know exactly what you are saying.  No need to get nasty or personal.  My concern is even greater than economic. Civil Unrest could come on a very massive scale.  That will lead to dangerous unsafe violence for all of us. The destruction of wealth will make even decent people do desperate things.  In addition, the violent street thugs will capitalize on the break down of order.

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  36. If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around [the banks], will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." -Thomas Jefferson

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  37. Super committee likely to admit defeat monday. think we're going to tank monday!

    http://www.reuters.com/article/2011/11/20/us-usa-debt-idUSTRE7AJ0KE20111120

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  38. Pretz, many thanks for the terrific analysis and charts.  Keep up the great work. 

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  39. As I've posited earlier, the pros who move markets already see the writing on the wall:

    http://www.bloomberg.com/news/2011-11-20/hedge-funds-cut-bullish-bets-by-most-in-seven-weeks-on-europe-commodities.html

    The key stat in the article:

    Money managers reduced combined net-long positions across 18 U.S. futures and options by 10 percent to 754,558 contracts in the week ended Nov. 15, Commodity Futures Trading Commission data show. That’s the biggest decline since the seven days ended Sept. 27. Sugar wagers fell 30 percent, the most since December 2008, and bets on lower copper prices almost doubled.

    Add to the above: the 1 million open SPY put contracts at

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  40. You do not know what I mean, and you mistake directness as nasty or personal, when if, if I decided to, to get nasty or personal, I would crush you into a pulp, in a few seconds.

    Listen up, child.  If you are correct, and you pick the correct market path, you may be so correct, that you do not even get paid, as your broer goes broe, and does not pay you at all.  Just like depositors--they go to bank, and bank is closed, no money for you, you are the greatest clown of all.  Violent street thugs?  Street thugs are but worms, to the thugs in boardrooms, that control it all.  Decent people, you say?  Don't make me laugh.  Decency is the luxury of the fatly satisfied, but just you wait, kid, until you nor your kids, have not eaten for a few days, and then we will see, where your decency lies, you absurd moron whiner daniel.  GRAND-SUPER-CYCLE-DEGREE-WAVE-THREE.  WAKE UP,  T-U-R-K-E-Y.  What fools these mortals be.  It is hard to free fools from the chains they revere.  There's a sucker born every minute.  you are not even worth room 101.

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  41. Got to tell you, PL, your website is now loaded with grinning idiots.  Not a good sign.  The only thinker CTP, is now gone.  Humorous.  Me, I am a ghoul, like all street or boardroom ghouls, ever seeking sucker blood.

    Metaphors. What good are they, but to deceive moronic grass-eating pseudo-human fools.

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  42. Guess you are dumber than I thought. No place for idiots like you. Street Thugs are animals. Hope you never experience a home invasion and a gun is put to your head.  It is happening more and more often.

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  43. Jefferson created america.  Edison made it comfortable.  All others, nothing.  america is a sewer, in need of extermination.  And china will oblige in 20 years.

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  44. Thanks Brian!  It is good to know.

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  45. With all due respect, how is it you know what most of us  think on the matter of a global meltdown ??? Silence on the issues you bring up doesn't mean the balance of this forum is ignorant, stupid , or uneducated as you imply...perhaps  the lack of response to your inflammatory posts should tell you that folks realize you are looking more for a fight than a discussion ...be careful  as pride mixed with anger is a dangerous cocktail regardless of how intelligent one might be...just saying
    rob

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  46. Anon, this is truly sad and pathetic. Pretz goes out of his way to help and accommodate you . . . and you insult the entirety of his patronage, the generally rather informed discussion that takes place here, and elevate yourself to some sort of superior and know-better-and-more-than-you status to all-comers???

    Hmmm, has it occurred to you that this is ungrateful and self-serving at best . . . and driven by misplaced internal-poverty and resentment at worst?

    Either way, it has NO place playing itself out on another man's board that may also happen to also be a primary source of his family's income.

    When reading your posts, one must separate your unfortunate personal resentments and agendas from your keen market understanding and intelligence. The two are not actually synonymous and interdependent upon one another, even if you do choose to intertwine them.

    Lastly, the world as we know it is NOT about to end. There will perhaps be a death of many of the untenable financial structures and arrangements that inexorably led to where we are at today, but civil unrest and violence and dispossession on a mass scale is simply very, very, very unlikely. Though it would a

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  47. I think the old adage is the best one for this discussion here, How do you eat an elephant? one bite at a time.

    Let's let the market open. Whether the consensus on this forum is right or wrong, my guess is that it will begin quite normally. After that we can see what the night brings and then what happens tomorrow. If you get worked up now when nothing has happened, what will you be like when something actually does happen?

    If anyone thinks that all who are here are idiots, then don't hang out with us anymore. We are big boys and girls and we can handle your rejection of us.

    For those who stay get ready for another great week of life, thinking, trading, and discussing. I can hardly wait for the games to begin.

    Pretz,
    Awesome post. I love the way you are so clear.

    Confidence my friends we enter a short week. (or possibly a long week for those who are long.)

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  48. Futes (not surprisingly) are in the red already.

    The lead stories on Bloomberg, SA, Finacial Times, WSJ are all pretty much telling everyone to sell. Problems in Europe. Supercomittee impasse. Commodities front running the coming takedown of the indexes. China problems too.

    A combination which no posse if even the most optimistic if bulls and buyers can possibly hope to overcome, at least not until after we head lower first.

    And I think this time it's news that should be trusted. Because lower equity prices are in fact coming. Looks like the moment to go all the way in short may be upon us.

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  49. What I love about this guy and the ECRI is he came on CNBC back in early 2009 and suggested their leading indicators were turning positive.  In 2010, they suggested no recession when everyone was thinking double dip.  He could care less about which way the economy is headed.  All he cares about is keeping their perfect forecasting recession record in tact.



    The CNBC idiots don't want to give this guy any respect.  They did the same thing with Peter Schiff when he was calling the financial crisis many months in advance on their network.

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  50.  I agree with you brian,
    The third wave waterfall comes when EVERYONE is selling so the news should coincide with the the trend.

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  51. A20,

    Well, I haven't read everything yet, but I'm going to have to delete this one as being unnecessarily insulting to readers.  I understand your humor and your direct way of expressing yourself (I didn't at first), but you have to realize that others probably do not. 

    Also, you must realize that it is VERY EASY to "read" things as being insulting over the internet.  90% of human communication is "non-verbal" -- so when you're left trying to communicate with only 10%, as we are on the internet, it's quite easy to be perceived poorly.  If I make a comment to someone in real life, such as "you're a jerk" how I convey that can drastically change its meaning.  If I say it with a lighthearted tone and a smile, it becomes an expression of affection.  If I say it angily, it becomes an insult.  Exact same words, though.

    And when I read it over the internet, it's *only* going to be perceived as an insult.  I also realize that some of your insults are intended as such.   

    Anyway, I do value your insights and market experience and posts here, as do others.  But please try to show some restraint in your approach, for my sake.  If you can do that, the blog will gradually attract other posters whom you personally view as "thinkers."  If you're too much of a hard-ass on people, they're never going to bother posting. 

    I also quite disagree with you that your aforementioned profit-seeking poster was "the only thinker."  Not even close.  The blog is a mixture of experienced and inexperienced traders -- don't make the mistake of assuming experience equates with intelligence; they are not the same thing. 

    Many are here precisely because they don't have the experience -- and they're smart enough to realize it.  That's admirable, not something to be sneered at.   Please don't mock them for seeking education: encourage them for it. 

    I'm going to indicate ahead of time that this is a joke coming (staying w/ my non-verbal communication theory):  What you need to do is find a nice BULL blog where you can go bash people and get it out of your system a bit, then come back and post your insights here.  :D

    Really, though, the fact that people are here at all should tell you something about them.  Whether they "know it all" yet or not, they're on the right path, don't attack them for that.  Hell, I don't "know it all" either; I'm sure you realize that nobody does.

    So could you PLEASE tone it down a bit toward the other readers/posters?  Try to limit your attacks to society in general; and recongnize that the other posters -- even the ones you personally consider "unenlightened" -- are on your side, not people opposed to you. 

    Everybody, even you, had to START somewhere.

    Thanks.

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  52. its also not 90% of  your communication is nonverbal. more recent studies have put the number closer to 50-70%. Still a large number but not 90%

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  53. Bengal, thanks, and thanks for the donation!  :)

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  54. A20,

    For the record, I do comprehend.  And I have well considered the possibilities of mass systemic failure, including of the exchanges.  I still think that's a ways off, though, although it's closer now than it has been.  I learned a long time ago, though, that collapse takes a lot longer than I think it should.  I've seen these problems coming for a long time now -- around 15 years really, and continue to be amazed at the ability of everything to be constantly "stick saved" by the authorities.   

    But man, how are people ever going to become educated if you mock them for seeking education?  That doesn't even make sense!

    If my kid comes to me and says, "Dad, teach me how to read," and I reply, "You moron, how could you not know how to read!  What's wrong with you!"  Would that make any sense, or would it help in any way?  Quite the opposite, I have just discouraged them from learning, and *encouraged* them to remain uneducated.

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  55. Daniel,

    Thanks very much for your donation, it's truly appreciated.  You guys keep me going here with those, and I really mean that.  :)

    In answer to your question, I learned a long time ago to never underestimate the authorities -- but I think this time may be for real.  If/when we get to that QE3 stage, I will certainly consider other possibilities and do my best to read the charts objectively.

    A good speculator must rigorously challenge his own assumptions almost on a daily basis -- and I learned long ago that if I'm right, but way too early, that's as good as being wrong.  So if/when the time comes, I will present the possibilities as objectively as I can.

    Thanks again, Daniel, and keep the questions coming!

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  56. Thanks, William!  I know you're as good as your word in that regard, and I appreciate it greatly.

    I also value your intellectual contributions to the site through your insighful posts, so thanks for that as well.  :)

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  57. ES futures actually gapped down several points.  That's usually a bad sign.

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  58. TY Colorado.  :)

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  59. 90%, 70%, 50% -- whatevah. 

    "Doctor said he's got a 50-50 chance of making it.  But there's only a 20% chance of that."  :o

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  60. Randy Pausch's Last Lecture! I recommend that to everyone I meet.

    lol i'm writing a paper on body language as we speak so it felt like the perfect opportunity to chime in

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  61. I do actually appreciate the correct number,I think I recalled 90% from an older book, so newer studies may have changed the number -- I was jes' messing witch yas.  :)

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  62. lol no worries, i gotz itz evans witfout reeding yoors boty language ;)

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  63. A20-

    You may be right about this week being sideways/up. As I said, I'm only favoring the waterfall starting immediately by a VERY slim margin.

    Re: the MA's -- that's a weekly chart, not a daily. That's why they're so different.

    Re: the edit button. No clue. It should be there. I can only see it when I use IE, not other browsers, FWIW. Don't know how to fix this stuff yet, didn't have any time this weekend. I literally spent all night Friday (took a break to have dinner w/ the in-laws) and all day and night Saturday (again, with only a break for dinner) on charts and replying to questions, and writing. Fixing the platform may have to wait.

    Re: NDX RSI -- two things there: 1) there's likely a lower low coming; I would expect to see a positive divergence before a rally, expecially when it gets that deeply negative. 2) In 2008, that oscillator could run along the bottom for LONG periods of time without generating any bounces. I called them "bear runs." That's one of the things I meant about indicators can reach oversold and stay there.

    Re: stocks above 200dma retested twice in '07/'08 -- yes, but *both* tests led to immediate declines over the following weeks.

    "Tanksgiving week" -- that's funny! But, yes, as I stated, I'm not sure on the waterfall immediately. It's entirely possible this week will be a sideways grind with a positive bias.

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  64. Brian, regarding the article blurb you posted:

    Money managers reduced combined net-long positions across 18 U.S. futures and options by 10 percent to 754,558 contracts in the week ended Nov. 15, Commodity Futures Trading Commission data show. That’s the biggest decline since the seven days ended Sept. 27. Sugar wagers fell 30 percent, the most since December 2008, and bets on lower copper prices almost doubled.

    Attached is a chart of Sept. 27...

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  65. Don't have time to read the whole thing at the moment, but I definitely agree with the portion you posted. 

    We have become a nation of bankers, living on (and exhausting) the wealth created by our forefathers genuine work and production.

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  66. Mav and Spiker,

    I think you were asking about cycles --Here's someone's cycle work chart, so you can actually see what they're looking at -- this is generally how it's done.  I can't give credit where it's due, since I found it re-posted from another site at an even different site, and they didn't indicate who the original author was.  In any case, this is what I would consider to be credible cycle work, based on my (admittedly limited) knowledge of Gann and Hurst.  He's predicting a turn on 11/28 and a low on 12/21, based on Gann vibrations and Hurst cycle lows.  This would actually jive quite well with the "more conservative" very bearish count. 

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  67. Also, since you guys may not have seen this type of thing before, so you understand what you're looking at:

    1)  The boxes represent Gann analysis and expected turns.

    2)  The arches along the bottom represent Hurst cycle analysis.  The peaks and troughs would roughly correspond with highs and lows.  You can back-check his work by following the arches along the chart and see how they correspond with market prices.  The red, blue, and yellow bars coming up from the lows on the arches show how well they worked.  With Hurst, there are often cross-currents where one cycle might be making a high and another making a low.  You can see in late-December, he's anticipating a "nest" of larger cycles lining up for an important low. 
     
     
     
     
     
     

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  68. wow this is really interesting and really good stuff. I wonder if theres programs that automatically do this kind of stuff. Probably not open for individuals and retained by the big I Banks and hedge fund managers

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  69. Dollar looks to have formed a clean five-wave impulse off Friday's low, now in consolidation mode.  Should see another spike higher there in the next 24 hours or so.

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  70. Brian, thanks for posting the link/summary of the article about money/credit creation.

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  71. Look at the headline lineup on Bloomberg for tonight and tomorrow morning.

    This is the very WORST and most ominous headline grouping I have seen since the August waterfall declines. The message is unmistakable: Stock market crash to be reported here soon . . . and please, please sell so that we can print the story.

    http://www.bloomberg.com/news/markets/

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  72. Your "more conservative" very bearish count also jives quite well with CTP's cycle work.  Maybe we hit 1190 +/- on 11/23 (CTP's cycle low) and then have a mini rally into the 11/28 turn date.

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  73. Actually, that's done on Tradestation, but you can use just about any charting platform to create it.  My buddy Lee Adler, whom I've mentioned a bunch, is a Hurst cycle analyst, and has been creating nice charts for years, although he uses a different platform for charting.  The charts are a necessary component of any cycle work.  Imagine me trying to do Elliott Wave with no charts! lol

    Lee's site is the Wall Street Examiner, as shown in the article link above, for anyone that's interested in subscribing to a good cycles analyst.  He even offers a free 30-day trial, and if you just order his "stocks package" it's only $69/quarter, which is dirt cheap.

    <a href="http://affiliate.plugnpay.com/affiliate.cgi?url=http://wallstreetexaminer.com&affiliate=plogic&merchant=capitalsto>wallstreetexaminer.com</a>

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  74. Amazing.  I read this one:

    U.S. Supercommittee Ready to Announce Failure

    The deficit-cutting congressional supercommittee is expected to announce tomorrow that it has failed to reach agreement on at least $1.2 trillion in federal budget savings, a Democratic aide said.

    The aide, who wasn’t authorized to discuss internal matters publicly and requested anonymity, said in an e-mail this afternoon that it was highly unlikely that the talks could be salvaged. Tomorrow is the deadline for the Congressional Budget Office to receive a plan that it can analyze before the committee’s Nov. 23 target date for reaching an agreement.
    *************************************
    Maybe another case of the charts leading the news?

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  75. Or maybe we crash into 11/25, then have a little rally on the 28th, then crash into December, lol.  Who knows.  That problem pretty well illustrates why I've never been a huge fan of "date" cycles:

    1) because the polarity can reverse; i.e.- could be a high or a low.  I remember CTP saying one time "I was expecting (whatever date) to be a high, but maybe it was a low."

    2) as I stated earlier, pretty much every day the market's open is a high or a low, so dates without prices are *never* wrong -- and never right.  Kind of like newspaper astrology readings.  :D    I literally could throw out dates almost at random to readers, and we would be able to link turns to those dates all the time.

    btw, what Lee Adler uses is price-based Hurst cycle projections (which are linked to time).  He doesn't give date projections, he gives price projections.  I find that information valuable as a trader.

    Worth noting regarding seasonality: there's been a rally on the Wednesday before Thanksgiving (11/23) in 8 out of the previous 9 years. 

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  76. ES opened with a 5-point gap: from 1213.5 to 1208.  Wonder if they'll be able to close it before morning.

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  77. Alright, this has been one of those somewhat emotionally-draining evenings, having to edit and moderate.  I'm going to go eat some dinner w/ the in-laws. 

    bbl

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  78. Also, I've just given this some thought -- 

    For future reference, any unnecessarily harsh and personal attacks -- from anyone -- on other posters will henceforth result in your IP being instantly banned. 

    I don't care if you're the best trader in the world and generally add to the discussion -- I don't need the stress, and neither do my readers.

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  79. thanks for the link! I'll have to look into that pretz

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  80. your a good man Pretz
    just saying
    rob/vt

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  81. Pretzel,
    Did you come out with any analysis on the precious metals that I missed? As I have been looking at the gold chart something doesn't strike me as the sky is "falling down," but I can't put my finger on it. So far I have been out of the metals I think that if I would play it at all it would be in silver, but even there I am hesitating. I certainly would find it near impossible to consider a 'Texas hedge' or any great position commitment there. Being old school, everything fundamental would push me away from a short at this time especially any whiff of more Fed easing from the Bernanke. Technically I can only consider that an impending rally in the dollar might give it a bearish tint.
    I saw some others shorting it and I do hope that the market tanks for them. Thus far I am not there with it. If you don't have anything on it, no worries. 

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  82. I, for one, and being a short time to this blog, have found the discussions extremely positive with all views discussed and responded too with reasonable arguments (or at the very least humor).  As to the posts with negative comments or connotations, these can be engaged or not, just as in real life.  The opinions with negative overtones bother me only in the sense that it appears to be an attack on your work PL, either directly or through some less than coy rhetoric.  While I find it distasteful, you are a very capable individual who can either take the time to respond to the caustic writings, or focus on the positive aspects of this, in my very humble opinion, tremendous blogspot!  I hope, for somewhat selfish reasons, you choose the later.
     
    You can choose you own saying, but I like, "water off a duck's back". 
     
    Please, continue the good work.....and I hope you enjoyed dinner!!!

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  83. CO,

    Yeah, I looked at silver too, got out of my short last week.  I agree with you.  I don't see it either, but I don't see it with much of this market.....i.e. industrials.  The whole gold thing going down makes some sense to me as a needed liquidity play, so maybe silver comes first.  I am trying to hammer out, what is the "best" play...dollar for dollar when the SPX drops.  SPY puts are darn expensive, so where is the best bang for the buck?  Not sure it's in silver, but I couldn't tell you where to play.  Suggestions?

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  84. I have remained unconvinced that gold is in "sky is falling mode."  I could definitely see one more leg up there, to new highs.  I spent a lot of time charting silver this weekend, and have been unable to reconcile its cycle degree count, which could have a big impact on its primary/intermediate degree count.

    Quite frankly, when I look at silver, my first inclination (first inclination, lol -- after like 3 hours of charting, it's my "first inclination") is a drop to 26-26.5... and that might be it.  I could see another leg up forming there as well, but without a cycle degree count, it's hard to say. 

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  85. That is kinda what I suspected too. It will be interesting to see how this pans out. Thanks.

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  86. My main concern is creating a pleasant environment for everyone -- young and old, new and experienced -- to share ideas and ask questions.  I don't want it turning into something where I have to play Kindergarten Cop, constantly yelling at the "kids" to share their toys, and quite poking Little Jimmy in the eyeball. 

    I especially don't want it to become where newcomers are afraid to speak up for fear of being attacked.  As I said before, everyone has to start somewhere; this isn't an "elitist" site where only people with 20 years or more trading experience are allowed to speak. 

    I enjoy sharing my knowledge and whatever bits of wisdom I've picked up over the years, both in trading and in general -- to me, that's half the point of life.  If I can help others learn something, without them being subjected to the same pain I had to endure while learning whatever lesson is on the table, then I feel I'm accomplishing something as a *person*.

    That's one of the big reasons I enjoy doing what I'm doing.   

    So from now on, rowdy kids who can't play well with others will get banned.  That simple. :)

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  87. please write a book, i promise ill buy it and not download it. lol or a video series

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  88. lol.  I've actually started several, but never seem to get them finished.  Had one up to about 200 pages and my hard drive crashed and I lost the whole thing (always back up your data, which I still only do sporatically). 

    But what I've written is mostly just sharing general life experiences.  I'd probably even be willing to let you read a few paragraphs for free, if you asked nice.  :D

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  89. I play the futures and futures options. Lately, I have been playing CL puts, ES puts and ND puts. I am considering some Aussie$ puts as I think the Dollar has an impending rally coming and I would think that a terminal move in the stocks would likewise constrict risk assets. I would consider the Euro but I have been smoked so many time by it that I am a bit battle weary. Furthermore I got caught with a large Swiss Franc cash position when their CB shot the franc in the head a few months back.

    For me the SP has to break the 1190 level to really confirm a downward move. I have always been a fan of selling the weaker market in a related group so that is why I went for the Nasdaq last week.

    I understand the liquidity argument and that could have some traction. However I think that the bulk of that got wiped clean in the late summer drop. Maybe I am wrong. Having a bit of a European background, I think that as the threat of a Euro collapse looms, Gold becomes a wanted alternative and QE? is definitely bullish for the Gold in the long run.

    All this is so 'fundamentals' and not 'technical', but for the real kicker is when the technical is not looking right. But I can't put a finger on what it is. Just a sense after 20+ years of studying charts. And then again I may be dead wrong. But I usually go with my gut when I get this sentiment.

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  90. pretty please? lol you already have my email address ;)

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  91. There ya go.  I accidentally published it as a blog post at first, then moved over to the side standing pages.  After you read it, you'll understand why I don't want to do anything to *add* to the suffering of others in this world; life is hard enough all by itself.

    http://pretzelcharts.blogspot.com/p/some-of-pretzels-unique-real-life.html

    Here's a sneak peak:

    I remember thinking that I could somehow stop the car. That if I tensed up and used all my strength, it wouldn’t roll over us. It would just stop, like an empty shopping cart. At ten years old, my understanding of physics, and particularly of Newton’s first law of motion, was woefully inadequate. The car just didn’t look that dangerous as it coasted down the hill directly toward us. Not that I had anywhere near this much time to analyze what was happening -- from the time I turned around and saw the car until the time it hit me, maybe two seconds elapsed.

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  92. Got the dollar spike I suggested was brewing... and ES is down about 18 pts.  Can they stick-save it all again? :o   

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  93. I am new to PretzelLogic, just discovered on marketwatch and am interested in elliott wave. What i would like to know how were you positioned, long or short or neutral, during the rally from QE1 &QE2

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  94. Hi, Billy Jay, and welcome!

    I spent the majority of QE1 positioned long, and the majority of QE2 in cash (sold most of my longs taken at the March bottom for a nice profit, but too early).  After that, I took a few quick swing trades here and there, but I actually took the better part of QE2 off.  I instead spent time relaxing with my family, waiting patiently for the next leg of the great bear, which I had been anticipating since 2008.  Got positioned short again in May this year, as I saw QE2's end as the most obvious sell signal in history, and figured it was finally time for the C wave decline. 

    Hope that answers your question. :)

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  95. Just to clarify, I have been following  Prechter for the last 2 1/2 year and in the beginning was doing well, and caught the turn in 2009. But a year later  I have had a bias to the short side and am struggling. Now some of it has to do with poor risk management, trading too many correlated markets and all the things you can do wrong. I am learning and its true nothing focuses you more than losing cash. I want to participate in this next down leg. But I always feel that I should have participated more in the leg 2 rally.

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  96. My advice there would be not to beat yourself up too badly over "missed opportunities."  The only way most of us learn is by making mistakes, so it's just part of the process we all go through (both in trading and in life).  Learn what you can from it; and move on.

    I don't follow Prechter myself.  I followed his service once, many years ago (2001, I think?), and decided they had too much of a bearish bias for me.  I currently have no clue if his counts agree or disagree with mine.  I try my best to stay objective and true to the charts, instead of using the charts to "confirm" my bias.  In fact, I often try to use the charts to challenge my bias.

    I can't promise I'll get it *all* right, all the time, but I do seem to get a fair amount of it correct -- and I always try to view things as objectively as possible. 

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  97. Here's a chart that should be looked at, especially in case the ST bullish alternate count plays out.  It also shows some support zones to watch for possible bounces.  Once the market moves far enough down (assuming!) we can put the knockout level at the wave 1 low (1215), since the fourth wave should not cross into the price territory of the first wave -- but of course, we can't do that until the third wave plays out and starts correcting. 

    Anyway, I'd hate to see anyone turn profit into loss, so trade safe.

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  98. I should also clarify that where the chart says "the extension lines up nicely" that's referring to the 1.618 extension of the C-wave in that count. 

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  99. The dollar has only formed three-waves up so far, and thus could still be in
    correction mode. It looks like there was a fifth wave extension, which would
    have the dollar currently in a wave b-up correction with c-down to come.




    If it breaks below 78.25 *before* it gets above roughly the 78.84/.85 level, watch
    for a retracement back to the 77.65 area. That could correlate with the
    SPX back up to 1215-1225.

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  100. Pretzel,

    Mahalo for your response on my questions.  Yes I can attest to the effictiveness of how much can be learned through a subscription service.  I did one my self (TA based) and it really accelerated what I learned as was your experience, and you've probably discovered that the teaching aspect probably helps sharpen your own awareness and trading.  I may scope out some EW based services. 

    I've got to say that even though I'm fairly comfortable  in my knowledge of classic TA (for my system of trading), I am experiencing that phenomenon in which the more I know, the more I realize how much I don't know so I'm going to order that TA book anyway.   

    Looks like we're getting that gap down we've been waiting on, now if we can just some consecutive gaps at open. 

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  101. Pretzel - great article and good point outon the dollar - the rising wedge you highlighted definetely is the thing to watch this morning.

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  102. Lol-  you've got a pretty good "free" EW subscription service right here.  ;)

    Heckuva lot better than any subscription based service I ever had, lol.  The one I subscribed to way back when did the Dow, Nasdaq, and SPX.  That was it.  Not to mention, all they did was show the charts with about a 3 second explanation behind it... 

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  103. TY

    I'm trying to give you guys some extra intraday info to watch 'cause I can't hang out too late -- got an early morning app't today

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  104. Good morning Pretzel,

    Just got up and saw that the futures are down big.  This does not bode well for the future.  Sorry no pun intended :-)

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  105. Wow, that's probably very true. 

    What I mean by wow is that maybe because of my own psychology I've treated this site a particular way. In all honesty I have not treated it as treated it as 'trading advice' rather as commentary and entertainment. 

    I haven't traded based on charting or commentary here.  I do expect though that once I do some more of my own studying and reading, that I will probably treat what you provide here differently.   In other words I'm not yet able to fully appreciate the learning potential this site offers, but I do expect that I will in time and that's not a critique on your work, but a statement about me. 

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  106. The curse about counting waves, once one starts, is that when I look at my own equity curve, I am starting to see waves.... since 2008 I saw three waves down already (including the equity in my home, personal liquid assets, and net debt) with no bottom in sight :-(

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  107. Pretty common psychology at work there.  There's an old adage that people don't value things they get for free.  :)

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  108. Frank, that's very true about counting waves.  I do it with everything from political polls to my own blog traffic.  btw, the blog looks to be in the midst of a third wave up at primary degree... lol.

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  109. Bears need to push through 1195/1190 to make it official.  Where's Rocky, btw?

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  110. We are entering an oversold condition that is currently more oversold than oct 4.  This could of course change at the end of the day as the oscillators in real time do not look the same from hind sight.  This might just be one of those days when oversold gets more oversold.

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  111. If we break 1197, what's next?

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  112. Hey guys, just turned on the computer this morning....liking this open :)
    But I'm going to take my vxx off...leaving my other shorts incase it get's carazy!!!

    Great calls Pretzel!

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  113. Currently on the charts, this "looks" more like a 3rd wave than the other recent moves down.  And the low "confirms" on 5 min RSI, in other words, no divergence.  So this may be the nested third wave setup.  Hard to say for sure this early, but it has the right look.  Until 1190 goes, though, it's just another day.

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  114. Good morning Pretzel,  does the open tell us anything more about which ST count is more likely to unfold?  How high does a bounce off of 1190 spx have to go to rule out the more aggressive st count?  Or would aggressive count not see much of any bounce at 1190?

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  115. 1190 is still a key support level, IMO.  Not much but air under it until the 1150's.

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  116. Ha ha yes, but the consumer in me doesn't pay for internet entertainment - don't take that the wrong way, because I expect that  how I treat the info on this site will change  in time and ONLY then would I donate. 

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  117. 1190, then 1168, then the low of Oct 4... go go bears!

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  118. TY Rock! 

    I'd really love to see 1190 blown through here.

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  119. from what i can tell it hit 78.71 and is now headed lower

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  120. The open "looks" more like a nested third wave on the charts -- so it "looks" in line w/ the aggressive count.  I would expect 1215 to be resistance now, if that's the case. 

    Also, if the aggressive count is playing out, I would expect us to move lower before we bounce, then we might bounce back up to the current levels before heading lower again.  In other words, these supports we're breaking should now become resistance and contain any upside. 

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  121. Yeah, what william said....I shouldn't blog before coffee!   :)

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  122. Also: if bulls can't generate much of a bounce at 1190, they're toast.

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  123. Hi Pretzel, love this blog, learned a lot so far. Quick question, your "US Dollar Update: Zero Hour Approaches; Bottom Appears Imminent" still your prefered view? (as long as no sudden QE3). Would be happy with just a yes answer if nothing spectacular has changed this your view, as I guess you have a lot of other charts on your mind than only the dollar (or maybe not :-)
    /DJN73

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  124. Morning,  PL

    You  liking Capn Kirk?

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  125. I think the political 'powers that be' WANT to see a big, huge 300+ point Dow drop in the headlines after this is all over.  And probably a week's worth.  The political benefits will outweigh the costs of economic damage to them.

    The political debate being framed is:  If only Republicans would agree to tax the rich their 'fair share', then we'd all just agree on things. 

    This is really about a tax on the sub-rich:  small business owners and individuals who make between $250,000 and $1 million who pretty much never vote for Democrat anyway.  The super-rich have their wealth tied up in long term assets that are subject to capital gains taxes, not income taxes.

    The actual effects of higher income tax rates will be further economic stagnation and another recession, since it signals to all employers individuals that there is no political will to protect what they make.

    And so they WILL make sure to reduce their income exposure.  And therefore employment and economic output will fall as well.  Higher marginal tax rates are not just about how much you get to keep from what you make.  They're also about what kind of economic environment one lives in.

    The market I believe is going to oblige the Democrats this week and give them their argument.   Seems that there are simply too many forces that WANT the meltdown right now.  When I read the headlines last night, it could not have been more apparent where the PTB want to see things go.

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  126. I understand -- actually wasn't soliciting you, I was just commenting on the fact that your psychology wasn't unusual.  And I also understand that if you're viewing it as entertainment, then that's another matter entirely.  Once it sinks in a bit, your viewpoint will probably change.

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  127. Hi DJN, thanks!

    And yes, still viewing the dollar as LT bullish.

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  128. I've always been a Star Trek fan, but even moreso today... :)

    Price... line Negotiator!  I swear, everytime my puts go up, that damn song goes off in my head.  :D

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  129. So far, this really looks a lot more like the aggressive count than the conservative one.  Notice on the SPX chart how this decline is sharper, steeper, and longer than the last couple.  That strongly argues: wave 3.

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  130. Yeah, you may have a good point there.  Elections coming up soon.  Finger-pointing to abound.

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  131. I would be utterly shocked if we see a reversal here and march back upward while we pause before testing 1,190.  There are headlines that need to be made at the moment.  And those don't get made if we show some 'miraculous' recovery after the morning drop. 

    We'll see, but I suspect the market is just pausing here. Shorts who are satisfied with their quick gains can cover, and the gullible who would buy attempt to mount a defense here can be cleared out.

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  132. He's driving a REALLY hard bargain there.

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  133. So this is looking like we are in blue 1 of iii?   

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  134. Oh, I could not be more convinced that this is well-planned and orchestrated.  Congressional Dems saw their poll numbers rises substantially verus the GOP after the August waterfall declines.  Obama and the GOP were the ones whose numbers fell at the time.

    If it worked for Dems last time, why wouldn't they want it again. They have very artfully framed the issue and it's been thoroughly poll-tested:  If only the GOP wasn't such a shill for the super-wealthy (and gave a damn about the 'little guy', we'd have an agreement here. 

    Meanwhile the GOP cannot agree to a tax increase.   It's politically untenable in their districts back home, and it would leave their base infuriated.  And it would signal to Dems that they can be broken.

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  135. I mean (v) of 1 of iii.

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  136. No.  This looks like the more aggressive count.  The nested third.

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  137. I think 1190 is going to get claimed by the bears here before the day is out.  Then our next rebound will retest it from underneath (if the bulls are lucky) and down we go.  I'm gonna move the aggressive count (XLE chart) odds up to 62.7738%   :o

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  138. that extra .7738 percent really convinced me. im maxing out my margin account on shorts now :P

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  139. Overall, do you think this bear market will be like that of 08 where it went down in a vertical straight down fashion but quick, or would it be like that of 2002 where it went down in "orderly" and slow fashion?

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  140. we're under 1190 now

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  141. rut hitting moving average support...I'll probably regret this but i'm taking all shorts off except SLV & OXY.
    I do think we get a bounce here. This level was too strong for us to blow through it like this. I'm going to load back up after a little bounce or a fall below 1184.

    This move is really testing my resolve though. I'm naturally a bull investor and cheap prices for stocks like BTU & FCX are really tempting me here.

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  142. This is a higher degree bear market than 2002.  2002 was a primary degree fourth wave.  2008 was a primary degree A wave within a supercycle fourth wave; this is an extension of the same supercycle fourth wave, but it's wave C of 4.  It will probably make 2008 look mild.  Maybe not quite yet, but when 3 of Minor (3) hits... ouch.  This is still only 1 of Minor (3) down to SPX 1000 or so.

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  143. Rocky, 

    Be careful here.  I am very bullish naturally as well.  I even though we had a bull market a week ago :-)  But DO NOT catch a falling knife, as the saying goes.  If it's a real bull market, you have months to buy.

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  144. Reason I ask if to figure out which vehicle is best to ride this, whether by using VIX or by using an inverse Russell/SPX ETF.  So sounds like VIX will hit over 90 again soon when 3 of Minor (3) arrives.

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  145. Cheap stocks, lmao.  Seriously, this market is so overvalued, it's insane.  Where's TJ when you need him, he'd probably have some good numbers for ya.

    Also: what Frank said.  If my count is right, this is NOT the time to think about going long.  Lighten up on shorts, then reshort on bounces if you want; I'm not even doing that here.  This is short and hold territory until proven otherwise. 

    But if I'm right on the count: Don't try to counter-trend trade a nested third wave down, you'll get slaughtered.  If we bounce back above support and the internals are strengthening, then you can decide I was wrong.

    NOT TRADING ADVICE, but I wouldn't go long here with your money.  ;)

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  146. Pretzel, really nice call on PCLN.  Those December 460 puts really took off (not that I am trading them, LOL).

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  147. btw, my ST target for silver is 26-26.5o.  This is a high confidence target.

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  148. lol- ty, skid.  Glad that educational paper trade is working out for ya! :)

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  149. I am trying to figure out where to pyramid my shorts here and via what vehicles.  I am only lightly invested, but my small shorts are in short and hold mode currently.

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  150. Anyone adding at the break of 1190 or waiting for a bounce ??  Thx

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  151. would you trade the second wave up?

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  152. Go bears!  take out 1168 with authority!

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  153. thanks guys...counting on you to help strengthen my resolve here. :)
    I'm so tempted right now.

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  154. Waiting for a bounce.  But these nested 3rd waves don't wait for no one :-(

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  155. Well 1190 is gone...heard a UBS trader say on CNBC that he was looking for 1185 as a key level to hold... also there's an economist calling for a 60-70% chance of recession in 2012... looks like more and more people are catching on.

     

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  156. vulture: short and hold for me, never covered.  Can't guarantee much for bounces.

    Rocky: did you see how easy 1190 went?  Like butta'.  I wouldn't recommend stepping in front of the train here.

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  157. as I was typing that one 1185 is gone now...

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  158. Looks like the political class will get their 300+ Dow drop headline, which I firmly believe that manyin politics are rejoicing.  They'll be even happier if we see further declines throughout the week.

    Those of you thinking about going long today:  IMHO that's crazy talk.  There are so many macor factors and forces arrayed against you at the moment.  Why trade into the teeth of them?

    If you are eyeing your favorite stocks right now, hoping to get in:  Please go look at the October 4th share price. Now imagine ten to twenty percent lower than that.  It's quite probable in the near future.

    Not advice of course.

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  159. Yeah, I would say if 1185 can't do it, it's pretty much game over.  If bears take 1185 and hold it, I'll move my odds on the waterfall up to 74.33786%.  ;)

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  160. btw -- props to Michael for his second donation!  Thanks, Michael.  :) 

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  161. RSI confirms new low.  No divergence yet.  If the waterfall is playing out, we'll backtest 1190ish, then buh-bye.

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  162. btw, AZO is another one living on the edge, although I personally don't have a position in that one. It has the potential to recover... or fall off a cliff here.

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  163. Welcome for the donation J.  I did see Dick Bove - my favorite moron, said buy banks hand over fist on Friday

    I think that means buy FAZ hand over fist 

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  164. lol- that's probably what he meant to say. :D

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  165. Dollar dropping and Euro spiking on 5 min chart - up 45 pips in last 10 minutes -- basically the same time the 1185 was violated by the SPY .. Algos at theri best

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  166. It's interesting that professional traders from UBS think 1184 should hold which is the 50% retracement from top to swing low on Oct 4 prior to strong leg up.  He sees it as support because his bias is bullish.  Market is contracting in terms of ratios on its way up from Oct4 to Oct27 (I am seeing it with hindsight now), we should be identifying resistance now and downside target, not support :-)   Of course the market can rescale and change its ratios on us any time but based on evidence it's presented now the bearish view holds.

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  167. Excellent analysis Frank.

    FWIW, everyone, my "secret weapon" chart is confirming that we still have some ways to go on the downside after this obligatory bounce flatlines.

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  168. Playing devil's advocate now:  Another thing I'd like to see, though, for stronger confirmation, is the bears push the VIX up through 35. 

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  169. Come on guys - PUSH - and we can crack that 1184-1185 mark - that's all that was left

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  170. Anyone have any other questions real fast before I get 3 hours of sleep?  I tried to cover as much as I could today.

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  171. nah go to bed bud! our questions can wait

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  172. you're talking about Art Cashin right?....i think he's a bit of a clown, so don't put too much stock in what he says. going into today i had read that 1184 would be a support, 50% retracement. It's tense out there right now for sure.

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  173. Hang in there brother.  We can get through this :-)

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  174. Mind showing your secret weapon chart? :P

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  175. I think it's waterfall city today, myself. 
     
    The notion that we might rally back up from here today toward 1,200.  Hmmmm, why does that just sound so terribly unlikely? 
     
    The incentives here for lower pricing seems overwhelming:  We have a political fight in full process, so fear and dismay need to be spread across the fruited plain right now.  That doesn't sink in until margin calls force sell orders that hit home with the voting public.

    The pros who move markets have already placed their bets, and they certainly aren't bailing now.  Not when mass margin calls won't be finalized for the next three days and the Supercomittee is making it EASY for them. 

    The notion that 1,184 is 'support' in this environment merely because it's a 50% retrace.  Hmmmm, maybe it is.  But that just doesn't sound right to me.

    Sound more like sellers have too much incentive to SMASH 1,184 by noon.  If only to completely demoralize buying sentiment and make them give up all hope.

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  176. Any clues to "some way to go"?

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  177. With a little luck, that first test of 1190 was A, the retest of the low is B, and we head back up to 1192/4 in C. If that was it for the correction, this market is weaker than I thought.

    And Frank, I'll just tell you what it is.  It's actually three things, used in special combination: the Tarot, the I Ching, and a Magic 8 Ball. 

    LMAO

    No, you can't see the chart!  :p

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  178. I know it ... you practice Gann too :P

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  179.  Also, regarding: "is it going to waterfall?"  I'm not sure what else you call today.  Seems to already be happening, unless the bulls pull out a stunning upset here.

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  180. I think 1184 will be broken sooner or later. 

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  181. 1168 is probably more significant than 1184.

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  182. I don't think we'll rally that much, I expect we'll close in this region.  BTW, we briefly broke below the 50% Fib level (1183.72) about 4 mins ago when we dropped to 1183.16.   A 28-30 point slide on the S&P really is a reasonable move for a day, but sometimes we see some stronger moves after Europe closes, so I'm not betting either way. Incidentally, the CAC & DAX are down over 3% each, not even 2.5% for the S&P. 

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  183. http://thegatewaypundit.com/wp-content/uploads/2011/08/cry-baby.png

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  184. Curious to hear what those watching makes of this consolidation and pause between 1,184 and 1,189?  Three bounces off of 1,184 so far, but not much ability shown by buyers to get themselves off the mat (so far).   

    Ever since hitting 1,184 we're back to watching paint dry.  Bigger resistance than I thought it would be?  Or just a natural point to pause before pressing further down? 

    Fifteen and five minute stochastics are about to roll over as I write this.

    Anon20, your post below is duly noted.  

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  185. Surprised by the channel of the last two hours.  Seem to be holding this support without much effort.  I, too, did not see 1190 holding, or 1184 being a problem.   So far, wrong on both counts!

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  186. Amazing work Pretzel. Hope you are getting well deserved rest

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  187. OK, really can't like the push up!

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  188. Newbie here.  As in just found the site 12 hours ago.  After a few hours of immersion, I'd have to say that it seems to be a refreshing and insightful EW blog.  Same goes for the host.   Can anyone please explain why A20 carries such a big chip on his shoulder?  I missed the set-up drama.

    To PL:  Really liking your style.  Suggestion: In general, it would be most helpful if Disqus could be set to display a time reference on the viewer posts.   I feel a format such as "posted 43 minutes ago" most helpful when catching up at EOD.   If anyone agrees, speak up.  Happy Thanksgiving all!  

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  189. Glad I'm not the only one.  SPY is stuck in very narrowed BB's at the moment  Bouncing up and down with 3 minute stochastics in a four point range.  This usually means that big movement and breakout is coming. 

    15 minute stochastics has not rolled over yet.  MM's may be waiting for that and to spend the afternoon clearing everything out at this level before making another push.

    I just unloaded everything at 1,186 at the 12:30 mark, btw.  Seems a safe bet I should be able to re-enter higher.  Or simply around where I sold.  

    Perhaps a backtest of 1,192ish is what has to happen next before be head lower.  I'll probably just trade the rest of the day based on stochastics and RSI indicators unless huge momentum in a particular direction materializes.

    I still think that market pros and the political class want a 300+ Dow headline to show the world by the end of the day.  That sould means closing below 1,286.

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  190. it does that already. I think it deals with the default formating on the screen. If you click and drag across the page, you'll see that you posted 8 mins ago

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  191. Really, I am patiently waiting for an opportunity to add on to my shorts - probably nearer the close. The key to this game is patience I think.

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  192. This *appears* like a good time to add short positions again (1,190), depending on which indicators you choose to believe. 

    1, 3, 5 and 15 minute stochastics and RSI, Williams, and Stoch are maxing out and ready to head lower.

    30 and 60 minute indicators are still flatlined and still trending up, but they have been ever since we bounced off of 1,284.

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  193. you don't think we take another run at 1194, before the day is out?

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  194. I have no idea.  Just going with what the indicators I watch are showing. 

    Looks like we may be done backtesting 1,190 with the 15 min stoch, RSI and williams now completely rolled over.

    This meandering action is simply too uncompelling for me to trade at the moment though. 

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  195. looks like we just did :)

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  196. Apparently, yes. PL made mention of it earlier today. 1190/1 seems to be s sticky level also. Increased my shorts at 1192. I'm comfortable that even if we consolodate or or raise a bit from this level it will pay off in the long run

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