Amazon

Thursday, November 10, 2011

SPX Update: Looking for Confirmation of the Crash Wave

On Tuesday, my readers and I were pretty much all alone, looking for a top.  How things can change in a day!  All the sudden, the masses seem to be waking up from the drunken euphoria of Wave (2) and realizing the world doesn't look as good without the beer goggles of Central Bank intervention.

I want to talk about the psychology of different waves for a moment, so readers understand why I will be telling them: at this point, it's okay for the masses to get on board with our top call.  Before we get to the present, let's take a quick look at the past.  Back on October 4, when I predicted the S&P 500 (SPX) would rally from 1074 to 1265 (close!), I wrote about the psychology we should expect going forward off the low:

Keep in mind that the psychology of investors will probably become quite a bit more positive in the near future, so that by the time we reach the Minor (2) peak, the majority will be bullish again. It always helps to anticipate the mood, because after Minor (2) completes, we will be presented with what (I believe) may prove to be one of the greatest shorting opportunities of our lifetimes (but due to the psychology, by the time Minor (2) peaks, no one will think shorting is a good idea anymore -- just as most don't think going long is a good idea right now).

I think it's safe to say that the psychology detailed above pretty well matches what most investors were thinking on Tuesday.  Tops are made a little differently than bottoms.  Due to short covering panics, bottoms tend to be fast and furious v-shaped affairs; tops take a little more time.  In my preferred view, Minor Wave (2) actually peaked on October 27 -- but this secondary, smaller Wave (ii) peak, which likely completed on Tuesday, helped stretch out the top and further fulfill the psychological requirements of Minor Wave (2).

AAII investor sentiment (right) was released on Wednesday, and again came in at elevated levels; bullish sentiment is almost 6% above the historical average.  Add that to the other sentiment indicators we've been looking at for several days, and you get some pretty frothy bullish sentiment, consistent with an important top. 

If my preferred count is correct, we are now in the very early portion of Minor Wave (3) down.  I liked being alone when calling the top of both second waves, but now for the third wave, I'll welcome company.  Third waves are the moment of recognition for the masses.  This is the time people will (again) start waking up to the world around them, and realizing what a mess it is.  Third waves are not waves in which to be contrarian; they are waves in which more and more people will pile on the bandwagon as the move accelerates. 

At some point, that bearish sentiment will become extreme (in fact, more extreme than is generally considered acceptable), and at the very bottom of Minute Wave 1 (the first leg of Minor (3)), people will believe the world is ending.  Then something will come along that is perceived as really good news: maybe QE3; or the announcement that the European Central Bank has been purchased by China and will be converted into an outlet store.  This good news will come concurrent with the Minute Wave 2 bounce, during which sentiment will recover slightly -- however, not nearly to current levels.

But I don't want to get too far ahead of the market here, so we'll examine these things again when the time is right.

Onto the charts.  While there are never any guarantees, the setup in the charts is as good as it gets for the beginning of a third wave down.  If the market takes out 1215 on a closing basis, many indicators will roll decisively.  If it takes out 1190 below it, these indicators should accelerate to the downside.  You can also see in this first chart that if the market breaks below 1190, there is no meaningful support until the low 1100's.


Additionally, the market is falling down from double retests of both the 200 day moving average, and the head and shoulders neckline.  Both tests have failed; it's hard to imagine that the market would feel the need to test these levels a third time, but stranger things have happened.  Add these facts, and the bullish sentiment, to all the other charts we've looked at recently, such as the dollar, copper, oil, and others, and it's hard to imagine that the setup could get much better.

But as yet, there is not any real, objective confirmation of the preferred count.  It is more a case of strong circumstantial evidence.  For this reason, I have presented an alternate count as the final chart, and despite the near-perfect setup currently, I would suggest remaining aware of that alternate potential.

There are, of course, still bullish alternate counts.  Collectively, I would give the bullish counts roughly 20% odds.  Because of the fact that this new wave structure has generated a number of different bullish potentials, I've decided it's no longer prudent to focus on only one single bullish knockout level.  Instead, I think the two levels to focus on are those just mentioned: 1215 and 1190 SPX.  Either of these levels breaking could spark a waterfall decline; these are really the last lines of defense for bulls until roughly 1115.  Below 1190, and a trip to the 1074 low is almost a given. 

If this is black subwave 1 of Minor (3) down (as shown above), it should eventually take out the 1074 low.  Assuming my preferred count is correct, I anticipate that the market will probably test the 1000-1050 zone before it finds any type of meaningful bottom. 

The next chart is the short-term SPX chart.  I have tentatively labeled the move as a nested 1-2 count, which means we've seen waves (i) and (ii), waves 1 and 2, and waves i and ii.  This count would imply a strong acceleration of the move once the market sees sustained trading below the recent low of 1226.

However, I must stress that this labeling is tentative.  I had to go study the ES futures to gain any insight into the possibilities, due to the fact that the wave structure in the cash market consists primarily of one giant red candle, which is indecipherable by itself.  The reservations I have with using ES for the count is that the futures, being a highly leveraged market, are susceptible to wave distortion.  So the count below is my best guess.  Basically, trade above the 1251.82 swing high would rule out the blue wave i and make it more likely that the whole move was one wave, depicted as the black "Alt: 1" and corresponding "Alt: 2" label and target box.

There are three KO levels marked on the chart; each one KO's the successive degrees of second waves. 

There is always the temptation, especially when things go almost exactly as predicted, to become lazy and complacent.  I therefore want to offer up a third possibility.  The challenge of Wednesday's move is that (again, using ES futures) it could be counted as a three-wave structure (we've seen this movie before -- several times over the past week); the problem here is that there's virtually no visible structure in the cash market, other than a clean five-wave move at the end, which could conceivably be a "c" wave.  So I would again mention that there is no confirmation yet, and present this alternate possibility (below). 

I would suggest being cautious of this potential only if the market were to trade above the 1251.86 swing high.  If trade stays below that level, then this count really isn't even a concern.  Even above that level, I would give this count low probability, unless we start to see internals strengthening considerably. 

 
So in conclusion, my preferred view is that this is indeed the start of wave (iii)-down of 1-down of Minor (3)-down.  It really can't look much more promising... well, it could, if we could decisively eliminate the potential of the 3-wave move shown above.  Barring the low-probability alternates, I would expect a bounce today for Wave 2, and a reversal either today or Monday.  Keep on your toes, and trade safe.

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

142 comments:

  1. Pretzel,

    two quick questions:
    - is there any rule as to how long it will take for a wave to play out (e.g. in your second chart you seem to imply today will be an up day, followed by a down day tomorrow. could it be that we will top intra day today and start going down on the same day?)
    - if there is an intra day violation of your KO levels, but the index ends in the safety zone, is that considered KO still?

    ReplyDelete
  2. By the way, ES is already in your target wave ii zone

    ReplyDelete
  3. My hunch is, early in the move down you'll see some dip buying like today with people still believing its just a pullback to a move up. After they get killed a few times that'll stop and they'll run for cover. Same happened to the bears trying to short into the buying wave and getting run over

    ReplyDelete
  4. TJ, no rules on time. intra-day reversal would be perfectly acceptable.

    Regarding KO's... with EWT, all the price has to do is print one trade above the level, and that count is KO'd.

    Vulture, sounds probable.

    ReplyDelete
  5. JSE +1% and FTSE +0.5%

    According to WSJ:

    Europe stocks turn flat to higher on Italy hopes

    Sounds like the old Slope of Hope again :)

    ReplyDelete
  6. The thing is: there IS no hope for Italy. Who's going to buy those bonds, knowing the ECB might give 'em a 50% haircut at some point? Unintended consequences abound.

    ReplyDelete
  7. futures are up over 1.4 percent

    ReplyDelete
  8. After the big gain yesterday, I am glad to have lightened up 50% on my leveraged shorts at the close. Looking now for another entry. Or should I be short and holding rather than worrying about profit management?

    ReplyDelete
  9. But thanks for showing me how that could be misunderstood. I went ahead and deleted the whole paragraph.

    ReplyDelete
  10. Thanks Pretzel. Does this mean that if we gap up today to your yellow box zone and start heading down past 1190, it would be the start of the waterfall stage?

    ReplyDelete
  11. We'll talk about waterfalls when we get there. Or not.

    And short and hold if you want to. Nothing here is trading advice.

    But thanks for showing me how things can be misread/misunderstood. When I wrote "below 1190" that was in reference to trade below 1190. Not always obvious to folks, though, even when you think you stated it as such... sure learned that over the past couple months. ;)

    ReplyDelete
  12. Just from my own experiences, when I tried to get too fancy in a nested third, all I did was lose profit. But like I said, we ain't there yet.

    ReplyDelete
  13. PL, I mentioned to you 2 weeks ago, and then agan last week, that the late2007-early2008 continues to be an amazing tell for what is occurring in late 2011. The similarities of the 2 charts, coming off their massive h&s, continues to nearly parallel every major move, and in some cases, even in the same time frame.

    I told you last week that I favored your ending upward diagonal as your best projection, because it fitted what happened in april-may2008, nearly perfectly. There were 2 retest of the neckline and 200day m.a. then, with the 1st retest slightly higher than the 2nd one, and that the spread between them, was 14 calentar days. And amazingly, it happened again almost exactly, with the space between the retests now, occurring at the very end of the 13th calendar day, nearly matching 14 exactly. And both times, of course, there were sharp falls right after, in the following day.

    So if you have access to detailed intraday charts of those periods in early 2008, I recommend further study, and I'd like to see them myself.

    Btw, I consider any potential bullish interpretation of the current several-months-ahead situation, to be nearly nil. Yes, there will always be quick and violent bear-trap, short-covering rallies all along the way (which can last a few weeks, sometimes, Prechter has a great FREELY published chart of 1930-32, that clearly show these violent several-week bear-rallies, but always leading to lower lows, afterwards).

    But, the super extreme MACD reading on your yearly chart, in addition to ICB mutual fund data of lowest cash ratio in +50 years, assures a sentimental dumb-money bullishness gone to a longterm extreme, that will take a minimum of at least a few months, to fully wash out--and only after a very large % drop from current levels.

    And I continue to strongly believe that the precious metals will soon follow the equity markets downward, with higher-beta weak-sister silver, leading the way. Because I opine that gold and silver are solely product of excess liquidity and easy credit, and not any hedge against world fiat currencies in a heavy deflationary, highly-uncollaterized, debt-ridden environment, as exists today.

    And world central bankers cannot inflate fast enough, IMO, to even remotely come close to matching, the size of the ever-daily coming-due, enormous world-debt. Debt (and their derivative CDS's) which dwarf world-fiats, according to several sources I've read, by over a 100-1 ratio.

    Therefore, what's coming, starting now, IMO, is world financial death, for the next decade--skyrocketing crime, barter-systems, national secessions, dictatorships everywhere, and finally: world war 3.

    As the chinese curse goes: "may you live in interesting times". we will. And it just started. Yesterday.

    ANON20

    ReplyDelete
  14. But we might be awfully darn close. You'll know when it hits, because it will feel like yesterday... but it won't let up. Everytime you think it's oversold and is going to bounce, it will bounce just long enough to convince you to get out, then it will start back down and you'll end up chasing half the time.

    ReplyDelete
  15. Anon20,

    I agree about the bullish counts being very low probability. But, unlike when I was posting my views to others in 2008, I now have the added pressure of feeling more obligated, and the onus to be "right" out of responsibility. So I give more weight to my devil's advocate approaches than I normally would, on the off chance that I'm blinding myself to something as a result of my own bias or expectation.

    btw, TJ was asking about silver yesterday, and I told him you were the guy to talk to. I don't track silver terribly closely, but I gathered from some of your posts that you do.

    ReplyDelete
  16. Yes with markets turning green around the globe it is so reassuring to see that all the problems have been resolved already... Now that had not been that difficult, had it? Could someone please pass me some more of that red party cooldrink while we await the arrival of the clown :)

    Perhaps if it is time for me to take out my Ghanaian Party hat again...

    (PS: I think TJN is only interested in the "waterfall" scenario hypothetically speaking.)

    ReplyDelete
  17. Be interesting to see what it does right here. c of ii opening right at the 1.618 extension of a.

    ReplyDelete
  18. Hmm. Quiet in here compared to yesterday.

    ReplyDelete
  19. Wow, Apple took a nosedive at the open.

    ReplyDelete
  20. Bears are yawning at the quiet action this morning.

    ReplyDelete
  21. Bears probably still sleeping off their party hangovers...

    ReplyDelete
  22. Apple has a great run the last 2 years. Maybe some professionals want to take profits and reduce risk after yesterday.

    ReplyDelete
  23. AAPL diving in the face of a strong rally.. not a good sign for the market. As in 2008, AAPL held up in the 1st Wave down but eventually succumbed to the bears and led the decline of the 3rd wave down. Both times having trouble with the nice round numbers: 200 and 400 respectively.

    ReplyDelete
  24. Not sure if this is a corrective wave here, or one and done gap-and-crap for old bully, thanks for playing.

    ReplyDelete
  25. That preferred count sure does look ominous, Pretz.

    Forgive me if I'm not understanding correctly, but what would you expect if we reach the KO level at 1,252?

    Does that still simply knock out the nested i and ii possibility and therefore mean that wave 2 simply hasn't completed yet?

    And in which case, wave 2 would complete in the range of the turquoise box to commence wave 3?

    Or does the introduce some entirely different possibilty for the ensuing wave structure?

    ReplyDelete
  26. Pretzel, just wondering, is it possible that we are still in wave i, with ii to come when we touch 1190?

    ReplyDelete
  27. Anon20,

    Are you serious about a World War III? Yikes... I am just hoping to make a few bucks on the way donw... but as far as war and famine... I am still a kind person at heart :-)

    ReplyDelete
  28. If this is the nested third scenario, the move will pick up if we break yesterday's low more than a little bit.

    ReplyDelete
  29. Frank,

    Just looked at Apple. Wow. Droppng like a stone as I write this. And Market is following along.

    What is the story behind that? Not good for the broad market, I would think.

    ReplyDelete
  30. this drop is just in time with the JSE closing in 5 minutes... i'm still a little down on the day, but this might just take us down a bit into the close ... before the final 10 min auction we were already down to +0.50%

    ReplyDelete
  31. Brian,

    Just KO's the nested i-ii. That's it.

    TJ- in a sense, yes... really just a question of labeling degrees, if I understand what you're asking.

    ReplyDelete
  32. A report was out yesterday that Iphone 4s sales were behind plan and Apple was slowing up suppliers. At the open took positions in DUG, ZSL and VXX

    ReplyDelete
  33. Brian,

    Apple's "story" is in the charts I posted over the weekend. ;)

    Apple is in a third wave down that's just getting warmed up.

    ReplyDelete
  34. Guess AAPL shareholders aren't too convinced about this rally... buying had been weak since Oct 4 low with TA divergences abound.

    ReplyDelete
  35. Look at the bulls defend that 1236.10 level. Below that, and it *might* start to come unglued here.

    ReplyDelete
  36. Apple is on its way to being Microsoft. Just re-editions of existing product lines, cash rich, no longer a creative mind at the helm. New CEO is a swell guy and a beancounter, but that's not inspiring. They will evolve into a mature tech company like Microsoft and Intel, pay a dividend and have share stagnation - IMO

    ReplyDelete
  37. It's quiet because we're too busy watching our theta decay

    ReplyDelete
  38. Got it Pretz. About both the i and ii and Apple.

    I hadn't forgotten your Apple chart. Was just wondering if there is some news catalyst, which I understand you probably think is not terribly relevant either way since the move down appears inevitable.

    ReplyDelete
  39. AAPL's story - I agree with PRetzel - it's in the chart. It is one of the widest held stocks by Hedge Funds, long only shops and individuals - all 3 of which are in early stagees of "I wish I was in more cash mode" - another good confirmation for the preferred count.

    ReplyDelete
  40. How did the nested i-ii get KO'ed? Thought it was a trade above 1252?

    ReplyDelete
  41. Anon, it didn't get KO'd. I was answering Brian's question about what would happen if we crossed 1252, which we haven't. ;)

    ReplyDelete
  42. Dollar looks like 5 waves up after the fakeout below the h/s. Seems to me it's only a matter of time for this little retracement rally.

    btw, Brian, was my article too technical? I forget sometimes to go into more detail on things I take for granted.

    ReplyDelete
  43. If SPX can make a new LOD here, I'd expect bears start showing up pretty quick.

    ReplyDelete
  44. Pretzel,

    Your article is not technical enough yet, you should throw in Gann Angles and Hurst cycles in there and it will be complete.. :-) Just kidding... I am already confused with the ABCXYZ... hehehe

    ReplyDelete
  45. Okay thanks. I read your post as 'KO'd' instead of the 'KO's' that you wrote. My bad. Do you think this morning's move up could have been enough for the wave ii or do expect a higher/longer move up for the wave ii?

    ReplyDelete
  46. NDX already undercut yesterday low... but could this be a undercut&rally whipsaw move by Mr. Market? :-)

    ReplyDelete
  47. I added some VXX this morning. Pretzel, I did it pre-market; thanks for educating me on opportunities outside the cash market.

    ReplyDelete
  48. With AAPL as the biggest horse, it'll be tough for the NASDAQ to get anywhere when it's down 11.

    ReplyDelete
  49. Unless I'm looking at it wrong, I think the HOD will probably hold. Might have been it for wave ii. If that's right, we should see the selling pick up soon. Maybe a little retracement first. Either way, looks like that might be it for wave ii. The move actually started yesterday and completed today.

    ReplyDelete
  50. Wonder how all those people at Minyanville who told me on Monday what an idiot I was for suggesting Apple might go down this week are feeling now... lol.

    ReplyDelete
  51. It wasn't too technical at all. I just wanted to clarify, so that I am understaning correctly what to look for and follow.

    So from the looks of things, we are in the nested iii of 3 down of the preferred count.

    ReplyDelete
  52. Apple has a lot of table pounders - similar to Dick Bove still screaming to buy bank stocks (before they get halved).

    ReplyDelete
  53. AAPL is still a very cheap stock with low PE.. :-) High tech growth stock with a low PE, where are you going to find that?

    ReplyDelete
  54. Yep, looks like the bears probably have today in the bag.

    I gotta run boys, got an app't to get to soon, gonna try and get an hour or two of sleep first.

    I think you can handle bully from here. Careful if it starts waterfalling... don't try to get TOO fancy. Hypothetically, of course. ;)

    Private First Class Jaco, lemme see your war face!

    Alright guys, trade safe.

    Please remember to show yer support for the blog!

    bbl!

    ReplyDelete
  55. Methinks you still give too much thought to your detractors, Pretz. Though I'm sure you were just being amused.

    You have the FACTS and eventual outcome on your side, which in the end winds any argumet.

    And those who read the article and disagreed or got upset are going to REMEMBER you. You stirred up their understanding of the world . . . and it come true.

    You probably will win a few of them over before too long.

    I've had plenty of initial fierce critics eventually turn into our strongest supporters. Because at first we violated their favored view of how it's supposed to be. And it just took awhile to bring them around.

    ReplyDelete
  56. Thanks for all your help Pretzel! Have a great day. Looks like we're weakening here....

    ReplyDelete
  57. AAPL will be an even better buy at 200 ;-)

    ReplyDelete
  58. damn...I was taking an econ exam and missed the open, didn't get a chance to use my dry powder for the AM high like I had planned. Oh well :(

    All is well, she's goin down anyway!

    ReplyDelete
  59. The crowd always measure an investment writer by the accuracy of his/her call. But I believe in trading it's not about being right all the time. C'est la vie. I would only measure one's success by asking this question: How much money have you made from the market?

    I love Pretzel's article for its breadth of information and his insight into EWT. Whether he's right 100% of the time is irrelevant.

    ReplyDelete
  60. np, anon

    Actually, brian, with the Apple people, I mainly found them amusing and/or felt sorry for them. They were largely clueless and it was personal to them, as if I had questioned their religion. I honestly mainly just felt compassion for them, I'm sure most of them were probably regular people who made the mistake of believing the Wall Street spin machine.

    alright, guys, i'm outta here for awhile.

    ReplyDelete
  61. Yes Pretzel, thanks and enjoy the rest. I'll do my best to hold the Fort!

    ReplyDelete
  62. did we make a new low today on SP500?

    ReplyDelete
  63. pretz wrote: "the European Central Bank has been purchased by China and will be converted into an outlet store" LMFOA! That's hilarious!!

    Also, thanks for the last paragraph explaining we are now (most likely) in "wave (iii)-down of 1-down of Minor (3)-down". I -and maybe many other EWT newbies- really needed to hear that as sometimes -often actually- one easily looses count (especially in a market as of recent). This is exactly the kind of explanations that help a lot!!

    ps: anybody who thinks we are in a bull market should fact check; 5 days of gains pretty much erased in 1 day. sounds bearish to me...

    ReplyDelete
  64. Arnie,

    You are not the only one. My bird's brain still cannot comprehend EWT.

    ReplyDelete
  65. Sorry to link to another website but just wanted to share a traditional TA view on yesterday's breakdown. Hope this pans out, at least to 1195ish, since I am heavily short. :/

    http://www.businessinsider.com/jordan-kotick-a-dark-beginning-2011-11

    ReplyDelete
  66. This comment has been removed by the author.

    ReplyDelete
  67. Frank; yeah man! I hear yeah! I think I get the big picture, I understand it to 1-down of Minor (3)-down, but the iii's and a's often escape me. However, even simpler views get you reasonably far (especially since I am more of a long-term trader than day trader)

    ReplyDelete
  68. Looks to a novice to me like its completing a subwave c of an a-b-c wave ii. This would imply iii starts very imminently - might trade above that 1241.55HOD then reverse, unless we get a short squeeze into close and test 1252. Not trading advice!

    ReplyDelete
  69. Wow looks like AAPL is helping us out here... at the end of the day, AAPL never disappoints :-)

    ReplyDelete
  70. When AAPl sneezes, the world gets a cold.

    ReplyDelete
  71. Arnie I am sure you still know more than me.

    ReplyDelete
  72. Come on SPX, drop back to the dark-side!

    ReplyDelete
  73. Trading today certainly appears to favor Pretz's preferred count. If he's right (and when isn't he these days?) we are in pretty good shape at the moment.

    ReplyDelete
  74. it doesn't seem like were going to get a new LOD unless theres a reversal. We seems to be rally up more. Maybe giving the bulls more hope and then bam! bear pounce

    ReplyDelete
  75. Anybody have info on this random spike higher?

    ReplyDelete
  76. could be in a channel, if so 1246 is the top.

    ReplyDelete
  77. This comment has been removed by the author.

    ReplyDelete
  78. Article on MarketWatch:

    A really scary comment from Elliott Wave Theorist’s Bob Prechter:

    “In my judgment, the situation is very like that of 1973. In 1973, the stock market topped in January and was weak into August; then it rallied hard right through September and October, statistically the two most bearish months of the year. It was a convincing rally and optimism returned. That rally ended on Oct. 31, leaving the ‘bear months’ in the dust. But instead of continuing higher, the market turned lower, and in just a month plunged below its August low."

    ReplyDelete
  79. 'Scary' from the perspective of the typical bull..

    ReplyDelete
  80. Just set up a small bearish MACD divergence on the 5 minute S&P chart. Maybe 1246 was the HOD. Drift lower or sell off? Seems like an a-b-c ii could be complete, but would be interested in Pretzel's count.

    ReplyDelete
  81. Pretzel predicted we might close higher today, but I don't have to like it. Guess I should't start worrying until we break through 1251.82, right?

    ReplyDelete
  82. Agreed anon, this stinks. R2k was outperforming earlier today now it is underperforming.......seems good for the bears. But yeah, that 1251.82 seems to be the level to switch to Pretzel's Alt count.

    ReplyDelete
  83. aloha from hawaii, i love this blog....I sold my shorts yesterday and buying more now

    ReplyDelete
  84. why this 1240-battle all the time? I don't see a long-term explanation for that level, just something that emerged in the last week... can somebody maybe explain please (both from EWT and classic perspective)? Again, I sold ALL my AAPL shares Oct 31, will re-enter at 200 level and this time go for 200%!!! yeah-baby-yeah (oh and apple store sucks, so does IOS5)

    ReplyDelete
  85. I think sometimes the bulls and bears can have fierce battles at certain "confluence zones" which are defined by fib retracement levels (depends on where you draw high and low and also depends whether you believe the market is expanding or contracting), also moving averages on different fractals also form these confluence zones. Different traders/algo/bots battle over these confluence zones and at the end of the day whoever has the most money win the game.... Is that right?

    ReplyDelete
  86. Frank : say what??? LOL, I think you may know more than me after all...

    ReplyDelete
  87. Arnie: at the end of the day, ask yourself this question, and it doesn't matter who knows how much... "how much money have made from the market?"

    My answer is I am still broke.. hehehe

    Hang in there everyone.

    ReplyDelete
  88. Come on my beloved Apple, help me fend off the bullies and defend the NDX

    ReplyDelete
  89. RockyTop - Looks like you nailed the 1246 top. What's next? Care to call the close?? :-)

    ReplyDelete
  90. Rocky, I hope you got some at 1246, seeing that you lamented "missing the opening rally" ;-)

    ReplyDelete
  91. A down close after being up most of the day would be heart-breaking for the bulls. Sell Moritmer! Sell! But I'll be happy with anything below 1240 cash.

    ReplyDelete
  92. Me thinks the bulls will defend 1230 to avoid a down day.

    ReplyDelete
  93. yeah, added some at 1246...I think we're going to stay in the green, no dramatics on the close, but somewhere in the 1230s. Got a feeling tomorrow will be ugly for the bulls. This was just a pause :)

    ReplyDelete
  94. This actually looks a lot like the bull move we had in reverse. You 'd have a big up day, at best a pause or slight down day to digest the move, then it would charge up. This is just a tepid consolidation day. Tomorrow is an odd one as the bond market and the Fed are closed

    ReplyDelete
  95. True - the bond market being closed tomorrow is making me nervous about my shorts.

    ReplyDelete
  96. Does anyone know what happened to FAS? That thing jumped 400%!

    ReplyDelete
  97. Anon: FAS reverse split 1 for 5

    ReplyDelete
  98. Any solutions out of Euroland? Is that why the market is up?

    ReplyDelete
  99. Haha - no, no solutions. Greece finally decided on a PM, and the ECB brought italian yields under 7% (barely). But that was all.

    ReplyDelete
  100. Whoever was targeting a sub-1240 close got it, but only by a hair.

    ReplyDelete
  101. Simple consolidation...no damage to the bear case IMO. Well within Pretzel's targets...holding my shorts overnight, just hoping we can avoid a gap up.

    ReplyDelete
  102. Pretzel, you are the reading it well. excellent analysis. it's hard not to throw caution to the wind when seeing the likely scenario ahead. My LT view is the same and has been for three years! Will be following your blog for finessing the minor moves. Maybe if I'm still here in a month prompt me for a donation.

    cheers
    Luke

    ReplyDelete
  103. http://www.forbes.com/sites/afontevecchia/2011/11/10/roubini-italian-debt-restructuring-and-eu-exit-coming-unless-ecb-qes/

    interesting article from dr doom. Things we already know.

    ReplyDelete
  104. Hello, just starting to read this blog. Terrific analysis! I wish I'd been following it prior to Oct 4th..The one thing I can't take my eyes of is that Oil keeps going up in leaps and bounds..Even on Wednesday's blood-bath..should this be a cause of concern to the preferred count? Seems OIL wants to keep tracking the lower bound of the channel in Pretzel's recent oil chart.

    ReplyDelete
  105. Hey all,

    I just got back from my travels and took a fresh look at the charts tonight. My current thoughts are posted at my blog.

    http://ctptrader.blogspot.com/2011/11/picture-becoming-clearer.html

    ReplyDelete
  106. Welcome, Luke, bigO, drew, and any other new readers! :)

    Today didn't look terribly promising for the bull counts... just consolidating yesterday's losses, looks like it may possibly stretch out sideways/up a bit more. Haven't really dug into the charts yet, but at first glance, it doesn't look too exciting for bullish prospects.

    ReplyDelete
  107. Hey CTP, welcome back to the bear camp. Had to take Frank back to the blog earlier this week -- he showed up at the door with his hair all messed up, and bear claw marks up and down both arms. :D

    Glad to see you're back on the exact same page as me! I welcome your contributions here. :)

    ReplyDelete
  108. btw, you guys are making this site quite popular. Almost 5000 hits yesterday; a new record. :)

    Gotta run a few errands, but I'll be back on later.

    btw, Drew -- which island? I live on Maui; just relocated to Kula from Lahaina (wife couldn't stand the unrelenting heat over there).

    ReplyDelete
  109. Pretz,

    Thanks, that phony thrust higher Tuesday was the ultimate bull trap. Luckily I was not long, but just stayed flat due to my expectation of choppy action into 11/11 +/- 1 cycle low, but I sure wish I would have been short :( ... From now on during these cycle turn windows I need to keep a closer eye on a wider spectrum of risk assets as it is just too easy for the manipulators to jack up the stock market on vapors while no other risk assets are confirming.

    ReplyDelete
  110. oh, and thanks Arnie. Good to get some feedback, I often wonder how my off-the-wall humor is received.

    I originally had the line written differently, and went back and forth with it a few times -- so, glad the end result was a winner. :)

    bbl

    ReplyDelete
  111. CTP, that's what you've got me for! :)

    It's a friggin full time job not only keeping up with, but sharing all this stuff. It's one thing to do it for myself, it's another to package it and present it to everyone else. I am literally putting 80 hours/week into this blog nowadays. It is turning into one of the most demanding full-time (double time?) jobs I've ever performed... though very rewarding emotionally. (One day, financially as well, I hope.) :)

    ReplyDelete
  112. Btw, CTP, don't beat yourself up too bad... That top call was HARD, I had to dig into everything from sentiment to commodities to currencies for clues. Maybe one of the toughest calls I've ever made... and it definitely fooled almost everyone else, so don't be too hard on yourself.

    ReplyDelete
  113. Pretz,

    Thanks, but don't worry I am not beating myself up for it, I just recognize it for what it was which was a masterfully disguised bull trap. If that top had come 24 hours earlier I would have been all over it, but now I know to keep tabs on multiple risk assets at these cycle turn windows not just the manipulated SPX. BTW Kudos to you for sticking to your bearish guns.

    ReplyDelete
  114. Glad to see you back CTP. You make a good foil/ accomplice to Pretz.

    ReplyDelete
  115. mav,

    I am the Robin to his Batman LOL! ;-)

    ReplyDelete
  116. ST low 11/11 +/- 1, ST high 11/14 +/-. If someone was going to trade the up wave, it seems like buying on the 12 and selling on the 13 would be safe IF the cycle count is right. Just throwing it out there. But for educational purposes, I would think its safer to just short around 11/14 to not miss the big wave down.

    ReplyDelete
  117. DEFINITELY do not take my musings as trading advice. just thinking out loud

    ReplyDelete
  118. mav,

    problem with that is that 12th is a Saturday and 13th is a Sunday ;-)

    ReplyDelete
  119. Well, that would make buying on the 12th and selling on the 13th a pretty safe play...

    ReplyDelete
  120. futures up...why won't this market just roll over and die already!

    looking to short oil through equities...any thoughts on a good high beta vehicle for that? Non leveraged.

    ReplyDelete
  121. Rocky,

    I'm not too worried about the futures because they were up huge Thursday morning too but that got sold into aggressively when the cash market opened so even if this rally in the futures hold on until tomorrow's open (which is a big if) then I would expect the gap up to be a gift to shorts.

    ReplyDelete
  122. hahahahahahahha whoops!

    well at least i wasn't incorrect by saying it. haha

    ReplyDelete
  123. Good to see you back CTP. And I'll look forward to hearing more of your perspective on things.

    I still think tops are the hardest thing to call. The equities market isn't going to provide any clues that a rundown is coming. If you have other ways of being able to see the cycle top coming,that's pretty cool.

    I was two days prior to it myself. I don't presume to be able to see the signs on a chart. But I do know the *feeling* of extreme sentiment. And things just not being sustainable. After that run up to 1,275 I was still feeling fine from buying in two days earlier, but I was certainly wondering: okay, where does this nonsense stop.

    Good to see your analysis is more congruent with Pretz's again. It still seems like the direction you'd choose for today's environment is down rather than up.

    ReplyDelete
  124. Pretzel, I am not familiar with EWT so hope you can enlighten me on this.

    I was reading your Big Picture SPX, and in the early Oct version, you mentioned that we are in the Grand Supercycle Wave IV now, and Wave III top was in 2007. Just out of curiosity, when will Wave V start? Also if you can post a chart of SPX since inception to show how you deduce 2007 as the GSC Wave III top, that would be most helpful.

    ReplyDelete
  125. Interesting article showing consensus is now becoming convinced that trading range will last for foreseeable future. That is probably the kind of sentiment that would indicate that we will see trending action soon...

    http://tickersense.typepad.com/ticker_sense/2011/11/technical-analysts-its-too-hard-to-say-where-the-market-goes.html

    ReplyDelete
  126. CTP what do you mean by trending action? Do you mean holding the trend or moving trend?

    Also does anyone know the typical volume of Vet Day? Light I presume?

    ReplyDelete
  127. Anon,

    Regarding when wave V will start, I can't tell you, time wise. I don't do time predictions, I just work off price. As to how I arrived at GS III, it's simply not something I can show on a chart. My last article w/ the LT count discusses this:

    "So on the largest cycle counts, it gets tricky when you get into time-frames like the Grand Supercycle, because you get into trying to approximate waves without price charts (so you're trying to plot civilization -- how much downslope do you apply to the dark ages? How does it fit in relation to the renaissance? etc.). There is an outside chance that 2007 marked a complete series and Grand Supercycle V's top."

    It's really an approximation. At least some of my approximation is based on the assumption that the strength of the bull/technology run of the last several decades has all the markings of being part of a massive third wave. As an example of my reasoning: there was more technological advancement in the 1980's than in the entire *history* of mankind which preceded that decade.

    So, as far as what GSC degree we're in, it's really just a "best guess" and I make no pretentions to it being otherwise. :)

    ReplyDelete
  128. mav,

    "trending action" would refer to the market moving decisively in the same direction (either up or down) for a time.

    ReplyDelete
  129. Hmm. Not liking the action in the dollar right now. Looks like it's forming a triangle; possibly a B-wave, which could lead prices down toward the 77 level over the ST.

    ReplyDelete
  130. It appears the European solution is for the ECB to keep buying Italian junk bonds. Can they do something more creative?

    ReplyDelete
  131. Pretty sure that'll fix everything. WHEW! What a relief. World is safe again! That was a close one. :D

    ReplyDelete
  132. How's the charts looking Pretzel?

    ReplyDelete
  133. ST structure is a complete mess. We might get a repeat of the last "rally," just on a slightly smaller scale, and to lower levels, obviously.

    ReplyDelete
  134. ES futures starting to look like the bulls might end up with nothin' but a big wedgie.

    (i.e.- bearish rising wedge forming):

    http://www.screencast.com/t/Vk8OH1eS7

    ReplyDelete
  135. Update's posted, let's move future discussion over to that thread.

    ReplyDelete