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Tuesday, January 10, 2012

SPX and BKX Update: The Moment of Truth

In a perfect world, the completion to the Minor (2) rally would mark a new high which exceeds the October top.  My preferred count of an ending diagonal suggests that perhaps the session today or tomorrow will finally complete that top.

Since Wednesday, the market has kept us guessing about its short term intentions, while it's traced out a pretty ugly consolidation in the meantime.  As I write this, the futures market is trending higher, so hopefully today or tomorrow will finally provide an answer to the question of exactly where Minor (2) completes. 

Assuming the big picture count is correct, the suggestion is that a large and extended decline in equities is just around the corner.

There really isn't much to add to the information presented in the articles over the past few days.  One chart worth updating is the Philadelphia Bank Index (BKX), which has so far performed in accordance with the projections posted in Friday's article -- which expected more upside and a new high for this move.  Both those things have happened, but further upside is still expected.  The question this chart poses is whether the BKX is forming an extended fifth wave, which is nearly complete (blue count); or if this current rally is only part of the third wave of wave c of (y) (black count).  The diverging RSI and MACD seem to argue that the extended fifth wave is unfolding.


The S&P 500's (SPX) preferred count of an ending diagonal would look perfect with one more lunge higher, ideally above 1292.  The implication of the very short-term wave count on the chart below is that the price should not exceed 1301.24.  Even in ending diagonals, the Elliott Wave Theory rule that the third wave cannot be the shortest wave still applies.


Below is an alternate interpretation of the short-term wave structure.  If the market exceeds 1301.24, then the count below (or some slight variation thereof) will move into the preferred role.



Beyond that, there simply isn't much to add to the technical picture from the last few days.  One of my favorite, and very reliable, indicators is approaching a major sell signal.  A decent rally on Tuesday is likely to trigger the indicator, and that sell signal would coincide nicely with the ending diagonal wave count which believes the top could be just hours away.  Trade safe.

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

276 comments:

  1. Dollar tagged the corrective target zone suggested in yesterday's article, and has (so far) bounced up from that zone.

    http://pretzelcharts.blogspot.com/2012/01/us-dollar-update-dollar-rally-is-just.html

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  2. Good morning Pretzel (and registering).

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  3. mornin'
    expecting a retrace in  GOOG. amazin' inverted hammer.

    http://www.screencast.com/users/katzo7/folders/Jing/media/128427a2-671a-4780-bebd-40509cc0ddfd

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  4. Morning PL, thanks for the update. Is it still possible for the minor 2 if S&P keeps going up to like 1330-1350, or does that make it a new bull market.

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  5. It's possible.  If it gets up that high though, gonna have to start questioning everything again.  btw, glad you got Disqus working.  :)

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  6. Morning, glad you registered.  :)

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  7. Morning.  How'd you like to be one of the people that just bought 5000 shares at, say, 668.  :o

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  8. not sure what happened everyones comments had disappeared, working fine now

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  9. katz - thanks for sharing - i like the idea for a trade today - on the final stab higher by market - stay nimble 

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  10. Absolutely, no rear view mirror in this market, only forward. lol

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  11. That came down damn fast.

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  12. Morning PL,

    I'm eagerly looking for the blowoff top to 1292 and then a quick selloff.

    Great work, thanks for all of your effort!

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  13.  As far as the placement of the stop, I thought EW4 to 5 transitions are hard to predict. Also are 5 to 1, 1 to2,  2 to 3.......

    Made me think of this poignant quote:

    "October: This is one of the particularly dangerous months to invest
    in stocks. Other dangerous months are July, January, September, April,
    November, May, March, June, December, August and February."


    -
    Mark Twain

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  14. Hi PL, I accidentally posted just now by mistake when I set up a disqus account.  I just wanted to get your thoughts on earnings season.  Do you think earnings season is material and if so do you have any opinion on how it will unfold this season with so many lowered expectations? Is it possible for earnings season to delay any next wave down?  Thanks

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  15. Any takes on todays intraday EUR/USD chart? It did look like a H&S pattern, which was just "ruined" as the second shoulder overshot the head :-)   Could it now be a 5-wave stucture soon-to-be-ending?

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  16. No thoughts on earnings season really.  Earnings look backward, the market looks forward.

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  17. If it's a 5-wave structure, that means the next larger trend is up.  So a 3-wave correction followed by at least one more 5-wave move up (note this is NOT my view, I'm just expressing how it would work if it was a 5-wave structure).  I'm not ready to take a stab at it very ST.  Low confidence in the one-minute waves on EUR/USD right now... more info needed from the market.

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  18. Futures equivalent of SPX 1293 or so.   Think we are headed higher yet, or gap and done for the day?

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  19. No clue until the cash market opens and reacts.

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  20. Anecdotally, I checked Daneric's site this morning and there's some vicious mocking of bears by the bulls, suggesting the top is near.  Wonder what the AAII sentiment numbers would be today.

    Just added a little to ES short @ 1289.50 for an average of 1281 ish.  Hope to get some gap fill this morning.  Moved my stop further up a few points so I don't get stopped out on the open and miss the pull back.  We shall see.

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  21. In other words, nothing to add since the update. :)

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  22. 3% bears.

    Added some ES shorts at 1289.25.  Average now 1283.5.

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  23. PL,

    Regarding your statement: " If the market exceeds 1301.24, then the count below (or some slight variation thereof) will move into the preferred role."  Is 1301 closing price only or any print during the day?

    Thanks

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  24. Any print high.   I should have expanded that diagonals are tricky and can go on forever, but I didn't because the end result should be roughly the same.

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  25. Wow...3%...That is something.

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  26. Sorry, I was joking.  Won't know 'til Thursday.  Last reported number was 17% bears.  :)

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  27. You just dashed my dreams...LOL  :P 

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  28. lol.  etrade is down, not accepting orders.  hilarious.

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  29. PL, is the investor sentiment report something you subscribe to or is it freely available?  If free, do you have a link?  Thanks.

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  30. I don't know the link off the top of my head, I have it emailed to me.  If you google AAII sentiment, I'm sure you'll find it.

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  31. Assuming this is wave 4 of c of v -- it looks like it may be targeting 1297-1300, give or take 50 cents, to complete this wave.

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  32. btb, many thanks for the *6th* donation!

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  33. Hi MR, I use the data here for sentiments. We're at the level prior to August waterfall. http://www.schaeffersresearch.com/streetools/market_tools/investors_intelligence.aspx

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  34. thats awfully close to the 1301.24

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  35.  Out of GOOG at 631, crossed TL.

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  36. Everybody keep in mind that I'm consitently a day or two early when I call tops.  :)

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  37. 1296.46 if thats the end of the wave would be spot on

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  38. Yeah, I'm beat.  I need to start getting more than 4 hours of sleep on market days.   :(

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  39. didnt you call a top 2 days ago? 

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  40. As a compliment, you've been saying the possibility of this last push higher was most likely for over a week now as your preferred count (This is probably going to draw some comments from A20 LOL). So calling the top here would make you right on time :)

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  41. PL do you think that with DJI reaching resistance at 12500 this could stop the market from going much higher or does the dow not mean to much.

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  42. This is from a couple of hours ago. 
    http://blogs.wsj.com/eurocrisis/2012/01/10/europe-crisis-live-blog-fitch-outlook/?mod=google_news_blog

    "
    Ratings agency Fitch has given a downbeat assessment of European sovereigns this morning. It said that euro-zone countries need to borrow approximately €2 trillion in 2012. Giving warning that Italy could be downgraded, it said Rome would be in the front line of the ongoing crisis.
    However, it also disclosed that it was not planning to strip France of its triple-A status over the next 12 months."
    For bears, it's good and it's bad.  It's good that France is warned and bad that they will not be stripped of it in 2012.

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  43. It's working ok now.

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  44. http://www.google.com/hostednews/afp/article/ALeqM5hQxdFPqhiGR8qzGZmfGBhmaaAMjQ?docId=CNG.f4e1bfc0979449aa1eadf5548e2284b5.321  from AFP

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  45. To be fair, I'm not always early.  If memory serves,  Oct. 26 I got the day right, but my upside projections were broken by like 10 points.  November, I was a couple days early I think.  December, I warned about all friggin week -- that was the easiest top ever.  TBD on this one.  :)

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  46. Nothing's changed from the update.  :)

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  47. No one seems to remember that some time this month S&P (the more influential one IMO) will downgrade France at least 1 notch.  Its possible they downgrade France 2 notches, and downgrade Germany and the EFSF 1 notch each as well.  This latter scenario is certainly not priced in to the markets, in my opinion.  All the banks free money is being parked at the ECB per ZH's analysis, so once downgrades happens, the markets are going to freeze up yet again.  And the new PIIGS debt offerings are going to cause massive problems as well.  But the market clearly is having a party today - wonder how long it will last.

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  48. C'mon super-reliable sell signal!  So close...  I'll let you guys know if it triggers.  If it doesn't, no soup for you!

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  49. It doesn't *need* to trigger for a top, btw -- but it would be really nice high-probability confirmation.

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  50. I was about to ask you about that signal... BKX is almost at 43, does does violate the extended 5th scenario?

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  51. hi pretzel

    I and others surely would like to know if you will call the top...?i mean you enter short this market firmly and irrevocably

    can you precise again that you are talking about ES or $spx levels?

    the blog is mostly in ES levels but yr studies  are in $spx

    cheers and This

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  52. C'mon yeah!!!! Go signal!!! Go trigger!!!!

    (btw let us know if the signal fails at any point as well)

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  53. I'm obviously calling for a top in this general area.  Have been all week.  If you'd like something to-the-penny, the market don't work that way.  :)

    I've been scaling into shorts.  And my short entry was ES, as stated.  But it's not "irrevocable" lol.  If the market doesn't play along, I'll cover.

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  54. market at critical point. get thru mid 1290's we should see 1310 area

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  55. My crystal ball say that if the SPX closes above 1285.09 today, that Friday's action will contain the top tick.
    Furthermore,  I checked my tea leaves...and they agree !

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  56. PL, you care to share your "super-reliable sell" signal? Why so secretive about this

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  57. I drank my tea leaves by mistake, and the kids broke the last crystal ball.  Right when the warranty was up, too!

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  58. lol.  I'll share it if it triggers, don't worry.  Like I don't share enough indicators.  :D

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  59. from the public site:2012 Trading Volumes




    By Alan Farley

    | Jan 10, 2012
    | 10:31 AM EST




    There's been a lot of chatter from contributors and readers alike about dismal 2012 volume so far this January, and its meaning.
    I can draw one specific conclusion at this point and it isn't
    bullish. It looks like traditional January public equity inflows aren't
    going to happen, no matter how much the Wall Street suits pretty up the
    tape. This follows the high disgust factor that's ruled public
    participation since the May 2010 flash crash.
    Without public money, the broad market will have a real tough time rallying to new highs and then sustaining those lofty levels.

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  60. its the number of blog comments per day. under 100 usually sets it off. ;)

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  61. Yep, funds have been seeing big outflows, and it's definitely trending in a bearish direction.

    http://www.insideinvestingdaily.com/images/web/010912.jpg?sub=TD&o=581900&s=586067&u=34969738&l=362208&r=Milo

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  62. Below 0 is negative cash flow, btw.

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  63. In 4 min. the 60 min. ES candle will close, have a doji followed perhaps by an inverted hammer. Put your TLs on.

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  64. Just shorted ES @ 1289...

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  65. Hard to tell when S&P will finally do their job and announce their rating review on France.  I thought it would be last Friday, but they still have not done so.  As another reader mentioned, they may have been influenced/manipulated into holding off until France and Italy finishes most of their refinancing needs.  I still expect it to happen this month though.

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  66. Dumb question for most, I'm sure.  But, does anyone know why pretty much every mainstream financial planner I talk to seems bullish, and wouldn't even consider going short?  I know they get paid by the transaction plus their usual 1% or so a year, plus whatever else they can squeeze out of you. 

    My question is:  What incentives (other than from their clients) do they usually have to keep you invested?  Do the banks pay them a commission too?  I know brokers obviously get one, but, supposedly, CFP's are required to disclose any of this, and most claim they have none of that, and that they're working for you, blah, blah...I find that a little questionable at times like these.  It's like thinking that a seeler's realtor is working for the seller...yeah, right!

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  67. Alright, I need to try and get some sleep.  I think everyone's got a pretty clear idea of what I'm looking for here.  Night!  :)

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  68. Thanks for your hard work PL.

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  69. Maybe they were just taught that leaving cash uninvested is not smart?  What matters is what you think is right for you.

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  70. you seem to have a different take than most on this board.. 

    i'm curious what your theory is regarding why this market only seems to go up in the overnight session? 

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  71. Juan,
    Had this conversation many times. They say they are not market timers. You walk in when DJ is at 14000 and they will go long.  You walk in when DJ is at 8000 and they will go long. They are just after the largest pool of $$ they can get...

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  72. I agree.  Just wish I had the time to manage it myself...if so, I would.

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  73. Heard that one before.

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  74. That last littl' run should be the back test of 90-1....  Dunno for sure.

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  75. I think they advise this way for two reasons. One, they want to give you, layman, a method to take away so they can call their job "done." Two, it's the official method and the only one they know, diversification, allocation, dollar cost averaging. It's got the blessing of the mathematicians, Bill Sharpe et al, and the stamp of approval of the certification body. So three, they don't want to be sued or worse, shot.

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  76. Setting aside any possible nefarious reasons, hidden perks, etc. It could just be the human condition. It's the personal Belief System (or BS) that each one of us uses to some extent to get through the day. They have to sell, and that is quite hard to do if you don't believe in what your selling. (That's the really short version.)

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  77. In addition to the commissions/fees that they get on various transactions, financial advisors from full brokerage firms will also get 'residual commissions' on a large holding of mutual funds from the same fund family.   For example, a financial advisor with $500 mil holding of American funds (from all of his clients combined) will get something from American Fund company, which comes out of the 'management expenses' of the mutual funds.  A financial advisor with only $10 mil holding many not get anything because this amount is too samll.   This why they always try to sell funds from

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  78. I'm not sure about their compensation structure, but I have found the same thing in those I've spoken with. One in particular explained to me that he was selling annuities, primarily to seniors, that were paying... I think the number was north of 4% with a guarenteed monthly payment. He then went on to tell me that even if that monthly payment started to eat into the pricipal of the initial investment, it didn't matter because they also sold you an insurance policy that would guarentee the return of your pricipal upon your death (I mentioned that the premium for that policy was cutting into the ROI of the annuity, but he said that you couldn't look at it that way...?)
     
    So I brought up the bear scenerio: What happens the economy runs into a situation where the it contracts, the stock market falls to below S&P1000 for an extended period of time and the US economy flatlines for a long time - a decade or more. In that case, given that your clients are living longer, iesn't it possible for them to outlive their annunities ability to pay out?
     
    His response was - that can't happen (he used the word "can't"). The market has historical returns of 7-10% in the long run. I'm just a permabear and don't understand the big picture.
     
    So I think that most FP's aren't selling things that they know are bad to just make a quick buck and run. I think that they truely believe that they will always get returns of 7-10%. Unfortunately, the baby boomers who pick up these investments are very likely to get seriously hosed which is sad.
     
    And in the mean time... if the FP's are wrong... they'll just move on to selling something else in an unrelated industry... which many of them were doing just a few years ago before they became experts in economics.

    And if you're talking about brokerage reps... insert their title and insert mutual funds where it says annuities, yet scratch the insurance - heck it won't do you any good when you're alive anyway.

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  79. Hello traders,

    Been following since December and I am learning a lot from everyone here.

    Just wanted to say hello!

    John

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  80. Can someone please recap what PL is looking for on his reliable indicator?

    Thanks

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  81. A sell signal.  We don't know what the indicator is or how it generates signals so that's all we have to go on until and unless PL chooses to share.

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  82. Thank you B_o_B, hope we see it soon.

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  83. lookin' for a drop right around here, this will represent the start of the EW3 down move on the ES/5 min. At this point my trade is a day trade.

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  84. It's a 3 waves down from top so it may zigzag up to top to form a flat before it goes down as wave 4. Just my thinking ...

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  85. katz, looks like ES is just drifting here, is there an intraday indicator you're looking at? 

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  86. Katzo7; I'm looking to enter a long to intermediate-term position in TWM(2X RUT  short) This here feels the right time and place to do it, Can I ask for your opinion...I know you don't give advise and I'm not asking for advise but your opinion. Thanks!

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  87. 5 minute SPX is showing BB pinch and down curl.

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  88. TI 1280 ES.  Diamond pattern.

    http://www.screencast.com/users/katzo7/folders/Jing/media/77c4a042-b235-47aa-969b-9d2996e5049f

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  89. vix diverging, dollar diverging, rsi on russell 2k diverging. may drop and retest one more time, but the setup is there for short

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  90. Could be one more run at the high, dunno. I will let you know what I do with my ST trade, it could turn into a IT or even LT.

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  91. tresuries diverging as well

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  92. Intraday counting ....

    We are on wave 1 down. Second?

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  93. I look at a shit load of them, my charts look like speghetti. LOL TOo many to mention, MAs, EWs, MACD, stochs, %R etc.

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  94. Great call Katz, thanks for replying

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  95. Fred, we just have to see how the 80 level is played.  No one knows the future, I posted ho I analyze a move, told ppl to look at dljis, insert TLs, etc.  If I see somethign I do not understand I will be out in a New York minute. So far, she is going by plan.

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  96. katzo7: Do you see a potential of this being "the" top? How would you expect the day to end in order to confirm further weakness for tomorrow?

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  97. Thanks Katzo, would appreciate if you tell us what you end up doing with your ES short, if you decide to make it IT/LT short.

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  98. God, if I knew how the ROD would work out  I'd be all set. But good question....

    Want to run down what I said in chronological order:
    ~In 4 min. the 60 min. ES candle will close, have a doji followed
    perhaps
    by an inverted hammer. Put your TLs on. ~Just shorted ES @ 1289... EDIT: I tend not to day
    trade between 11 am and 1:30, don't want to steer anyone wrong..... [this means I went in earlier than I usually would]**
    ~That last littl' run should be the back test of 90-1....  Dunno for
    sure.
    ~lookin' for a drop right around here, this will represent the start of
    the EW3 down move on the ES/5 min. At this point my trade is a day
    trade...  A break of ES 1287 will confirm my trade.
    ** mrkts that fall early in the day usually keep on going, I dunno....

    Usually mrkt is slop from 11:30 to 1:30, a renewed down push within this time is very bearish.

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  99. Fitch not downgrading France, just a FYI.

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  100. bear flag on the 5 & 8 min. may be ending... Dunno for sure. Fall in GOOG and AAPL may have been shot across the bow.

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  101. I have watched the $SPX on my 1 minute chart not move more than 2 pts for 40 minutes.  Could this get anymore boring.  I am wasting my time sitting here watching paint dry.  This is four days running. We need some volitility!

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  102. PL, just checking in real quick for "da action" and isn't it gut wrenching exiting to know that a major top is most likely oh so close that we can almost taste it? These maybe price levels we won't see again for a long, long time people. History may be written! (Sorry getting overly dramatic here). As for nailing the exact top -in this case- or bottom, that doesn't matter. What matters is that you are on the right side of the trade. I've been 100% cash since Friday. Waiting for the top. May have to wait a  day or two for confirmation, who knows, but I am not risking my money for a few % upside when the % downside is much larger. (Risk management guys!). This is NOT the time to going long, but close the longs and consider going short and/or place a put. 

    ps: only a meager 100+ posts on your blog so far today. This must be the top!?

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  103. Need to break 1284 ES soon.

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  104. Good non-advise "advise",  thanks..completely agree!

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  105. I sincerely hope we're not gonna repeat the last 5 days.

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  106. ES/240. BBB.

    http://www.screencast.com/users/katzo7/folders/Jing/media/c5e2c207-4c3e-42f4-b2f9-13b3adf37cc2

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  107. FWIW...those watching the banking sector, looks like BAC on the hourly is just about to complete a 2.618 c=a off the low on 12/19/11.

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  108. Excellent chart katzo7. Thanks!

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  109. Last run to 1296 ES?

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  110. If these price levels (potentially SPX 1300+) are what we won't see again for a long time, "they" (e.g., the big banks) will need to drive the stock prices and the overall market up as much as they can because when the market drops, the banking sector is the first one to get slammed.   Also, if the banks need to recapitalize, they want to do that at a higher stock price level.   Thursday is a big EU bond auction day, and JPM reports earnings before Friday open.   We'll see how the market reacts then.

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  111. Pivot  R3 of ES is at 1290.25. If the market ends today below this level then there is a good chance that it may gap down big tomorrow...

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  112. looks like were sticking with the flat all day, big moves overnight market....

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  113. Let's hope two can play this game.

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  114. not sure how many more upward revisions for the top  i can take before i  realize this is a new bull market and i missed the bottom :)

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  115. ES/60 min.
    88.5 = 50% retrace
    89.50 = 61.8%
    turn there or above that and we go higher

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  116. Paolo Giacobbe PiolJanuary 10, 2012 at 10:00 AM

    The Coppock Curve is saying: either Wall Street goes up 10% or shortly we will face a sell off

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  117. I think the market is topping right now. Check out the money outflows while the market is making new highs:

    http://online.wsj.com/mdc/public/page/2_3022-mfsctrscan-moneyflow.html?mod=topnav_2_3022

    I shorted SPX at 1294 and will add to the position with a stop at 1302.

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  118. I guess my username changed from HT to HT00

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  119. Just noticed that today rut gapped up and out of that ascending right triangle that's been forming since Oct. 04th.   Plus, it looks like rut is going to close above its 200 DMA today for the first time since July 29.   Isn't that sort of thing typically considered pretty bullish for U.S. equity markets overall?  

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  120. ???????

















    Here are some general statistics regarding the nature of Wave 2 bounces.



    Approximately only 12% of Wave 2’s hold the 38% retracement of Wave 1.

    Approximately 73% of Wave 2’s retrace between 50% to 60% of Wave 1.

    Approximately 15% of Wave 2’s retrace below 62% of Wave 1.
















    http://www.screencast.com/users/katzo7/folders/Jing/media/44116c61-8adb-4f55-9e85-129218de1236

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  121. Wow, PL must have been really tired! I 'd like to ask him what happened to the sell signal? Are we still close to it being triggered I wonder...  :-)

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  122. a break of ES 85 puts us in a 3 down (or an ABC)

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  123. 6 days in a row i have to cover flat. if we could just drop a little i could have a profit buffer and risk holding overnight....  if i held my shorts last night I'd be toast today...

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  124. why not trade futures?  would eliminate some of the issues you're mentioning..

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  125. EricS, tops can rip one apart. What time frame are you trading off of?

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  126. Thanks for the update. Watching.

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  127. Yes. It is also sitting right at the H&S neckline through the Mar. and June 2011 lows.  We are likely going to struggle right around here until we get a meaningful break in either direction.

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  128. im (trying) to  swing trade this next move ... looking to hold a position for a day or two, daytrading isnt my style i have too many wordy distractions.  right now i have a 1/2 short positions, was a full short position intra day but wont risk an overnight hold.  i cant trade futures, so im limited to cash market only.

    basically an impossible market for a cash market trader.  that means something, I think, in the grand scheme of things...

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  129. Is there a way to see live comments? I have to refresh to see new comments. Thanks.

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  130.  Stopped dead in its tracks right at my 85 (for low). Bass-a-tard, wanted a good ole fashioned rout.

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  131. Go to the bottom of the page. There should be a subscribe to email button.

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  132. Good question, I have the same problem since my email notification is no longer working!

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  133. Your email notification should work. It's working for me. I'm also able to reply via email.

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  134. A potential island reversal top maybe is in play at this moment with the close today after the market failed to reach its critical point.

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  135. What is the critical point, the 1303 upper neck line?

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  136. Possible gap down tomorrow. To play it safe LT players should not be shorting until it breaks a TL.

    http://www.screencast.com/users/katzo7/folders/Jing/media/04b36830-0530-455a-998b-cdee7f1fe593

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  137. Great chart, katz . thanks

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  138. Thnx, dle. We will see.

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  139. Fellow traders, any good practices for setting stops when longing individual stocks?  Would you go by a certain percentage?

    I usually get stopped out too early even when I make a good trade.   For example, two weeks ago I longed CLF at $61.85, targeting an exit price of $68-69 in 1-2 weeks.   A day or two later, it went up to $63 and I set stop at $62.20, and I got stopped out the next day.   Today, it hit $69, and I missed out on this good move.   Did I set the stop too tight?   

    Appreciate your suggestions.

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  140. TOLD YOU CHILDREN LAST WEEK, THAT PRETZELHEAD'S PREFERRED COUNT BACK THEN, WAS TRUNCATED, DIDNT I?   EVEN ONE OF YOUR WEAKER ONES, THAT DOES NOT INVEST, BUT USES HIS EMPLOYER'S TIME TO PARODY HIS BETTERS, IMMORTALIZED WHAT I SAID A WEEK AGO, IN ONE OF HIS MOCK MOVING CARTOONS.

    I TOLD YOU THERE WOULD NOT BE A TRUNCATED EW5, I TOLD YOU SEVERAL WEEKS AGO, SPX 1295APPROX. WAS THE ENDING TARGET, NOT THROUGH ANY EW PROJECTION, JUST SIMPLY FROM TA WORK, AND MULTIPLE SENTIMENT WORK.  AND BACK WHEN PRETZELHEAD HAD IT AS HIS LOWER PROBABILITY TARGET.

    ONCE MY MULTIMONTH TRENDLINE AT SPX1255 WAS BROKEN, THIS WAS ONLY ENDING POSSIBLE, A LAST FINAL STAB AT THE YEARLONG H&S NECKLINE, YOU DONT NEED EW TO KNOW THIS.  BUT NOW ITS OVER. 

    THIS IS THE TOP OF GS5, FOR DECADES TO COME.  I TOLD YOU ALL NOT TO SHORT LAST WEEK, ALL THE WHILE PRETZELHEAD WAS SAYING THAT THE TOP WAS IN, AND I KEPT SAYING IT WAS TRUNCATED, AND TOO EARLY.

    BUT NOW ITS IN.  PROBABLE GAP DOWN TOMORROW.  THATS ALL, PRETZELHEAD FOLLOWER KIDS. 

    BTW, I DO NOT CARE, IF I AM QUOTED CORRECTLY IN PARODY, AND WHICH I WAS, AT START.
    HOWEVER LATELY, WHAT I WROTE, IS CHANGED BY OTHERS, TURNED INTO SOMETHING ELSE.
    BEWARE.  IF IT CONTINUES, REMEMBER, THERE IS REVENGE.  AND ALL CAN PLAY SAME GAME.

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  141. your screen name has no flow, man..

    held below your 1290.25 level to be sure.  pretzy mentioned the island reversal top potential also. 

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  142. Thanks katz, love the intraday charts and commentary from you.  Very helpful.

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  143. No, the market isn't that far up. For today, the market failed to close above the 1290 level of ES or  129.48 of SPY.

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  144. Sorry, I'm just a newbie with this stuff ...

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  145. On my whiteboard, I have the first resistance written as 1292. It closed on it, after four days of "consolidation" for want of a better term. Not encouraging to the bullish case, if you ask me.

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  146. hehe . I'm mentally pronouncing it as "delete" ... delete what? Hard to say ;)

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  147. Where the other guys's screen name, I mentally pronounce as "bastard" ... he's a tough guy, I guess ;)

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  148. This market is in distribution mode...we haven't had a significant close above the open gap up since dec 27th. Gap up, then remain flatish...DISTRIBUTION!

    But I will admit, I'm getting quite tired of this. Ready for it to roll over already with some truly impulsive moves to the downside.

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  149. i'm josh'n you buddy :)  just trying to inject a little levity into the board. 

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  150.  Hope this helps. my one ES trade today. See stops just above or below waves.

    http://www.screencast.com/users/katzo7/folders/Jing/media/120d517d-e088-45cf-b0fc-d3c15fbe522f

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  151. Stop levels are as personal as what kind of underwear you buy... sorry... that was too personal!
     
    It really depends on your comfort levels. Mine are probably higher and tend to change depending on the situation I'm in. In this market, we are swinging all over the place, so getting an intraday move on ANY stock of 2% or more isn't a rare occurance and in fact, should be expected since everything it seems in moving in tandem.
    If I'm using levered ETF's (yes, I'm one of those on occasion!) my stops are usually loose - like 5-8% depending on the volitility of the day. I do have to make the decision to accept the loss at that level before I go in though, otherwise I don't sleep. If I'm momentum trading and buying a stock on the way up for instance, my stops are usually the cost that I paid plus commission fees. Somewhere in the middle of that is probably normal, but moving stops as the price increases is a very good practice - essential actually.
    It works for me, and you have to find what works for you, and allows you to sleep or get on with you life without having bloodpressure issues every time you place a trade. Also what works without stopping out on every trade. Well, if you're doing that every day for a long time, it's time to rethink your strategy.
    On the flipside of that, you have to be OK with missing upside if you get stopped out. It can be frustrating, but it's part of the game. I'd much rather miss a $5 move in a stock and be able to sleep than loose $5 per share  I couldn't afford to loose because I didn't put my stops in at my comfort level.
     The quick answer therefore is - it depends! Hope that helps
     

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  152. Thank you, that means a lot to me Michael. Just trying to help. This is how I learned, following the great Atilla. I like to share. Atillla did not do EWaves but I followed his calls with EWs saw what he saw. One Thursday nite in Oct. 2008 he said mrkt would drop Friday at 10:30 am. Think it was 10/06/08. I went to work early then rushed home, and could not believe his call !  800 DJIA points.

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  153. I use the Average True Range study. Depending on the timeframe of the intended trade, I will use different scaling factors and different read-off methods. For intraday, which I don't have much experience with, you might want to use a 5 minute frame and read off the maximum ATR for the past 24 hours. Then multiply that by a certain amount to fit your loss tolerance. Once in the spreadsheet, I just reuse the formula. I plug in the price, max ATR, monetary commitment in the trade, and it calculates the stop, the dollar loss at stop, and the percentage loss. These latter numbers are for confirmation that it fits my expectations. Hope this helps.

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  154. Hi dust (or devil),
    1290.25 is my pivot level worksheet calculation of R3 of ES based on popular pivot formula (yesterday's ES high, low and close). Today, this level is also the top of wave b after the market pullback from its top.

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  155. You guys have SARS PARABOLIC on your charting programs? All the work is done by it automatically for points to set stops.  I dont use it, I use setting it just above or below the last wave.

    http://www.screencast.com/users/katzo7/folders/Jing/media/ec67e020-a289-4063-ae44-a0acfc2fe6b2

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  156. interesting method!

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  157. Thanks for explanation. I just copy levels I receive in the morning from various update newsletters.. the lazy (and ignorant) way.

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  158. Thank you so much for your charts...it makes sense of things....learning a lot.

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  159. Katz07 - how important is it that it dropped below 85 after hours?

    And thanks for sharing as much as you do. This site has been an eye opener for me.

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  160.  Very important. Shut out the RTH traders, bass-a-tard mrkt !

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  161. thank you all for your suggestions.

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  162. Still new, RTH=? Does that kill the fast drop you were hoping for?

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  163. RTH is regular trading hours. No, think strengthens case that we will be in EW3 now, headed for 1280 ES. O/n (over nite) action important to watch now. Think we are in an IT down mode.

     

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  164.  You are welcome jbg.

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  165. Rocky, glad you made it through the rigorous new site registration process! 
     
    I should note that your account has been only tentatively approved until we get the lab results back.  Also, we're going to need another blood sample, ideally within the next 10 business days.  TIA

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  166. ty for posting this kat.

    This is very similar to what I do.  Depending on what time frame I'm trading, though, I may use a higher or lower degree waveform. 

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  167. got it. thank you!

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  168. wth, how can you reply by email?  I can't even do that!

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  169. Close, but no cigar.  It's reached an area that is moderately reliable as a top signal, but not ultra-reliable.  :)

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  170. Test reply by email.

    PL, reply to this if it appears on the blog.

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  171. ES 81.5 is next level to break, that makes my call clearer.

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  172. Yes, If I feel better about the trade relative to the EW count I will give it more room.

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  173. katz,
    It looks like it may head down to 1279.75 first then 1278 with the next wave.

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  174. Yep, Michael, worked.  Imma have to try this now.  This would be quite time saving vs. seeing it in my email, then refreshing the page, then scanning to find out where the post I'm supposed to reply to is.  And if there's one thing I need, it's more friggin time!

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  175. Nice!! Thanks for the tip Dust_ Devil.

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  176. lol -- to be fair, I called the bottom on October 4, and I called the top at 1292.  Technically, this is the first time it's been violated since.  So... ONE upward revision so far.  I'm sure it won't be the last time I have to revise a call though.  The market's organic, after all, and it's constantly evolving.  Just ask Dr. Bernankenstein:  "It's alive!!!  It's alive!!!"    :)

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  177. Hi Jack, welcome!  TY for the update.  Great profile pic, btw!

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  178. my interpretation of SPY action today, for what it is worth. should be easy to understand, but for those who are not into TA: this may suggest top is in or very near IMO

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  179. Juan, re: brokers (or "borkers"). 

    jbg touched on this, but it's important to remember that they are salesmen, first and foremost.  Their job is to "sell" you on the idea that over the long haul, stocks always go up.  I once got into it with a borker (not mine, I've always been self-directed), who was insisting that stocks have averaged an 8% return for the last 100 years.  My points to him were:

    1)  I'm not investing on a hundred year time frame.  Are you? 

    2) Besides, your "average return"  numbers aren't real, since they ignore inflation and ignore the fact that the major indices rebalance and drop companies who go bankrupt or significantly underperform (think AIG).  I pointed out that many of the Dow Jones companies which made up the average 100 years ago were now bankrupt. 

    He said I was "misrepresenting the facts."  I said, "Look, I realize your job is to sell stocks, and realize that you have to be a 'true believer' to do so, but go home and think about what I've said -- maybe one night when you're contemplating the real people who are your clients, as you're trying to fall asleep."

    Dunno if he took my advice or not.  :) 

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  180. Yep, I was noticing that reversal bar too.  VIX also shows a potential reversal bar (hollow red bar).  Ty for posting that Arnie, it helps out a LOT when I don't have to post all the charts -- so I appreciate you and Kat and others who post charts.  :)

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  181. Nice call Pretzel, right off the top. NICE !

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  182. wait...does that mean there is a drug test? um...
    I thought that sample was to match my blood type incase my bleeeeeding get's too bad. It's about time for a transfusion for me anyway, an S&P 1000 kinda transfusion if ya know what I mean.

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  183. ES/5 min. Forgot to note MACD divergence right under the EW3 & 5, 6 am to 10 am respectfully. Massive.

    http://www.screencast.com/users/katzo7/folders/Jing/media/319846e5-63c9-457a-a576-b22f23582b42

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  184. Big MACD divergence still ongoing on the hourly charts too.

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  185. I had a conversation with one, told him I used EWaves. He said what is that? Then I asked him if he used trend lines. He said what are those?

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  186. Can do, as am doing now.

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