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Wednesday, January 4, 2012

SPX and RUT Update: Market Has Reached the Topping Target Zone

I was watching CNBC last night, and it seemed like every other guest was predicting Dow 36,000 for 2012.  Correct me if I'm wrong here, but don't bull markets start when everyone is bearish?  In March of '09, AAII sentiment was over 70% bears.  The new AAII numbers come out tomorrow, and I'm reasonably certain the bullish percentage is going to be well above the historic average; the numbers were slightly above average last week, and the rally since is sure to get more on board the bull bus. 

Anyway, I changed channels a couple times to see if I could find any bears out there, and finally I did.  I came to a channel where a fellow was talking about how he expected the Dow to hit 10,000 soon.  He was even wearing a Dow 10,000 hat; and I thought, "Now here's a guy who might have a clue!"  Then I realized the show was a re-run from March of '99. 

Part of the job of the second wave retrace during the early legs of a bear market is to fool the majority into thinking that the first wave down was just a correction in an ongoing bull.  Bear markets need buyers early on -- that way there's somebody selling later to keep prices heading lower.  That current sentiment fits that pattern.

The other factor which fits the pattern is the extreme difficulty in nailing the exact top.  This top needs to leave confusion in its wake, and that can only happen when the majority are still looking for higher prices.  There should be buyers all the way down for the first half of wave Minor (3); so those buyers can turn into sellers all the way down for the second half of Minor (3). 

Now, all that said, if prices break above the 2011 highs at any point, it's back to the drawing board on the whole kit and kaboodle.  I'm not a perma-bear with some type of agenda -- so if the market proves me wrong, then so be it.  However, my expectation that the market is in the process of forming a significant top has thus far been unchanged by the price action -- and this top seems to be confirmed by sentiment.

The market action yesterday was in line with larger expectations.  I'm going to present the long-term chart first.  It shows some resistance lines from the old head and shoulders pattern of 2011; yesterday the market broke above, but closed beneath, that resistance area.  The blue target zone has now been solidly reached, but still remains active for the moment. 


  
The next chart is the Russell 2000 (RUT), and I'm sharing this one because it shows an ugly, but clear, 5-wave structure off the December lows.  The count shown on this chart would seem to indicate that time's about up for the rally -- but prices are still living within the nicely-defined red trendchannel, and until that breaks, there's no solid signal of a trendchange.


The last chart I want to share is a speculative possible ending for this move.  I've been kicking this around for awhile, and the market has performed close enough to my expectations under this potential that I feel it's worth sharing.  This count would create even greater confusion over the short-term, and I think that's what I find most appealing about the possibility.

This labeling takes a little creative license with the waves, but I don't feel it's forcing the count excessively.  Keep in mind that the lower red line is just for illustration, as opposed to being an actual support zone.  Also keep in mind that this is pure speculation; there's nothing yet to indicate this will unfold.


The short-term waves yesterday left me with the expectation that prices during Wednesday's session will reach beneath Tuesday's low, but whether that was "the" top remains to be seen.  This is going to be a hard top to nail to the penny, so the larger waves in the first chart will have to be our guide.  The target zone's been hit, so my stance now is that the rally could end at any time.

Worth mentioning, the Euro is sporting a complete wave structure which allows for the possibility that it may have already completed all of its 4th wave rally, as anticipated and mentioned yesterday.  The rally fell slightly short of the target zone, so if that was the whole of wave 4, it indicates extreme weakness in that currency.  This would bode ill for equities as well. Trade safe.

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

154 comments:

  1. Dust Devil -- I actually stole your anecdote about CNBC bullz, largely so I could set up my (bad?) Dow 10,000 joke.  :D

    I would have talked about sentiment either way... but that made it more fun.   

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  2. HAHA - I just want a f'ing crash period.  One almighty S & P gap down of 100 - please Lord - just one - I've been ground down with gap ups while short to where I'm down like 15% since that Fed/ECB debacle.  I do think your last chart is probably what we're looking at - one more pullback - one more lurch to the heavens - then every company reports and says customers are pulling back, we lack visibility etc etc - then of course the newly more Dovish Fed will step in.  What we may need is a new Pres, Bernake gone and all Hawks on there to really get a crash wave

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  3. Morning Pretzel.  Are you going to sit out until we see a break in trend lines?

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  4. PL,

    Not sure if you changed something on the web page setup, but the readability on mobile devices is MUCH better.

    Thanks

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  5. I'll play it by ear -- but, for my style of trading, there's really no reason to rush positions here.  There will be plenty of points to grab when the time is right.   I may jump in and out if I see a setup I like.  Probably not today, though.  I have an appointment tomorrow a.m. (today, for the rest of the US), and need to get at least a couple hours sleep first. 

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  6. Michael -- got your post in my email, though I don't see it here... but yes, I did do a few things to try and make it more mobile-friendly.  Glad they worked.  :)

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  7. Uh oh, you've used Anon's H&S neckline without proper attribution.  Expect a lawsuit, or at least some belligerent diatribe replete with cursing and childish name-calling.

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  8. I am kicking myself for closing all my positions at huge losses yesterday.  Saw the strong upward momentum in all the markets and was thinking that this rally should last for 2 days at least.

    sometimes I wonder why i bother doing this, all the lack of sleep and stress and loss of money on top of that. 

    i say, the best way to make money is to get a salaried job.  that you can be sure is 100% positive cash flow :)

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  9. lmao!  I know, cause nobody else in the world has seen it.  It's not like I was doing charts depicting the h/s LONG before Anon20 came along or anthing...

    btw, welcome back bob -- I was just wondering where you'd been.  Haven't seen you around in a bit.

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  10.  Mornin' everyone....
    TJN, gotta think like a criminal in all this, this is how the market whipsaws ppl and makes money. If they can rob a thousand or two fron=m each palyer, that adds up. Triangles (and megaphones) are extremely hard to call and play. I once called 12 megaphone forms in a row, the blog site author got pissed off and booted me off. lol

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  11. You just really need to work on your entry and exit strategy.  You generally want to bet the opposite way of how you *feel* in this game.  Next time you think it's a good idea to go short because it "feels" right, consider that might be the time to go long, and vice-versa.  Look for areas of resistance to get short near, and areas of support to cover or go long.  Don't chase moves. 

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  12. Thanks again, PL. Matchless insight!

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  13. Alright, I have to get a couple hours of sleep.  You guys are on your own for most of the day -- I'll probably be back before the close, though.  Try not to break anything.  :)

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  14. will do our best, get some rest after yday's 24hr marathon. We'll hold the fortress and thanks for the good story. I cannot but agree: what a mess!

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  15. Dang! He locked the liquor cabinet before he left again!!

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  16. GGecko,
    Here are my two thoughts. This and 25 cents won't get you a coffee. 1) We get back into the triangle, that increases the possibility of a sell off, a huge move to the downside once we get near or at the bottom of the triangle.  2) we conclude this up move, tgt is 1319 ES H2.

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  17. Interesting, $RUT has touched lower red trendline on PL's 2nd chart but not breaking below it.

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  18.  I speculated that there would be an ISLAND TOP left and we would begin heading towards bottom of triangle (around $RUT 700). Major divergence appears, green arrows.This island top shows up best on the 120 chart. Mrkt is making up its mind now, to go up or continue down.

    http://www.screencast.com/users/katzo7/folders/Jing/media/f9066f49-77c5-48a1-a72e-4df6e2108adb

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  19. Just a reminder ....

    Friday is non-farm payroll and options expiration day. As PL says all the time - trade safe. :)

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  20. What the heck is going on in $SPX.  30 minutes of 1273 plus/minus one point.  Watching paint dry last month was exciting compared to this.  Are the bots holding a huge war and we were not invited?

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  21. BTW: Tomorrow is ADP report - it often moves market ahead of non-farm payroll.

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  22. anyone else short financials?

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  23. I think we are riding wave 3 down - from yesterday's 1 at HOD and 2, the peak before closing. No?

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  24. I'm shorting spx for the day. Financials seems like down in the dumpster already. No?

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  25. Unless yesterday's gap up was 1 and this is still c of abc in wave 2.

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  26. interesting read: 
    http://www.marketwatch.com/story/the-need-vs-want-trade-2012-01-04?link=mw_home_kiosk

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  27. PL said that wave counting is an art - no kidding! :)

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  28. "Then I realized the show was a re-run from March of '99. "

    Haha... isn't that just the way it goes.  That was pretty funny stuff.

    Pretzel, I don't think there's anybody any more bearish than myself out there.  I like to joke that I've been bearish since 1977, but the truth is that that's not all that far off the mark.  Because I learned about the Rothschild cabal decades ago and have been railing against them ever since (at least in my attitude toward bankers and the whole scam they've perpetrated on us).  I want them to burn.  So I guess that means I want their scam to end.  Unfortunately, when it ends they won't be the ones hurt the most.  I watched a TV show last night on Fort Knox and it just scared the livin' hell out of me.  Here's a quick read about the banking orcs:
    http://www.marketoracle.co.uk/Article32377.html

    But I'm afraid I'm starting to crack.  I still have dirty bearish thoughts but darn it all, maybe they 'are' going to run the S&P to 2900 in which case we'll be spending $37 for a loaf of bread and oil would be at $700.  No way the global economy is going to survive that.  I keep doing studies to try to find out which it's going to be and they all come up with the same conclusions... that most of the POMO and QE money has flowed into commodities.  In fact, since 1999, commodities only related stocks have risen 129 times as much as the S&P has.  You read that right... 12,900%.  But the bottom line is that the entire world is at an inflection point now.  I finally think I know what all the nonsense about 2012 is all about.

    This just has to come to an end.  It just has to end very, very badly.  I just don't know 'when', but that's what I'm trying to find out.  In any event, as you and I discussed a week ago or more, you said you didn't mind if I posted a link to my soon-to-be published article on that topic.  Well it's now published and available on my own blog or on Global Economic Intersection.  The original piece was only published on GEI but John Lounsbury informs me that it was the #1 article on his site over the past half year... so 'somebody' sees some merit in it.  I'm a bit shy about doing this, but I have your blessings and I'm positive your readers will not regret taking a look at an analysis as focused as this one:
    http://albertarocks-ta-discussions.blogspot.com/2012/01/crx-beginning-to-rumble-suggests.html

    Thanks for another fabulous post Pretzel.  You really have a great mix going on here.  I seldom see a good chartist who also has the ability to write.  We often see good writers but most often they don't have a clue about they charts they're presenting.  You've got both and that's why I shamelessly promote you.   I really like Pebblewriter as well.  He's a  great guy also... and certainly a man who thinks for himself.  One of a kind that guy.  Oh... and thanks for the chuckle.  I'm glad I didn't have a mouthful of coffee going on when I read that, lol.

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  29. Looking at the fibonacci extension based on the rally the week after Thanksgiving. It looks like this morning's retrace backtested the 61.8% support level, which held. Implication is for move upward, seems like. Chart attached.

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  30. I'm watching  1269 like a hawk. spx, euro and gold are all at support/resistance. I'm keeping my fingers crossed. This is not wave counting, but macro situation is very tenuous.

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  31. well faz is at a a 3 years low, im thinking banks are due for a serious correction... just a 1/4 position in faz for now...

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  32.  You guys watch eur/$$? This illustrates morning action and is a good part my call.

    http://www.screencast.com/users/katzo7/folders/Jing/media/1c0f506b-63aa-46f0-b3c4-06993a6250fb

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  33. Good call.

    My fear is that there are too many euro shorts and the sucker can snap back in a big hurry. Right now, it is at an all year low. If it cannot hold, then .... :)

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  34. If spx's current uptrend is indeed end of c and start of wave 1, then it will have 5 wavelets ahead. Right?

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  35. Seems to me an impulse wave always has a 5-subwave structure. But I'm a novice :-)

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  36. Start of wave 3, not start of wave 1. Probaby just a typo on your part.

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  37. So far, this intraday wave 3 doesn't look all that impulsive, but what do I know. lol

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  38. Alright... So RUT broke lower trendline. Per Pretz, this mean much less likely new high in the RUT and in fact it looks like it's wanting to test the lower side of trendline now. SPX went below 1269.37 so the speculative count is looking more likely now (meaning probably will look to make another high to comple v, C, (2). So both are contradictory...Head spinning anyone?

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  39. On MY CHART (lol), $RUT broke the lower trend but has recovered and is hugging it. So it looks like strong resistance at the lower trendline. So no contradiction, imo.

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  40. I'm seeing a pretty clean continuation of yesterday.  My best guess is that this recent turn up at around 10:40 EST could be the beginning of wave (v) of v of C of y of (2), tracing it all the way back up to Minor degree.  I think max SPX of 1288.5 based on v needing to be shorter than iii at the subminuette degree.  Doesn't have to go all the way to 1288.5 though.  I'm a newbie-rookie-novice though.

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  41. Euroland closed. It was a sea of red. Germany's bond auction went OK. But UniCredit sent everyone running for cover. It is seeking to raise 7.5 billion Euros of capital. It's market cap is 12 billion Euros. And share count will be up by 200%.

    Deadline is mid-summer for Euroland's banks to raise capital.

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  42. Market wants to hang around these levels (Mon. high  - Tues. low) as long as possible - probably at least until after Friday's employment report.

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  43. Went short at 1270 on the $SPX and it has moved up mostly since then.  If you want to make money, just ask me what I did and do the opposite.  Hope the high for the v,C (2) isn't too great and comes sometime today.

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  44. why this rally may not hold: 
    http://seekingalpha.com/article/317351-stock-market-outlook-breakout-but-then-again

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  45. Got it. I think. :)

    I think EWT could use the Dewey decimal system, or something like that.

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  46. I never really understand what is considered impulsive and what is not. Is it a rapid movement in a short period of time? If so, what is considered rapid, short, etc.?

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  47. I see that hugging..yeap I think your right. I'll close my short position on a little retrace I'm expecting in few mins (Dolla, TLT oversold right now). Is anyone seeing an extended 5 of wave 2 in APPL? I went short yesterday... anybody else see anything different?

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  48. Not good at this but doesn't the IWM appear to be a huge ending triangle??? Excuse terminology.

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  49. I was gonna post around 10:30 to 11 that I felt the down move was over for a while (1-2 hours??). I do not want to post too much tho. I have no idea if you all are short term traders (ST = hours to a day), intermediate traders (IT -= swing traders, holding overnite or longer), or LT trader, long term; I suspect  a number of all of these? My system is pretty well developed to pick up on these small interday changes as well as longer term ones.

    Avoid positioning except at certain times, watch the candles for the typical telling indicators. When I start talking about spinning tops, inverted hammers, dojis, that is time to take notice. This is gonna be sloppy, hence avoid ST trading positions IMO, until we get back inside my triangle, if that is where we are going. Once back inside, traders will understand what is happening, and when we get towards the mid or bottom of my triangle, the bottom will fall out. Just my opinion....

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  50. Also, I think it is an EW rule that 5th waves must be at least 70% of wave 4, so that would put a minimum price target of 1279.66 (at least on my count).

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  51. I get an EW tgt of 412-14 for AAPL,  three points above that could break the next down wave and it goes up. If it breaks, I will poser up into an EW# of 3 (D). There was an island top on 10/17 at 421 that I played and called pretty accurately. Was stopped out using a TL at 370.

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  52. CORRECTION ~ 'If it breaks it will power up into an EW3 of 3 (D). . . . '

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  53. can you post the chart of you triangle

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  54. that is correct.

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  55. ooops look like a liftoff again. 1310 to 1330 maybe your short and big

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  56. ignoramus whiny bear kiddies, as berra said, it ain't over 'til it's over, so stop shorting this damn here thing.
    maui punk did not tell you all, that his preferred (2) above is TRUNCATED---and I am certain it will not be.
    this mad rally aint over, more madness ensues further very soon, spiking this crazed puppy to near 1300.

    I have good news though.  There is a monster killer chart lurking, waiting to be unleashed.  I saw it today.
    it's coiled like a snake, and the worst snake of all, for this 'lunatic bull' market--full of destructive venom.
    spx NEEDS 1 more HIGH, above 1285, for EVERY amerikan fool in land, to get on the hell train--down.

    when this puppy cracks, hold on to your panties.  it will be MODDER of all gaps down.  but it aint now.
    not yet.  but MY new chart assures, that when it breaks, all hell will break loose, for ALL but---cash.

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  57. Looks like it for the upside, a strong down now will confirm what I posit...

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  58. please enlighten us with your charts or otherwise you'll be just like all the other lill screamers... :  "veel geschreeuw maar weining wol" go figure that one uit.

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  59. The problem with the "down now" idea is that from yesterday to now, the downward view is waves 1 - 4, but 4 overlaps 1, so the pattern is void. In other words, I don't think there's a wave 5 down coming.

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  60. HEY, pathetic B.O.B.A.  What I will take the maui punk to task on, is something else.
    for he has NEVER before given any validity to CLOSING prices, until I came on board here.
    And now, once again, he usurps one of MY ideas, without due credit.  and thats why she/he is a punk.
    Since he notes above, near EXACT as I have told him/her repeatedly, that intraday prints are not THE story.

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  61. guys and galls, following up on PL's awesome "trading strategy post"  from yesterday , http://pretzelcharts.blogspot.com/2012/01/some-thoughts-on-trading-strategy-and.html, today is a good practice day if you have a paper trading option. I've been doing it all day so far and it really trains one skills to nail tops and bottoms better. No harm done when you lose, that's how you learn. Once the real-deal hits, you'll be all set to go. Just a word of advice. that's all.

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  62. Is that a EWT rule\- that 4 cannot overlop 1?

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  63. days like today annoy me- who is buying the dips, and why?  If you're a bull, why not just let the market come in a little and buy lower? 

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  64. Great article Albertarocks.

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  65. As I understand it. Usual caveats apply.

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  66. The volume is very low. Neither side is convinced. I, for one, has been longing and shorting - with minimal bets.

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  67. im building a short swing trade position, either we top out around here or we start the year with a massive rally

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  68. There was slight dip to 1274. Was that a very short 2 and then onto 3? Or are we still on wave 1, in your opinion?

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  69. Good idea. I wouldn't bet my farm though. Not until there is at least some conviction - one way or another.

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  70. In my silly opinion, I don't think we've completed wave 1 up. From what I read, wave 1s can be very messy and drawn out. I think there's a lot of wait and see because of the reports thurs and fri as you advised this morning.

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  71. I think you are right on the money.  Started wave (ii) down at 12:20 EST and ended up with an abc flat correction.  Wave (iii) up started at 13:20 EST.  Could see 5 wavelets within this current wave up.

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  72. hey, usa KRAUT, you have as much soul, as a dogweiner.

    GRAND supercycle 5---END of amerikan world power. 
    300 years in the making. and---about ffkkking time.



    I CANT WAIT.  BUT---it will take a screaming this end,
    up to near 1300---all crazy amerikan idiot bulls--IN.

    MY chart aint gonna save shorting bears.
    GET OUT.  BE in cash, 100%, usa t-bills.

    MY chart only accelerates UNEXPECTED down move.
    THIS ain't a market for weak usa men.  GET OUT.

    And, weak usa babies--- get OUT of ALL govt. related vehicles.
    ALL.  in ever nation, not just amerika.  BROKE govts will drain every citizen.
    today's GOVT RULES, are NOT tomorrow's rules.  401k, etc, ARE DOGSHIT for govts.

    WHEN the game IMPLODES, NO current GOVT. 'rules' will be respected,  GET ONLY CASH.

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  73. The bots are "buying" the dips to keep the market up - so as to take it higher when some additional "good" news hits.  If they let it drop before the next good news hits, it would be harder to break into higher highs.  As katz07 says below: "think like a criminal".

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  74. I'm honoured that you read it William.  Thank you :-)

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  75. Objectively though, we had a gap up yesterday. That provides gap support. I plotted the fibonacci retracement on the gap. Today's 1268 on the SP is almost exactly a 61.8% retracement. That's not "wrong."

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  76. SPX/euro divergence?

    They have been moving in opposite directions since 1 pm. Usually, they move together. Also, European banks were decimated while US banks are up. Temporary?

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  77.  Observe the doji on the ES 15, will this do the trick into the 5 down for EOD?

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  78. Great call!

    I covered my short at the fib support after seeing your plot and went long shortly after. The EW counted beautifully. I wish everyday can be that smooth. :)

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  79. Dust_devil, I looked at your chart below regarding the Fib retracements.  The Fib. you are refering to is the one you used to project a final target price around 1311.  Therefore, if it is being used to project a price, I don't understand how you could call 1268 a 61.8% retracement (to a top that hasn't happened yet).

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  80. It does help "validate" the projection... but it is not a retracement.

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  81. So mystical, isn't it? lol --- Large timeframe fib 618 lines up exactly with short timeframe fib 618. Fibonacci, Illuminati, OM....

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  82. It wasn't a retracement. It was an extension based on a big AB (of ongoing ABC) from late Nov to mid Dec.

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  83. friday close to tuesday high is a move...market has retraced that move 61.8%
    1257 to 1284 was it?
    dust_devil is right....but I'm strongly feeling this morning's low was wave 4 in the ending diagonal...wave 5 higher to 1300ish and we're all done...I think we top out friday am, sell off friday pm and S&P downgrades france over the weekend....spanish and italian debt auctions suck next week and we are in for some hurt.

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  84. lmao, Don't you wish!

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  85. I'm not sure whether it's mystical or too many technical traders. That's why I often wonder what would happen if everyone were to trade using EWT. PL assured me that counting wave is an art. To a guy who likes the certainly of 1+1=2, I'm not sure I was assured. :)

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  86. Is your projection  a measured move up from the Dec. lows equal to the October rally?

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  87. good article from zh today about the euro/es/risk decoupling that has been in place for some time now.  i believe at the es oct 4th low eur was at 1.31ish.  

    http://www.zerohedge.com/news/reading-euro-risk-decoupling


    as pretzy says, these relationships come and go

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  88. Sounds like a good plan...

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  89. if govt rules aren't respected, then government cash won't work....do you mean gold?

    I agree with your 1300 wash out move...I see it as the wave 5 of an ending diagonal. Then crash next week...I think 1300 is seen on the open friday with a good jobs report giving false hope, just like the last time S&P downgraded US. I've got an erie feeling friday after the close, france is getting the axe.

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  90. TY for the article. Great read.

    No more training wheels. :)

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  91. Not October rally. Late November rally.

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  92. Lol! - "...not sure i was assured." 

    On a serious note, indendent of what "everyone" does or of "too many technical traders", the market makers and the bots DEFINITELY use EWT and technical analysis to deliberately give false signals and false breakouts so as to fool as many technical traders as possible.

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  93. Yes - just reviewed your chart again.  Thanks for the correction, dust_devil.

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  94. You mean...like today's momentary drop below .618? ;-)

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  95. RockyTop, I agree with your plan of S&P making their announcement by this week.  I found another post mentioning the same gist:  http://www.forexlive.com/blog/2012/01/04/french-downgrade-already-priced-in/
    The author's main comment was:
    “With the EFSF expected to sell bonds tomorrow, it might make sense for S&P to go ahead and conclude its review of France today so investors don’t get caught buying a piece of AAA paper only to see it downgraded days later. ”

    My thoughts also are that  it could look very bad for S&P if they do not get their review on France wrapped up ASAP before the incoming volatility that (in my opinion) may be over due soon.  Italy’s bonds will be up in both February and March. If Italy, and other Euro countries have issues with their auctions or paying back/rolling over their maturing bonds, this first 2012 quarter.  Also with corporate earnings for 1st quarter, I don’t expect them to be good; and even if they might be “ok”, I cannot imagine futures earnings outlook to be good with the troubles of Europe.  If S&P does not make a statement soon about their review on France and their opinion on the European countries, people could look at S&P as having not doing their main job of rating entities appropriately and on time.

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  96. Funny how the RUT is teasing the bear at the support trendline, but it's trending up. Not breaking down.

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  97. I am wishing! :)

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  98. holding 1/2 short position overnight... if we pop tomorrow i can cost average, if we drop I'm in good shape. 

    trying to cut down day trading for 2012, its too hard to time the game successfully every trade, and frustration is way too high with these ridiculous overnight moves and choppy intraday action..  going to try riding the big moves through cost averaging, scaling in and out, using pret'z sweet sweet targets and my own dd.

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  99. Exactly!!!!    They do this ALL the time.

    In my note above, I meant to spell the word "independent", but obviously failed...

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  100. ...Or they are holding it up to sell as much as possible to the willing before the market tanks on some upcoming news they already know about.

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  101. gotcha dare_devil

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  102. The price action on the SPY today from noon to the close looks extremely ugly.  A gap move tomorrow?

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  103. My amateur's interpretation of today's doji is that it's an inverted shooting star, and is bullish.

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  104. AF ~ good point about SPX/eur, been watchin' all day. Copper got hit today, down 2.75%. Mngkn9, here is a chart, actually 2 of the (D) and 120, of $RUT with possible island top. As with all TA, put something out there and see if it proves or disproves. 

    http://www.screencast.com/users/katzo7/folders/Jing/media/8f79b692-3261-48bf-8a75-5f80b8b4e455

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  105. i agree, probably a pause before more buying continues. this mornings sell-off was corrective and lacked conviction (otherwise we'd have a big red candle today), buying came back strong and selling never made more than a blip. 

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  106. gap which way? Up?

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  107. Looking at the price action of SPY alone, it looks like controlled distribution between the 50% and 61.8% retracement from the Tuesday high.  It looks like a decelerating/rounding top from the bottom at around 10:40 AM and from 1:30 to the close, it has a H&S look to it.  All of which point to a down move from here.

    HOWEVER, we have the ADP jobs report, the ISM Non-Manufacturing data,  and retail chain store sales reports all coming due tomorrow - most of which should be positive.  A gap up tomorrow?

    Is there a French banks downgrade planned overnight? A gap down tomorrow?

    There is no way to know, but the pattern seems to point to a sharp move coming.

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  108. i am not sure if SPY is the right ticker to look for clues about tomorrow. 

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  109. GOLD AINT CASH, IN TODAY FIAT WORLD.
    gold now has value, but it is trade value, not rigid value.
    I MEAN LITERAL PHYSICAL USA FIAT SHIT PAPER CASH.




    THIS is an endgame, of decades of amerikan lies.
    only other literal truth I am certain of, usa t-bill wont implode.
    that is where the ubermasters have been holding their trillions, for 4 years.

    look at entire history of usa t-bills, and you'll know truth. 
    MASSIVE DEFLATION, ASAP.  WORLDWIDE.
    other than usa t-bills, just physical cash.

    there is a SHOCKING world ahead.
    and most brokers, wil go BROKE,
    and NOT pay your bear 'WINS'.

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  110. I like to focus on RTY2K -- we broke out and finished outside of the upchannel (barely) - while coasting along the underside the back half of the day. Retraced slightly more than 38% of the downmove from yesterday's high while 5 points below a significant resistance level at 752. Much better setup for the shortside with a stop near 758 so your not taken out with a stop seekign whipsaw. Trendline from July highs will take us to 680 sooner rather than later. Keep in mind, the last leg of the correction almost always seems to truncate. Don't forget about that France downgrade which is waiting in the wings.

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  111. DIA, IWM, MDY all display the same basic pattern.  QQQ seems more bullish short term, but it has underperformed the other indexes lately (rightfully so based on earnings warnings...) .

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  112. Great interview about 2012 expectations for the 1st quarter http://www.bloomberg.com/video/83658400/ 

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  113. To clarify... distribution took place between the 50% and 61.8% retracement up from the Wednesday low back up toward the Tuesday high.

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  114. ALSO, barter items, at neighborhood level.
    BULLETS, ammunition, are one of MY favorites.
    they are small, light, and soon---to be REGULATED.
    thunk, you amerikano idiotas, it is easier, to control bullets,
    than guuuns.   guuuns are worth noting, without bulletsss... hahaha.

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  115. Yeah, took a short break over the holidays from trading to reboot (today also).  Actually, your blog is basically the only stock-related information I've read the past two weeks.

    It was very nice not being caught short in the large rally yesterday for once.  :)  I'm thinking about starting to pare in some longer-term short positions over the next few days, particularly if tomorrow sees another surge higher.  I should be around more often - Anon should enjoy that.  :)

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  116. If the ED is the way it plays out and I had to write a script - I would say that the ADP number tomorrow is better than expected and everyone jacks their jobs numbers for Friday to 200k+ or - and the markets ramp to 1285ish by EOD tomorrow. Then 8:30am Friday - we get the numbers, and it is a classic gap n' crap - where we touch 1294 and reverse. The story for the reversal initially will be that the jobs numbers were good, but didn't meet the raised expectations plus, and this is the kicker, the market will fear that the number was TOO GOOD and the probability of QE3 actually went down b/c the jobs numbers had gone up. So there you have it - set a good to close to sell short at 1290 on Friday and sleep in tomorrow.

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  117. Great indeed, thanks!

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  118. That is the most concise and cogent presentation of the current global economic situation I have seen yet.  Thanks for posting.

    "The blame is on the countries who got drunk at the party.  Now we have to figure out who is going to pay the bill at the bar."  ...classic.

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  119. RE. short at 1290 on Friday.

    I know that PL says the (2) count is getting long in the tooth, and I know that 1292 is resistance. But setting those aside for the moment, everyone is expecting a France downgrade this weekend - RockyTop and William Li brought it up - thanks for the heads up. So by Friday, that will have been priced in. In fact, it is my belief that that contributed to today's uncertain final round-top up move, or "controlled distribution" according to Guest. BUT,,,what happens if the France downgrade doesn't transpire? If you hold massive shorts, you'll be slaughtered on Monday. Think about that, small down move if downgrade. Huge up move if no downgrade. Very bad risk/reward. Might be worth buying a straddle on Friday though.

    Just thinking out loud.

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  120. That script sounds totally plausible.  I think you nailed it.

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  121. concur, this is how I see it playing out....as long as friday close is below 1275, i'll be confortable holding shorts....anything above that and I'll continue to be nervous....what I'd really like to see is a friday close below 1268 (today's low)

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  122. OK, I see what you're saying. Short in at 1290, hold over weekend at 1275 or thereabout. A 15 point buffer is nice but it's not all that much. Tough decision, I'd admit.

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  123. Good point about the France downgrade already being priced in.  It may just be a shoulder shrug event for the market.  If so, we should see a gap down open (whenever it happens) followed by a rising market the rest of the day.   If the France downgrade doesn't transpire, the market should just drift along. If the rating agency actually says that it reaffirms France's AAA rating, then we get a move up.

    Also consider that China may implement another rate cut at any time.  It could occur this weekend.  What happens if both events take place?

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  124. RE. the market should just drift along.

    Maybe the drift along scenario can be ruled out. If all the bears pile in at 1290, then the slightest reverse up on Monday will trigger a short squeeze. This could juice the rally up past the next resistance at 1325. At that point, the bulls will pile in because there's nothing to fear anymore. All the bears will realize this on Monday, which just makes this inevitable at that point. So if you decide to short and hold on Friday, then your strategy must include bailing out immediately on Monday if it didn't work out. Hold and hope will not cut it.

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  125. Well, I've got good news and bad news. 

    The good news is the hard drive on the custom i7 laptop I do most of my blog work on crashed today, so I've spent the majority of the day on the phone with "Peggy" at HP tech/warranty support.  I'm way behind the 8-ball now, and my work laptop is toast. 

    Hang on, lemme check my notes real quick...  My mistake, apparently that's the *bad* news.  The good news is they claim they can fix it and have it back to me in about a week, and I was able to recover most of my charts. 

    Fun day!

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  126. Well that sucks! No matter what the timing, and I'm sure we've all been through this, it's never a good time! Backing up my computer right after I hit "Post as Dave" button!

    Good luck Pretz!

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  127. PL,

    Sounds like "peggy" was WAY more helpful to you than she has been to me.  VERY sorry to hear about "your" crash, and I think I speak for many of us, when I say....This is not the crash we were hoping for....It is such a drag when this happens....

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  128. Santa was so busy whipping up an X-mas rally he missed your e-wish, "Please Santa... Bring me a crash!" - and now it looks like he finally got caught up with business. You lucky boy, you!

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  129. lol-  yeah apparently the computer was taking all the crash talk *way* too literally.

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  130. ugh the futures  are red. ughhh the one time i decide to go long

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  131. Huh? It doesn't look particularly red to me. A few points is noise. You need a drink :-)

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  132. lol i do live across from a bar...hrmm

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  133. I have a bar fridge right next to my 'puter. And I *am* drinking port at this time. lol -- No kidding man, going long is scarey sh*t!

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  134. Yeah, not red enough yet.

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  135. Good excuse to get your next dream computer, even if you do get this one fixed. :)

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  136. Going long near the bottom, when everyone wants to short is scary, but that's the time to do it.

    Going  long after a rally has reached the reversal zone and the market is overbought and near resistance is not something I have the stones to do.  :)

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  137. Maybe for a quick day trade, but not in an overnight cash postion.  Hope it works out for ya, Mav.  :)

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  138. Good advice on "bailing out immediately on Monday if it didn't work out. Hold and hope will not cut it."  There are so many possibilities.  The safest thing would be to stay out from now through the weekend; but then you would potentially not make any money either. :)   It would be sweet if S&P makes the announcment prior to Friday's close.  It would then be a get in and out move with less risk.

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  139. If the downgrade does not happen, many bears will be caught.  Great point on the high risk low reward...

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  140. yeah i regretted it once i did it. it was quite foolish on my part but I couldn't sell bc of the restrictions on becoming a pattern day trader. I was definitely swayed by the poor bear performance today and the seemingly unstoppable power of the printing press. hopefully tomorrow we pop a little higher on good numbers coming out and then I can exit.

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  141. Here is another 5$ stock that showed a nice basing action, then a parabola. Never thought this income stock would do this, a 14% gain yesterday. I initially bought this for an income, look at its paid once-a-year dividend, but could not ignore this straight-up move. I scan through numerous charts looking for these. Will go back in if it drops.

    http://www.screencast.com/users/katzo7/folders/Jing/media/3d517406-ec02-4f16-9705-7a4330861e66

    http://screencast.com/t/nN50sfulIn

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  142. When I bought BFR it had a 22% dividend, now it is 18%. But dividend has not been announced yet, so that could go up in smoke.

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  143. Frankfort desk just opened at 3 am, spiked ES ~ three points.

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  144. yeah...don't try and squeeze the last bit out of the rally...I tried back on October 28th...the next monday I got rapped. Not going to make that mistake again.

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  145. Overlap today at least took a few options off the table.  Looks like yesterday's counts were the correct two options -- either the rally already ended, or there's one more quick spike high coming.  Time running out for bulls here.

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  146. Agree PL, very hard mrkt to trade.

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  147. HOLY CRAP.  I just finally checked AAII -- am I good at reading the mood or what?  Numbers verify exactly what I suggested today, but in a BIG way:


    Bullish 48.9%up 8.3 Neutral 34.0%up 5.4Bearish 17.2%down 13.7

    17% bears?  OMFG.  Game over.
     

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  148.  Yup, just reread you article. This is what I think and have been saying too, I have ways of measuring the potential for a final EW5 move to my 1319 ES and it has only a 28% chance of happening. BUT EW5s are like a bull in a china shop, very unpredictable and erratic. About island tops, look at previous October island top in RUT to see how powerful these are. Nice analysis PL.

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  149. Update's posted, let's continue discussion on that thread. :)

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