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Sunday, January 29, 2012

SPX Update: Yet Another Top Signal -- and Sentiment Suggests a Confused Public

This weekend, I was studying some data from the Yale School of Management which I found intriguing.  I can't post their charts in this article, because I didn't receive written approval in time for publication, but I will link to their site in a moment.

Yale tracks a number of sentiment indicators, among which is their "Crash Confidence Index."  The CCI survey measures confidence that there will be no stock market crash in the succeeding 6 months -- and it has now reached levels nearly equivalent to the levels after the 2008 crash.  This is a contrarian indicator, so those lows would generally be interpreted as bullish for the market.  Here's the link to Yale's chart.

Flying in the face of that data, we have the American Association of Individual Investors sentiment survey, and it, too, measures investor expectations over the next 6 months.  This survey shows that the number of bearish investors is still hovering at readings which are extremely low by historical standards.  This would be considered bearish for the market, as a contrarian indicator.

So which is it, investors?  How is it that less than 19% of investors are bearish about the market over the next 6 months, and yet at the same time, the number of investors who think a crash is possible over the next 6 months is near all-time highs?  Has John Kerry been the sole respondent in these surveys?  (Actual quote: "I voted for it... before I voted against it.")  These two pieces of data seem completely contradictory, so I'm left with the conclusion that the public must be very confused.

The charts are also giving some signals of indecision, as this week the S&P 500 (SPX) formed a doji candlestick on the weekly chart, which is an indication that buyers and sellers have reached equilibrium.  A single doji by itself only predicts a reversal approximately 50% of the time, so it has roughly the same predictive value as a coin flip. 

Since the doji by itself has no predictive value, I dug deeper into the charts.  I noticed that the Nasdaq Composite (COMPQ) closed the week more than 1% higher, so I decided to back test prior occurrences where the SPX closed the week virtually flat after a well-defined uptrend, while the COMPQ closed the week greater than 1% higher.  I added the 10 Year Treasury Yield (TNX) into the mix as well, with the qualifier that yields closed the week lower, to further narrow the results and to add another logical component to the study.

The logical components of the study are as follows:

1) SPX roughly flat is suggesting indecision after an uptrend.
2) COMPQ is suggesting investors are now chasing the rally in the riskier Nasdaq stocks.  This is somewhat common to see at the tail end of a move.
3) TNX yields falling flies in the face of the Nasdaq surge and suggests that smart money is in "risk off" mode.

It's an interesting result.  This has only happened three times in the prior six years -- two of those three occasions marked virtually the exact top for SPX; but in 2007 the SPX still had a hair farther left to run on the upside.  On other occasions, COMPQ failed to reach the "greater than 1%" qualifier -- two of those are mentioned below, but are not included in the results since the qualifiers failed.  In the chart below, the SPX is in the center panel.


Add this to the mix of the dozen other indicators we've looked at over the past couple weeks which also suggest a top, and we have the markings of either an actual top in progress -- or a market that is being so distorted by the money flood from the world's Central Banks that these indicators simply don't work under these abnormal conditions.  I suppose our government does have a vested interest in keeping the market afloat, since they have huge stock holdings in companies like General Motors (GM), American International Group (AIG), Citigroup (C), and others.  And, to use just one example, GM's stock needs to double just for Uncle Sam to break even.  Can you say "moral hazard"?

Anyway, much as I'd love to go off on a rant right now, I'm going to move on to the next chart. 

The decline off the 1333 high in SPX can be counted as an impulse wave and subsequent completed correction.  It's a bit ugly and very complex... however, assuming it's an impulse, then it's a first wave -- and first waves are often ugly.  Below is my preferred very-short-term count.  This count suggests that the top is now in place at the 1333 high.  Interestingly, 1333 is almost exactly double the March '09 666 low (as pointed out by one of my readers, "billabuster").  It's also the level at which wave (y) equals .786 Fibonacci times the length of wave (w). 

Here's the very short-term SPX chart, which shows my preferred count of the decline as wave 1 of a new impulse wave lower. 


Next is a slightly larger view.  This is the same chart from Thursday and Friday, which shows that the Minor (2) rally appears to have completed in the blue target box.  To be fair, if this is the actual top, it has kept me running -- and my short-term alternate counts have been the ones hitting targets.  I keep trying to place a cap on the top, and the rally keeps blowing through it.  However, also to be fair, in prior articles I have plainly expressed my lack of certitude in the short term counts of the structure.  At this point, I now feel a reasonably high degree of confidence in my short term counts.  In any case, if this top sticks, I can still accept kudos for the big picture count... if it doesn't, I have several crows warming up in the oven. 

The bears need to hold the rally below the 1333 high, and start moving the market beneath the three red support zones shown on the chart.  The chart is labeled as “invalidation for bear count” – but this is specific to the count shown and only a short-term invalidation, not long-term.


This is the first time I've felt reasonably confident that the top could be in since the rally started.  This is primarily due to several factors: the first is that the entire wave structure finally seems to reconcile very well (for once); the second is due to the fact that the Dow Jones Industrials came just about as close as they could to the 2011 top; and the third is the combined weight of the numerous market studies I've shown over the past couple weeks, which are all screaming for a top -- as well as the current study shown at the beginning of this article.  I feel like it's now or never for the bears here. 

However, the count above would be invalidated with trade higher than 1333, and until the market starts breaking some key support levels, there's still nothing to indicate a true trend change.  The market hasn't even broken down from the blue channel yet, so conservative traders may want to give the rally the benefit of the doubt.  I'm attempting to anticipate a reversal, which can be a dangerous activity for traders who aren't nimble.

In conclusion, as I've stated on numerous occasions, until the Dow breaks its 2011 highs (among other things), I remain a bear.  I'm going to go on record here with a bold (and possibly stupid -- we'll see) call and say that it's my belief that the top is now in at 1333.  Assuming the market continues lower from here, we'll start looking at targets if and when the market confirms this view -- and I'll attempt to determine at that point if this is, indeed, the significant top we've been expecting, or only a smaller correction.  Trade safe.

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

361 comments:

  1. OMG FIRST?!?!

    ps great post pretz!

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  2. ty mav, and congrats -- you win the Kewpie doll for being first!

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  3. Said yesterday "Be on the watch for a spike in the $VIX. . . [tomorrow]"
    &
    UUP/15

    http://www.screencast.com/users/katzo7/folders/Jing/media/335ba923-2d50-4e0f-b46b-2142b3618d1c

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  4. I actually went back farther with that SPX doji/COMPQ up <1%/TNX down study, but there are very few examples of it happening.

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  5. it wouldnt surprise me that that was the top of 1333. thought 1320 for a while so pinnochio thru and back down makes sense. still need break of 1295 area for a bearish lean. thanks for the mention. tremendous article right there!!

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  6. Well-reasoned and thought out post, thanks PL

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  7. I thought that was an excellent data set to examine for market tops - good stuff!

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  8. Excellent post as usual PL...TY

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  9. That's a helluva spike...good call

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  10. Are you inverting the results of the 'Crash Confidence Index'? The "Crash confidence reached its all-time low, both for individual and institutional investors, in early 2009" and it's near that low again. That would make it another bearish contrarian indicator, right.

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  11. Great post as usual PL.  Thanks for your insight!

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  12. Nope. It reached its last low right when the market bottomed.

    ________________________________

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  13. Gap down for all (futures) indices, oil, gold, silver and others.  That S&P 1310 support is very near being or actually is toast in the futures.

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  14. Nice call!

    Also, I seem to remember that someone was suggesting on Thursday that the VIX was bottoming... dunno who, though.  :)

    http://3.bp.blogspot.com/-evi5Q867tTQ/TyE7EE3HgKI/AAAAAAAABD8/aZCqhNOhwj4/s1600/vix+vxv.png

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  15. You had a good call too :)

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  16. PL,

    Truly unbelievable analysis.  Truly amazing. God Bless You.

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  17. PL, thanks for your analysis. I think confusion is what the MM would like. So that neither bears nor bulls have the confidence to go all in without getting fleeced. Guess who benefits from these confusion? :)

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  18. Hi PL great post as usual. 
    After reading Saturdays blog im quiet amazed how successful your calls have been if one was trading those moves. As I do not trade futures and I have heard you say before you have done a lot of option trading, would you please be able to suggest what symbol would be suited to follow your moves ie (SPY,SPX) in the cash market. Also If one was hypothetically using a $10,000 account, what amount you would use on each trade. As you stated the transaction figures for futures not cash market in that blog. I only ask because the last couple months my account has taking a beating from my reckless actions and if I was following your calls I would have done very well. Im learning a lot everyday from this site, thank you all. 

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  19. Hey PL, great post. I also liked the one in response to the trolls ;)

    Quick question for you, how concerned are you about the golden cross being formed? Been hearing a lot about it from bullish analysts. 

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  20. I always love the analysis, excellent work as always PL.

    For the fundementalists, keep your eye on whether Greece  is willing to turn its so called soveriegnty over to Merkel and her Golden Goose.  Right now she is putting the condition of absolute control over the Greek budget and actual money dispesal in exchange for the next tranche of bailout cash.  This represents a substantial policy change since Friday when the market was expecting an Onassis sized cargo ship of Euros.  Probably figured out over the last week that the Greek government cut Jack #@*t from their public payrolls and implemented zero austerity since they received their last welfare check.

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  21. looks like 07.5. held, not to 1310. more down, if it does not reach that level that increases bearishness

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  22. Aussie:Yen has a closer correlation with the S&P than any other currency pair I've seen... even closer than Aussie:USD  And that baby is down hard tonight:
    http://www.forexpros.com/currencies/aud-jpy-advanced-chart

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  23. BROUGHT FORWARD
    Some eye candy, no one knows what will happen next week but I am predicting to start, a gap down, then a building of the right shoulder on the 3P&DR DAY chart, then down. Anything notably above the extant left shoulder level will change my opinion immediately. I reserve the right to change my plan in regards to future mrkt direction.

    http://www.screencast.com/users/katzo7/folders/Jing/media/85257bcd-b3a9-4ebc-acb6-e1435eb0c8c0  (see volume spike)

    http://www.screencast.com/users/katzo7/folders/Jing/media/c91b5170-9ce7-41e5-a94a-0e40c77fbdeb

    http://www.youtube.com/watch?v=pSQ1akE2CcM

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  24. Now, here is a key. Now why would a broker do this, because they thought the mrkt was gonna go up???  Bass-a-tards, they just f**cked thie client. Posted yesterday "Just read on another site someone (retail) was short 1,000 shares of QQQ and the broker called the shares."

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  25. So AUD/JPY down 1% scales to how much in SPX in your expierience?

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  26. I've never even worked that out DD.  I've just been keeping tabs on the fact that when the currency pair drops, so do equities and vice versa.  So if we can get a glimpse of what the currency pair seems to to do, we can expect equities to do the same.

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  27.  ES/120

    http://www.screencast.com/users/katzo7/folders/Jing/media/0b2b542d-e074-4138-aa4d-cc704d2a2ef9

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  28. Hi katzo7,

    a bit lost in ES/120 ST wavecount regarding -  did we make wave 4 (?) up to ~1307 (and now wave5 down to ~ 1301).

    Then ABC to compete the bigger wave 1 down (of your long term view - if its correct - wave 4 down wich you posted a couple of days ago)...

    And after this wave 1 down the ES will build some more of the right shoulder in a wave 2 up.

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  29. PL,
    whatever happens in reality - your work is excellent. Top Notch!
     

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  30. Dear PL,

    Congratulations on a great site. I read with interest your article on entries and stops. I too use cash charts for the purposes of analysis but trade futures. I usually hold contracts for between several days to weeks. One of the issues I've struggled with in terms of setting stops is that outside of RTH the futures market will often range well outside the cash market's range and as a result stops that I set based on the cash market get triggered. I was wondering if anyone has any suggestions or strategies for dealing with this issue? What I started doing was to set stops based on the futures daily ATR. But it is a little anxiety provoking carrying such distant stops into every trade. Any insight you or your conrtibutors can provide would be greatly appreciated.

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  31. Hi, m_at, it's awfully hard for me to answer this post in a way that doesn't come across as "trading advice."  The questions you're asking aren't really things I can answer anyway, without knowing your personal situation.  That's what your broker is for, etc.. 
     
    SPY is a good proxy for SPX and it's one that you can go short or long in.  The practical differences between trading it and a futures contract would be 1) the leverage and 2) the hours (futures being open 24 hours).  If I were trading the cash market, I would be forced to trade completely differently than I do now.  Cash is subject to gap moves which futures aren't (90% of the time they're not, anyway).
     
    I honestly would recommend to less experinced traders to use leverage very sparingly.  Yeah, you're not going to get rich in a week that way -- but most new traders go bust, and "not going broke" while you learn might be a better first goal.  Leverage is going to make every mistake amplified, and some of those vehicles are tricky and designed to take "noob's" money to a degree.  For example, options and triple inverse funds will lose money if the market trades sideways, whereas SPY will not.  So there's no room for error with options/leveraged funds.
     
    As to "what amount" to commit to each trade, there are entire books on that sort of strategy.  I learned that the hard way, so I don't have any great book recommendations, but maybe someone else does.
     
    Not trading advice, but some thoughts to consider.  

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  32. Great post PL - thanks.

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  33. When you get a chance, take a look at the Dow daily chart from 2000-2003.  50/200 crossovers all over the place. 

    Here, I'll save you the trouble of looking it up and attach one. 

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  34. Thanks very much for your help much appreciated.

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  35. Nice charts and music.  Always liked Winwood's solo stuff too.

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  36. Hi AU, thanks, and welcome!

    As to setting stops, I use Elliott Wave, combined with a dose of "think like a criminal" experience to help me determine stops and protect against stop runs, if I'm even leaving a trade open in the first place.  It's hard to give you a simple system, because it's based on the market's position on a given day, and my read of that specific postion at any given moment within the context of EWT -- so my stops can vary quite considerably from day to day, depending on the situation.

    Sorry there's no simple answer for this question.  :) 

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  37. You could look at Tharp - Trade Your Way to Financial Freedom and then on to his book on position sizing. Just my opinion.

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  38. Hussman weekly commentary, extract:-

    http://www.hussmanfunds.com/wmc/wmc120130.htm 

    "In late October, I noted a condition that we characterize as a Whipsaw Trap - which essentially involves a breakdown in a broad set of market internals, followed by a recovery driven by some of the more volatile components (sectors such as financials and transportation stocks are good examples). I noted that only about 30% of these whipsaw traps were followed by further advances - a statistic that was based on subsequent market action over the following 6-8 week period. The real question is "What then?" The answer is both straightforward and troublesome. Specifically, whenever we've observed a whipsaw trap that then advances enough to a) drive the S&P 500 earnings yield below its level of 6 months earlier and b) raise advisory bullishness beyond 45% - or bearishness below 30%, the result has almost always been hostile. Essentially, what this combination picks up is an already fragile set of market internals that has enjoyed an "exhaustion rally" that both exceeds earnings growth and is met with overbullish sentiment.The previous observations of this exhaustion syndrome, and the deepest decline from that point to the low of the next 7 months, on a weekly closing basis, were: November 1961 (-25%), August 1987 (-33%), July 1998 (-18%), July 1999 (-12%), August 2000 (-22%), May 2001 (-24%), March 2002 (-32%) and May 2008 (-43%). There were also two instances of this syndrome that were not associated with a market plunge: January 2006 during the housing bubble (which ultimately led to a market collapse well below those levels), and November 2010, just as the Fed was initiating QE2 (which still did not prevent the market from trading at lower levels about 9 months later)....In short, market action is presently showing features associated with "exhaustion rallies", which have often been followed by deep losses over the following 6-7 month period."

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  39. My method is a bit different than other Elliotticians I think in that I apply EW counts on very  short time frames. Since this appears to be the beginning of a move down, and the EW1 and 2 are counted, I look for a 1.618 to 2.618 times the EW1 range to guide me in where it might go. Also, you can see that the 03 level is a major support level. In my ES I am a day trader and  need to know exactly what is happening at all times. The 1310 level would be the EW4 level if we turn at 03. But we did not get to the 10 level (yet that is), got to 07.5 so we may be channel surfing which brings up the idea that this down move, if it breaks the 03 level is headed for a 2.618 relationship with the EW1, or a extended EW3.

    To counter above argument, there are a series of dojis appearing on the 120 now. So it is quite possible it fulfills its 1.618 relationship to the EW1 at this point. Hard to tell and this is where I go flat. Hope this helps.

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  40. appears it is headed for the 1310 level now, anything above that firm EW mark (I will give it 1215 to totally prove itself) and the building of the right should becomes the next possibility. IMO this mrkt is not gonna die so quickly, no waterfall down move, no flash crash yet. If set up is correct that comes after in this progression. Longer term I think the 3P&DH I spotted will work out at this point, meaning over the next month a steady decline. this mrkt is like a vampire and needs multiple stakes in it to kill it (or one major news event). Look for huge sustained spikes in the dollar, $VIX. a move to 1210 would help to solve these late nite gaps earlier, am a firm believer of the earlier they are filled the more the mrkt can uninhibited run its direction. . . 

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  41. Thanks for your response, seems I'm going to have to stare at a few more charts to get the hang of out of hours stops :-). I think I'll start by collecting some data to build a picture of the point range of out of RTH stop runs. It might allow me to tighten up from from a daily ATR based approach to some multiple of the average stop run range.  

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  42. Did anybody get a kick out of the part in the article about John Kerry being the sole survey respondent with the "I voted for it, before I voted against it" line?  It's not too politcally offensive or something, I assume, since he actually said it, and it fit the context perfectly. 

    Yay or nay?

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  43. Yes, thanks!

    My question was speculation,
    Your answer is speculation,
    Just as it should be.

    Im not so interested in potential trading entrys as much as trying learn how to read the waves and the fib relationships - if I understand your predictions/charts correctly or not.
    So I wont take anything you say or do as trading advice..

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  44. On Haussman's Oct. Whipsaw Traps, I would time them from Aug. to Oct. & are actually what I spotlighted as the first floor of the 3P&DH. Brought my 3P&DH chart forward but first here is a schematic.

    http://sites.google.com/site/wavediagnosis/tradingsystem/three-tops

    Where I think we are now is the #21 to 25 area, the 24 & 25 specifically. It is TBD if we do a traditional right shoulder, to be apparent on a DAY chart, or if we start slipping more quickly. I give each an equal chance right now. The bulls have had their say on another site I monitor for novice investor sentiment (dumb money who shout "see I told you f**king a$$holes we are in a bull mrkt and are goin' to 1370, 1450, 1600, 2500 $SPX") Why do they scream loudest at a top, to buy, buy, buy? Shouldn't they be sayin' cooly 'buy the dips,' Or JBTFD as they say? Could never figure this out. Bears do the same at a bottom, I was raked over the coals on another site for calling a bottom a year ago when I said "we will have a rally that will make your head spin." 

    The mrkt's psychological prowess is magnificent, it figures out how to shave off cash from the greedy. AS I said before, 100$ here, 1000$ there; pretty soon you are talking real money (a point up for the first one who knows where that is from). We saw a emotive meltdown on our site, it was not pretty. But it provides info for the cool trader. Personal attacks means we are almost there. Personal attacks with swear words, we are gettin' closer. Personal attacks with rhetoric about someone's mother, we are there. The mrkt is an equal opportunity employer; it will take from bull & bear alike. Keep your emotions in check, wait til a proper non-emotive entry, do your homework. Sitting tight is a position also. Sometimes I watch the candles for hours without a position (or go our for Chinese).http://www.screencast.com/users/katzo7/folders/Jing/media/cb57ed5a-9b7f-4a80-a52a-148897a08504

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  45. It was a perfectly legitimate analogy.

    Gooooood Morning All! 

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  46. this is the only take away from that 'verbose' statement. the rest is all B.S. "Since this appears to be the beginning of a move down, and the EW1 and 2
    are counted, I look for a 1.618 to 2.618 times the EW1 range to guide
    me in where it might go." a EW5 is easy to spot, the 1 & 2 are easy too. Just count from the 5.

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  47. I sometimes forget how literal some people are, so I added this sentence above the final chart:

    "The
    chart is labeled as “invalidation for bear count” – but this is specific to the
    count shown and only a short-term invalidation, not long-term."

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  48. i count five doli or ending signature candles on the 120 ES, not liking this for immediate further down.

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  49. Agreed.  Looks perfect as the right neckline point.  Right shoulder to come...  We'll see.

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  50. Much like the quote of his former former role model: 
    “That depends on what your definition
    of "is" is”

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  51. Beginning diagonal... exotic.

    "Do not go gentle into that good night.Rage, rage against the dying of the light."

    I still think I'd have gone with the pterodactyl though.

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  52. Goodmorning everyone! I am a swing trader (not a daytrader) and I am waiting to find the best point to short the market through ETFs (TVIX and FAZ). I am thinking of waiting on the sideline this morning and hoping for a brief upward correction this afternoon in order to buy at a better price and then hope for the down(trend) move to continue tomorrow. Any comments or suggestions?

    Many thanks in advance!

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  53.  break of 03 or actually 01 very telling for any possible reset to 1310.

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  54. true. yes, stay away from 3x etf . once you get in them, you end up keeping them and waiting to get back even. decay erodes and blows ur account. also futures trading will eat you up also. newbies stick with spy. set stops at a percentage you would like to LOSE. take profits. pigs get slaughtered

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  55. It was fair game I guess but that one still smarts a little. I don't remember every detail but basically there were two competing versions of the funding bill he was talking about. All spending for the Iraq war was off the books up to that point, funded by a series of "emergency" appropriations that didn't show up in the regular budget deficit to make people think we ought to think about, you know, maybe paying for it somehow.

    The Democratic version of the bill sought to offset the cost by winding down some of Bush's tax cuts. Republicans preferred to just keep maxing out the credit cards. Kerry voted for one bill and against the other of course, which made perfect sense. But Jesus effin' Christ, for a man so hopelessly enamored of ponderous eloquence he sure could get up there and gaffe with the very best or them. And of course any such subtleties are completely lost on what passes for a political press corps in this country, perhaps owning something to the attention span our citizenry generally has for matters of public policy. So the reaction was completely predictable, but painful to watch.

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  56. a little update on €/$

    that what I expected him to do, as posted here:

    http://img513.imageshack.us/img513/4672/forexchartsfreeforexcha.jpg

    the little focker had to go the extra round... (5*) but could not trick me. Still the Alt.y is possible, but I give lower lows a higher probability. With 1,32 crossed, it's perfect possible to start. So I am looking again for intraday movements to jump onto and hold half the position until dead or el dorado... 

    Happy hunting everyone.

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  57. lol, you crack me up and I am glad you are part of this community. thnx lena.

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  58. no island for aapl. Still have a target of 480 for that stock... even though I do not remember, how I got it.... :/

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  59. VXX and VXZ indicating a short term bottom is in.  No guarantees...

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  60. taking a long here at 1301ish...

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  61. "until death or el dorado...

    Nice.

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  62. Yea, I got a kick out of it, but now you going to have to dig up a Rep quote.  Not for me, I am ashamed of both sides, but it sounds like a toe or two got stepped on.  I am sure you could recruit some help to dig up a suitable Rep quote!!!  :)

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  63. look at DAY/AAPL, look at  in last island top, 10/14. that one that I played took 3 days to form. this is be very clear what it gunna happen. wait for island top to form

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  64. How about this:  "I can see SPX 666 from my house."

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  65. sideways & chop, would like to see 03-4 ES hold tight. if not move higher to start construction of right shoulder

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  66. Sorry, Cal, no offense intended.  Just like I didn't mean to offend any Ernest Borgnine fans when I made that crack about ugly waves.  :)

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  67. lmao -- one word for ya':  "Strategery!"

    Looks like "mission accomplished" so far today.  Just need to see it turn into a 5-wave form.   I'm going to bed.  ;)

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  68. lookin good on the long side for the cash mkt gap fill

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  69. board is so quiet today! no 10 page posts...

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  70. Thinking the same thing... "silence"...

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  71. shhhh, mrkt thinking about direction

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  72. H&S on AAPL intraday...

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  73. On SPX, could be in wave ii of blue 3 down (from PL's post)...

    Michael Roberts
    Integrated Flow Solutions

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  74. This will make you laugh. I studiously avoided all risk today and finally went short on the new low at 1297. Working hard to justify my title as the world's worst trader. You guys make this look so easy...

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  75. Hi Katz! Just wondering, how high do you expect the right shoulder to go up to?
    Thnx!!

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  76. Not easy at all...

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  77. H&S on AAPL is now looking like a head fake...

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  78. Don't be too hard on yourself.  If this is a major top you might have only missed the top 3 or 4% of the entire move lower.  If you can live through the pain of a bounce here (fingers crossed that that's all it is) then you could do pretty darned well with your short position.  If it makes you feel any better (and it should, lol) here's a very simple chart of  $BKX.  As you can see it is not participating in the glorious bounce here.  Not only that but on most charts we're starting to see these moving averages roll over.  I've found that this is about as good a method as any:
    http://stockcharts.com/h-sc/ui?s=$BKX&p=60&b=3&g=0&id=p32445600633&a=242990863

    The MAs on that chart correspond to the 3, 6, 12 and 26 day.  The danger of course is in not knowing whether or not that 26 is going to roll over.  I guess the question is "do we wait for that one?"  And then we could ask "well, now that the 26 day has rolled over, should I wait for the 50?".  At some point we have to "get in" and I think using the 6 day is relatively safe.  But one thing we know for sure is that any larger move higher or lower always starts with the smaller MAs rolling first.  I've found that when the 6 day rolls over... that is a good sign (in either direction).  Sooooo.... there's hope, lol.

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  79. truerangeballisticJanuary 30, 2012 at 6:58 AM

    I see the head at 452.18 and the right shoulder forming but where is your left shoulder point. Just the blind needin help.

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  80. Left shoulder at 10:49AM, head at 11:03 AM.  1 minute chart.  It is currently fighting the neckline...

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  81. Katzo, nice call on gap down open.  You called for it all weekend. 

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  82. SPY (cash) fighting at the 23.6% retrace of the down move at SPY = 130.85

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  83. truerangeballisticJanuary 30, 2012 at 7:20 AM

    I agree. I don't know much about double tops but is that possible here?

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  84.  mrkt thinking about direction, after this kind of move mrkt goes into sideways in ABC mode. IMO no advantage now at this point. mrkt bias is a slight up at this point. thnx, davezarling.

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  85. at PL
    concerning the post of QE from sunday. If found something nice on a german website, faz.net (german conservative newspaper, Newt would say a socialist one...) 
    Here is the interesting part, a graphic about, where the Bundesbank activa is coming from. And interestingly most of its money is coming from credit to other european central banks via the ECB (the ECB is the creditor to the Bundesbank). And in that case, this is a little bit like the CBoC, with all her credit to the FED. So if someone wondered, why the hard currency Bundesbank is printing money, it is 
    1. because it is not a own central bank any more. She has to act accordingly what the ECB says.
    2. because a lot of money from all over Euro-Europe is flowing into Germany, other european central banks owe the Bundesbank a heck of money. So it is not credit to business banks, but credit to other central banks. As I said, you can compare that with China. Hostage of its own success... 

    http://www.faz.net/polopoly_fs/1.1630054.1327845699!/image/1675140689.jpg_gen/derivatives/default/1675140689.jpg

    Milliarden Euro = Billions of Euro
    Staatspapiere = government bonds
    Kredit an das Eurosystem = credit to other euro central banks
    GIIPS = PIIGS ( :D )
    TARGET = Trans-European automated real-time gross settlement express transfer system

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  86. Everything is possible.

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  87. Appreciate that, thanks. The sad thing is I know what to do, I just seem to have a death wish that makes me trade like an idiot occasionally enough to ruin everything. Hope I find a cure soon.
    Sent from my iPad

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  88.  One of my rules is to avoid trading between 11 am and 1 pm, EXCEPT under very clear (to me) conditions. not worth it to watch the mrkt in chop zone

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  89. Katzo7, what are your thoughts on the market ending today at the bottom of the megaphone you've posted here @ around SPY (cash) = 129.72?

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  90. yeah, but it could be a fung wah, in which case steer clear.

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  91. Looking like a double top now, but it still has to break that neckline to confirm it (minimum) or below 451.45 (much better).  451.45 is the 23.6% retrace of the move from pre-market to HOD. 

    I don't trade AAPL, but I watch it for clues.

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  92. Everything....Bernanke will never come clean!!!   :)

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  93. LOL...You're the best AR...I plan on stepping in front of a bus before I have to make that FIRST decision, the alternative that you allude to is one of the reason why I went into nursing. God forbid we should ever run into each other at a pub...I believe the ensuing crime spree would be epic.

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  94.  any break of 1301, give it a point or two, could put all future up move in major jeopardy. take a look at the 120 chart, imo there is no way this thing can try to build a right shoulder from now on, the left shoulder at 1/25/12 AT 14:00 with a huge doji (remember this one i mentioned?) and the right one at 1/27/12 at 6 am may be it. take a look at the 120, the fall off of that smaller right shoulder is not right to build a future right shoulder. BUT any break of 1305 and we go up possibly to 1312 area so coast is not clear to short with abandon.

    BREAK OF
    1300 we go down
    1305 we go up

    personally think sideways with one more level down mid to late aft.

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  95. I've just been thinking that I have my own little rules of "success" in trading.
    Always sell at support and buy at resistance.
    If you're lucky enough to sell at the top, make sure you double or triple your position just before resistance. If your short position starts to move against you, make sure you cover just before resistance. Always trade when you're dead tired or have just woken up.
    Always believe that a 3rd wave crash is imminent and trade accordingly.

    Sent from my iPad

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  96. Sorry, hit send before I added the disclaimer that none of this should be considered trading advice (obviously)
    Sent from my iPad

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  97. I am certain that one of Ben's minions is a regular reader. Thanks for the heads up Katzo...I was considering going long a bit with that gap down. I'm just going to stay sidelined now. It isn't worth the chop (for me). Thanks again. :)

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  98. VXX and VXZ going higher.

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  99. For clarification, are your prices for /ES or $SPX?

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  100.  as stated before, I am lookin' for a change in character in the mrkt. In BULL mrkt moves start strong in BOD, draw in bears mid day, the action really actually looks like it will sell off, then EOD run to a HOD or run up. They stair step up. BEAR mrkts do the opposite. this is a real generality tho.

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  101. LOL.  And I'm guessing that you're telling me that those rules don't work particularly well?

    And thanks for the disclaimer... you sent that just in the nick of time, lol.

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  102. Great info, Lena. Thanks.  I have not seen it posted, but news that should be getting bigger media play is that the German Economy Minister demanded (and has since retracted) that Germany be allowed to dictate Greek fiscal policy.  This is an incredible development.  Can you blame Germany?  They are doing most of the heavy lifting when it comes to keeping the EU afloat.  But, to demand fiscal control of another country?  It is probably posturing to get an end result to negotiations, but it is incredible nonetheless.  From Chicago Tribune:

    In Berlin, Economy Minister Roesler became the first German cabinet member to endorse openly a proposal for Greece to surrender budget control."We need more leadership and monitoring when it comes to implementing the reform course," Roesler, who is also vice chancellor, told Bild newspaper, according to advance extracts of an interview to be published on Monday."If the Greeks aren't able to succeed themselves with this, then there must be stronger leadership and monitoring from abroad, for example through the EU," added Roesler, chairman of the Free Democrats who share power with Chancellor Angela Merkel's conservatives.Reuters reported on Friday that Germany wants Greece to give up control of budget policy to European institutions as part of discussions over a second rescue package.Even before Roesler spoke, Finance Minister Evangelos Venizelos reacted angrily to the suggestion on Sunday, saying Greece was perfectly capable of making good on its promises."Anyone who puts a nation before the dilemma of 'economic assistance or national dignity' ignores some key historical lessons," he said in a statement before heading to Brussels for a European Union summit on Monday.LAOS chief George Karatzaferis told reporters after meeting Papademos that Greece must examine whether the lenders' demands are in accordance with the Lisbon treaty and that he would not take any action until the European Parliament made a decision. 

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  103. Just be your own contrarian indicator...I've been tempted to have my wife open an account and just do the exact opposite of what I tell her...she's kinda good at that already so it would be a sure thing.

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  104.  ES, add 4.25 for SPX

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  105. Thanks everyone. I am learning a lot reading all of your posts. Trying to learn!!!

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  106. I’m thinking retrace window for ES to be 1306.75 – 1310.

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  107. ES at 05, going up, i am wrong

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  108. I feel ya. The cure I'm working on is to concentrate first on position sizing and risk management and browbeating myself into making an actual plan for each trade and sticking to it, even it it's as simple as marking profit targets and stop levels on a chart and respecting them. Stop gets set when the order goes in and can be moved only in my favor from there. Figure if I can get that stuff ingrained, it should give me some breathing room to work on the rest.

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  109. The problem for Greece is, EU or becoming a lackey of rising Turkey. And they shit everyone with their data, so trust in them is not too big. But I wonder what a financial commissioner should do against a bureaucracy that is used to not work correctly but with giving favors and stuff. He would be helpless. Until he would come with his staff and could command a special federal police force to enforce his will. And with nationalistic countries like in Europe that is not possible. Would it be possible to for e.g. put Alabama financially under federal mandate? Not easy, but would work, I guess. Will not work in Europe. But they put up talk like this to put pressure on them. I mean definite pressure. Exiting is no choice for Greece as they are too afraid of their arch enemy Turkey and they do not like to play by the european book so they do play their usual game, the time will be on our side game. This is one counter play. And maybe you noticed, that normally everyone will shout against Germany and its chancellor Merkel, but in the end, they will go with her. We will see. 

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  110. Tried to post this 5 minutes ago, but it didn't go through.  Dallas FED manuf. index came in today at 15.3 vs 1.0  This could point to good readings in Chicago PMI (9:45AM tomorrow) and ISM Manufacturing Index (Wed. at 10AM).

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  111. Not good for ST bear case.

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  112. Looks like it's back testing blue trend line on PL bottom chart.

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  113. Tapped 1306.75, now let’s see if it can break through to the 1310 range.

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  114. LOL... it sounds like that plan might work.

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  115. thinking of shorting somewhere around here...   also matches PL's rough expectation for the day, i.e. another leg up around mid-day and then starting downward move this afternoon, throughout the night and continuing down tomorrow...

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  116. It may go to ES 1310. Wait for it then short

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  117. Oh hell yeah.  We'd probably be laughing our heads off even as they're in the process of tossing us out the door.

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  118. thnx!!! (taken into consideration)

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  119. For now, just go along with the market. Enjoy...

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  120. Lena,

    The Germ finance minister was out of line, but simply said what everyone was thinking.  Greece has trouble enforcing its own rules (i.e. Tax collections), so it may be in Greece's own best interest to get an "outside" enforcer, but it can never be Germany, at least not in name.  The EU could suggest some sort of arbitor to provide transparancy and guideance to Greece, but I still think they would fight it.    Somebody mentioned it on this board before, but it is not just the financial struggle, but the underlying cultural change that is monumental.  I think alien takeover is really the only option.  These governments (and I put the US at the top of that list) needs a parent around to tell them what to do and how to behave.  Does anyone know any aliens willing to help?  Sorry Lean, I don't mean to make light of your post (quite enjoyed really), but its either laugh of cry, and I am not much of a crier!

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  121. It's trying to fill up gap at SPY 131.68. When this close then it's going down.

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  122. hey dle, good to have you back. yeah, i get 10-12

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  123. Hi katz, yes it's more than likely at 1310 and it may go down hard so be quick...

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  124.  nice to have you back

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  125. I am looking at $WTIC. If the world is in recovery it should be above $100.  It ain't.  Even with Iran constantly threatening to block the gulf.  If it breaks out above $104 then you have a different story.  We may be in a channel for a while so I am swing trading it using plays on both sides.

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  126. right bout the gap filll, but my long stop got triggered... so now i wait for rentry to short side

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  127. PS right here is the test of the BOTTOM of that reliable December channel...

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  128. yeah, they should send some Italians... 
    like to the head the ECB... oh, they did that for real... only in Europe. lol

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  129. that's livin'...and it's all about livin'

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  130. and on that note im taking a substantial short position with a crazy tight stop

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  131.  possible quick run down to 00-01 ES area

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  132. I can't really criticise the EU....too busy looking at the US in utter disbelief.

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  133. Now, it may go to ES 1312 after the pullback below, kartz

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  134. Ok. Now a little bit (not more) more serious. Greeks with money are not crazy. They send their money to a lot of places, like buying property in London or shares in Frankfurt or the US. The younger ones with a good education - mostly got outside Greece - can go to better places. And Germany has a big Greece community, so a lot already show up there and bring their ideas and knowledge. You can think of a potential devastating brain and money drain, like a looming bank run in Greece only also with people of great value to the society possibly leaving the country, as going into other EU member states is just like moving from Florida to Illinois. That is the scenario for Greece leaving the Euro zone. Only poor and old people, bad educated, they have no choice but to stay. And them get angry. No way to go. Left with a big bowl of shit. Greece is a Chapter 11 country. You should think, that people like to buy now cheap Greece property. Problem is, they think they get it cheaper in the future. No solution but to declare Greece the Florida of Europe and sent all the elderly there for their retirement. Greece is at the brink of loosing the integrity of its society as a whole. Its strength as a civilization that can live in their means with enough power to support its own. Pretty amazing stuff.

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  135. that gap in the cash spx wont get filled today

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  136. ww,
    just sit back and watch, no need to trade. get into the swing of the rhythm of the mrkt. now is a tough time imo to try out positions.

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  137. Yep! And - most important - it doesn't seem to gradually inch down during the day, even thought the market is gradually inching up! VIX had been hitting a bottom and then turning back up again and again during the day...

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  138. It's not enough.  I would want to see the VIX move greater than 7% and the SPX to be below -10 points (-10 to -20 would move the VIX).

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  139. Watch to see if VIX, and its counterparts VNX and RVX, CLOSE under their respective 10 day MAs...a bullish portent.

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  140. i revise what I said below, tgt now 1312.50 ES, needs to hit that area before we go down. . . should be a fast spike to that area, then perapas down, will evaluate when up there. . . .

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  141. Katzo, how are you coming up with that number? I’m figuring max of ES 1311.25.

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  142. Do not forget, the US is so blessed by its geography, so blessed, that even 25 years of idiots cannot mess it up enough. And the US is blessed with its people: The Americans can run for sometimes into the wrong direction, can fizzle around but they have shown in the past, that they have the courage and strength to change course when needed. They just have to get their head around the thing and then they just do it. I am pretty confident, that the US will be the strongest country in the world for a long time. Ron Paul for President. ;)

    BTW: my bull scenario for the DJ is no more low needed, and 30K to be seen latest in two years...

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  143. LOL. It's amazing...

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  144. that measure was on the upswing represents the retrace so not the strongest impulse

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  145. short ES at my 10 (entry 09.75)

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  146. Shorted at 1309.75. We’ll see where we go from here… J

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  147. This site is slow today. It's hard for me to help.

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  148. Be careful if it's up above 1308.75

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  149. should be a spike in the $VIX now to confirm

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  150.  Are you still thinking there's more gap to fill?

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  151. Spx spiked to 1314, but VIX did not budge. What gives?

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  152. Something is changed. Again, shorts are careful if it's back up above

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  153. EW5 on a short time frame, needed comparable spike in $VIX to confirm

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  154. my levels are very rough, not able to triangulate as I usually do as charts are all different rather than in alignment. This happens at the beginning of a move. BUT this could fail at any time and I could see an ED drop, never reaching the 12.5 ES level

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  155. I’m hoping that 1310 proves to be HOD. I’m still short from 1309.75. If this holds at 1308.5, should be a nice ride down. If not, my stop is at BE.

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  156. snowbeast, it's hard to say at this moment because the market didn't go the way I think... Please see my other comments

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  157. is there still time for a drop at EOD?

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  158. Volume went anemic on the 15:15 (5) min bar.

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  159. back to the old drop in the morning and buy all day- persistent bid is going to be a problem for the bears

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  160. It's down to go up more than likely. Make sure your stop is working properly.

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  161. Maybe, but at this moment it's trying to test 1310 again and may go up more..

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  162. Visually, it looks like it's on a 2nd try to break above 1309. Flux says likely downmove at 15:48 (but it could be upmove - have to play it by ear) and I don't think there's enough time for it to back off and make a 3rd try to break above 1309 (about 15 minutes window for it to do that). So I'm holding my short and waiting for now.

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  163. I’m holding short from 1309.75. If it breaks 1306.5, could have another nice move down into cash close.

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  164. as you may've all guessed: below ES 1306 and down we go...

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  165. about right we are now in cash....trying to hold it up

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  166. It looks like SPX is beginning to hemorrage a bit into the close.  Down quickly from 1313 to 1310, though as I write this, here comes a bounce right off 1310 to 1311.32.  Lot's of cross currents in play here, apparently.

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  167. My T&S streamer is *all* red.

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  168. Second attempt to break 1310 (in the last ten minutes) has failed, at least for the moment.

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  169. I'm out. Not going the right way (down) for me.

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  170. missing the forest for the trees- we hit 1300 and decisively rallied back- bears cant win in the cash markets....

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  171. You are very very good!

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  172. I hour chart SPX still in down channel from 1333 high. Until that breaks, maybe new down trend established. Close to top now as we are speaking.

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  173. It gave no clue for tomorrow opening. Clever, clever, clever...

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  174. Ran my first Futures trade this afternoon and made $320!!!!!!
    Not bad for 10 minutes work.
    Thanks for everyones info here.

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  175. Well, we're still in this tight trading range we have been for weeks now, and I'm not sure today sorts things out all that much, despite the nice bounce back from this morning.  I can't for the life of me predict where this market goes next, but that's why we will wait for PL to offer up his great analysis later tonight.

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  176. Congratulations!

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  177.  this thing is struggling to reach my 1312.5, even 1310 seems to be out of reach. what this does it to reset my indicators back to the top, very beneficial imo for the bearish POV. consequently there could be a move down in o/n trading presenting another gap down at opening bell.

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  178. the dow rallied 125 points today?  If you didnt buy/cover at 9:31am you'd be destroyed by now

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  179. As the old theme goes this market will never drop ...until it does :)

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