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Wednesday, November 16, 2011

SPX Update: The Picture is Again Becoming Clearer

For once, what I found most interesting about yesterday wasn't the charts. It was the push that suddenly materialized from the Fed to assure the market that the stimulus guns were ready, and loaded for bear.  I found that quite unusual, because the Fed meeting was barely two weeks ago, and they decided "no stimulus."  Are we to believe that the Fed governors suddenly woke up yesterday and randomly said to themselves, "Sheesh, well, THAT was a bad decision."  Hardly.

This concerted "feel good" effort seems to hint that the Fed is aware of some pretty bad news lurking on the immediate horizon; and they're trying to reassure the market before this news event hits.  I can't see any other logical explanation for the sudden about-face, and ensuing media blitz, in light of current events.  It's not like the market is cliff-diving at the moment; and it's not as if the economy got significantly worse in the lengthy span of two whole weeks.  No, I'm pretty sure they must be front-running some piece of bad news that has yet to reach the public; or perhaps it's something that's already there (such as the stress being shown by the credit markets), but hasn't sunk in for the public yet.  Either way, it's an unusual and telling move that indicates underlying issues may be worse than they seem.

In other news, I've just been handed a short note from the Horn Tooting Department, which mentions that yesterday's BKX count and chart has so far played out to a tee -- although I missed the exact bottom by 17 cents.  Hopefully, some readers were able to take advantage of that setup.

The charts are finally starting to narrow down some of the possibilities.  The "simple" explanation that most chartists are looking at is the potential triangle continuation pattern that's forming.  This would be bullish for equities, and implies a move higher.  That's certainly possible, but based on the best analysis I've been able to muster by examining numerous markets over the past few weeks, I find it less likely.  That could always change as the market gives new information in the future.

I still favor the bears here, as I have since October 27.  If the bears can get through the bulls first two lines of defense, SPX 1,215 and 1,190, they should be able to take the whole cake, and run this market quickly down to new lows.

Unfortunately, I can't tell you exactly what the market will do next.  I can, however, present a few things to watch for.  Since I continue to favor a bearish resolution, and continue to believe that October 27 was a meaningful top, there are two potential bearish resolutions I'd like to share here.  Both are counts we've been watching for a few days, but I want to share with you how they could diverge in the next few days.  The first chart shows the move as a series of sub-dividing waves, each forming a smaller first and second wave.  This count is just about out of time here, and needs to accelerate lower almost immediately, or it will lose plausibility.  The chart says "today," but today/tomorrow would still be passably acceptable.

The alternate bearish count is shown in black on this chart, but is detailed in the second chart.


    
The second chart shows another way for the bearish count to resolve.  The potential currently exists that the market is forming a double-zigzag formation, and I have drawn-in a likely way for that to play out.  I am starting to grow fond of this count, as it would cause the greatest confusion to all players with a head-fake triangle breakout.  This count also foresees downward movement from the market today, but instead of accelerating, it would then stage a rally near the lower triangle boundary:


I believe the market will seek one of those two resolutions in the coming days.  Both are quite bearish, and would both call for significantly lower prices once this correction is over.  I continue to favor a bearish resolution by an 80% margin.

However, if in the event I'm wrong, readers should be aware of the bullish possibility, should it start to unfold.  The bullish resolution is what many players here are expecting, as triangles are continuation patterns in the vast majority of cases.  I am handicapping this scenario at 20% odds; in other words, I think the triangle is a "fake."

Of minor note, this triangle is consummate with the expanding ending diagonal alternate count we've been watching for weeks; it's simply a different way to chart it.  Since the triangle has become so prominent in the charts, I feel it's more prudent to address the market in these terms going forward.


As I have stated repeatedly, I continue to be bearish at this juncture, whether that comes by way of the first chart or the second.  If the first count is to play out, it's do-or-die time, so today should answer the question of whether this ends immediately, or drags out for a few more days.  The bullish count is presented, not because I think it's likely, but because sometimes I'm wrong.  Trade safe.

197 comments:

  1. Morning, all! Hope everyone likes the new comments format... though I have to tweak it so you can see the "reply" and "edit" buttons. Still a few kinks. Getting there!

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  2. How many counts you want to create to cover all scenarios?

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  3. I didn't think 1245 would be such huge resistance. I expected the bears to cut through it and keep going

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  4. bueller?... bueller? Where is everyone today?

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  5. lol, scared of the new format maybe. The reply button is somewhere in the lower right, need to get it to show up.

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  6. Silver chart just went straight down from $34.20 to $33.65 (final support before freefall area, IMO), from where it deadcat bounced back now to $33.85.
    Similar to Custer's last stand---silverminers scalping time, IMO, straight ahead.
    So hiyo, silver, down boy, down, straight down to silverbull hell.

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  7. if you click and highlight the page, it makes it easier to find. haha temporary solution. anyhow, i dont see much conviction on the bear side right now...com'n jaco!

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  8. Seems like a lot of the comments from last night disappeared or something. Anyway, Pretzel, do you have any thoughts on WTI? Its spiking like mad this morning - I think it blew through your KO target.

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  9. Silverbull hell, lmao. Gimme a minute to try get my Minyanville thing sent, then I'll take a look at silver.

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  10. I can see the reply button just fine

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  11. Bob, I'm gonna have to take a hard look at CL and figure that one out. I've got to get the Minyanville stuff packaged, then I can focus on charts again.

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  12. My question is when will this freakin market give us 2 consecutive down days? it has happened once since the Oct 4th low....and I was on the wrong side of the trade.

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  13. Pretz, I like your Fed observations, but as Ben and his team disgust me, I am going to stick with the bipolar argument. ;)

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  14. LOL

    Alright, time to grit my teeth and look at silver and earl.

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  15. Yeah, noticed that too.

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  16. btw pretzel, I like the new comments format, easier to respond directly to others in the forum.
    and this is Rocky, too lazy to setup a Disqus profile so I just logged in with facebook...so I'm no longer incognito here.

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  17. Thank you for your excellent work.

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  18. Oh, cool. Mornin', Rock!

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  19. CL is going to take a while. Gotta start over from zero there -- I'll try to deconstruct it later today. At this point in the night (5:30 AM here in Maui) my brain is exhausted from writing and charting all night, so it's not something I can tackle on the spot. It may be an extended fifth wave, would be my first thought, though.

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  20. Curious early morning trading. Even with the wind at their backs, sellers cannot seem to make much movement happen (so far). 1,245 was defended easily and without fanfare.

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  21. Looks like 'rare earth' metals megamania has fully crashed. Portentous, IMO, for it's 'precious' metals brethren.
    http://finance.yahoo.com/news/prices-rare-earth-metals-declining-134016169.html

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  22. Pretty sure it's going to get close to that lower triangle boundary, if not tag it directly. The ensuing rally will almost certainly determine the market's short-term fate.

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  23. Morning Rocky. It's gonna take some time to get used to the new flow, when replies are not at the top of the list.

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  24. Preferred Old Message Board you had because you could view the time stamps and the replies were in order by time. Now I have to scroll up and down to view who's posts you've replied too.

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  25. Use the drop box above and to the right of this comments section to switch the sorting to "newest first". HTH.

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  26. Pretzel - This new message board is very confusing since the posts don't fall in chronological order. I'm forced to scroll up and down to find out which Posts you've replied to. Please consider the old board you had which showed a timestamp and also were sorted strictly by when posted.

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  27. The challenge for SLV's LT count is this -- trying to look at it just based on the chart, not on any bias:

    The overlap of the current rise with the 31.97 price point make the move down from the April high a 3-wave move. So it is either an ABC or 1-2, i-ii. The nested 1-2 count would be uber-bearish. The other would suggest new all time highs at some point.

    Interestingly, my take on the dollar currently is a nested 1-2 bullish dollar count. The two may be in sync, and the dollar takes off as silver collapses.

    The ST move up could now count as a complete A-B-C, IF it is a wave ii. ST SLV looks to be almost mirroring the SPX, and could seek similar resolution.

    It's a hard chart to decipher, but this certainly seems like a reasonable place to dip into some shorts -- I would carefully manage stops if I were in that trade, though.

    Like everything else right now, the chart seems to reflect some indecision, which should form a clean directional break soon.

    Hope that helps. :)

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  28. B.O.B. - Unfortunately that still doesn't solve the problem of have to check every message that has a reply under it. I have to scroll up and down all day just to check for responses to each post. Whereas before everything just was based on when posted.

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  29. Use the drop-down to "sort by newest first"

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  30. Oh, I see what you're saying. I still have to get the settings adjusted some, so let me play with it a bit before we decide to toss the whole thing. :)

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  31. YW, Martin, and welcome! :)

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  32. seems like it is a capitulation type move -- can't figure out if it had something to do with MF Global liquidations or European banks collapsing positions or market running in front of QE3 - fundamentally, $100 oil when Europe in recession, US barely above recession and China slowing -- makes no sense. I like SCO play

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  33. I wonder why you can see it?

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  34. Does Disqus allow you to delete your own comment?

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  35. I have to agree with Jerry. I'm spending more time trying to figure out who's responded to who. Voting for the old message board back since much easier to follow.

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  36. The main "fundamental" I can see for Earl is hedging against the printing press. Could explain the spike, along with stops being run.

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  37. Even better: you can EDIT... ooh.

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  38. Yeah, that part is kind of a pain. Maybe we can all just agree not to use "reply" and post in a linear fashion? I really like the fact that I can edit if I post a typo or what have you.

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  39. SPX might be completing an ABC off the lows. If it breaks above 1258, something else is going on.

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  40. I tried deleting all text as an edit, meaning I submitted a blank edit, and received a pop-up that my comment required approval from a moderator. I guess to delete, just enter the words 'Deleted by user' or some such.

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  41. Trying to adjust this Disqus thing is going to give me a massive headache. :[

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  42. BTW, disqus has email notification turned on by default. Adjust the account settings if you don't want an email when someone replies to your comment.

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  43. We can live with it for a day. You must be tired at this hour of the morning.

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  44. Ah, also in the settings, you can turn on the time stamp. Now if I can just make it readable, lol.

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  45. Okay, fixed the default to "sort by newest first" I think...

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  46. I can see the Reply button on my iPad, and I like Disqus because the conversation flow is better. Just need to figure out how to default to Newest First, and you'd be all set.

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  47. Hi Pretz! I'm a new disciple, having found my way here from Minyanville. Very impressed with your work. Thank you for an interesting and informative web site!
    I share the overall bearish perspective but, from what I can see, it sure seems like SPX bears are having a hard time pressing their case. Gap-down opens, such as today's, fill with relative ease, while few sustained intraday downtrends develop. Just my two cents' worth ... .
    Keep up the great work!

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  48. Thanks Bengal, and welcome!

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  49. If anyone knows how to get the stupid "reply" and "like" buttons to be visible on this ridiculous thing, I'd be thrilled to hear it! Been messing with it for an hour to no avail. :0

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  50. I'm not sure if everyone is having the same technical difficulties on this website. The link to the comments was missing until I refreshed the screen. The comments then quickly showed up on the next screen but then disappeared when the page finnished loading.

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  51. Okay, definitely got the "newest first" part fixed.  I think.  Maybe.  Now if I can just make the time stamp and stuff visible...

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  52. Spike in oil is being attributed to a pipeline change:

    "Enbridge also announced it was reversing the
    pipeline’s flow, immediately lighting up hopes the bottlenecks in
    Cushing would be eased. The Seaway pipeline would transport about
    150,000 barrels of oil a day from Cushing to the Gulf, pending
    regulatory approval.






    “Crude has exploded higher” on the news Seaway pipeline reversal news,
    said in a note to clients Matt Smith, an analyst with Summit Energy.







    “This will now aid in alleviating the supply glut, rather than previously exacerbating it,” he added.







    Problems in Cushing have been at the heart of record premiums between
    New York-traded oil and Europe’s benchmark, Brent oil traded in London"

    http://www.marketwatch.com/story/crude-oil-cracks-100-for-first-time-since-june-2011-11-16

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  53. I can see them both.  Must say, bad time to change formats if today is truly the start of it all. 

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  54. Yeah, I don't like the reply thing anymore.  :(  It really is a pain to scroll up and down.  I have a hard enough time when it's all linear, with everything I'm trying to do. 

    Now there's two replies to the thread, which I know from email, and I can't even find 'em.  Ugh.

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  55. If we could everyone to agree to use the "add new comment" section, it should remain linear.  Just a thought.

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  56. If the morning rally was ABC, does it follow that we might see a 5 wave decline to a lower low?

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  57. Spiker, yes.  Assuming that's what it was.  I'd go 63.275% there.  This ST wave structure is a general pain in the rear lately.

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  58. Wow, another new blog record:  700 hits at 9 a.m.

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  59. If bears can't bring it pretty soon here, I'm really going to start favoring the second bear count where we fake-out over the triangle.

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  60. Honestly, this action is NOT what I would look for in a third wave down... so far.  This is dull, and third waves aren't.

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  61. you see us heading back towards 1280?

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  62. Well, not ready to throw it out just yet... but the burden is definitely on the bears here to get something going pretty quick.

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  63. I like the disqus thing ... just need to get used to it. Check out the wave structure on the Italian 10 year bond ... oh boy.........

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  64. The price overlap on SPX seems like it should all but guarantee we take out today's low at some point.  But this market has been behavin' kinda funny lately, so I keep second guessing my take on ST structures.

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  65. POTUS... eww.  That's what I would expect to see for a subdividing 1-2 count right there.  Fugly.

    See, I REALLY like that people can post charts now, including me.  I hated using screencast, added 5 minutes to every chart I posted.

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  66. I think as long as we just keep the comments linear -- and I can ever fix the color so you can see the time stamp -- we'll be golden w/ this.

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  67. Alright, y'all, I have to get some rest.  See if someone can get ahold of Jaco out in Zambia or whatever, and get the bear troops riled up!  GL, bbl.  :)

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  68. pretz,Ican see the time stamp

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  69. http://etfdailynews.com/2011/11/16/sp-500-etfs-updating-the-sp-500-symmetrical-triangle-pattern-spy-sds-sso-sh-spxu/

    this guy has an interesting idea about a triangle pattern forming. A breakout sometime soon is imminent

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  70. PL, jerry is right.  the old board worked better.  because the 'sort by newest first', does NOT sort by newest first, the replies you made, to prior posts made, like the one you did to my 'rare earth' metals post below.  It sorts the newest first NEW posts, but not the replies to older posts, so you are forced to continually scroll back and forth endlessly, to catch whatever interesting minutea, was stated in reply to prior posts of the day, whether yours or others.  However, it is true, that the new blog is much better visually, you can post charts, and it starts from the top, not the bottom, as before.

    And as to what you told me about your silver chart analysis today, I personally give 95% chance to silver and spx going down together bigtime within next few days, and only give a 5% potential to your bullish alternate count.   Too many overbought technical and sentimental contrarian factors, going against a new bull leg now, and most especially with the rockhard overhang of the 2011 h&s neckline and 200day ma, standing strongly together, and nearly identically mimicking the 2007/2008 chart pattern perfectly.

    Only question for me from this area, is whether the world takes the express elevator down, or the floor by floor elevator down.  My bet is on the express, though.  May I have looked at too many 1929, 1987 and 2008 charts, and studied their sentiment.  Sentiment which, in my opinion, closely matches today's blithe complacent one. 
    For no matter how huge the ever-coming-due world debt is further revealed daily to be, the ever-adding 5th-wave dumb-money uber-bulls continue to happily whistle it away (despite the growing monsoon debt rain), and laughing away at the last few grunting bears, that are just thrashing about angrily, solely seeking a dry cave to hiber, from the forthcoming major shtt storm. 

    This market will break soon bigtime, when we least expect it, but after it has exhaust all, even the most diehard of bears.  Its a grand supercyle degree turn, remember that, and to last many years.

    My opinion.

    ANON20

    PS---Do any of you keep track of current margin debt ratio to actual cash stock purchased?  In oct. 1929, what destroyed the entire markets in only days, was the 90% allowed margin accounts back then.  And I know that currently, only 50% margin is allowed;  however, in today's "sure thing" bullish Santa Claus rally atmosphere, where I am sure weak-hand investing-rookies are adding 50% margin to every penny of their cash that they can, even 50% margin calls, can slap the market sharply lower and fast, once it starts to fall.

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  71. yeah, how many nested 1, 2s can we possibly build before wave 3 finally breaks, I guess the more nesting we do the more violent the drop will finally be?If this is the big number 3, I think we're on the 4th level of nesting from the minor that started back in May. That's crazy.

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  72. sorry, not liking the new comment section. (btw, this is Arnie). Hard to follow comment flow.

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  73. Anon20

    As to the new format, we have to resist the urge to hit the reply button and post in new comments. 

    History often repeats itself in various forms, but the bulls have the Bernake on their side pumping money into the market on his whim.  In previous drops, the Fed was not armed to the teeth as it is now.  I wholeheartedly agree that the US (and the rest of the world) are living in la la land and eventually will have to pay the piper.  As much as I want that to be in the next 48 hours, I don't see it happening.  I hope I am wrong, but until I see a bull charge, I will continue  my search for some rose colored glasses.

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  74. should be bear charge in that last sentance.

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  75. the number of comments has decreased tremendously since the disqus was put in

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  76. US equities in danger of peakinghttp://www.ft.com/intl/cms/s/0/01f2fea8-0f1d-11e1-b585-00144feabdc0.html#axzz1dtY32y2F

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  77. i can't read that link for some reason

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  78. Um, this looks mysteriously like yesterdays action.  Is it Ground hog day ?

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  79. http://www.ft.com/intl/cms/s/0/01f2fea8-0f1d-11e1-b585-00144feabdc0.html#axzz1dtY32y2F
    (some how the previous post put it all together....)

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  80. yeah it does, how many of these down days that miraculously rallys up are we going to have?

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  81. It mirrors what futures seem to have done every night for a month.  Is it the new Fed policy to support the market by buying futures over-night and then buying equities during the day ??  I think it is !  Ben has an Etrade account - we will fooled into believing in the new Bull market despite Europe imploding

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  82. As long as today closes under yesterday's close on the Nasdaq Composite.  It's still bearish IMO.

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  83. I have the same suspecion as you do and also look at the recent goverment inflation number vs $100 dollar
    oil, something fishy!

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  84. Hmmm, I keep trying to imagine the S&P staying above say 1,280 for ANY length of time in the current worldwide economic environment . . . and it still  just *seems* so unlikely.  The bulls have not felt at all comfortable trying to even hold 1,265.

    That being said I am entirely in cash in this environment and I think it's crazy to hold anything that is tied to the indexes overnight.  Unless it is a very long term short position that you don't mind riding up and down for however long it takes.If the 'Supercommittee' reaches an agreement (unlikely) or it simply punts to a later date (rather plausible since it' would be closer to the election) and the Fed keeps up talking more QE, well I can see a plausible argument for another run up.  But that still doesn't resolve Europe's debt crisis which WILL implode their financial system and lead a  very severe and extended European recession that will take China's growth rate with it.  The problem over there is simply NOT going away.  And will drop the market once it blows up or there is a downgrade of France's credit or weak member's bond spreads continue to rise above 7%, which is seems a certainty that they will.

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  85. I made the same arguments at 1200 over a month ago!

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  86. Earlier Pretzel said that if we broke 1258 then its something else - i.e. not an a-b-c correction.  So I am wondering what it is.  Is it the w-x-y (ii) scenario playing out?  Or could we still be in the nested 1-2 sequence somehow?

    Also we don't seem to be spending any time in the bottom half of the triangle the past few days, at least not in the cash market.  The futures dip down there but always magically recover before the cash market opens.  Its frustrating being stuck short.  Might have to cover here if we refuse to break 1245.  Very frustrating.

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  87. the current "rally" is IMHO because of the oil pipe deal :

    http://online.wsj.com/article/SB10001424052970203699404577041901234224874.html

    with the energy sector leading advances on the back of oil's rally

    again more 1-day news driven trading (unless you're trigger happy and have your hands on the trigger all the time, I ain't touching this)

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  88. i thought pretzel says "news is noise"?

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  89. Hey - finally showing some green on the screen - wha happon ?????

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  90. there she goes!?

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  91. Other than Brian saying he was in cash ;) - wonder what triggered that ??

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  92. This smells like a crash to me ...

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  93. major downside accleration in the markets starting around 3pm EST.  1/2 hr to go and we're under 1240.

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  94. Of my shorts - the one that really took off was FAZ - any news from the bank front ?  Someone flunk the stress test ?

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  95. I like scotch, scotch scotch scotch. It goes down, down into my belly. BTW Pretz, I've greatly enjoyed reading your updates every day. Thanks!

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  96. 1240 turned from support to resistance. 

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  97. Nice sell off  the last hour, this is what we've been waiting for.  I picked up a few Nov 119 SPY puts a few minutes ago at .22 on a small flyer.  I'll probably lose it all, but if she does crack this week...BWAHAHAHA

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  98. still within the triangle though, looks like we're approaching b (pretz's 2nd chart) or is it e (pretz' 3rd chart)???  looking forward to pretz' update 2nite, surely looks more bearish by the day/hr.

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  99. Yepper - would be nice to see futures head down and stay down so we can gap back into that 1220-1230 channel and see if we can do anything with those 1215 and 1190 levels - finally (I hope)

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  100. Well, that was a nice way to end the day.  Has the SPX broken out of the triangle yet?  It depends on how dull a crayon I use to draw the trendline.  Hopefully, tomorrow will provide the anticipated-for downside resolution ... otherwise we're back to knotting and twisting.

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  101. What was the news du jour that caused the last hour crash?  Sorry I don't follow the news.. :P

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  102. Fitch warnings of US bank exposure to Euro crisis.... not that we noticed....

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  103. anyone adding to shorts? Hopefully we bounce somewhere, I want to add to shorts. short short shorts

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  104.  
     It was triggered by Fitch bank-rating agency stating approx at 3pm, that they might have to soon downgrade some large American banks, due to possible overexposure to Eurozone "problems" (read: italian/spanish bonds).  How surprising.  Yawn.  Every day, one more banking lie is revealed.  It's worldwide contagion, unavoidable to stop.

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  105. Below is the news item that triggered the selloff.  Was bound to happen.  And if my going to cash this morning was helpful, I'm glad I can contribute.

    I've been  buying small put positions above 1,260 and waiting for below 1,250-ish to arrive while we've been caught in the 'triangle'.  

    Seemed pretty clear that buyers simply weren't comfortable with crossing 1,265.  So I had stops set at 1,267.  

    This morning when we bounced off 1,245 I got out of everything again.  This market has been a directionless and wandering bitch to anything in with confidence.  

    Perhaps that finally changes tomorrow and we'll have an understandable direction, though why everyone needed to wait for Fitch to tell them the f***ing obvious about Europe is beyond me.



    http://www.bloomberg.com/news/2011-11-16/u-s-stock-index-futures-slide-as-european-sovereign-debt-concern-deepens.html

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  106. The Fitch report gives sellers all the ammo they need to take everything lower in the next couple days.  When a ratings agency gives the sell signal, there isn't a bull posse in the world who can stand in the way of that.

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  107. do you guys think there will be a bounce tomorrow given that this is considered the "crash" wave?

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  108. Somehow, SPX landed right at the triangle lower boundary and is "due" for a bounce, as confirmed by stochastics oscillators that it's "oversold".   So I think many people are expecting a bounce tomorrow, and there may well be some sort of a bounce.  But the impulsive high volume selling in the last hour will probably fool the crowd, and maybe this time it might just break down for real? 

    Also, I believe this move brings us to back to Pretzel's preferred count.  I am afraid selling may start to accelerate from this point on.

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  109. That Fitch report may prove to be devastating.  This week's 7% yields and rising spreads news, which the markets basically shrugged off, may prove to be just a precursor to where it's all really going.  

    There are simply NO buyers and the Fitch report will make certain that there are even less.  

    So the EZ countries' bond dump is coming.  Which would probably mean that 7% is the starting best rate for all EZ debt that is not Germany-Austria-Switzerland (and related smaller EZ countries whose finances are on similar ground) pretty quickly here.  Can you imagine what happens to all asset classes (and especially all equity indexes around the world) if Italian and Spanish yields cross 8 and then 9 percent? With Ireland, Portugal, etc. following along?  Especially as the number of institutional buyers shrinks to zero and there is a mass panic to unload.   We may soon be witness to an historic version of a mass panic 'bank run' to get out of EZ bonds.  China's equities would then be in freefall along with ours.

    And if that happens, then we aren't talking about a test of the 50 dma anymore.  It's wave three party and look out below time as we see a reprise of October 4th territory.  Which would mean no big Santa Rally past 1,300 for all you fund managers this year.

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  110. is that why the fed is talking up qe3(fitch ratings downgrades)

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  111. Mavrich,

    A clear sell signal was given by a major credit ratings agency.  And they just attached it to the U.S. Financial market.

    This one cannot easily be walked back by ANY European leader or delegation who could say ANYTHING to answer it.  

    What are they going to say here??? We'll protect the United States banks with the ESFS and the ECB bond sales backstopping everything?  Uh, good luck selling that one.  

    It's one of the best sell everything now signals that anyone betting against equity indexes could ask for.  

    And the market did not have this one priced in.   Quite the opposite.  And as of now, it has had only one hour of cash trading to respond to the news.  

    I wouldn't be placing bets on a bounce in the am.  Even the most optimistic of bulls knows when to not stand in the way of a coming selling onslaught.  

    There are two sides to any major market meltdown (or run up).  Bear selling with complete conviction and bull rationality to know well enough to not stand in the fucking way and it's time to get out now at whatever price you can get.  Because tomorrow those pricess will be even lower.

    And from where we sit even at the close today, equities have a LONG ways that they can fall.

    Maybe some news event turns this around by the morning, but I wouldn't be betting on it at this point.

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  112. My guess is tomorrow target is SPX hitting 1220.  Just a guess :-)

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  113. thanks brian, I usually dont like chasing weakness so I wanted other view points and yours definitely contributed.

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  114. T'is time to be short and hold for a Santa "Plunge".

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  115. There may be quite a few concerned bulls tonight at home. 
     
    A 4 scotches night for them, probably, to just slightly reconsider their 'assured Santa Claus rally' stance.   
     
    Yet, they'll go to bed happy, thinking that they'll just trim (just a bit) their bullish portfolio tomorrow morning (just to be cautiously responsible, and wifey won't nag) since they are already at 50% margin (and wifey doesn't need to know). 
     
    But of course, they will all be (groggily) thinking this, exactly the same thing, at the same time (but not before dutifully finishing their 4 scotches), so they'll head happily to bed, with dreams of Santa still bringing lots of easy stockmarket cash presents, by Christmas time;  but just to them, because they such responsible, serious investors, real true professionals, that responsibly cut back on their risk, when the market tells them so. 
     
    Therefore, I opine, that tomorrow morning's opening bell, should be a very interesting start, after all these very responsible bulls tiredly hungover (yet still happy) wake up, and stare in shock at where the much-lower futures already are.  
     
    Then they cut themselves shaving, as they frozenly make the most gut-wrenching trading decision of all:  place 'market-sell' orders. 
     
    And these 'market-sell' orders they nervously will make (as they fervently pray, I bet), because of their of worrying (cold-sweating) 50% over-extended margin positions, which they never told wifey about. 
     
    And I, ANON20, love it when others place 'market-sell' orders, right into my prepared longterm bear trap.

    Because if I am correct about my imagined bull story above,  1190spx could be gone even by the opening bell.

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  116. Mavrich, completely agreed on 'chasing weakness'.  But there ARE certain market freefalls that are perfectly fine to chase.  

    They are the ones that crash through previous resistance levels because NOTHING is going to stand in their way.  And you can hold at least until the next major resistance level is tested.Which is also why if you enter a position during a slide and do not sell when there is a failure to break an obvious resistance level, you should be very ready to sell VERY QUICKLY AFTERWARD.  This is a mistake I've made numerous times as I watch gains evaporate on the run up.  

    The Fitch report explains the Fed QE blather from yesterday.  Looks like Pretz was spot on.

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  117. Since Mr. Buffet announced purchasing 5% of IBM, Mr. Buffet has such a track record over the years and every time if he's "wrong", he always just maintain his "buy & hold" as a sound business  approach and invest in the long haul.  Unfortunately Mr. Buffet, at his age, he won't be around to see IBM turning around in his life time :-)

    This is no usuall bear market, IBM can easily lose 50% of its "value".  But that doesn't trouble deep pocket value investors like Mr. Buffet, right?

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  118. Adding fuel to the fire...  

    Frankfurt am Main, November 16, 2011 -- Moody's Investors Service has today taken rating actions on the senior debt and deposit ratings of 12 German public-sector banks (primarily Landesbanken), closing the review that was initiated on 1 July 2011. The rating actions reflect Moody's assumption that there is now a lower likelihood that these banks would receive external support, if required. "

    Full article
     
    http://www.moodys.com/research/Moodys-takes-rating-actions-on-12-German-Landesbanken--PR_226714
     
    Given the stupidity of this market... and my blood pressure levels today... I'm waiting for more assured levels to re-enter shorts, but am pretty sure our day is near!

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  119. I think when Pretzel wakes up, he will be very pleased about the downside acceleration from the last hour.

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  120. While I liked the price action and definitely made money on my shorts, we still closed at the triangle trend line so nothing appears to have changed today...Pretzel will certainly correct me if I'm wrong. 

    If this is the collapse, I would expect we need to close below the triangle trendline on friday. If we jump back in, I bet we're going higher, If not, I think next week we'll see 1190 give way. I do expect a backtest of that trendline at some point probably on friday...at the close just to make us nervous going into the weekend. 

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  121. 1237 seems to be support.  Not a believer the Fitch report will be enough to send the markets down.  Need more dire news...like  "Berlusconi to be elected Supreme Leader of EZ"

    Bulls won't give up without a fight and the Bernanke will be more than happy to provide the ammunition.  We will see how strong the bounce is tomorrow.  Don't get me wrong, I'd love to see it "slice through 1197 like a hot knife through butter", but I don't see it.  Not yet

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  122. agreed, I am less bearish near support...I feel like we need to test 1200 atleast once but i'll need a convincing move below 1190 for me to see the ultimate collapse has happening. Until then, I'll be covering shorts near and below 1215. When 1200 comes, I'll be in cash waiting for the market to determine the next move.

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  123. agreed Frank...I honestly feel there are only two options now and neither has us rallying off 1236 tomorrow morning. We will either breakout of the triangle and collapse or we'll break out and snap back into the range and find a new high. 1220 may be it...I'm favoring the 1225 support level we've been setting up...I think that is stronger than 1215, if 1225 breaks i think we find 1200.

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  124. Key to watch the EUR-USD to see if the 135 breakdown continues. Also the Spanish and more importantly the French bond auctions tomorrow to see if the ECB jumps in to buy. Additionally, Pretzel thanks for all your great work and for creating this great forum for discussion ---- you are the man. Skideep

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  125. Hey, you guys did much better handling Bully into the close.

    Pretty sure that was the piece of bad news the Fed was trying to front run yesterday.  That story will probably pick up steam as more great "investigative journalism" begins to "reveal" just how exposed US banks are, lol.

    btw, welcome to all new posters!  Seems like a lot came out with the new forum.

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  126. Pretzel, your preferred count looking better?

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  127. Frank, this was the make or break moment for that count, and bears did what they needed to to keep it alive.

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  128. Futures continuing down AH so far.  Maybe the bears can steal one from the bulls playbook and gap below some key support levels tomorrow.  

    Next level we have to watch for clues is the potential wave a low on the bullish triangle chart -- 1215.   

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  129. Actually, ES made potential 5-waves down -- so what shape the rally takes here could be very revealing.

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  130. see 1225 as any significant support? that's the one i was worried about.

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  131. Testing, testing...1, 2, 3.
    Finally created a profile after lurking for about 2 weeks.Pretz, Been following you for a few months, but very regularly since the Oct 4 low.  Since then you've nailed every single one...at least the ones that matter.  Great blog, and equally great community.  Keep it up.Juan

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  132. I like the new time stamp very  much. Saves me the trouble of converting time zones=P

    **Fingers crossed for ES to be game over**

    BTW, could I get some TA explanation here. Why is it that when we get too close to the apex of a triangle, the breakout is more likely to fail? 

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  133. Looks like a convention of shorts. My guess is that we get that top side break out to 1305 before the downturn. Be ready to cover those shorts.

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  134. Juan, thanks.

    And thanks very much for the donation!  I really appreciate that -- and welcome to the blog!  :)

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  135. Dan,

    The triangle's apex is an axis of support and resistance which gets weaker as it extends to the right (on the chart).  So, (using the bullish example) late breakouts don't benefit from the same level of underlying price support as earlier breakouts, and are subject to their support diminishing very quickly after the breakout.  This is why a small triangle pattern from two months ago can be effectively ignored when looking for current support/resistance.  But as a result of the diminishing influence of this support/resistance cradle, late breakouts fail more often.

    Hope that answers your question.  :)

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  136. 1225 being the most recent swing low will probably be an area for bears to contend with, but it doesn't KO any counts, so a break or bounce there won't really tell me much.

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  137. BTW, my formatting is strange, and I can't see the "edit" and time the way I do on other computers.  

    Is there anything I need to do from my end?

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  138. No, it's something to do with the default "automatic" color scheme.  I'm working on trying to get it fixed.

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  139. So Pretzel you mentioned earlier that if we took out 1258 then something else was happening.  We did ultimately break through that, but obviously finished well under that level.  Did that change anything?  It seems that the nested 1-2 count still holds, if today was sub-subwaves 1,2 and the start of 3.  But obviously just looking at your prediction for the "alt" count it looks very accurate if we completed a b-wave today and we start a multi-day rally to the 1285ish level tomorrow morning.

    IMO, the Fitch report and the Moody's downgrade of some German bank ratings isn't enough to take this market down.  Futures are already back up to even.  I think a bank has to go under or the Spanish bond auction fail or something else with more umph needs to happen to get people to stop buying the dips but rather sell out at whatever price they can get.

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  140. Hi Bob -- the break of 1258 doesn't cause any material change there.  Looks like the move up was a double-zigzag instead of an a-b-c.

    And yes, the first alternate count potentially holds a lot of water.  As the market has continued hovering around, I have been growing increasingly fond of that count.  

    The burden of proof remains on the bears' shoulders tomorrow.  Any *significant* bounces from here will severely weaken the blue count.  There's a point where it just starts to look like too many nested 1-2's -- and we're almost there now.  Once a count begins to "look" too wrong, you have to start assuming that maybe it is.  Tonight/tomorrow will probably provide some answers.  

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  141. A quick shout-out to Tom for his donation.  Thanks, Tom.  :)

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  142. So Pretzel,if the alternate count is in play,then  the bullish count can't be ruled out just yet since they start from the same point?  and projecting the triangle base to the 1330s would get a lot more suckers to become bullish and believe that another rally is starting ,once everybody is onboard and giddy Mr. Market would then lower the boom.just speculation from a noob. 

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  143. PL

    I hope you got some well deserved sleep.  Seems like all the crew is exhausted tonight.  Blog is pretty quiet.

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  144. Didn't get nearly enough.  Was just thinking about taking a nap, before getting to work, lol.  I can only average 4 hours a night for so long before I hit the wall.  Think I just hit it.

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  145. Hey, I just noticed I can see the date and time stamps and like/reply buttons.  Guess something I did earlier actually DID change the settings -- just needed to clear my browser cache, apparently.  Cool, that makes my life at least a *little* easier right now.

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  146. That's about the size of it.  I still favor the alternate bear count over the bull count, though.

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  147. In keeping with the decision to keep comments as linear as possible...

    Mav, re: "pretzel says news is noise"

    It is.  Notice that both bearish counts were pointing to *exactly* what the market did today before the news even came out.   This is why I've long been of the opinion that the charts *lead* the news, not vice versa.  The exception to this can be black swan events -- although, even in 2008, the crash was showning in the charts before it happened.  But just like today, it wasn't 100% -- it was, "hmm... IF the market does this, then this looks probable."  Once the market started breaking down in '08, it never looked back.

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  148. Oh, and I wanted to get new feedback from anyone who disliked this comments format initially (anon20, gina, jerry, anyone else).

    Now that I've fixed the time stamp, fixed the "sort by newest first," and everyone has agreed to keep it linear, whatdaya think? 

    My thoughts regarding linear:  if the comment you're replying to is more than 4 posts down, then don't reply directly, but reply as a new post.

    Personally, I lke that you can edit, that's such a nice feature
    I like that people can post charts
    and I like that new comments are on TOP, instead of having to scroll all the way down. 

    Also, I have it set to a max page length of 250 commments (highest it goes), but that's 50 more than blogger allowed.

    All in all, I think I like it better.

    Thoughts/feedback?

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  149. Pretz, once again, great job on the comment box. Hope it didn't cut into your sleep too much! Now just need the colors to appear hehe. 

    I personally think your 250-comment max will be busted in about 5 days' time, maybe less. 
    Well, ok, I know I'm not helping... 

    Thanks so much for your clarification on my triangle qn. I lightened up on my shorts but kept the ones that are weak/in the money (me stock trader, so I guess I'm having a slightly easier time than the futures traders here due to lower volatility). Will add if/when confirmation comes. 

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  150. Thanks.  What I had to do was clear out my browser cache and restart it, then suddenly everything showed up.

    As to volatility: personally, I *love* the volatility in futures right now.  Unfortunately, I just don't have time to regularly post "educational" setups like the one I posted last night.  But that resulted in a quick 14 points in about an hour... LOVE volatility.  :) 

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  151. Apple looks like it's rolled over, from about $3 north of my 388 target.  Next stop should be 370 +/-

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  152. Futures look like they might have traced out A of an ABC.  Probably turn south from near this level (1239-40), make a B wave low in the 1230-35 area, and head back up in C, maybe 1245 -- it'll all depend on where B bottoms.  Slight chance that was the whole rally too, but I would favor more sideways action from here.

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  153. BKX looks like it rolled yesterday.  I *really* hope someone took advantage of that setup I posted.  It's a 2+% gainer in one day so far...

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  154. Put/call ratio extreme high reading today, which is usually a CONFIRMING indicator for a top -- 'cause it means the Big Boyz came to town and plopped down bags o' money on puts.

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  155. I can see the time, "like", and "reply on Internet Explorer, but not on Google Chrome.  I guess that was the issue on my end.

    I wonder if you have any thoughts on BEN.  Seems like it's hanging by a thread, and it has lots of room south.  For my own edification and entertainment...not education.

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  156. After studying my "secret weapon" index, which I'm *not* going to reveal, since a certain people like to "borrow" my work (FRANK! j/k), I really like the bears' chances here.  I think we could see that lower triangle boundary wiped out very soon. 

    Let's see what happens when Europe opens. 

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  157. I think Ben is clueless, and only worried about his "legacy" of not wanting to be the Fed Chairman who presided over Great Depression 2.0.

    Oh, you meant Franklin Resources... looking at it now.  ;)

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  158. Oh, man, that is one *great* chart... for bears. Thanks for putting that on my radar.

    I would say your minimum ST target there is 95-96 and potentially MUCH more. It will all depend on whether BEN is making an ABC now to form a more complex 2nd wave. If that's what it's doing, it could bounce off the 95/6 level and run back up to about 116.  If it's not an ABC, it should knock out the recent swing low around 88 before a big bounce like that. 

    That's short-term, though.  LT, I'd say you're looking at 35 or below.

    I'm adding that chart to my "favorites" on Stockcharts. 

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  159. dang't frank, ruining it all for all of us lol. Was this secret weapon mentioned/used before? like the last time you called a top?

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  160. It's something I use all the time now, although I have only recently discovered it.  Every bear market has one... the index that seems to lead the others.  Could be domestic, could be foreign -- you just don't know 'til you stumble upon it.   

    This is different than the secret weapon I used in '08, which everyone knows about now -- the BKX.

    Alright, I'll go ahead and tell you:

    It's Rocky.  

    When he goes long, you go short; and vice versa.  lmao -- just messing with ya, Rocky.  :D

    And, no, I haven't mentioned it, or it wouldn't be much of a "secret"!   lol 

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  161. Pretz,any thoughts on TOT, for education purposes not advice of course.Seems ready to implode.Thanks

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  162. haha sneaky sneaky pretz.

    and I already use the rocky contra indicator all the time when I make trades, i max out my margin on those trades ;)
    lol jk rocky

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  163. Hello PL, I like this new comments format (so long as folks follow your "replies" guidelines), but for some reason I still cannot see the timestamp/like/reply links - I have cleared the Firefox cache (Options->Advanced->Network->Clear Now button) and restarted, but to no avail. Any suggestions? Cheers.

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  164. That charts a little tough.  It's got more gaps than the smiles in a Hllbilly photo album. 

    My best guess would be that ST it heads down to about the 46-47 level.  Honestly, my first impression is that from that level, it will then stage a rally back up to the recent highs around 56 -- or a little beyond.

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  165. Actually, let me amend that target:  could go as low as 44/45 ST.

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  166. Rolf,

    Unfortunately, I have no clue.  Seems to work fine in IE.  Eventually, I'll have to trouble-shoot it in more detail.

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  167. ES just took a trip from 1241 to 1233 btw.  Covered shorts from 1240, should get at least a little bouce here.

    What I should do is start a service where I post real-time futures trades for people to follow.  Been killing it these last couple weeks while the market goes up/down to nowhere.

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  168. Hmm.  Might jump right back into this one.  Have to watch it for a few...

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  169. Got short again at 1235, stop at 1237.  That guarantees me 5 points profit no matter what, but it looks like it might go lower here.

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  170. Alright, gotta get to work here.  So tired I'm apparently talking to myself, lol.

    "Replying to PretzelLogic"

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  171. Sat here, on the other side of the world, hunting for that reply link :) Nice call BTW

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  172. lol, ty.  If you highlight the page, it becomes visible.  Although, once you know where it is, you don't need to do that much.

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  173. Keep them coming PL! Great work! 

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  174. Hey RolfT, you in Asia too?

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  175. Dan, no UK. Seems we're scattered liberally around the world!

    (nailed that reply link now:)

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  176. It's ok, even when you appear to be talking to yourself, we are still lurking in the dark. LOL.

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  177. I never liked that triangle option, and I like it even less after studying the charts tonight.  With the last couple days price action, it doesn't fit well at all.  I was giving 20% odds on that triangle.  I'm cutting those odds down to 5% (this is the cue for the market to do "that triangle thang" now, lol).  I don't think I'm even going to post a chart of it tomorrow. 

    I see one potential that is ST bearish, then ST bullish that I like much better, so I'm going to talk about that tomorrow.

    I'm almost 90% at this point that we break DOWN from the triangle, one way or another.

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  178. ha! that contrarian move would have served you quite well since August....fortunately, since Nov 1st I've actually been on the right side of most trades...short mostly but covered some on a few of these dips only to put them back on higher. So I'm getting better, slowly. 

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  179. Well, had to give up 3 of my hard-earned 7 points.  Got stopped out at 1237, then got short again at 1234.  You win some, you lose some.  Almost finished with today's article.

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  180. lol- that was timely.  I like it EVEN LESS now that the futures have broken the lower boundary.

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  181. That screws up half my article, though.  I just spent 3 paragraphs explaining why I'm almost certain now that the triangle's a fake!  Not gonna look so smart now if we open below it.  Sheesh, stupid market.

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  182. Pretzel - the eur/usd chart looks the cleanest to my eye that the waterfall is aboutto begin. You agree? Also, i think the R2K is best leading indicator right now for risk on/off.

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  183. I agree, Euro-dollar looks pretty unhealthy.

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  184. Glad I put my shorts back in yesterday.  Looking forward to the next update

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  185. With the stress in credit markets now being shown, remember to bear in mind the greater likelihood of an imminent policy response of some kind.

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  186. And now ES has moved back into the triangle.  Can I post this update AFTER the market closes, lol. 

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  187. Morning Pretzel,

    I like that you give sneak preview comments before you are ready to post the charts.  It gives us a chance to update our positions before the cash market opens.  I haven't made the jump futures yet.

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  188. Thanks.  You confirmed my suspicion/hope.

    Morning.

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  189. I had the same problem.  Switched to IE, and all's good.

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  190. Hoookey dokey.  Update's posted, so let's move the discussion to that thread.  :)

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  191. Nice work, Rock.  You may call yourself Christopher now, but you'll always be Rocky to me, lol.

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