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Thursday, December 22, 2011

SPX and VIX Update: Indications this Rally Won't Last

This market is a mixed bag of messy charts right now.  But many of the indicators I'm looking at are now suggesting the market is within 2% of a top -- potentially an extremely major top. 

From an Elliott Wave perspective, it remains difficult to nail this count down, largely because the October rally leaves itself open to a lot of interpretation, as does the December decline.  I first suggested that October 27 was a major top back on October 28, and so far, that's been a winning stance for almost two months.  The lingering doubts of alternate counts have never resolved, however, and here we sit in short term limbo. 

Let's see what we can find to help resolve that.

We're going to look at a couple indicators before we get to the counts.  The first one I'd like to share is the Volatility Index (VIX) to VXV ratio.  VXV is the three-month implied volatility index and tends to be more stable than VIX.  Comparing the two can yield insights... however it's worth mentioning that the VXV has only existed since November of 2007, and thus allows limited back-testing.  The chart below is self-explanatory and shows the S&P 500 (SPX) in the top panel, the VIX:VXV in the middle, and the VIX in the bottom.  There's a red dashed horizontal signal line toward the bottom of the VIX:VXV panel.


This chart suggests the SPX may be approaching a top, and strongly suggests the VIX is approaching a bottom.

The next chart is a very simple chart of the SPX and Nasdaq 100 (NDX).  Yesterday, the NDX was down more than 1%, while the SPX closed in the positive.  This is a pretty rare occurrence, and since 2008 has only happened one other time... at the end of September 2011.  Prior to 2008, one has to go all the way back to 2004 to find another example.  The chart shows what happened most recently.

The three times this happened in 2008, it was early on in the bear market; two of those times led to lower prices almost immediately; one of those times the market hit lower prices about a week later, then rallied for another couple weeks... and then it started crashing.  It would seem this indicator is not only confirmation of lower prices soon, but almost a confirmation of the bear market itself.


The last chart is the preferred count, which suggests a major top is coming quite soon.  The perfect world target is 1254.50, but it's not a requirement that the market hit that level and reverse.  Anywhere between here and 1267.06 would do.  Also note that the count has already hit its blue target box. 

Above 1267.06, and the alternate count is playing out.  There's no solid evidence of the alternate count yet -- currently it can neither be confirmed nor denied, much like an Elvis sighting.  I'm favoring the preferred count over the alternate by a margin of 65%.

[Editorial note: yesterday, there was a clerical error in this chart's labeling.  It's been corrected.]


In conclusion, I remain long-term bearish.  The short term is a mixed bag -- but due to the preponderance of evidence, I favor a bearish resolution.  Trade safe.

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

177 comments:

  1. For some inexplicable reason, I've really been wanting to say "y'all" in the morning greeting.  Or the plural of "y'all" -- which is "all y'all."

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  2. morning pretz,

    how was life outside the blog yesterday?  get some shopping done? 

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  3. We've kissed the 200dma 5x already - maybe the 6th is the final charm?? 1259.59 pucker up

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  4. Got to eat a nice dinner at a restaurant.  Restaurants are outside of my house, and away from my computer!

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  5. Howdy. 

    Family comes first.  Enjoy the rewards of your work.

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  6. Been a while since I thought of this, but it seems fitting ...
    Hoowdy!
    http://www.youtube.com/watch?v=zjX1LpSow_g

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  7. I'm short NQ from 2249.  Screw ES, NDX has been outperforming for shorts.

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  8. Whoops, that was a typo.  2242 -- fixed.

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  9. y'all from the south, buba?

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  10. In the best tradition of Big Bang:

    Leonard: All right, well, let me see if I can explain your situation using
    physics. What would you be if you were attached to another object by an
    inclined plane wrapped helically around an axis?

    Sheldon: Screwed!

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  11. Was considering shorting ES, but went and got some coffee not thinking about what time it was, and the economic data came out.  We spiked up initally when the jobless claims came out (down 4k to 360k), then starting seling off when the Q3 GDP was revised down AGAIN, from 2.0% to 1.8% (after the prior revision from 2.5%).  Felt like I missed the opportunity, but now there's indecision and we're coming back up a little bit.  Might wait for your target, which would be about 1247 ES, with a few point stop.

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  12. I don't know what the hell's wrong with me this morning, other than sheer exhaustion.  2249 wasn't a typo.  Friggin eyes are blurring when I look at my screen right now, and I'm trying to do too many things at once.  Might not last too long into this session... lol.  That'll give Anon20 a chance to lurk until I go to bed, then pop in and attack me when I'm not here to reply.

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  13. morning PL. Classic analysis as usual!! I agree that a top is hear soon; either today or tomorrow. Anyway, going back to your put/call ratio analysis from yesterday, where you showed failed and correct targets, what stuck me (now) is that the last two days look like this year's july 19, 20, 21 days... july 19 was monday, 20th yesterday, 21st today... ??? Same set-up etc. july 20th (=yday) almost kinda same candlestick. Now futures are up; so another solid green day??? and then... we all know what transpired a few days later... 

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  14. ps: I think 1255 is all she'll write since that's a major resistance trend line hit and what's more it  goes perfectly with the/your 0.618 retracement @ 1254.5 !!

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  15. Pretzel,

    If I lived in Maui, I would be counting the real waves, not the EW fakes. :)

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  16. Yeah, definitely some nice confluences in that 1254-1259 zone.

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  17. Nope, the Northeast, actually, lol.  Born and raised in Pennsylvania... but I did live in New Mexico for quite a time, so that's Southwest.

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  18. Yeah, I spend a lot of time outdoors... unfortunately these days, that's mainly in my backyard while on my laptop. 

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  19. 1,255 is my 'expectation' as well. 

    Unless sellers really show up this morning (and I think they know to save their bullets for later this week or next), I'll be trading this one mostly long today.

    With another 'good' jobs report (yeah right, that's a funny one) though and the Street going to milk this one for all it's worth, meaning selling overpriced stocks to those who'll buy them . . . I would think we get another green candle or two.  All the better to run down from when it's all over.

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  20. if that breaks, which is kinda your 1267 level, all hell is loose...lol

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  21. Will also be curious to see if yesterday's trend channel from the LOD holds. 

    If so, then hitting the turns in today's session should be a cakewalk. Though it's seldom that anything is quite THAT easy.

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  22. is this kinda the channel you mean?

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  23. PL:

    Yesterday, all components of SPX (other XLF's) were up, except XLK (tech).

    People are running for the safety of the likes of utilities, health care, consumer staples, energy, .... etc.
     Don't you think that the  rally may continue till tomorrow (last trading day before X'mas)? And the bull may want to push SPY to its 200 DMA?

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  24. It's entirely possible. Did you read the aritcle? ;) Quote:

    The last chart is the preferred count, which suggests a major top is coming quite soon. The perfect world target is 1254.50, but it's not a requirement that the market hit that level and reverse. Anywhere between here and 1267.06 would do. Also note that the count has already hit its blue target box.

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  25. Out of NDX at 1246.  3pts is 3 points right now.

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  26. Not answering for Pretz, but his update didn't rule that out.  Your point about all components being up is well-taken though.  Thank you.  The sectors you mention improving would suggest a more defensive position being taken by the smart money. 

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  27. Well we just broke the upper range of the channel on the open and a break of 1,250 seems an inevitability. 

    Waiting to see if the bots will drag trading back into it, fill the gap, and sellers can make crossing 1,250 at least a little work for da bulls. 

    Hmmm, maybe not.  Hit 1,250 as I'm typing this.

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  28. out! at 1250. 15 point gain. thanks!!! going on vacation tomorrow for a week so now i don't have to check my phone every min.

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  29. As a christmas bonus I'm throwing  in a free sample from my exhorbitantly priced market forecasting site.

    The chart is simple enough, it's a plot of the 50 & 200 dma.  The un- labled rectangle corresponds with potential near term trading highs.  The first thing to notice is the 200 dma which has acted as the most consistent resistance since the October rally.  I'm of the opinion that the 200 dma will continue to hold off the bulls as it has. 

    The purple line is the faster moving 50 dma.  The SPX is currently closing above the 50 dma as of Tuesday's rally and would continue to rise, barring a reversal. 

    I have bolded some trend lines extending the 50 & 200 dma lines to approximate  what might happen if we were to see trade above the 200 dma, i.e 1290-1300  in the near term. It's not hard to see that trade in that range would signal a Golden Cross in early January - a bull market signal.

    As a result, the implications of the 200 dma resistance and Golden Cross, I don't expect we will see trade in the 1290 range either in December or in January.  One thing I can say with a bit more certainty is that if we get a Golden Cross signal, then we should not look for a quick reveral back to a  bear market.

    Looking back over 10 years, I found that once crossed those dma's don't reverse quickly.  The shortest lived were roughly two months. Of course I don't expect we'll get a bull market signal before this rolls over.

    There you have it folks.  I'll be annoying Pretzel by redirecting all of Pretzel's traffic to my non existent site. ;-)


    Merry Christmas!!!

    And if anyone is offened by Merry Christmas - too bad!   

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  30. thanks PL, you make my trading life much easier! I think ~1250 is all she'll write this morning and y'all enjoy the ride to ~1255 over the next 1-2 days. I am gonna enjoy my days off. 

    Happy holiday's to y'all. 

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  31. I lived in Santa Fe for about a year.  Beautiful area, but not enough ocean and forest for a New England boy.  Where were you in NM?

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  32. Uh, that's one very instructive chart.  Thank you.  A true bull market in this environment seem rather farfetched, but the Golden Cross possibility is not to be summarily dismissed.

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  33. Nice office w a view.

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  34. Happy holidays to you too.  Enjoy your break. 

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  35. Albuquerque.  Not enough ocean for me, either.  Although, it used to be part of the inland sea millions of years ago -- and there were rare days when I swore I could smell saltwater.

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  36. Took a stab at a few shorts at 1251 SPX

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  37. Exactly.  In truth I didn't realize how close to that we actually were, until I cleared up my usual charting and plotted those two.  I'll also add that of those short lived crosses, they happened to be Death Cross/  bull markets.  A short lived Golden Cross would be the first in the 10 years I looked at, and probably very anomalous otherwise.   

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  38. Edit: the short lived were Death Cross bear markets. 

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  39. Just glancing at the 5 min chart I don't see anything to suggest that we won't get one more thrust to higher intra day highs to set up some divergences.  The latest data was better than anticipated too, so I'd guess that would support that notion as well.  May also bring us to PL's fib level.

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  40. You got some balls, Pretz.  I see all the ST chart indicators topped out.  And there *should* be some kind of at least minor reversal for a couple points here.  But I'm not willing to bet on da bulls letting us go lower than 1,249-ish.  And if we do fall to there, I'll probably go long.

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  41. i bought vxx this morning, it finally got to cheap for me not to take a stab...observe as the vix drops to an alltime low in the next 2 days!

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  42. Looking (at least so far) that trading is now bouncing off the TOP of yesterday's upper trendline.  Hmmmm.

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  43. Morning Pretz, glad to hear your night went well bud.

    Waiting to pounce on the 1255 level. i feel like a hunter lol

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  44. As much as I want this market to decline, I have a hard time seeing a third wave down during this season.  Too much holiday cheer around Christmas, and with some positive economic reports for support.  Perhaps the 2 wave extends sideways for a few days?

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  45. Out at 1250.  Could go as low as 1245/6, but I'm too tired to watch.

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  46. PRETZELHEAD WROTE EARLIER TODAY:  "I don't know what the hell's wrong with me this morning, other than sheer exhaustion.  2249 wasn't a typo.  Friggin eyes are blurring when I look at my screen right now, and I'm trying to do too many things at once.  Might not last too long into this session... lol.  That'll give Anon20 a chance to lurk until I go to bed, then pop in and attack me when I'm not here to reply."------------------------------------------------------ 

    ANON20 REPLIES BACK, RIGHT NOW:
    Just took a look right now, at your comments, I see you have brought up your closingprice KO to 1255, to align with mine.  You are getting smarter, following ME.  And I see you have allowed for a spike up to 1267, before an intraday KO.  Smart.  You are MY little follower.
     
    Hey, maui crybaby. I don't consider you important enough, to do what you state above.  HAHA.  you are a child.
    I KNEW that yesterday, you would write a SHIT post, and I didnt even look here, until late in day, and lo and behold, a worse shit post than ever imagined, I even felt sorry for you, crybaby, it was so pathetic, I puked MY liquor.
     
    However, I will say this, maui boy, your post today, was excellent.  First, you have finally killed off all the baby talk, so I am CERTAIN, I am making you tougher.  You now go directly to the point on your blog, and save your baby bullshit for your rotten spoiled offsprings and bossy wifey. 
     
    Second, the esoteric bit, of the 1% downday npx, and an upday at the spx, was FIRST RATE, I would let you work for ME, just from that bit.  EXCELENTE, NIÑITO DE MAUI.  You are starting to make MY cut, maybe I'll allow you beside on a trench, after that one. Great stuff.
     
    Anyway, here I am, punk, 1020am et, tell ME what you got say.
    I still say 1255 spx closing price will hold, I am 100% in already, and here all MY bets, are wellknown.
     
    Now, all I do is wait.  Wait for spx death, and most especially, amerikan homebuilder death.
    But I will add something, though.
    I raise MY 1000dji stake higher---I am looking for a MINIMUM 10% spx fall, in only 1 day.
    And I'll add this, to make it crazier---BEFORE 2011 ends.
    HAHA.  Don't matter to ME, I got options good til end of 1-20, and I will KILL with them.

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  47. Ha, ha.  Feeling about like you right now, Mav.  I may make a few scalp / ST trades long on the way up here. 

    But what I'm REALLY hoping for is the prospect of going short from above 1,260 (if we get there).  Probably starting next week. 

    Shorting gratuitously (SPY Puts at pretty much any reasonable strike) from ANYWHERE above 1,260 has been the single easiest and most profitable IT trade one could made ever since the October 27th high. 

    Have never had to hold that one longer than five or so trading days.  And the profits are pretty huge.

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  48. http://online.wsj.com/mdc/public/page/2_3022-mflppg-moneyflow.html

    SPY second from top of Selling on Strength list again.  SPY generally doesn't show up on this list when the market is bottom.  They tend to show up on it a lot when it's smart money trying to sell to the masses.

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  49. Above 1260 would be a gift. A freaking early christmas present from santa. Salivating at that prospect too brian

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  50. Also 70% of the outflow is in block trades, i.e. big money players.

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  51. Pretzel, Your first chart showing $VIX:$VXV is very interesting. The first hit (red dotted vert. line) *after* a major spike in the ratio is 100% good. Limited back-testing, as you said, but then, the indicator is tuned for this macro environment.

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  52. When's the gold and silver rally starting?

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  53. Just took a quick scalp from 1,248 to 1,250.  Holding 30% of it still to see if we extend from here. 

    Why do I hate going long in this market?  Hmmm, maybe it's knowing in the back of my mind that pretty much every stock sold today is overpriced to begin with.

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  54. I read somewhere that if the market declines 8% it will automatically shut down for the day.  Previously the limit was allegedly 10%. Is that true?

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  55. at this rate, it doesn't even seem like we'll hit 1255 brian.

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  56. Hi, we have still Crude Oil and Copper both positive and this is a sign of bullishness but the VIX now is inverting from the low. We do need to check the VIX trend tomorrow

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  57. 1251 is .786 re-tracement. seems like its where the resistance is right now

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  58. It's like watching paint dry.
    What is the sucker waiting for?

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  59. I have a love/hate relationship with you.  

    You have your Anon20 Tough Love, but you consistently go too far with it.  Certain days, like when you decide to attack my family -- well, that's going too far.  You're walking a thin line with too much name calling and random attacks.  You might consider that people who actually *are* tough don't need to *act* tough, especially on the internet.

    And then other times, generally when you talk about the market, I respect your posts -- and I start liking you again.

    As I said, it's a love/hate relationship. 

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  60. Oh, I'm never attached to any particular level.  We are just about hit the bottom line of yesterday's channel and this looks like a mini-triangle in the meantime.  We're going to see a breakout in one direction or another pretty soon here.

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  61. A quick shout-out to Kane for the donation!  Many thanks, Kane!  :)

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  62. I do not know, but it is a good question.  Google it, nowadays, all world knowledge is there.
    However, in MY experience, if the market is SHUTDOWN for ANY reason, during regular trading hours, it is almost always VERY bad news, for the next day. 
    Shutdowns of any type, almost always INCREASE the panic selling following day.

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  63. i agree with you there. just stating how it seems like right now

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  64. Ok - I admit I have changed my opinion of A2020 posts.  What I had 1st considered to be simply rude, brusque in your face comments, I now find myself oddly looking forward to each next installment.  Channeling the Boris Badenov spirit.  Gotta be that or either an alter ego of PL in some weird sleep deprived state.  Sort of a sordid  S&M thing going on - strange at Xmas time.  I can see him slipping into a coma and engaging in anti-PL comments to exorcise demons from excessive fibonacci consumption.  Whatever, this site is a gas.  Merry Christmas to all!

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  65. Looks like we are about to meet the crucial 'test' of the session so far.  At the top of the triangle and hugging the bottom line of the channel.  Do longs call it good here?  Or do bears capitulate and save firepower for later? 

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  66. I am still seeing bullish divergences on the momentum indicators and am holding on tight to my BAC calls unless proven otherwise. In case PL's bullish count plays out, we would be embarking upon the 3rd wave of C up, which should be the largest price movement for this leg up. Getting caught short on that would hurt, at least in the short term...

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  67. Another good question, so I will answer.  Answer is this:  there might be one, I only allowed for it, back to yesterday, when spx ended in the mid 1230's.  But, since the spx is already so close to MY closing max of approx. 1255, then---there might not be, any further gold and silver rally.

    After all, gold already spiked yesterday into the low $1640's, and got rejected instantly, so it has already fulfilled MY prophesy, of 2 days ago, of it mking a stab into the resistance $1630's, with maximum rejection at the $1665 area.  Silver is even weaker, yet it also stabbed into the $30+ area, as I also predicted, but I expected it to actually penetrate into $31, even if briefly.  But it didnt do it.  Silver price is very weak, IMO, even weaker than spx and gold.

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  68. This has the look of a small fourth wave consolidation, so odds seem to favor at least a marginally higher resolution.  There's a way to count the whole thing as a complete wave up, which would rule out a higher resolution, but it would have a blow-off fifth wave which was stronger than the third wave -- and that's unusual.

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  69. Buddy, the VIX can easily hang around its long term avg of about 20 for Months. And the NDX story ystdy was all about ORCL and related software stx. Focus on your Alt work...SP will top 1300 before any meaningful downside. You wouldn't want to bet against that!

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  70. Good to know.  One thing to consider:  with 'everyone' expecting an advance back up into the 1,250's right here, I sure wouldn't be surprised to see a reversal.  I'm sitting this one out until I see how it resolves.

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  71. lol!  That's hilarious that you say that.  A few weeks ago, when A20 was off his medication and going hog wild, I awoke to find two emails from my sister. 

    The first one said, "One of the posters suggested that you were Anon20.  Please tell me you're not that guy, 'cause that stuff isn't funny." 

    The second email, an hour or so later said, "Okay, THERE IS NO WAY you are Anon20.  That guy is sick!"

    lmao.

    Why on earth would I post insulting stuff about myself?  Especially while I'm sleeping?  Hell, why on earth would I post ANYTHING, except as me?  You and my sister are bizarro for even having that thought.  :D

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  72. I am definitely into S&M. With young good looking submissive white girls.  Always consentual and age legal, of course, as I am a VERY SELF-righteous dirty old huge fat MAN, I'm your prototypical DIRTY OLD NASTY MAN.  HAHA.  And you'd be surprised, kiddies, how many worldwide white girls, DEEPLY NEED a nasty old BAD DADDY, loving them up HARD, and with punishment too...  HAHA.

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  73. If I were going to post stuff to myself, I'd have done it back during the first month the site was up when there were DAYS with zero comments.  That would definitely have been the time to engage myself in some snappy repartee!  In retrospect, I should have done that, although I still would have posted under my own name for everything.  But nowadays, I can barely keep up with just replying to most people.

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  74. Bots running over and squeezing shorts in slow motion along that channel bottom the last hour.  Which it's taken 55 minutes to travel 5 points.  Buyers commitment has been VERY strong through this run. 

    Should be a strong snapback pretty soon though.  This cannot go on forever.  Will enter short if we get to 1,255 before there is a retrace.

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  75. What not wait till 1260 - the 200 DMA?

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  76. psychic boundaries are killing you, little maui boy, I feel sorry for you.
    You will not solve your life with ew synergy, you must look elsewhere.
    answer is in your past;  but, I know, that is where you fear most, to go.
    this blog will not compensate for your superego's madly driven needs.
    you'll learn hard way, boy, as all existentials, that projection is death.

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  77. Just went short at 1,254.  Small position.

    One minute candlesticks just release from the BB's and Williams and Stoch finally starting to come off the highs they were pegged on on the one and three minute charts. 

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  78. Alright, I need to get some sleep. I'll bbl. Try not to break anything. ;)

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  79. Took a small short at ES 1248.25.  Now I'm really going to sleep.

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  80. That would mean a 12 point run up from 1,248 with no intervening retrace along the way AT ALL.  I cannot tell you how uncommon that is, especially on upward moves.  Though it does happen on downward moves far more often. 

    I am trading an expected retrace here.  The market VERY SELDOM moves more than seven points up without a two point retrace before then moving higher.  

    And it also very seldom will keep RSI, Williams, and Stoch pegged to the very top of their ranges for longer than an hour on the three minute chart.  There are exceptions of course. Especially in fast moving markets. 

    My own theory is that the bots have this programmed into their algos. 

    Think about it:  Let's say the computers are on the wrong side of the trade.  If they 'know' that at a certain point there will at least be a two point retrace of the move and they have the tools to 'predict' where that retrace move is likely to commence, then they can buy heavily at the 'expected' bottom./top of the wave.  And so they can play the retrace move to offset the loss they'll take on the unprofitable portion of the trade.

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  81. TMF which is a very sensitive ETF is rising, sign of end of rally.  It needs confirmation

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  82. Why don't you post a daily P&L (in percentage points) of how much you lose each day so that people can quickly dismiss your drug-aidled ramblings?  You continue to be an amazingly accurate contra-indicator.  You are the definition of unstable emotional investor.  I just hope you actually did put all your money in Jan puts.  People that listen to you may even lose more money than you do, as your balance is likely only 4 digits in $US.  Now try and come up with some new names and tell us you actually have $10 million and everyone should listen to you.

    Warning, listening to Anon20 advice is damaging to your balance!

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  83. Gr8 minds think alike, mine was at 1248.13 on ES ;-)

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  84. It would be interesting if SPX closes the year 2011 at the same spot it did in 2010.  SPX closed at 1257 on Dec 31, 2010, and it was pretty much flat during the week after Xmas.

    There is practically no gain

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  85. Just for the day. I got it.

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  86. Already closed it out for a 'gain' of $40. Ha, ha.  Didn't like what I was seeing. And we are at the bottom of the channel trendline again.  Not worth the bother at this point. I think the trendline holds here.

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  87. That's a nice steak dinner! :)

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  88. I LOVE THAT.  LOVE IT.

    "Warning, listening to Anon20 advice is damaging to your balance!"
    Just like the 'rocky horror picture show.'   You FEAR ME.   Most excellent.

    And do, please, gorally1322, you are MY best love friend, please, place ALL you mo-ny on 1322spx.

    Please, I beg you.  I'm just a stupid, know nothing, I'm your 'accurate contra-indicator'.
    Please, I beg you, from the bottom of MY heart (heart?). Please, put ALL your mo-ny---against ME.

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  89. And sure enough it did.  Glad I got out.  Whew.

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  90. Your sister NEEDS strong corporal punishment from a BAD MAN, and that's why she FEARS it.

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  91. Bulls playing this masterfully to cause max slow pain to bears.  They allowed only a one point retrace from the pause at 1,254.  Held at 1,253 and then waited to just run into the trendline.  Then back up from there.  It's rendering the 'normal' chart indicators virtually irrelevant for today.

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  92. And your return on your most recent investment was -25%, in a month?  Yeah I fear you running out of money so you can't be a contrary indicator any more.  At your current rate that will be what, April-ish?

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  93. Not sure about bulls and bears.

    This is bots trading with each other. I'll not change until after the NY when volume returns. Hopefully. :)

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  94. Ok.  Bull bots playing this masterfully agains the bear bots.  Or whoever it is that's doing the trading today.  :)

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  95. Just bought VIX March calls and more TZA. Hoping 1255 break topped us.

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  96. That mens I'm plenty of time to buy TZA as suggested by Rebel

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  97. Added to shorts at 1254. 

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  98. Took a position in SPXU (-3x on $SPX) at 1254.

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  99. Not to mention how they have decoupled from the EURO this week.

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  100. This guy ANON20 is the best part of this blog!  What a rush!

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  101. ANON20 is Jason's wife!

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  102. Long or short?
    BTW - tomorrow is option expiration, watch out.

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  103. XLF  was up 2+%.
    Euroland QE is working. :)

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  104. This is 3x ETF on the short side of S&P. It's a minor position, not "all in". But thanks for the heads up.

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  105. Trading range of like two and a half (f-ing) points for more than half the day, huh?  Not exactly a day trader's paradise.  Was still able to net out nicely positive, but it was less than half of what I am used to.  And with such minor movements, I suppose it's to be expected.

    This session reminds me a LOT of the session on November 11th.  I remember the day clearly because I was in New York for my brother's wedding. 

    The bond market was closed that day (it was a Friday), so volume was low and it was a freebie day for the bots to take up above 1,260 for the day and hold around 1,265 for the entire session.  The S&P just hovered between 1,262 and 1,265 the entire day.  

    What was notable to me about that day was that longs could have taken the indexes to ANYWHERE they wanted (within reason), but they chose not to cross 1,265.  That's where they stopped and held.  Which told me that that was all the firepower they werell willing to spend on the matter.  After that it was all about selling to whomever would buy at that level for the rest of the session.

    It marked unmistakably though: beyond here market pros don't have any confidence nor the desire to spend the money to get there.

    The indexes fell back the following Monday to around 1,250.  And eight trading sessions later the SPX was a hundred points lower.

    I wouldn't be surprised if tomorrow the Street holds up here for another day to sell off more to those who'll buy up here.  The Street needs enough TIME to simply make this all worth their while and prepare for the rundown.  But I sure as hell don't think there is ANY intention to stick around up here for long.

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  106. the guys who went short in the afternoon near highs -- what did you do with your positions?

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  107. I have never such a collection of utter morons, and perennial anal hair splitters, collected into 1 stockmarket site.
    Makes sense though, as pretzelhead is both, at the same time---ergo, a compendium, of imbecilic subhuman trash.
    Mental spastics, only reason I am here, is the crazedpretzel can think, and he works as hard, as a retarded dog will.

    THIS--IS--THE TOP, YOU FUCKING MENTAL RETARDS.   Act on it or not, your business, imbeciles.
    Only reason I tolerate the babe idiocies of the maui pretzelshithead, is that----he ew confirms for ME.
    So kiss your mother's ass goodbye.  this planet is going down the shithole.  starting tomorrow, pathetics.

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  108. I agree with your take Mr Brian.  The big gap this week was just the release of pressure on the compressed spring - PL had been warning of an oversold bounce.  Again - the majority of the move was done with the futures, but buying after that has been pretty lame.  Most all of the counter trend moves have been done via the futures

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  109. OK, let's cut the crap sugar-coating.  What do you REALLY think?

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  110. Hmmmmm, do you remember the posts you wrote on November 11th, Anon?  The day I just mentioned below. 

    I'll remind you what you were crying about then:  You were telling us all that buying was exhausted and calling for an immediate reversal by the end of the session.  You were CERTAIN that at reversal was going to happen.  Only it didn't happen quite like you said it would.

    I told you that buying wasn't exhausted at all.  It's that buyers were SMART, and they knew where to stop.  Same thing is going on here.



    You are very smart and insightful about the marketAnon, but your constant classifying everyone as pussies and retards and not as smart or all-seeing you . . . while you make call after call after call that doesn't pan out as you've predicted does more for eye-rolling.  

    If you had a little more smarts about you, you'd make a LOT more money doing this, you know. And not turn this into a constant test of manhood and balls.  Which will only hurt you as a trader, because it means your ego is far too involved.

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  111. Brian, you're quite the historian. I would nominate you for the Pulitzer, so... Could you discern now exactly what drove the Oct 4 rally, ending Oct 27? It went from 1097 to 1284 (open/close, not intraday), a 17% run.

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  112. Hmmmm, not sure if this is even a serious question, but I can give you my thoughts in just a few sentences:  

    Equities had no other place to go but up after October 4th.  The market was so overstretched to the downside that a rubber band snapback was only logical.  Also, Bernanke and the PTB stepped in and made the proper announcements.  

    Then short covering the whole way up drove the rally even further and harder.   I think that stretched it out to the upside by at least twenty to thirty points more than otherwise might have happened otherwise.   And the Street was going to capitalize on the momentum anyway.  

    Then once we were past the 200 dma, Europe and the reality that sustaining those levels would be more costly (and far less profitable) than simply running back down again took over.  

    What's easier and makes more money?  Driving the market from 1,290 to 1,320 and trying to hold up there?  Or dropping the whole thing from there back to 1,150 after you've hovered above 1,250 long enough to sell more overpriced stocks to the gullible and have positioned yourself for the rundown?  

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  113. I'd also add that intraday MATTERS.  I think the run was from around 1,070 to 1,292.  

    If I remember correctly, the market through all of August and September had not fallen below around 1,110 (working from memory here so I might be off), which was perceived as rock bottom support where institutions would step in and hold the line and start buying.  

    That support broke for only a day or two.  So the buyers got an extra forty SPX points out of the bargain. And hence the sheer panic when 1,120 didn't hold.

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  114. Was a serious question. Was womdering if it could all be attributed to the Fed.
    Thank you.

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  115. James Dailey (TEAM Asset Strategy Mutual Fund), predicted on 9/16 that S&P would hit 1280 - 1320 "in a few weeks". Part of his rationale was that he fully expected the Fed to announce new initiatives. I was extremely skeptical, and the market took a dive right after he spoke. But voila! It touched his target six weeks later.

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  116. hey brian, sound like a smart, reasonable fellow.  what's your background?  how long you been trading?

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  117. Brianhut, 
    >> You ARE very smart and insightful about the market, Anon. Not trying to say you aren't.

    His returns would suggest otherwise.  There's no points for style in this game, and in a place where you eat what you kill, Anon20 has been lunch.

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  118. Fed plus bear short covering on the way up throwing more fuel on the fire is the one sentence answer I'd give.

    Short covering on the way up is the primary reason for why bear market rallies are so much more violent.  You don't have as many shorts covering and adding to the buying during bull market rallies.

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  119. Trading off and on for quite awhile.  I am a product of the bull market years though, so I had to 'unlearn' a lot of assumptions.  The hard way.

    I own and run restaurants and lounges.  Perfect environments for studying and assessing human behavior, priorities, what people REALLY respond to and value, rather than what they THINK OR SAY they value and respond to (they are NOT the same thing). 

    Was out of the market and trading while I was building my last establishment, because every cent I had was being put into it's construction.  Was a much gutsier 'call' and with one hell of a lot more on the line than any trade I've made.  Risk taking takes on a lot more forms than just playing the market.

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  120. Beginning to understand the absolute importance of scaling out via profit taking. Btw, I made a lot of money in the downdraft after 9/16, but lost it all and then some since. A lot to learn.

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  121. PL,
     
    Please let me know what you think about this count (attached chart) of SPX daily chart.  This count shows a complex correction from August 9, which is a triple combination correction - a flat, an expanded flat and a giant triangle.  This triangle has almost perfect ratio relationship between waves.  Wave iii is 0.5 of wave i, wave iv is 0.5 of wave ii. Expect wave v is 0.5 of wave iii, so the end of wave v target is around 1255 ~ 1260 closed to 200 day moving average.  The question is which direction will the market move after this triangle?  If this is a triangle, the market will move in the same direction as wave ii does, i.e. DOWN.  The triangle just likes a tighten spring and it will thrust downward right after the end of wave v when it release.  If this count is correct, a waterfall can be expected after reach the target of 1255 ~ 1260. 

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  122. Came back now on a late lark, juanito.  What do I think, lo que pienso?
    I think all of you should be in usa t-bills, 100%, you are all imbeciles.
    even nouveau rich ghetto restaurant owners, most scumbag of all.
    pseudo intellectuals?  I cannot speak, from trash scum I behold.
    Goodbye, mental retards, ever seeking someone else, to be you.
    What a pathetic bunch of fuckheads, you ALL are, usa clowns.

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  123. really good stuff there.  i have the utmost respect for the real entrepreneurs in our society.   i wish your venture(s) nothing but the best. 

    you mentioned human behavior and the divergence between what people claim to value/respond to and what they actually value/respond to.  can you talk more about that and what you mean.  thanks.

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  124. Well, keep up the comments.  I actually enjoy and look forward to them.  I don't care what anyone else says.

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  125. Ray -- It's a count I have considered -- that's one of the reasons I've been highlighting the triangle for a couple weeks.  It's a bit like the literary art of "foreshadowing."  :)
     
    So yes, I think that's certainly possible.

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  126. Sorry for jumping in to toot my own horn here  :)   but I was pretty proud of my October bottom call.  This was the last solid IT swing trade in this market -- just wish all you guys had been reading back THEN.  :(

    October 3rd:  http://pretzelcharts.blogspot.com/2011/10/spx-update-10-3-11.html

    October 4th: http://pretzelcharts.blogspot.com/2011/10/spx-update-multi-month-counter-trend.html

    My projection was for 1265 -- a little light, but not too shabby. 

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  127. Question is will you have the balls to come on here and admit you were wrong if the SPX does not fall 10% before the end of the year. Forgive the old platitude, but markets can remain irrational a lot longer than you can remain solvent no how hard we wish otherwise. You may be right on direction but totally wrong on the time aspect.

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  128. There's no points for conviction.  Conviction is a trader killer.  I've said this before:  I'd rather be rich than *right*.  Meaning I'd rather cut and bail if the market tells me my "conviction" is wrong and I'm taking the wrong side of the trade... and get on the right side.

    Discipline must trump conviction for a trader to be successful.  That's a lesson some haven't learned yet.

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  129. Great call, really. A couple of other trading services I followed had no clue. I tried re-shorting a couple of times on that rally but bailed at small stops. I won't name those other guys. Live and let live.

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  130. GG- ty for the donation today.  :)

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  131. Private First Class Jaco!  I've been wondering where you went.  You were AWOL this week, and I'm pretty sure that's what allowed Bully to take control.  :)

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  132. Most recent AAII sentiment is hugely neutral, btw:

    Bullish 33.7%down 6.5Neutral 38.0%up 11.9Bearish 28.2%down 5.4

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  133. My guess is that you need a dose of your own medicine, and that's why you talk about it so much.  You're not really my type, sorry... maybe if you shaved your back and wore a little more rouge.

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  134. Holding. Will let my options play out and my TZA short just added to a large position. Long term player, rare here, so I am in for the big fall........whenever that might be. Besides the VIX calls today I own April TZA calls. Loaded to the hilt and need a top now!

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  135. pretty much can go anywhere

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  136. Nouveau rich, huh? You'll have to do better than that to insult me, An

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  137. Marketcycle StudentDecember 22, 2011 at 4:11 PM

    Hi PL, stubled on this site few weeks back. Really love it. Quick question on how much one can make by trading futures in a year if one is as good as you in undestanding the market dynamics, like below million or few millions?
    I know there are legends like George Soros/Richard Dennis/Paul Tudor Jones, who made billions overall.
    The reason I am asking is I started learning trading for last few years thinking that one day I can make millions by trading futures. Is that even possible for average Joe's? Because so far I am on loosing end, even though I am learning a lot and getting better and better in making trading decisions and I still think it is possible one day.
    Appreciate your thoughts/comments on this as I think, you are already there and done it!!!

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  138. If traders and fund managers buy calls without hedging with puts the market will grow. It's a bet on the future it may work or not. Recent data on Cina and Europe economies suggest it should be better to hedge but most people are betting things will improve. This way we may have a new market crash

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  139. First off, thanks, and welcome!

    Second, all I can tell you is that trading success is like every other type of success in this world:  it depends on the individual.  A few can, most can't.  The majority of traders bust out their accounts at some point, especially in the first few years. 

    But the fact that plenty of "average Joe's" earn their living as traders should answer the rest of your question.  :)

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  140. Also, just a general observation:  I've noticed some confusion over my mention of .618 on the SPX chart -- that's not the .618 retrace, it's a target based on the c wave being equal to the a wave x .618.  :)

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  141. On that line of question Pretzel, it seems that you are trading for a living is that correct?

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  142. it hit around that area and bounced off downward today. But it seems like futures took it out if we do gap up tomorrow.

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  143. PL, you did foreshadow it well, so I got the picture.  Thanks.

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  144. Marketcycle StudentDecember 22, 2011 at 5:56 PM

    Good to know plenty of "average Joe's" earn their living traders. But then it becomes like any other job you do for living like engineer/doctor. You are still "average Joe".
    The question was more of , Can "avarage Joe" make millions by learning trading futures and become rich. As you said it probably depends on individual and some individuals have made it. Thanks for your reply.

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  145. I don't mean disrespect to your question; and it may be very relavent to many of us considering trading full time.   At the same time, this may be a personal question to some people.  If PL wants to volunteer this information, sure; but let's not put PL on the spot.  He's spending a lot of time sharing a lot of great ideas and has brought many of us together for an even greater sum up experience and thought.

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  146. the october monthly  spy reversal bar followed by inside bars could trigger a massive rally if its high is exceeded: the w bottom
    of 8/9/11 and 10/4/11 is now followed by a reverse head and shoulders: this projects 1380 -1400 esh2: this scenario would bring in fast uptrending action that would begin the real rally into march 2012

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  147. PL, funny to see your 2-3 comments on a post turn into 150-200 in less than months.

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  148. meant to say in less than 3 months

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  149. I'm not saying this is totally predictable, but *of course* the night I go out shopping is the night everybody wants to chat, lol.

    I'll bbl :)

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  150. This question has been answered previously here: Obviously.

    Is there any way I could devote the constant time, attention, and hours to this blog if I worked a day job? ;)

    That's why the income this thing generates matters to me -- I'm working three times as hard now as I was just trading. I find I've become quite emotionally involved with all you guys now, but believe me, there are plenty of nights (like tonight) where I'd rather just go to sleep than work on charts/articles/updates/etc. I do miss setting my own hours and trading schedule... But hey, then I'd miss out on the joys of being insulted, attacked, and generally unappreciated by certain members of the "arm chair quarterback" club. And I'm not just talking about Anon20, more about certain personalities who post here and there at Minyanville.

    Anyway, the majority of you make it emotionally worthwhile, not meaning to sound grumbly. :) Just been really tired this week, so my tolerance for BS is way down.

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  151. pretzy, what do you think about getting short this market if we can push up a bit higher to 1261 or so here overnight?  to me that would virtually coincide with what you've been saying about a nearby top as it would imply an open well above the 200 dma.  i don't see tha holding up during the day session, but we'll probably get some pullback and then a lot of thin volume sideways drift.. then next week we'll see a more aggressive pullback.

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  152. That's one advantage to having been an active trader for so long.  In the past, I've freely shared my work with some of the right people.  Lee Adler at The Wall Street Examiner being one key person in my "overnight" success (it's one of those things where your "overnight" success really took about 10 years, lol). 

    So anyway, once I started publishing on a daily basis, it went parabolic pretty quickly.  Minyanville and Yahoo! Finance picked me up after only a month.... but again, in a way, that month was about 10 years long.  :D 

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  153. Keep in mind that next week is light volume as well, so it's possible for the bulls to have their way, if that's what they desire.  Your strategy sounds reasonable, but I would keep a tight stop on it.  The bull count takes us up toward 1310 without too much trouble.  Personally, I would never endure that much drawdown off an entry, but that's just me.

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  154. Well, just got official word from Google on the appeal about AdSenseless.  Basically, they're going to screw me out of the money they owe me based on... ?  Nobody knows.  It's a big secret, and they regret to inform me that they can't tell me, because of their proprietary BS.  Whatever.  I understand they do this to a LOT of people.  Glad I could give them free advertising for a month and a half so they could screw me out of paying me.  I'm moving platforms as soon as I have time to do so.

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  155. PL 

    Hi,  I'am new to your blog (last few weeks), really enjoy your knowledge and sense of humour! One thing i've noticed about the market since the Oct rally, is that the rallies have been half of the previous one (roughly). Plus you have mentioned the SPX potentially going down to 457ish next year, from Ray's graph if you were to draw a line from x to y, is that where you get that figure from. Keep up your good work.

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  156. Hi Delboy.  Thanks, and welcome. :)

    My SPX target comes from my long-term Elliott Wave count.  A brief overview can be found here:

    http://pretzelcharts.blogspot.com/p/big-picture-long-term-elliott-wave.html

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  157. Will you move to http://wordpress.org ? I have seen other people moving there

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  158. I'm leaning more toward trying to set up a real website.  I think it's be nice to have an actual site for us to interact on, instead of being stuck with these blog platforms.

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  159. It may be that today the VIX confirms yesterday tentative change in the trend. Banks and Insurances have a funcition called Risk Management that sometimes asks the traders to cover with put or to sell the long. Something the like happened in mid January and in February 2009. Sometimes Risk Management unintentionally contributes to market sell offs

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  160. Pl

    Thanks for that, have you closed out your SPX short from last night, or are you still in with a stop at you red break line at 1267?

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  161. It was this morning actually, during the cash session.  I averaged in a few more at ES 1256.  Keeping a pretty tight stop on it from here... I've had a good month so far, no need to try to chase every single move.

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  162. Pretz,sorry to hear about that.

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  163. Looking at the SPY upside-down, does it make sense to call it a head-and-shoulders? Isn't that something applicable only at the top. It's off the top now.

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  164. Hey pretZ, I do web design and development for a living, maybe I can help you out- email me if interested. If not happy holidays

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  165. Okay, update's posted.  Let's continue discussion on that thread.  :)

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