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Thursday, January 12, 2012

SPX Update: Gaps Usually Get Filled

Yesterday, the market spent the majority of the session in consolidation mode, and formed a wave structure which looks corrective -- indicating that it's reasonably likely there are at least slightly higher prices to come before this wave completes.  The structure is vague enough that higher prices aren't guaranteed, though, and the rally has already completed the requirements of the larger waveforms.  My stance is that the reversal could begin at any time. 

The S&P 500 has overhead resistance in the 1300-1310 zone, and the market is now approaching this zone in an overbought condition, which severly weakens its chances of breaking though.  I would be quite surprised if the SPX can break through this zone for more than a head-fake, if at all.

Something my readers and I have discussed at length is the current market sentiment, which is now well-above historic levels for bullishness, and well-below historic levels for bearishness.  While this indicates that many traders have already committed to positions (i.e.- there are more holding long positions than short postions and thus fewer buyers),  the question has come up as to what might shift sentiment to bearish and increase selling pressure?  One thought as to what might accomplish this is that the United States is once again bonking its head on the debt ceiling.  It remains to be seen how this will be handled politically during an election year, but if it turns into another drawn-out gunslinging contest, the market could react in a similar fashion as it did last August.  Not that anything like that could ever happen... I'm sure we can rely on our elected officials to handle this issue peacefully, and in good taste (excuse me for a moment while I fall out of my chair laughing).

In any case, the charts continue to suggest that the market is forming a top in this zone.  The first chart I'd like to share is the one-minute SPX chart.  I've simplified this chart because there are now a number of viable ways to count the current wave structure, but they all seem to end in roughly the same place: somewhere between here and 1310.



The next chart outlines some support and resistance zones which are below and above the current market.  The trendlines run back a long time in some cases, but in order to make it readable, I had to zoom in on the current price action -- so the beginning of some of the lines isn't shown.


The last chart shows some of the unfilled gaps which are beneath the current market, which is a result of the fact that so much of the rally has occured in the overnight futures market.  The vast majority of the time (nearly 90%), gaps of this type are filled within 100 days of when they occur.  Obviously, there's never any guarantees, but this seems to be one more suggestion that the market will soon retrace this rally.


My expectation remains that the next move after the market finally turns will be a break of the October lows. For the longer-term charts, please see yesterday's article.  Beyond that, there simply isn't much more to add to the last few updates.  I'm starting to feel a lot like I did at the December top when I spent nearly a week suggesting that a turn was imminent, and I was even starting to repeat myself (repeat myself).  Unlike bottoms, tops take time.  To sum it up, here are some issues which support the bull and the bear cases:

In support of the bull case: 

1) The market is still in an uptrend
2) There were several resistance areas broken over the past couple weeks.

In support of the bear case:

1)  The market is overbought, and approaching resistance.
2)  The wave structure supports a top.
3)  Sentiment is exceptionally out-of-whack to the bullish side.
4)  The market has numerous unfilled gaps below.
5)  Several indicators which were triggered over the past few weeks suggest the market needs to return to lower levels.
6)  The put/call ratio is reaching extremes where tops normally form.  Conversely, the OEX put/call numbers suggest that smart money is placing bearish bets.  Unlike equity put traders, OEX put traders are right more often than they're wrong.

While my style is to try to anticipate the market by shorting near resistance and buying near support, I am also quick to exit if a trade goes against me.  My expectation is that a top is forming, but more conservative traders may want to wait for some type of actual confirmation of a trend change, such as a break of the lower short-term trendline, or a break of the trendline which connects the November lows and the December lows.  Trade safe.

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

328 comments:

  1. Good Morning PL...I got Vader off to preschool. GLTA

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  2. Morning PL.  The site refreshes so much quicker w/o so many comments.  Once an article gets into past 250, slooww. 

    Good stuff as always.

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  3. Euroland trumps US data. 1300 today?  :)

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  4. Pretz- Would you say that ES 1297.50 is roughly equivalent to 1304 in the cash market?  Just wondering if we may have seen our termination in the Futures market instead of the cash market.

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  5. Morning PL.  With the new rules this week requiring everyone to regester to have access, I saw yesterday where  the blog had 300+ comments.  I would say no impact was caused by the change and it is a lot more civil in here :-)

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  6. Good morning!  Great article once again.  Wish I had gotten up earlier, before the US data, so I could have added to my short up there.  Opened up my trading platform right after the big move down.  I figure we'll probably at least test 1300 intraday here, so will try to average in at that point.  More of a drawdown than I would like, but I started out small so plenty of ammo remaining.  Time frame is IT.

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  7. Pretz,

    Is the threshold of 1301.24 that you mentioned a couple of days ago still in effect for invlidating your preferred count?

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  8. Always possible.  I feel like the market wants to make one last push... but that's gut as much as anything.  Could even take another day or two (i.e.- down today, up tomorrow).  We'll see what the cash market brings.

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  9. Yeah, doesn't seem to have impacted much, though there's a couple regular posters who haven't shown lately.  Or if they have, I don't recognize their new names.

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  10. If the market opens above yesterday's high and then closes below yesterday's close, can that be considered a push-through failure and the downtrend can begin from there?

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  11. It would invalidate the ending diagonal -- but the top could end up being 2 points above that.  That's one reason I simplified the chart.

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  12. Yeah, we're 'decoupled' when the Euro goes down, and 'recoupled' when it goes up.

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  13. Yeah, though there's still a few regulars who haven't shown since the change.  Although, it may just be that I don't recognize their new screen names...

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  14. That would be a very bearish intraday reversal, especially if the swing is large.

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  15. Good morning everyone.  I wonder how many steps we should think ahead of the market at this point.  The market will do what is illogical to throw as many of the ride as possible.  Many think it will go down from here, so maybe the market will go up more.  When the market has fooled the majority that has been against it, then it may finally turn to the direction that  has been expected.   At this point, I am so tempted to buy some back month long calls... but since I am already holding to some mid-back month calls, I will wait for confirmation before buying more back month long calls.  The time decay is tough with the VIX.

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  16. Bob, that's what sell limit orders are for!  I got filled at 1296 ES, so averaged to roughly 1292 now.   

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  17. Lemme get this article ready for Minyanville, be back in a few.

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  18. Hi PL,

    I ran across an interesting twist on conventional EW analysis and I wondered if you had seen it before and if so, what your take on it might be.

    http://newelliottwaverule.org/

    Thanks.

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  19. fat fingers!  im in already... meant .05 not .5 :/

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  20. You know, I've been doing that most evenings, but I was so tired last night I went to sleep early and didn't even think about trading.  Congrats on that fill.  I'm probably 1286ish I think, added a little more at 1292.50 on the open, and will scale in further if needed.

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  21. Never heard of this, but stuff like this is usually just an attempt to repackage and "rebrand" RN Elliott's masterwork.  i.e.- it's generally crap.  If it ain't broke...

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  22. Morning all, william here using my Yahoo login ID.  I'm in Boston at a work event, so haven't been around much since last week.

    I read somewhere that for Greece's debt restructuring to be 'done' in time for the 3/20 debt maturing / rollover, the terms need to be agreed to 6 weeks prior to that date in order to give the lawyers time to make it all legal.  Current Greek law doesn't require minority participants in a debt restructuring to be forced to participate.  So some big hedge funds, who own 10-15% of the debt maturing 3/20, are holding out and don't intend to participate in any 'voluntary' restructuring.  To force them to go along, Greece would have to change it's laws.  It's not clear to me if that too would have to happen by 3/20 as well.

    Also, the big banks who do want an orderly restructuring ('want' might be too strong a word) still haven't come to terms with the Greeks on the terms of the new bonds they will receive - little things like the coupon rate, maturity date etc.

    In any event, 6 weeks before 3/20 puts us at about 2/7, so I expect Greece to be back in the news a lot in the next few weeks while they try to work out these 'little' details.   An 'orderly' default/restructuring is still not a given...

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  23. i havea a feeling this morning could be it... just a hunch

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  24.  $SPX cash is running 4.5 pnts above ES H2.

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  25. Glad to see ya!  You were one of the people I was just referring to who hadn't checked in since the registration change.  :)

    Great info!

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  26. lol, I skimmed right over that part of the question and got focussed on the projection part.

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  27. That may have been the "one last push" right at the open.

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  28. VXX is climbing - not believing in SPX? :)

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  29. RE - PL, "I feel like the market wants to make one last push..."
    Astro $.02 - As previously referenced, we're now getting to the point of some energy change.
    Friday, 1/13, we finally get to and past the Venus conjunct Neptune that I described as "rose-colored glasses". I use that phrase because of the irrational nature of the energy. Once that is past, reality may become clearer in this market.

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  30. I've been reading his ebook. Just a bit into it but of course, I'm EW newbie so totally cannot evaluate. He has a very interesting new rule, a discovery. You might want to take a look. A few hours on Sunday will probably give you the gist. The ebook is free and is short.

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  31. fyi solar way up 30% yesterday, already down 7-10% today- indicates frothiness?

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  32. Per previous WSJ article:
    Monday  1/16 - "Troika of international inspectors expected to return to Greece to resume talks on new bailout deal."
    Friday 1/20 - "Troika talks in Greece expected to end."

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  33. Thanks.  :) 

    And welcome to the blog, btw!

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  34. Outside reversal bars are very bearish.

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  35. Looks like it might be becoming clearer today.  Do the astro thingees influence in a window by chance?

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  36. Hi Whoa_Nellie,  I'm William Li and also from Boston!

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  37. This may be sideways movement until the last 15 minutes of the day...

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  38. PUT buyers of the SPX?

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  39. Who is going to go long off this trendline hit?   Bueller...Bueller....Bueller?

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  40. Of SPY - the ETF proxy for SPX.

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  41. By window, I assume you mean over a period of days?  
    Yes, allow +/- from 1-3 days depending on the strength of the energy.
    Friday, we also have Mercury (contracts, communications, thinking) conjunct Pluto (debt, taxes, wipeout).
    As previously discussed, this is another "preview of coming distractions" with regard to the very powerful  Uranus square Pluto coming up  first hit in June 2012.
    So, here we have a slight tug of war between the illusion that things are fine and the issues around long term debt. Next week, 1/19, we get the hard energy of Sun square Saturn.  That should be a serious reality check.

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  42. Speaks volumes that you have created a community of returning readers.

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  43. The price action of VXX says that this is not going to be a dull day. :)

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  44. I was wondering, Furrr, why the long-running Jupiter-Saturn opposition didn't apparently do anything?

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  45. Yep, VIX is up 3% so far

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  46. Said "No one [RTH] is making money up here. Bulls are waiting for a higher high.
    Bears are waiting for a break down. Stalemate. Reset sounds
    corrective, not impulsive." Looks like RTH could not get out. & "This is a freakin' beautiful set up, hope I am right..... Will post my
    triangle chart tomorrow morn. They gave the bulls hope and washed out
    the bears." & "If they drop this in a/h trading it will lock in longs. My 120 triangle
    may be set up for a fake out to the upside with a down after. And lock
    out the shorts.... This is what I think will happen."

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  47. VIX daily looks like an "abandonded baby" candlestick pattern.  Bullish for VIX.

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  48. 1/19 is the date many megacap tech companies report their earnings. Coincidence?

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  49. ES tagged 1294....cash translation of 1300?
    I don't know....I was expecting a little more up action early. Could still sell to 1280 to finish 4 then rally for 5.
    Hope I'm wrong...still big time short.

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  50. wow- i may have caught the top at 1294, full short position.  go me.

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  51. Could... but I strongly suspect that was it and the top is now in.

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  52. Goodmorning everyone! PL, do you remember an excellent VIX/SPX chart you put up the day after Thanksgiving that demonstrated how the VIX wouldn't make new highs during the intermediate wave down? Is there any chance of this happening now, or should the VIX probably skyrocket once this market turns around? I'm just asking for your simple honest opinion, no strings attached. :-)

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  53. Actually - Vix has been better last 2 days. Bought sso after the close and sold pre employment report for a nice scalp and added a few shorts. I was expecting the jobs number to stink with the seasonal workers getting pink slips - nice

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  54. I want to commend Pretzel. He saw it absolutely correct, the big picture, no distractions. Guess we will be partying/crashing at Maui. LOL Maui has been voted “Best Island” by readers
    of Conde Nast Traveler for more than a dozen years.

    Said this was gonna be fast. Fake out (at this point) our of triangle, not a break out. this is what usually happens with triangles...

    http://www.screencast.com/users/katzo7/folders/Jing/media/b38ba95b-f1e0-4054-9783-26a3ed373d2e

     

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  55. A cellphone's ring tone stopped the final movement of a performance in New York Symphony.

    Yikes!

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  56. This early morning move looks really impulsive to me. I’d be surprised if this pattern would be in a wave 4.

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  57. Katz, I've got to say that I absolutely love seeing all the intraday charting you contribute.  It adds so much to this, esp during the trading hours when PL has to catch up on his zzzz's. 

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  58. It's tough to say how 1 of 3 down will play out regarding VIX.  I would definitely expect VIX to rise from these levels, though.

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  59. RE fake out, not break out ...

    Just a question of chart/reality pairing: Do you really think the chart actually knows about about bond auction and jobless claims? Hmmm

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  60. Thnx Green, I try my best.....

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  61. 1/19 is my doctor's appointment. : )

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  62. I've been waiting for this comment for 5 days!

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  63. Just for educational purposes, here's how you could see this impulse as part of a fourth wave:

    Yesterday's decline would be A.  Yesterday's/today's rally would be B.  Today's impulse down would be C (always an impulse wave).  Not suggesting that's what's happening -- I think that was it for the top -- but it technically possible from an Elliott standpoint.

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  64. Third and last passage of Jupiter opposition Saturn was 3/28/2011.  Jupiter (expansion/ growth/opportunity) at total polarity with Saturn (structure/roadblocks/challenges/limitations).  

    What was more important is Jupiter in the latter degrees of Aries and then entering Taurus. back into Aries and then back into Taurus. There is a historical correlation to market tops/highs  when Jupiter is in the latter degrees of Aries up to 7 degrees of Taurus.  Jupiter is currently approaching 1 degree Taurus and will pass through the 7th degree by end of first week March. This long terms correlation study is courtesy of Ray Merriman of mmacycles.com.

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  65. Intraday wave 4 now?

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  66. Seems 'impulsive' rather than 'corrective' to me too, but not sure if there's a technical definition of those terms or not.

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  67. Major divergences with equities today... but this time its the opposite way! Euro still up, US Bond yields up, Oil steadily up and Copper still surging higher!

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  68. Tgts ES

    ES levels ~ 1283, 75, 71, 62.

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  69. Now on 5 coming down!

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  70. It was a great article and Alan Gilbert is to be commended for what he did.  Some idiot in the front row tried to pretend it wasn't him andthe phone kept ringing when there was very very soft music.  I think 2000+ people were ready to lynch someone at that point.

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  71. I do not watch the news, just the charts.

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  72. An intraday reversal day. Seconds?

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  73. And c waves are always 5 waves right?, so it may look like impule 1 of (3) minor but could fake out still...as it bounces it could be perceived as corrective 2 of (3) minor but could also be 1 of v of C of (2) minor ... any K/O to look out for here?

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  74. I do.  My experiences of the charts leading the news has been absolutely un-friggin-canny at times. 

    I cracked up over what RolfT said one night -- I was thanking him for updating me w/ news, and mentioned how I was terrible about tracking news, and said something to the effect that "a meteor could crash into the Baltic Sea, and I would hear about it from you guys." 

    RolfT replied, "In all fairness, PL, you would probably see that meteor in your charts before we saw it in our skies."

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  75. There will be that specific event that will catch us 'non news watchers' off guard. That has happened to me. But there is also the possibility that we will be last to see it and mrkt will react the other way when we hear.

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  76. Negotiation for Greece haircut went nowhere. "Voluntary default" may not fly. :)

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  77. FTSE and CAC have gone red for the day. DAX looks like it may close in the red but still up.   

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  78. Wave 5 ended, now a wave up.

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  79. Covered at 1282.5 -- five waves down, expecting some sort of bounce.

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  80. Good move, PL.

    I was hoping for an intraday reversal. :)

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  81. A close below yesterday's low would be idea.  That would form an outside reversal bar, also known as "bearish engulfing":

    http://thepatternsite.com/BearEngulfing.html

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  82. I meant outside reversal, sorry. :)

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  83. Ready to jump right back in, though if needed.  I covered "just in case", and to see if I can get a better re-entry... but there's a chance there won't be much in the way of bounces today.

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  84. Question - does the corrective b have to be above the 5 before, or not really.

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  85. Typical corrections retrace to top of Wave 4?

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  86. news is noise between advertisements

    Thanks for your charting, and being kind enough to head us newbs in the thoughtful direction. You too PL

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  87. Typical fouth wave corrections do.  2nd wave typically 38-62%.

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  88. Investors Intelligence commentary yesterday:-

    “The bulls increased to 51.1%, from 49.5% a week ago and just above their reading prior to that.  Again we count the most bulls since late April 2010, when their number was contracting from a lofty 57.3% at the start of that month.  Many indexes set the 2011 highs that month.  Readings above 55% are dangerous and bull market tops often include them as high as 60%. 

    Some bulls commented on the positive year-end trading and more noted the overall advance from early Oct, when the indexes were down 15% from the start of the year.  Those lows had the bulls down to just 34.4%, and well below the reading for the bears.  After that the rising number of bulls coincided with money moving into stocks. However we are now approaching readings where bullish sentiment is a worry.  

    The bears pulled back to 29.8%, from 30.5% last issue.  The bears have stubbornly held within 0.5% of 30% for seven weeks, even with the DJI gaining over 1100 points, and much more from their early Oct lows.  Those showed the most bears [46.3%] since Mar- 09.  That high level suggested many advisors had raised cash and the selling was near an end.  As contrarians we pointed it out as a buying opportunity.  We are now watching for a further contraction to the mid-20%s for the bears to provide evidence of a top. In Apr-11 the bears were as low at 16%, a low reading rarely seen. 

    The difference between the bulls and bears was +21.3%, up from the previous 19.0%, and heading for negative projections.  The spread is still below +28.0% that was shown in July and the +40.0% difference last spring.  The spread was -11.9% at the start of October.  This is a contrarian indicator so wide negative spreads [below zero] are signs of low risk for new positions.  The current rising reading [above zero] suggests increasing risk.”


    My Bullets:

    - Bulls (51.1%) now at highest since April '10 (57.3%).

    - But, bear levels (29.8%) currently far from the extreme lows seen at prior peaks (e.g. in April '11 nr to market top, bears were at 16%), although much lower than at the Oct '11 lows (46.3%), which was the highest bear levels since March '09.

    - And, Bulls + Neutrals (70.2%) sentiment is above the long term average (~69%), but only moderately so.

    - So, the rally has encouraged bulls, but not caused bears to throw in the towel.


    Data sourced from http://goo.gl/vZeu6 and http://goo.gl/Isd0D

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  89. Don't understand the question, sorry.  :)

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  90. Ahh…was looking at ES coming down from 1297.5. Looks like wave 4 there, but bad habit. Should be watching SPX.

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  91. predictable bounce off 1286, looking for 1280 to break then we should be rolling and cockin

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  92. The bulls beat the bears by a hair in the race to an outside reversal. It was a photo finish. :)

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  93. Using EWT, how do you decide whether and when to jump back in?

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  94. How much of a retracement are we expecting if this is an impulse wave down?  I don't know if that was akwfung"s question, but it seems related.

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  95. I guess you answered below...i think

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  96. I watch how price responds at different wave peaks and troughs... then I go w/ my gut about what's happening.  :) 

    Just went short again at 1284.5.

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  97. Same thing, if impulse.

















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



    Approximately 73% of Wave 2’s retrace between 50% to 62% of Wave 1.



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




     

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  98. Shorted again at 1284.5, let's see if da bulls can take it back up or if that was all dey gots. 

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  99. Great fingers act alike. :)

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  100. I counted 5 wavelets up and put my order in at the end of the 5. Is that how you decided?

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  101. Thx.

    So, in essence, we're looking for the open to hold as resistance.

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  102. TY. It is very helpful.

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  103. Same her. I was a bit leery of the VIX and wanted to wait for it to come down more before doing that.

    But my heart said "just do it". :)

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  104. To me those 5 wavelets would be the end of wave a of 2 at SPX 1289.68. Now looks like wave b of 2 is making a flat. Still would have wave c of 2 up after that.

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  105. I see 5 mini-waves up off the morning's low, could be an 'a' of an 'a-b-c' correction, if so we'd probably retrace to 1282.75ish in 3 waves, then another 5 waves up to 1287ish to complete the correction, then a 5 wave 3rd (tomorrow after JPM earnings?) down through this pesky support in the low 1280s.  But then again I thought we were rolling over yesterday afternoon.......

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  106. Oops, this was supposed to be a reply to akwfung's reply just below this post.

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  107. the pattern over 8 days have been drop at open and buy the rest of the day... so far we're following that pattern... need to break it!

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  108. That's part of it.  It's not really something I can explain in a few minutes.  I try to triangulate the pattern in real time, then watch the charts and see if it confirms my view.  Speaking of, I'm out if we go much higher.  Too much chance there's a third wave up coming. 

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  109.  EW4 up move 15 min. ES, up to 1286 (done), down to 1284-5, finish off at 1288.5 or so before more down.....

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  110. Let's see how SPX does at 1291.  If that was an extended fifth wave heading down, that's the expected retrace.

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  111. That's why I was torn between my heart and my mind. My mind was telling me to wait a bit until the VXX dropped more and began to rebound. But my heart told me "just do it". :)

    Wave reading is not exactly a science. :)

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  112. I've noticed these recurring patterns as well. We either drop in the morning and then cruise back up in the afternoon post European close or we gap up in the morning and just waffle sideways all day.  We had good news out of Europe and bad news in the US today, I guess they cancel each other out. 

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  113. Exactly which is tough for me because I come from a science background, so I want to apply rules strictly but it just doesn't work like that.  That's why I come here because PL's experience and EW aptitude/feel are vastly superior to my own.

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  114. In the south, they have faith based science. Sounds like you are not a product of that? :)

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  115. Tomorrow is Friday the 13th and market is closed Monday. Any chance of a mini rally as shorts go to cover for the extended weekend? (Headline risk over the long weekend?)

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  116. If that was a second wave off the lows, it should be pretty much done.

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  117. Why the market close on monday?

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  118. Martin Luther King day, I think. 

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  119. According to the pro's, JP Morgan's earning report and outlook will be the key. They are not optimistic that it will be able to meet the market's expectations.

    Today, they are taking profits like crazy. :)

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  120. Very interesting.....

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  121. Lol, no, Northeastern liberal education for me - much to unlearn either way though IMO.  I have enjoyed the South very much the few times I've been down there.

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  122. Any takes? Should we run for cover? It looks like a repeat with a gradual rise to the close... :-(

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  123. should start heading lower soon me thinks

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  124. I'm allowing for one more move up, roughly to yesterday's close, to complete an abc up.  Then we'll see. 

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  125. At tops, its always wiser to wait for a retest of the VIX lows, because greed takes time to attenuate...ergo tops are slower.

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  126. Nice stereotype, Yankee pig ;)

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  127. 2nd chart in article -- market now backtesting the blue trendline it was sitting on yesterday.

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  128. Come on back now BOB anytime, but leave that liberal education at home!

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  129. My ES 1288 just tapped,, now we see.... 

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  130. As I have repeatedly stated herein, there is NO decoupling of gold ad spx.
    So now gold also confirms an spx top.  (145pm et, gold at approx $1655)
    For the chances of gold going over $1680 now, are EXTREMELY small.

    I interpret the recent 'breakout' over the $1640 (printed in Dec.), that I was actually waiting for to fulfill the ew abc, and now that it's complete, at approx. $1660 area, gold price is now fully ready to break down BIGtime again. 

    (All that it is waiting for, believe it or not, is this delusional lastgasp spx churning at its current top (in the 1290s area) to end, and continues to be only MINUTES away from turning down BIGtime, in synch with gold's fall.)

    I will list some of the primary points why $1680 gold presents FORMIDABLE resistance, and which has about 99.9% chance of NOT being broken, for years to come.

    1. Very exactly created, SHARPLY down trendline, touching all 3 2011 tops (each top, being a lower top)---
    trendline which, right now, coincidentally, is at approx. $1680.

    2. the 50dma has also been falling sharply for approx. 3 months now (for first time in over 2 years), and also, coincidentally, is at approx. $1680 right now.

    3. the 200dma has been broken upslightly by yesterday's up c-leg action, BUT, it was also broken exactly the same way by the a-leg action in Dec., and it was instantly slapped back the next day.  I strongly opine that the same thing will happen again, and gold price is VERY soon to be slapped right back UNDER its 200dma where it BELONGS, in a DEflationary world.

    4. But most important of all, if you look at the 2011 chart ever since the mania blowoff alltime top at $1923, you will note that the repeated churning ACTIVITY between the $1660-$1680 area, is CRUCIAL resistance/support area for the gold price, and that now it presents MAJOR resistance, from any further upward penetration.

    5.  Therefore, the convergence of ALL these 4 powerful resistances, plus the abc ew completed pattern confirmation, strongly enforces that there will NOT be ANY further upward price action, than say, $1670's area.
    (personally, I think the peak in low $1660's earlier today was probably the top, as rejection from there was swift).

    6.  In MY final target opinion, when the spx FINALLY breaks down strongly (imminently, ANY minute now), 
    MY first target for the spx is 1000 approx, and for gold $1350 approx.

    -----------

    I have some additional commentary, to be provided in a later post today, about the greatest sector to short NOW.

    ----------

    I include below an interesting chart I found today, that further confirms THE top is in, for ALL markets, except cash.

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  131. Yay!  Thanks.  Homebuilders looking better each day for a short (YOUR xhb short).

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  132. Great advise. People dump hot potatoes in a flash, but takes time to gather chestnuts. :)

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  133. Why, this is even better, 1288.5 on the nose. Now shorting.

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  134. any new takes? seems like the same old script from every day. dip, then slow gradual rise

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  135. welcome back anon!

    anyone follow xlb (basic materials)?  broke up and out in a huge way today..  in contrast to that bullish development is xom (exxon) which has lagged considerably since the upturn on 12-19-11. 

    xlb and xom should each be forward directional indicators. 

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  136. Welcome back Anon20

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  137. Welcome back. Your posts are always interesting. :-)

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  138. stay short here.  i think we'll see a move back near the lows this afternoon and a bigger move down tomorrow.

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  139. lol.  im such a sucker should have sold!

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  140. Welcome and thanks for the analysis.

    Now, granted that I'm not as well versed in EW and gold as you and PL, and that I may very well be a(n) (insert your choice of expletives), I came across this chart that my 3 year old drew.  Do you think it makes sense, and that next stop may be in the 1200's and below?

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  141.  Lovin' what I see......

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  142. Agreed.  Surprised we got all the way back to 1290.  Hope today was/is the start of some 1-2's we've been looking for.

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  143. Thanks for your comments, would you present your gold chart so we can see how you are counting EW's? Also, since all major western Central Banks are printing money, one would expect that gold would attain the status of'"arbitrating" currency which would ultimately decouple it from any paricular currency!

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  144. Shorts need to press here, or its back up we go...  We're at the 50% retrace of the move for SPY (cash) RTHs.

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  145. Great post, A20.  Keep 'em clean like this, and we won't have to keep playing The Banning and Deleting Game.  ;)

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  146. The VIX has to move at least 5% for some meaningful gain...  if it is at 3%, it will go continue its decline.

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  147. big faz coming when 2 min macd tops out again

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  148. Just did a retrace measure on the 60 ES, 50% = 1289; 61.8% = 1291

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  149. usa major homebuilders stocks yesterday went totally BALLISTIC, so they are VERY overpriced,
    and when the UNavoidable herd realization finally hits, that there will be 'NO amerikan recovery',
    these will provide the GREATEST, FASTEST bearish profits, even FASTER than worthless usa banks.
     
    And out of all these stocks, I especially single out toll brothers (tol), not because it is the worst,

    but because, chartwise, it has just hit yesterday (and today) its price top of the last THREE years,
    all the way back to Oct. 2008, previously having been hit FOUR different times, at $23.15 close,
    and whenever on each of these other ocassions  this price was hit, reversal was FAST and NASTY. 

    Yet, even more importantly, than these incredible price reversals at exactly the same $23.15 price,
    the company's INSIDERS ALWAYS dump their own stock to retail investors, in the $20-22 range,
    since Oct. 2008, I have seen them do it 3 times previously, and this December they did it again BIGtime---
    http://seekingalpha.com/article/318059-consumer-and-retail-stocks-experiencing-heavy-and-unusual-insider-selling-in-december?source=yahoo

    And lets not forget that toll brothers currently sports a 'lovely' P/E of near 100, coming just under, at 95.5. (HAHA).
    But you see, the way they figure it, at least they have SOME profits, which can't be said for some of these other big homebuilders, like pulte group (phm), which haven't had ANY profits in FOUR years. Yet, phm stock has OVER DOUBLED, since it's Oct. low.  Ripley's museum should be informed, as 1 of greatest examples, of amerikan stupidity.
     
    (btw, all this manic buying excitement yesterday, believe it or not, just because lennar (len, another BUM homebuilder stock) reported that their new home orders were up 20% (up 20% from WHAT, I don't know, but CERTAINLY from some already record LOW level of new home orders).  Interestingly, yesterday's lennar buyers totally ignored that, their 4q earning reports came in 5% BELOW expected.) 

    FINAL SUCKER BLOWOFF DAY, I SAY.  Greatest shorting opportunity of all currently WAYoverpriced usa sectors.

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  150. Great post,  AÑÓN.

    Thanks.

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  151. Well, if da bullz can take this back above today's high, then this morning was just c of 4.  :/

    Bears need to get to work here.

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  152. Here is second level coming up? a retrace measure on the 60 ES, 50% = 1289; 61.8% = 1291

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  153. Any news on the Dec budget deficit? Must have just come out... and euro falls...

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  154. Katz, have you reconciled the EW count of the move from 1280.75 to 1290? Looks a little messy, trying to figure it out.

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  155. I don't see any chance of the bulls taking this above 1296, at least not today.  Today looks to finish between 1292 & 1285 .... and it had such a nice start. 

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  156. next week is earnings season AND options expiration

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  157. Double zigzag?

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  158. keeping us in suspense?

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  159. Hehe…it’s like the Cliffhanger at Six Flags. Hopefully the answer is the same (bottom drops out from under you and drops 10 stories fast!).

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  160. And at the same time, of course, in a supposed 'boom' for new home building, the usa home markets (and Europe's also, not just amerika) are being SWAMPED with GREAT beautiful USED homes, going for a fraction of what they originally cost, in a piece of dirty business, called FORECLOSURES. 

    So MANY foreclosures, as a matter of fact, that even your amerikan ignoramus half-commie president, has decided to get himself personally involved twice already, to 'solve' the OVERPRICED)  'housing' problem. 
    And every time hussein tries to 'solve' another amerikan economic problem, usa goes deeper down, the DEBT outhouse hole.

    http://www.huffingtonpost.com/2011/10/24/foreclosure-plan-obama-harp-refinancing_n_1028554.html

    http://www.thestreet.com/_yahoo/story/11370128/1/obama-foreclosure-to-rental-plan-being-readied-report.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

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  161. Here's the current wave count.  Sure looks like we're forming a fourth wave triangle.  Still possible it was an a-b-c

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  162. Lots of intraday posts here today...I suggest everyone take a step back: Iran just got a 6 month reprieve from the EU (interprete as EU has enough on their hands with the coming greek default and exit of curency).. US Budget/debt tax talks to resume in congress next month...supreme court to review healthcare law in 2012...holiday retail numbers heading lower. Consumer credit usage up while wages flat to negative. The consumer is 70% of the economy or so ther were. Maybe now like 50% in my opinion. Given the number of cars sold in late 2011 the us consumer is likely again tapped-out already. Lets not talk about all the student loans that aren't getting paid because so many 2007-2011 college grads are unemployed. My point is this...Bulls should beware the ides of March. Here is to a really good St.Paddys day!
    In the mean time, let the institutions and fund managers do their 2012 target rebalancing to new allocations and walk this thing up to 1320.

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  163. Much appreciated pretz

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  164. 1291 ES is the 61.8% retrace, pretty standard. Look at PLs chart.

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  165. Out of ES at 1288.75.  -4.25 off my +9.50 today.  :/

    Gonna go get some sleep now.  I put some orders in, we'll see what happens from here.  Night all.

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  166. EOD, or Globex or tomorrow's tgt 1279 ES.  Very hard to tell....

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  167. I GIVE YOU, IN PARTICULAR, ONE OF TWO CHOICES.

    YOU EITHER NEVER ADDRESS ME DIRECTLY AGAIN--
    IN WHICH CASE I WILL ALSO IGNORE YOU TOTALLY--
    OR, IF YOU CONTINUE TO ADDRESS, THIS IS EXACTLY
    HOW I WILL ALWAYS ANSWER YOU,  SCUMBUCKET:

    THE SOONER YOU DIE PAINFULLY OF AIDS, WORTHLESS FAGGOT,
    THE SOONER I WILL FEEL THE PLEASURE OF HAVING KNOWN YOU.

    and as to the rest of you, I will not explain why I single out this garbage, if you do not know already.
    edit/ban do as you please, P-head, but I WILL NOT ALLOW this idiot scumbag to further mock ME.

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  168. I GIVE YOU, IN PARTICULAR, ONE OF TWO CHOICES.YOU EITHER NEVER ADDRESS ME DIRECTLY AGAIN--IN WHICH CASE I WILL ALSO IGNORE YOU TOTALLY--OR, IF YOU CONTINUE TO ADDRESS, THIS IS EXACTLYHOW I WILL ALWAYS ANSWER YOU,  SCUMBUCKET:THE SOONER YOU DIE PAINFULLY OF AIDS, WORTHLESS FAGGOT, THE SOONER I WILL FEEL THE PLEASURE OF HAVING KNOWN YOU.and as to the rest of you, I will not explain why I single out this garbage, if you do not know already.edit/ban do as you please, P-head, but I WILL NOT ALLOW this idiot scumbag to further mock ME.

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  169. Whatever it is, it's definitely not just a repackaging. The book is free but a little hard to follow. He writes English like a second language but I managed to grind through about half of it last night and if I'm reading it aright he claims to have discovered a rule whereby the 4th wave of C waves and 5th waves always contain a B wave that breaks new pro-trend price territory.

    The way he goes about counting to arrive at this conclusion was a little... unconventional though, resulting in some very large "4th wave" structures that most Ellioticians I think would find ummm, arguable. I was pretty bleary-eyed when I put it down last night so I want to attack it again when I'm a little fresher. But I thought it might make more immediate sense (if any) to someone who's spent a lot more time staring at price charts than I have.

    I liked his notation style though, if nothing else. Easy to type and easy to follow. So there's that.

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  170. as a bear, its amazing how every move can be rationalized as a bearish- every step up is right before the roll over... 

    just a frustrated observation, on another flat day. cant hold overnight so back to the drawing board tomorrow. have a nice day.

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  171. Wave 5 completed, 1 down?

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  172. FWIW, here's the bullish way to count this.  I'm really exhausted and need to get to bed for real now.  Didn't want to leave everyone hanging though.  Alternate bear count in red.

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  173. Paolo Giacobbe PiolJanuary 12, 2012 at 10:15 AM

    Hi PL, I read the stress of a TOP, it is the stress of the traders that try to hidden the reality

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  174. 2nd chart btw.  Disqus glitch will attach all the charts I post today over and over to every post I make.

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  175. Also, I should add that I still think we're topping here.  Just might get that final wave up into 1300-1310.

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  176. And another disappointment.....

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  177. total waste of a day with some real nice gains.  this drift upwards is going to go on for weeks, that channel is *solid*

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  178.  truth or consequences time....... (ES 1291).

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