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Sunday, December 4, 2011

SPX and Euro Update: Euro Still in the Driver's Seat

There are now so many indicators suggesting the market is forming a top, I'm beginning to lose count.  Of course, past performance is no guarantee of future results and all that, but let me lay out the case for a top:

1) Friday was a non-farm payroll bearish reversal day.
2) There are now two bearish reversal candlesticks in a row on the daily chart (not shown).
3) The Volatility Index (VIX) has traded outside its lower Bollinger band for three days in a row.
4) Retail investors, as measured by Rydex fund flows, are again very bullish.
5) "Everyone" is expecting a seasonal Santa rally.
6) The wave structure seems to support a top (see charts).
7) The Euro, while open to some interpretation, could be on the verge of a major breakdown (see chart).
8) The market now has a fourth apparent rejection at the 200 day moving average.
9) The 1158 bottom was not formed very well, as far as bottoms go (here I'm tempted to make off-color jokes about "well-formed bottoms.")

I've spent roughly 40,000 hours this weekend charting and re-charting, so I'm going to get right to those charts.  The first chart I'd like to share is a big picture chart, and compares some similarities between the current market, and the market earlier this year.  I'm using the Wilshire 5000 for form; the chart explains the rest:


The second chart shows my revised count for the short-term structure of the S&P 500 (SPX).  I've never been entirely satisfied with the prior labeling of the decline, and the entire sideways correction in early November was also a big challenge.  The count I'm about to show is one I haven't seen anywhere else, which is another thing I like -- it always worries me when too many technicians are on the same page together.

This new labeling accomplishes two things:

1) Shows indicator confirmation of the internal third wave, which didn't match using the prior labeling.
2) Explains the violence of the rally.

This is one of those "either I'm a genius or a madman" charts.

Anyone even passively familiar with Elliott Wave Theory will see why the decline was so difficult to label in real-time -- the wave peaks don't always line up with the price peaks.  While I did get the direction of the decline consistently correct using real-time charting -- and did anticipate the rally potential at the correct time -- I failed to anticipate a rally this massive. (Which is why it's important to always protect profits.)  This type of rally is consistent with a first-wave leading diagonal, and the revised count reconciles well under this interpretation:


Do note that the above chart raises the knockout level for the bearish count.  This count seems to suggest that the top was made on Friday.

The next chart is the intermediate picture Euro chart.  I spent a ton of time on the Euro charts this weekend -- in fact, I've now reached the point where if I spend any more time staring at Euro charts, I'm going to feel compelled to start wearing a Speedo.

I feel the Euro is hugely important here, because it's been perfectly correlated with the SPX since September.  If the Euro bottoms, the market bottoms.  The challenge here is there are also two completely viable interpretations of the Euro chart.  One indicates a short-term bottom is coming (brown alternate count), the other indicates a big decline is coming (red and blue preferred count). 

Both do seem to agree that lower prices are needed in the short term.  Neither count foresees a long-term sustainable rally in the Euro.

Note the blue vertical lines, which show how every bottom in the Euro now correlates with a rally in SPX.



And finally, the bullish (short term) alternate count, which remains with us at 35% odds.  While the market did trade into the target zone for this count on Friday, the structure for this count would look much better with a new high above 1260.  A new high would also serve to clear out some of the stops sitting above Friday's high, to then make way for a correction.


In conclusion, I remain medium and long term bearish -- and bearish over the very short term, due to the preponderance of indicators which are screaming for a top now.  The market hasn't clarified the case for a Santa rally yet, and we may instead see Santa falling down the chimney.  I continue to favor a bearish outcome across the board right now, but there are clearly a number of reasons to merit a cautious approach here.  In a perfect world, this portion of the picture would clear up soon -- obviously, a lot depends on what the Euro does in the near future.  Trade safe.

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

247 comments:

  1. Whoops, I initially published the wrong SPX chart.  Refresh the page if you need to and the right one should come up.  Gotta run for a couple hours.

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  2. A quick shout-out to a donor who made need anonymity at the moment  ;)  for his *fourth* donation!  Many thanks, and I'll reply to your e-mail a bit later -- running out of time right now!  :)

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  3. Hi Pretzel, in general how "long" can the 4th wave stretch out in time compared to 1st and 2nd waves?  Also, is the third wave usually shorter in duration compared to 1st and 5th wave?

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  4. PL  Great analysis as always.  With regards to the euro currancy, Austan Goolsbee recently wrote that the euro will not survive and provided his logic.  It is a short article that can be found at   http://www.washingtonpost.com/business/economy/is-the-euro-zones-flaw-fatal/2011/12/01/gIQAvWLXIO_story.html

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  5. great work this weekend Pretzel, loved that first chart....some of the best work you've done recently.

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  6. Good Work Sir! If your preferred count is correct, I shall dawn a speedo in your honour (even spelled it the European way to get in the mood)

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  7. Pl, thnks for your dedication and  the great result; I love your analytical mind with an intact sense of humor!
     On your LT SPX chart, you show a rectangle in which you wrote C=A at SPX 457, would you carify this nomenclature? I assume it means target for C is 457, but rather be sure.

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  8. PL,
    Being that it is some 16 degrees here in Colorado, I trust you will understand if I would cordially pass on the whole Speedo thing. First, awesome post, nuff said there. Second, I am quite interested by the change in count and have a few questions regarding the differences this makes. First am I to understand that a five wave impulse count tends to be more orderly than a three wave correction count? Second my understanding (though limited) would be that unlike a correction wave count, when an impulse wave five is complete especially in a bear market the likelihood of a strong snap back to a bull market not so much? (in other words if this plays out long term we would be in a world of hurt for a rather long time.) And finally (more to the immediate) how would a 3 wave differ in character than the previous marked C wave? Are we to expect it to be slower more deliberate and at the same time longer? or is it anything goes?

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  9. PL nice work, for the euro, 1.31 has been key support for several years a break below that and there be dragons, and perhaps unleashing the DX beast. Nice chart that shows the critical importance of 1.31, but I'm sure you prolly saw that this weekend in your speedo :)


    http://macrostory.com/2011/11/29/euro-approaching-critical-support-area/

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  10. Great work and it will be interesting to see how it plays out.  Futures are up and we will see if they want to try a gap up open to see if they can get a few more folks to pile in.  Thanks so much for the info....and the humor!

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  11. BTW, Genius and madman are not mutually exclusive!   :)

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  12. PL, great work. I was waiting for your analysis to make some sanity of this madness. Few questions: if the euro continues to rally, S&P will too? And the USD will drop, right?

    Futures were up last I checked. Maybe gap and crap so we get Wave 5 in (higher high than Friday) tomorrow ? Would make sense: suck in the last buyers. 1-day SSTO is about to peak and on more "up day" would get it there. I also noticed a bearish divergence there between Nov 25th low and The Oct 4 low (higher lows in the market, but lower lows in SSTO).

    Considering all eyes are on EU now (and not on you in your speedo ;-) ) would the bullish count be more realistic? That is: drop before Friday; then our great brilliant colleague politicians have saved Europe from the brink (right around the 12th, where you placed wave B)rally, rally and then reality sinks in, focus shifts to China, and then that bubble bursts!? Too predictable, too easy? That said, I don't see much difference in your prefered chart and your bullish chart.

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  13. Speedos and well formed bottoms.

    Are you trying to tell us something, Pretzel?

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  14. Pretzel, I really like your stuff.  Excellent charts and real good reasons for your opinions as far as I'm concerned.  I'm spreading the word about your site.  Keep up the great work.  And... thanks.

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  15. great analysis. Makes complete sense to me. Butt, speedos on Oneloa  beach?  nice rounded bottoms though.

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  16. Right then old chap! Having a cup of tea while saying "tally ho" to the market. Well done old' boy. Nicely done. Ta Ta for Now!

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  17. Holy Mother Mary! PL you are a genius. Its sinking in as I read it for the umpteenth time.

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  18. Fourth waves are known for their complexity, and it's not unheard of for them to take longer than waves 1-2 and 3 combined.  Elliott Wave was never intended (by R.N. Elliott, anyway) to predict time.  It's based on price movement only.  Hopefully that addresses your question about the 3rd wave as well.

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  19. Shine, ty for the link.  I've been saying the EU will eventually collapse for years, so I agree w/ him.

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  20. ty Fred, and yes.  That's my preliminary target for Wave C of Supercycle IV.

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  21. These gap ups are killers. Why doesn't it fall already, hasn't it squeezed all the shorties.

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  22. CO,

    Currently, Speedos violate my blog TOS, so NP there.  Anyone caught wearing a Speedo in the blog chat will be expelled immediately and with extreme predjudice.  :D

    Impulse waves tend to be more orderly than corrective waves.  Impulse waves are the market's way of getting its agenda accomplished.  C waves also tend to be quite orderly.

    Re: new bull at the end.  This is quite likely.  Think of what happened at the end of wave A in 2009.

    Your last question I'm not sure I understand.  The waves can often be labeled several different ways -- i.e., there is quite a bit of "art" to Elliott Wave (and any TA, really).  There are concrete rules that cannot be violated, but there is often enough play to leave it open to interpretation -- otherwise, it would be so ridiculously predictive that we all could quit trading in a month and buy ourselves Donald Trump, just because we wanted to keep his hair as a pet. 

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  23. ty Arnie:

    yes, Euro/SPX/USD all seem to be trading together right now.

    Regarding the difference between the preferred and the alternate: it's a huge difference over the short term.  The alternate targets a new high above 1292, the preferred targets a drop toward 1100 (before lower).  Either way, I think we're going to 1000-1050 -- the question is one of "now or later?"

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  24. lol -- not that I knew of.  :D

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  25. ty, Alberta.  Appreciate it!  I've noticed you've been a follower for a while, glad to see you joining the conversation.  :)

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  26. Unfortunately, I've seen my fair share of Speedos out here -- we get a number of European tourists.  Actually saw one over the weekend being worn proudly by a very fat, very hairy guy in his late 50's.  I've thought about taking pictures and writing a photo-book called: "The Speedo Diet Plan!  Lose weight fast by being so grossed out you will NEVER WANT TO EAT AGAIN."

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  27. ty vin.  Just remember, that's exactly how the bulls were feeling the week before last.

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  28. btw, if anyone wants to hear a bit of my personal hell:  I spent 4 or 5 hours doing a long-term Euro chart, which I intended to post w/ this article -- but it's vanished.  Gone.  Can't find it in any of my chart lists now.  :(

    I hate redrawing charts.

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  29. >>> buy ourselves Donald Trump, just because we wanted to keep his hair as a pet.<<<

    Classic!

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  30. Thank's PL, I see a lateral market with a short term top coming this week. Euro? Europe is about to go in recession and in this case the Euro support is at 1,25. Therefore I' m about to buy short term US bond, I'm sitting in Europe 

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  31. Several questions and comments---

    1. Why are you drawing the h&s neckline horizontally now?  You used to have slightly tilted upwards, exactly from both shoulder bottoms (2 other technicians I ocassionally read also, continue to have it tilted upward).  The importance of this, IMO, is that it would raise your KO level, which might be tested in a day like today, where the futures are already up 14 points, and very close to your 1260 mark.

    2. Why didn't you mention the ratio of block-trades for last wednesday, when dji rose 500 points?  You mentioned it as important for both Monday and Tuesday, yet not for Wednesday, which was obviously the most important day of all, to study block-trades sellers vs. retail dumb-money buyers.  Can you mention it now.

    3. Was Dexia the Eurozone bank you read rumors about last week, that it was close to failure?  News today confirms that yes, it was about to fail, and has had to be bailed out, yet again:
     http://finance.yahoo.com/news/dexia-using-emergency-liquidity-facilities-102657851.html
    I have also read in a couple of places that Societe Generale, is on the ropes and in danger of KO, or bailout-needy.

    4. ANON20 Silver/Gold Update---Despite the spx big bullish move last week, silver continues to stay below the prior trading range (high$33 to low$35), but did try to enter it on friday morning in a spike move up to $33.7, and was INSTANTLY slapped back down, dropping all the $32.4, by the afternoon, on an spx flat day. It has settled now into the mid to high $32 area. 

    I continue to strongly believe (and bet on), that silver is dying to crater, and is just waiting for ANY small confirmation from the spx (that it is finally heading down), to LEAD all indices and commodities on the way downand for a bigger percentage drop, than most  Therefore, I still continue to opine that this is the best bear bet there is.

    Gold has flatlined, basically, for last 2-3 days, since it's big bull move on wednesday, trading in a very tight range of 1740-1755, yet staying under $1760 (which I believe I read somewhere that that was the 61.8 fib retracement from it's move recent low, however, I have not checked this).  Gold will follow the spx down, IMO, and not lead it, however, I still expect gold at low 1500's, when spx hits low 1000's.

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  32. Re: Your negative  euro bias, you're seeing some serious de-risking in the euro bond market yet the euro currency has yet to feel the 'positive' effects of it. Could it be that the market is pricing in QE1 from the ECB? Could the euro start to lose its correlation to equity markets?

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  33. Commerzbank, the second bank in Germany is in trouble because they have Greek bonds anche they are trying to issue hybrid finacials to convert their bonds into capital. They need 600 milion Euro and it is not sure they will succeed, if not German state may buying Commerzbank. I remenber a similar case with Hypo ( Fred and Fannie in Germany) before 2008 market crash 

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  34. 1.  I'm not.  That horizontal line is marking a peak, not the h/s.
    2.  Block trades were positive last Wednesday -- the implication there is that big money didn't front-run the move, as they did with say QE2.  This implies it was a surprise.
    3.  Possible.

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  35. If the ECB performs QE1 - wouldn't the Euro fall as the dollar did and hence, the dollar rally which would cause equities to fall - or at least commodities ??

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  36. I guess I'll also add that the biggest MYTH the Euro analysts keep putting out there is - the ECB is the only one ....yada yada who can solve the crises (by buying bonds).  Um - that's pretty much crap - has QE1 & 2 and 3-10 done much here other than cause equities to go up then drop ?  We're still going to go back in recession as the Euro is now.  Really - the austerity type measures and strict budget controls will dampen any growth and China is still headed for a recession.  Once the froth wears off of any announcement, people will finally realize ----- hmnnn- what really changed ?  You can only create a fake positive for so long - as the current administration - cash for clunkers, homebuyer credit etc - none of that stuff really does anything other than fake push up GDP for a minute and lets you say at least you're trying - everyone really needs to be trying to create growth - and they are going the wrong direction - off my soapbox and into the gym

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  37. Yep, if you look at a chart of housing prices for example, there's this little spike where the homebuyer credit came in, then back to the decline.  Bubbles on bubbles is all it is.  Eventually it all has to pop.

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  38. Looks like "the they" really want to run those stops above 1260.  They sell their shorts at those levels -- to all the retail shorts who are covering.

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  39. PL,

    Thank you for a wonderful analysis.  I just get back to your blog after blackout.  In your SPX chart, I like the leading diagonal idea that explains current massive rally.  For the 3-3-3-3-3 wave structure of a diagonal, is it possible to label blue iii at your blue 3 and label blue iv at your read (4)? 

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  40. LOL - Asian markets are mixed, Euro markets are up modestly - but futures in the US are in a new bull market.  There isn't any more of a scam than that

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  41. Sorry! It is red (4) instead of read (4).

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  42. Leading diagonals are supposed to have 5 wave sub-structures.

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  43. Well, I should say 5-3-5-3-5.  The real issue with it, that I can see, is that 1 and 4 don't overlap.  So maybe it's just a big first wave wedge... but it seems to fit the "spirit" of a leading diagonal.

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  44. This will be the first 100 point rally where no one bought a single stock.  :D

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  45. Yes, the continued contraction in China and Germany makes me bullish on equities - God Save the Queen !

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  46. According to the "Elliott Wave Principle" book written by Frost and Prechter, the leading diagonal  can be lableled as 3-3-3-3-3 or 5-3-5-3-5.  The book also indicates the diagonal has 3-3-3-3-3 wave sub-structure. 

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  47. Well, the 3-3-3-3-3 is true for ending diagonals.  My understanding, from reading The Elliott Wave Principle (and looking it up recently to double-check my memory) is that *leading* diagonals are either 5-3-5-3-5 or 5-3-5.

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  48. Here is a sentence from the leading diagonal section of the book.

    In the few examples we have, the subdivisions appear to be the same: 3-3-3-3-3, although in two cases, they can be labeled 5-3-5-3-5, so the jury is out on a strict definition.

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  49. PL, 1260.08 on chart 4 just got taken out. Does this mean the "bullish" count is in play?

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  50. Hmm.  Alright, well, apparently I have the other version of the book, lol. 

    Here's what mine says, verbatum:

    "When diagonal triangles occur in wave 5 or C position, they take the 3-3-3-3-3 shape that Elliott described.  However, it has recently come to light that a variation on this pattern occasionally appears in the wave 1 position of impulses and in the wave A position of zigzags. (blah blah blah) the convergence of boundary lines into a wedge shape remain as in the ending diagonal triangle. However, the subdivisions are different, tracing out a 5-3-5-3-5 pattern.  The structure of this formation fits the spirit of the Wave Principle in  that the five wave subdivisions of the actionary waves communicate a "continuation" message as opposed to the "termination" implication of the three-wave subdivsions in the actionary waves of the ending diagonal."

    Wonder why mine's so different?  They're pretty clear on the 5-3-5-3-5.

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  51. Pretty much no more or less than it did last night.  :)

    Might be just about it for the rally.  Hang on, I'll do a quick chart of something.

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  52. Thank you for the information.  The book that I referred to is 10th edition, 2005. 

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  53. Amazing how much one bar can change the look of a structure.  This is one possible termination for the rally, unless it's just gonna run forever.  ;)

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  54. Shorted some es at 1262.25.  What's the KO level where the red line is drawn on the second chart?

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  55. 1277.56 would be the KO.

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  56. Hmm.  Didn't realize they changed 'em.  Mine is from '98. 

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  57. Just joined you at 1263.

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  58. Ah, more selling to hopefuls and suckers above 1,260.  

    Why do I get the feeling that Street pros aren't terribly comfortable with taking things much past 1,265?  It's hard to imagine them having a lot of confidence that things can be held up here for long.

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  59. I hope this beautiful rising ending diagonal chart is correct, then SPX will have sharp decline after.

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  60. Did you see the chart I posted a couple posts down?  Sure look like distribution.

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  61. I have open order to sell double my existing position at 1266.  But I'll have tight stop above that to cover at...

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  62. One would think this area we're in now up through 1268, then 1277, should be pretty good resistance.

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  63. rising wedge in 1min ES

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  64. ok, im short for a 1/3 total position at 1266ish, in case euro news comes in and every parties like its 2009

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  65. LOL, just got some junk mail horoscope reading.  I'm a Gemini and here's the first sentence:

    "You may be taking some unexpected trips that were not planned, but it will clear your mind and make your life easier in the long run when you get back."

    Does a trip up to 1266 count as unexpected and unplanned?  Granted I only gave back a handful of points on this "unplanned trip," but still - lmao.  I'm encouraged by the making life easier "when you get back" part.  :D

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  66. Noticed that, was wondering if it's another ending diagonal within the ending diagonal.  You see that with some frequency.

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  67. Shorting here for a move down to 1240 es.

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  68. They may be trying to move the goalpost a bit on the diagonal/wedge.  Might make a last run at 1268 to finish it.

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  69. ISM Services figure below forecasts

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  70. is it possible this market will never see a down day again?  feels like it...

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  71. IMO, if eur doesn't hold 1.3465 here, we go lower.

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  72. I think the big 'test' of the morning session is coming up here at 1,265.  5 and 15 minute Stochastics and RSI finally rolling over. 

    This would be the first time today that they're coming down from the top of their upper ranges.

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  73. I'll listen and learn.

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  74. Hey, ever-tentative, minutea-goggling, pseudo-bear kiddies.  I just added my last penny, into even more puts---got so many Dec. puts, either I make a huge KILLING over the next 9 days, or I, ANON20,THE MASTER OF DISASTER, will be nearly typhooned out of THE GSC big-game.   Only got miserable 5% in January puts, and 95% in Dec. puts.   Tictictic.   I am used to it.  

    I figure, with what I see, indubitably acomin' reeel soon, cain't be stopped, even my miserable Jan. 5%, will keep me in THE GSC game, even if I am wrong, over next 2-week term.  

    Therefore, my little ever-scared cubbybear children, I am WHOLE HOG, in expecting a CRATER  C-R-A-S-H, within next 9 days.   Tictictic.   I am used to this, cub kiddies.   

    So tighten your wannabe-bear panties, the GSC whallop is nigh, nervous nellies.  We shall see what we shall see.  Shorting position of a lifetime, IMO.  Shame I got no more to bet on it.  The central-banker suckers are piling in, so let them buy buy buy... wonder how many will jump off a building, a bone meat fun splat, before 2012 hits.

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  75. LOL Anon20.  When you think about the actual noise - its been all negative - Merkel says no ECB bond buying - we'll dig out of this by raising taxes !!! Nice.  Factory orders slowed, US service sector slowed.  China is showing early recession signs as is Germany.  Running out of bullish(shit) notions.  I guess the Beard can save the day as we glide into a global recession.  It is what it is

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  76. ANON20 I am sure even if you get typhooned out of the GSC game for the time being you will find capital shortly to come back in to make a killing :-)  You have the spirit of a warrior

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  77. ANON20, I like your style, what are your strikes if you don't mind me asking?

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  78. The only thing out there that can slaughter all of the bears, IMO, is Ben working out a way to buy PIIGS debt via the IMF without requiring Congressional approval.  If that happens you get dollar crash, equity and commodity spike and the EU will be saved without much out of pocket.  Everyone wins except future generations of Americans.

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  79. The sad thing is... that's a realistic possibility... slim, but possible.  Ben would have to move to a compound in France with all the other Fed Govenors, but would certainly be treated like royalty while there!

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  80. If that happens, the administration'll have a full-blown revolution on their hands.  People will be dressing up like tea and throwing Indians into the harbor fer real. 

    Or dressing up like a harbor and throwing tea at Indians.  SOMEthing.

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  81. Agreed.  Though I don't think that Ben can do that (just yet).  What scares me most of all about Ben is the upcoming Presidential election.  He knows he's gone if Bam Bam doesn't win.  No GOP President could surive the wrath of his base if he reappointed Bernanke. 

    So Ben's going do what he can to engineer seeming prosperity between now and Election Day.

    Newt now being the likely GOP nominee has said explicitly on numerous occasions that he'd fire Bernanke 'as soon as possible'.  And Romney wouldn't reappoint him either.

    You know that Obama administration would love nothing more than to buy every PIIG debt bond out there, tie our fortunes to Europe, and flush the purchasing power of the US Dollar down the toilet with it.  However, this would also probably be a losing election strategy, which would be the main thing that would keep it from happening.

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  82. That almost makes me wish for a rally so that you don't have money to pay your internet bills, and then we don't need to listen to the ramblings of such a loser any longer.  In fact it does.  Go rally!

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  83. Lugnut;
    We can't ignore the Bernak scenario you brought up...Eurpean yields have come down big time, who is buying?

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  84. Well, I just put a few billion into Italy.  Also got a real good deal on some Greek debt -- bought it from some bankers for like 80 cents on the dollar!  Feelin' pretty good about that purchase.  20% discount?  Sweet.  What could go wrong?

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  85. Local banks are buying at gun point. The central bank mafia is making an offer they can't refuse. 

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  86. Some of us spent weeks building our short positions when the "short fairy" aka Ben Bernanke made off with our money last week.  There! Don't you feel better now, PL?  :)

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  87. Put in a 1/4 position in shorts. Hope it goes well.

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  88. PL, I have a 'big picture' question concerning [your] wave analysis.  I fully appreciate that this is a tool to "increase our probability" of being on the right side of the market.  But how do you handle events like those after Thanksgiving where (deliberate?) rumors and central bank interventions artificially ALTER the market, induce short squeezes and force people to cover short positions with huge losses through these external distortions?  It's interesting that you simply declare a "poorly formed bottom" and simply carry on with numbering the new wavelets.  Do these "fake" waves have different "weights" or "meanings" or does Elliott Wave ignore their origins?  I want to be smart but have lost money so I feel dumb.  Thanks, Jason!

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  89. Quick update on this potential pattern:

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  90. LOL, keep your sense of humor!

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  91. I trade futures and use stops.

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  92. Nothing could go wrong of course. Why VIX did a minimum at 25,29 on Friday and today minimum is  26 this is indicationg that something could could go wrong

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  93. Pretzel: did you notice just how incredibly close we came today to your original KO numbers for the older bearish count!

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  94. I'd like a freaking pattern that goes down to make up for the ass-kick I took last week !  This needs to reverse now and undercut Friday

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  95. Pretzel - Amazing how that RSI divergence trend keeps chugging along.

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  96. The "fake" waves as you call them are just as valid and become part of the pattern.  It's a dynamic environment, so there's no "right" answer, ever, with *any* type of analysis -- so you have to be fast on your feet.  Market analysis is always a series of probabilities, never guarantees -- you have to weigh it as such and be prepared for things to change at the drop of a hat.

    The problem you are addressing comes down to proper trade management.  It doesn't matter what type of analysis you use, if you can't manage your trades, you are eventually doomed to go bust -- because *everything* will be wrong eventually.  If you're not managing your trades, then all it takes is one wrong time.  Make sense?

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  97. It's like the Little RSI Divergence That Could.  "I think I can, I think I can..."

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  98. That ED is a nice bit of clarity, finally.

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  99. Jesse Livermore: ”Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting.” 

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  100. I'm not so sure we had a "fake" wave.

    The wave down always had a wedge shape, which virtually assured a sharp rally to the top of the wedge, no matter what form of TA you use.

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  101. Thanks for this Pretz.  I know you say 'news is noise', but my principal concern (for THIS week only) is the Euro summit.  We generally don't have falling indexes when the dignitaries and heads of state getting together. 

    And today's rise is DEFINITELY news related.  We'd be falling right now if it wasn't for the Italian headline that was accompanied by falling yields, which I am sure will be temporary.  Does ANYONE really believe they aren't going to spike again and very soon?

    The news cycle tends to turn all rosy with stories about 'final solutions' and hand holding and everyone in happy agreement during European summit time though.   And so the indexes hold their ground or run a bit higher.

    Not necessarily saying that I expect 1,265+ to be held all week.  Just thinking out loud here.

    And then when it's all over, we find out that it's just more posturing and shaking hands . . . and then the indexes tumble again. 

    This *feels* just as fake and illusory as all the other times.  Even more so. 

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  102. Good eye PL. LD and ED's are so hard to label for me. 

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  103. That may be the case here.  My least favorite place is between the 50 dma and the 200 dma

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  104. And then there's this, in the NDX (let's see if the chart come up):

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  105. Yay, chart worked.  IE doesn't like me to post charts, it says, "Just a moment" indefinitely.  So I have to refresh the page and post on faith that the chart will be there.  :D

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  106. Take a look at this chart of the effect of the presidential election cycle on the dollar: http://www.seasonalcharts.com/zyklen_wahl_usdx4j.html

    The dollar will be going up and oil will be going down through autumn of 2012. Usually the move waits until January of the election year to really get going.

    TPTB are pushing Gingrich because they know he can't win and they want their lap dog reelected. (Check out Nate Silver's math on this at the New York Times.)

    The fundamentals are also good for an oil dip. Libya will have 800,000 barrels per day back on the market by the end of December, and 150,000 bpd will rejoin the world market from Cushing once the Seaway pipeline is reversed. Oil is priced at the margin. The end of the China property bubble, a fading Europe, and almost a million bpd added to the market means a dip to roughly $85 in Brent (which is what matters.) If Libya really gets cranking, the dip could go farther, but speculators will likely be loading it on to tankers again at that price. Watch for a big contango to set up in Brent prices and you'll know the oil dip is over.

    I don't know how the stock market reacts to a rising dollar (bad for the market) with falling oil prices (good for the market). 

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  107. One honest person.  Kid, you know how many pathetic losers like you, I have kicked in the face, bashing it in.   Had to change my nazi storm-trooper steel-toes boots often, from kicking in the face of born whiner beatch smartaleck losers like you. 

     But hey, at least you are honest.  For I bet there are many others here, just like you, that detest MY GUTS, but don't have the balls to say so.  And I prefer straight-in-the-face honesty.  I live for enemies like you, pussee boy---the more and meaner, the better.  Because the more I have, the more CERTAIN I AM, that I am 100% percent CORRECT, in whatever I state. So come on, pretzel kissazz turkeys, you all turn into bulls right now, you hear, you PSEUDO-BEAR PANSY-AZZES.

    THIS is the shorting opportunity of the century, whimpoids, I will leave you all behind in the dust.  ANON20

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  108. Too many puts, too many strikes prices, but I seldom buy in the money.

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  109. Here is a confirming assessment of what is likely ahead ,by Graham Summers.
    https://mail.google.com/mail/?tab=mm#inbox/1340f56ca68de8b1

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  110. The last time ES 4H RSI was this overbought for such an extended period of time was in early July - which according to this post PL is exactly where we are right now. Keep up the good work!

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  111. Added ES shorts at 1266.

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  112. theyre walking it up, point by point... excruciating!!!

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  113. And there's the chart again.  It just does that.  I'm not showing the NDX chart intentionally.  I guess it would make sense if I was talking about NQ, BUT I'M NOT, DISQUS, I'M NOT. 

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  114. "Most people who speculate hound the brokerage offices... the ticker is always on their minds. They are SO ENGROSSED with the MINOR ups and downs, they MISS the BIG movements."  
    Jesse Livermore.  (CAPS mine).

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  115. The rest:
    3)   Accounts for 21% of US exports
    4)   Accounts for $121 billion worth of exports for South America
    So if the EU banking system/ economy collapses, the global economy could enter a recession just based on that one issue alone (ignoring the other issues in China, Japan, and the US).
    This is the reality of the financial system, no matter what the talking heads say. The IMF, Bank of England, and others have warned of a systemic collapse... do you think they're doing this for fun?
    Many investors will have their portfolios wiped out in the coming carnage. It could be next week, or it could take place next year... but we ARE heading into a Crisis that will be worse than 2008.

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  116. At this point you can count on any big move being after hours.  Not looking as though SPX will even finish todays session below 1260

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  117. Yep, he and I are in agreement on the majority of issues.  Is this newsletter free?  If it's not, I'll have to request that you remove most of it.  Otherwise, "it just ain't right," if you know what I mean.  :)

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  118. The Euro will not collapse, but there will be a restructuring and some countries will get out of Euro

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  119. Disregard EVERYthing in the daily news.  Today's headlines, if repeated EXACTLY the same tomorrow, mayhave a WHOLLY different interpretation, and market reaction. 

    Sarnozky and Pukerel say this or that, who cares?   They could be Abbotta and Costellzy, for all I care.



    All I know is that I studied this uber-leveraged debt-monster, for thousands of hours, years ago, and I am DEAD CERTAIN, there is ZERO escape whatsoever, from the mountain of decades-long, socialistically-induced, fiat DEBT---but, a debt that dwarfs (by a ratio of between 2o0-1 and 300-1), the ACTUAL physical fiats that exist. 

    ALL YOU NEED IS ONE JUICY WORLD BANKRUN, AND IT'S ALL OVER, you tentative cubbie folks. 

    And now that I think about it, you all should be Chicago Cubs fans, I bet you all WIN BIG, as often as they do.

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  120. I believe that the Euro in its present form will not survive the unfolding crisis.  Blood is thicker than water, as the saying goes -- and the EU treaty is nothing but water.  When the feces hit the fan, countries will look out for their own best interests and the whole thing will fall apart.

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  121. Finally got in short with a 50% position at 1,266. When buyers were turned back after briefly catching 1,267 just a few minutes ago, I decided there's really not much sincere interest in taking things much past 1,265. 

    My reasoning is that the pros know that the 'news' today doesn't really solve anything and the surge today was simple opportunism by buyers to sell off more overpriced stocks to those who'll buy them.

    Just as a few weeks ago, when we were hovering at 1,265 for a few sessions:  this does not feel serious. 

    Also: sellers have done a good job of at least holding the line below 1,270.  That's all they really need to do today.  Their time to take down from here will be here soon enough.

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  122. Alright, on that note, I'm going to get some rest.  Maybe the market will do something interesting after I head off.  Feel free to talk amongst yerselves.  :)

    bbl

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  123. A question for you minutea 'geniuses' herein.

    If th news coming out of Hanselzky And Gremertel today, is so great, why is the german dax today up only .4%, while the stupidmoney usa santa 5thwavers, are up a whopping 1.6% ?   You think the germans are bigger suckers than amerikans?   please.   no one is a bigger sucker, in the entire world, than the typical santa-believing, shht-eating grin, middle-class amerikan.

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  124. lmao, it's STILL ATTACHING THAT CHART.  I feel like The NDX Wedge Spammer. 

    "Yes, it is a lovely day... but have you seen the wedge in the NDX?"

    "I'm sorry to hear about your dog dying... let me tell you a little bit about the NDX to take your mind off things."

    "NDX?  Funny you should mention that, I just happen to have a chart RIGHT HERE!"

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  125. Finally, you are feces talking, boy.  I wholly concur with your analysis above;  even more so---blood will run, within 2-3 years, between European nations.  And the 'Euro Currency'?  But a forgotten bitter memory, and so will the entire concept, of 'European Unity.' At least the British had the sense to keep their own historical currency.  ALL other will revert back to theirs, but, obviously, they'll pay a price for having left it.

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  126. Ah, and here comes the seller pushback.  Right on time. Apparently they know this isn't serious either.  And now that the morning's buyers are cleared out, there's only one place to go . . . ;)

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  127. John Hussman, President of Hussman Funds, is among the few peole in the bulshit world of fiancial analysts/reporting  who stands out as knowledgeable, informitive, and intellectually honest. He has a weekly(Mondays) report that I rarely miss. Here is the link to today's report.

    http://hussmanfunds.com/wmc/wmc111205.htm

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  128. Europe back to feudalism :-)

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  129. S&P credit watch warning t
    http://tinyurl.com/cf2ngrh

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  130. Opinions, tody the Euro is a commercial money and the bet now is to change it. There are chances that this will happen. Please rember that after Lheman crash a lot of people though than the American banking system would have crased. Citi was saved in december 2008 and the market make a minimum on March 2009. Opinions 

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  131. Fred: agree - been reading Hussman every week for years. Along with Jeremy Grantham, one of the voices of reason.

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  132. if this crash doesnt happen you definitely have a future in comedy!

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  133. PL, I think you pressed something other than CTR-ALT-DEL when you decided to leave...lol...you posted and DOWN the market went...:)

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  134. The sharp drop a few minutes ago was due to rating agencies putting a few European countries on watch list for degrading...

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  135. Congratulations PL you went short the right moment, different opinions do not impact Technical Analysys

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  136. WOW, again -and this time really hard- access above DMA 200 denied. That was a very clear signal!!!

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  137. top A (5) of PL's bullish count is now clearly in (short the mofo guys, short it hard). 1200 here we come!

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  138. A nice trend in motion: every retracement on the 1 min ES chart has been sold.

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  139. To save Greece in march 2010 was a mistake made by Trichet to help German banks and from then the situation has deteriorated. Now Greece and some other coutries will leave the Euro and the rest will make a common economical policy. In the meantime S&P500 will go to 1015 and myself and my customers  will buy also BMW, IBM Caterpiller Saipem which is in CITI list of 2012 and so on

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  140. I think you should talk more about the bullish alternate count. I understand that you're very much bearish over the short, medium, and long term, but it's hard to ignore the fact that your bullish alternate scenario has been hitting your targets like clockwork. 

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  141. Once again Pretzel is like a top dog hedge fund manager.. as soon as he sells short at 1266 down the market goes :-)

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  142. Narfu187; I agree. Some other forecasters/charters like PL  have 12/12 as the next low (~1200), just as PL has on his bullish chart. And then after that a move back up to above 1300. Minor 2, would then be in. But, it all depends on how around 12/12 plays out. It would kinda make sense, since that's right after the EU summit ends, so the world has of course been saved from peril (disaster has only been delayed IMHO), and we rally right to heaven (hell in fact), then reality sets in, China comes around and kaboom, crash we go. That's at least one scenaria, but kinda so far ahead in the future that it's pure speculation. Let's focus on today and the week to come. I think it's clear that the top is in at that 1200 area in the next few days is the level to look out for. After that, who knows. Right now the bearish are in the drives seat! Vroom-vroom!!!

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  143. Hmm, Crude turned south on the day.

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  144. covered!  no way am  holding overnight, the closes lately have been a free for all so- back in tomorrow.

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  145. all 17 euro-nations on negative downgrade  watch

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  146. Closing my short position out here at sellers bounce off of 1,251.  Not going to hold this overnight.  And I'm happy with what I've gotten out of today's move down.

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  147. That's too bad Brian.  Euro markets haven't had a chance to respond to the S & P stuff and I think we may gap down tomorrow

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  148. I don't worry about missing out on overnight moves.  I've been burned too many times the other way and it's not worth the stress.  Every time I hold overnight, I end up looking at the futures every five minutes. 

    My perspective is there is always plenty of movement within the session to make money. 

    I do have a modest position in Jan SPY puts that I bought recently that aren't trading positions and are more of an IT hold.  Those will benefit from any gap down.  I bought at the 120 strike.  And am considering adding more at the 180 strike.

    By way of reference: The Jan SPY 120's were trading between $5.75 and $6.25 five just five days ago. They are at $1.72 right now.

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  149. 9 minutes, grow some BALLS, SUCKERS.  BIG MOVE WILL HAPPEN OVERNIGHT, leaving all fahgy wimps behind.

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  150. I know! I had to grab those this morning just based on the huge discount. But I went in for the Feb 120 puts to afford me some peace of mind.

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  151. Are you referring to me specifically, Anon22.  Sorry to disappoint, but I'm quite heterosexual, you know. 

    And as it turns out, I added back 30% of the position I took this afternoon on the close and bounce back up past 1,255, which I believe to be a total fakeout move at the end.  I figure my worst case scenario is that a major gap up wipes out todays' gains.  I can live with that.

    Vulture, you are partly to thank for my decisision to get back in. I had not considered what the European markets will do in the next 24 hours. 

    If there was ever a time for the European 'bond vigilante' crowd to strike HARD and push those yields back up, it's in the wake of the S&P warning.  My calculation is they won't let this opportunity pass them by.  And that the Euro will see a move down as well.

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  152. One other thing I'd add about deciding (this time) to hold a position overnight:  My calcuation is that sellers KNOW that they MUST seize the opportunity for tomorrow's session.

    Today was just about holding off the upside, namely rejecting the 200 dma.  And probably waiting for the European market and currency slide to make tomorrow easy for them once the S&P news came.

    But if they can't capitalize on the S&P warning shot and gift hand-delivered to them, then hell I just might turn bullish for the next couple weeks.   

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  153. brianhut,

    I know you said once before that you are not a fan of futures, but they allow you the opportunity to set smart stops that are active almost 24 hours per day.  The only exposure from that perspective would be positions held over the weekend.

    Just curious.

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  154. 1260 almost to the dot, at the apex, out of time. Gentlemen, this is a defining moment. This is Newton's cradle when the steel ball strikes the line. Sarkozy has said his piece; Merkel hers. From somewhere in Greece, in Italy, ... can you feel the anger and the humiliation? So in this climate, is one to relax and wait for Santa Claus? The Santa rally thesis has two problems: You need a genuine spirit of giving and a greater fool. Time is risk. Everyone knows that. The bull has been lucky, very lucky. Is he going to push his luck to Friday and beyond? This moment is all about confidence, isn't it?

    Today, I added some Citigroup puts to my existing triple-inverse SP.

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  155. Michael,where do you go to learn about futures trading?

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  156. Read a ton of posts from Pretzel right here in his blog.  Also, read as much information on my brokers website as I could find.  There is also some info here at the CME Group website.

    http://www.cmegroup.com/

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  157. Brianhut,keep the insights about the market coming,they help a lot.btw,a couple of weeks back you posted that the media was pushing the sell side too hard and that the market  would go to around 1265 iyo.great call.

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  158. ANON20, big old crazy permabear, im with you. Fuck it, all in now again shorted silver and s&p. Gonna stay with it until spx reaches the area 1200-1210. And if not so be it.

    However i have one serious question for you if i may, please answer and also feel free to take your best shot insulting me at the same time.

    Whats your time horizon and how will you react if the market dont act according to your plan with a major crash within 9 days?
    1) If the market within a few days reaches 1300 spx, will you just sit tight with your puts hoping for the crash?
    2) if the market reaches 1200-1210 on the 12/12 (which according to ctp is the cycle top before the c wave up which may correspond with PLs ST bullish alternative count) and seems to go up again, will you sell your puts and hope to get in higher?
    3) the metal you love, silver? Are you of the opinion that it will basically become worthless within (I guess) nine days, or do you agree with the more common idea it will maybe reach 25-26 and then follow gold up to new hights?
    Actually i think i could summon the questions to "happy now? Gonna crack open a couple of beers, go fishing for a week and be back in time for when the crash has occured?".

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  159. betoq,

    I did say that the media was pushing the sell side too hard and that it made me extremely nervous about holding overnight short positions when we were down below 1,270.

    But I didn't actually predict a run back up to 1,265.  What I said was that the news environment reminded me of the virtual reverse of when we were at 1,265 (in the second week of November).   I thought then that the indexes were being held up there for distribution and to promote bullish sentiment. 

    The news storylines were WAY too bullish at the time to be believed.  And we crashed hard soon enough from there.

    My essential and nutshell thesis on when the news is screaming to do something (whether buy or sell) is that the market will deliver the result JUST LONG ENOUGH TO MAKE YOU BELIEVE IT AND PULL YOU IN.  Which is about a day or two. 

    And then it'll screw you.  Big time.

    For where price is going to end up, I don't actually have the tools to know other than to look at resistance, support, trading ranges, etc.  Which is more than enough to make profitable trades.

    Someone with Pretz's skills really brings the tools to the table for where price will end up though. 

    Though with the chronic government intervention, I don't think ANYONE could forecast the market with much precision.  Which isn't a shortcoming on Pretz's part.  No count can overcome Fed money giveaways and printing. 

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  160. I don't have a problem with futures trading at all. The broker that I use requires that I log into an entirely separate trading platform though. 

    And I'm so used to how the platform I use is arranged and set up that I don't feel too much desire to switch to a different one. 

    I use two monitors and keep around five charts open at all times with multiple indicators running on each.  It took me a little while to get this one 'dialed in' and so that I'd know exactly where to look to find up the second information, which for how I often trade is REALLY important. 

    Eventually I'll switch to a different platform that has forex, futures and the equity markets, but I'd need to get familiarized with it first.  Especially for real time day trading.

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  161. HT, I didn't even look at those.  I'll check them out later tonight. 

    Will be curious to see what the premium over the Januarys is like.

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  162. I stand corrected. Agree about PL's great skills

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  163. PL, for what it is worth: please find attached an edit I made to the SPX bullish alternative chart you presented today (Ok, posted yesterday). I noticed extreme similarities between this (bull) run and that off the Oct 4 low. 

    I've drawn vertical lines, based on "key point", e.g. MACD crossovers, highs and lows. I numbered each line 1-8 the Oct bull run, and the corresponding vertical lines for this current bull run 1a-8a. I don't have the 60min data for today, but as you can see on today's chart; 6a, 7a, and 8a all happened today (which took 2 days in the previous bull run). Now maybe, this is pure EWT and all is easy to explain, but IF past performance is indicative of future gains (or losses...lol), then it appears as if we've got higher highs coming. What strikes me is that the first 9-10 trading days off the Oct 4 low are now compressed into 6. Is that in line with the EWT? If this trend is to be continued, and more rapidly, then we should see the high off the Oct' run (labeled W in your chart)  in ~12 days from the beginning (6/9 * 18 trading days = 12 trading days) of the current run. This would bring us exactly to Dec 12-13; the days after the EU summit... 

    Given that MACD, SSTO, RSI, CCI all follow the same pattern now as back then, I found this comparison between now and then even more intriguing, and thought I'd share it with you, because maybe you have some use of it and/or can explain my observations. Either way, we all know what happened after the Oct' 27 high... Considering the bearish divergence between the Oct' 4 low and the Nov '28 low I'd expect the next low will be lower.

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  164. Those intraday charts are looking pretty good right now. 

    The SPX ending diagonal tracked a couple points shy of perfect, and the NDX broke down and backtested the wedge.

    Tonight/tomorrow should be a good day fer bears.

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  165. And, there's the NDX chart!  Still attaching itself to everything I post, like some kind of internet herpes. 

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  166. Been short since last time we were at SPX 1260.... short small caps and 2x short euro etf. Haven't tried to trade shorts given conviction to downside. Seems to me that we will go back and test 1215 (the other battleground beside of course the 1260 battleground). The level which will cause the most confusion would be to slightly pierce through the 1215 area, causing most to question whether it is a B wave and a bounce C coming or is it wave 3? Timing seems to suggest this will occur this week given that the bozos in Europe will be on stage. Also believe that maximum success for Euro bozos actually comes from crisis levels - will France and Italy really sign their soul to Germany if there bonds are trading at 3 and 7%? Pretzel - congrats on traffic -- last time I looked the views were 100k less -- that was about a week or so ago. People must be seeking the truth.

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  167. Good eye, Arnie. :)

    This exact thought actually occured to me as I was trying to fall asleep earlier.  There are some subtle differences between the two -- though I haven't really studied the chart with the thought in mind.

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  168. That's what make the projections work, Frank.  They're not actually "projections," per se.  I just decide ahead of time at what level I'm going to reverse the market, make a couple of phone calls, and poof!   :D 

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  169. Thanks PL! Maybe give it some more thoughts?! I don't see the subtle difference, nor their significance on trying to predict the current bull run, but I'd be very interested to know 'em for sure. If the market is to continue as I suggested, then we'd have a new deep low just before year's end...

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  170. Paolo, one huge difference between the US in 2008 and the EU now is the sovereign nation factor.  The US was able to respond to its problems much differently, because it *is* one nation.  Europe does not have that same strength. 

    The American people as a whole could barely swallow the bailouts of *our own* institutions -- they certainly wouldn't have tolerated the overt bailouts of other nations.  Therein lies the problem for the Euro, and it's only a matter of time, IMO.

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  171. PL, What really bothers me is the repetition of patterns from the March 09 lows.  Summer of '10 I brought this up on another board.  Prechters's group was calling for wave 3 down, and I pointed out the similarity to the previous year's pattern - an ABC down and the C ends up a quick five count and off to the races and new highs. Have you considered that we had our ABC and this is 1 of 5 up to new highs for the year?

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  172. ty potus.  :)

    I'm expecting we'll get a decent bounce no matter which count is playing out, so I'm going to look to close shorts near the next target (which is TBD) and either go short again from higher levels or wait in cash until the count can be clarified.

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  173. I have a real strong susppicion we're going to gap down tomorrow, as Vulture said too.

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  174. OMG stop w/ the NDX chart already!  I'm going to restart my browser.

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  175. PL, 

    The SPX ending diagonal was a good call, congratulation.

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  176. I don't follow Prechter.  Prechter has been calling for the big crash forever... since the 90's, or 80's maybe. 

    FWIW, my LT count does not agree w/ Prechter's.  Also, I'm not Prechter.  ;)

    But yes, I've considered it.  A big difference between now and 2010 is we've had a true 5-wave move down this year.  In 2010, the Elliotticians who were calling for the crash really had to do so while ignoring the charts to a degree.  That's the difference I see between the patterns, and it's a huge distinction. 

    The other difference is one I can't quantify:  it's in my gut.  I didn't buy into the crash scenario in 2010.  This decline "feels" right -- and I usually have a pretty good nose for this stuff.

    But, the other potential can't be *completely* ruled out, and I'm watching it carefully.

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  177. ty, Ray!  And ty for "updating" my old edition of the EWP.  :)

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  178. PL, Thanks for comment.  Nope, you're not Prechter, TS (Thank Something_), Prechter's group comments are like trying to drive forward down the road while only looking in the rearview mirror.  :)

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  179. its like a bad case of herpes!

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  180. I'm so sick of these gaps...I get a strong feeling that if we break the 200dma to the upside it will be overnight and we'll open above 1300, giving no chance to get out. I've got to start trading ES....gaps are killing me.

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  181. what were you trying to show here?... besides the fact that NDX is awesome... better than 6 min abz...we get it

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  182. LOL just gonna show this NDX chart with every post I make from now on.  Yay... NDX! 

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  183. I get it.  It's part of who you are now... like a cyber tattoo

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  184. LMAO!!!  Stupid NDX chart.

    I think I need to call an exorcist.

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  185. omg, I can't stop laughing about that NDX chart!  I'm going to need to reboot my whole system apparently.

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  186. this is getting funny!

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  187. That's funny PL, I was just reading Tom DeMark's latest forecast.  He's been fairly accurate this year in cycle turning point forecasts.  He had a major low on the week of Thanksgiving and has a target of a S&P top at 1330 on 12/21 followed by a sharp decline.

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  188. dystopiansolutionsDecember 5, 2011 at 4:49 PM

    lol. blackjak, I was just reading the DeMark comments as well.  It looks like 12/21 should be an interesting day.

    http://www.bloomberg.com/news/2011-12-05/demark-s-p-500-at-1-330-by-christmas.html

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  189. Any chance someone cast post that NDX chart again? Having double finding it...

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  190. lol

    I've got yer NDX chart right here...

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  191. lmao.  wtf. 

    I'm like a chart magnet. 

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  192. I am, incidentally, DESPERATELY trying to troubleshoot this stupid Disqus program now. 

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  193. PL is the SPX chart/count here the original bearissh count? 

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  194. Does this chart dangle only occur with initial posts? Good that you can laugh when things do not work properly and there is no obvious reason.  I just throw a hammer at it.

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