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Friday, February 10, 2012

SPX and RUT Updates: Red Alert Indicators in Conflict with Short-Term Wave Counts

I've been pulling my hair out all night trying to nail down the exact short term count, and have compared the NYA, INDU, SPX, RUT, TRAN, BKX, WLSH and several others -- partially because, due to the indicators, I'm having trouble believing what I'm seeing in the counts. 

The short-term wave counts are suggesting the rally is due a minor correction, then more upside --  however, the indicators seem to be contradicting that, and are now reaching full-blown red alert stage.  While it's possible that a meaningful decline is due, it remains dangerous to front-run against a rally that has shown this level of resiliency. 

Let me present a few of the arguments I'm wrestling with, along with the charts.

First, let's start with the wave counts, which appear to need a minor correction, followed by further upside, to reconcile.  My preferred count is shown in blue and red below, on the 10-minute S&P 500 (SPX) chart, followed by a zoomed-in view on the 5-minute SPX chart. 

I have highlighted some of the key price levels on the charts.  For the SPX, trade beneath 1321 would invalidate the blue count, and cause me to shift preference to the idea that a more meaningful top might be in place.  For anyone wishing to enter long on the idea of a fourth wave correction that leads to a bounce, there are plenty of support zones shown on the chart which could serve as stop loss levels.




The Russell 2000 (RUT) appears to be a similar position (below), and also suggests that a minor correction will be followed by another leg up.


Logically, one of the problems I'm running into with these wave counts is that 1350-1360 is a substantial resistance level, as I mentioned in numerous articles well before the market got here.  So this seems like a logical spot to turn back the rally -- but then again, head fakes are common in fifth waves.  Think of October 4, when the market broke down in an attempt to get everyone on the wrong side of the trade, and then whipsawed.  A head-fake breakout over 1350-1360 could serve the same purpose in reverse. 

Let's move onto some of the indicators, which are warning that the rally is getting substantially over-extended.  (This is more stuff that makes me want to doubt my short-term counts.)

The latest signal is a sell indicator that has proven to be very reliable over the years, which compares the total volume on the Nasdaq as a ratio to total volume on the NYSE. The idea behind this indicator is that extreme amounts of volume flowing through the higher-risk Nasdaq in relation to the "safer" NYSE indicate that investors are feeling exceptionally bullish. And we all know what happens when bullish sentiment reaches extremes and investors are feeling invincible -- the market usually whaps 'em upside the head.

This indicator serves as further warning to bulls that a correction, or worse, is probably close by.




Next is a top study I first presented a couple weeks ago.  When this signal triggered in 2007, the rally lasted another two weeks before ending.  It has now been two weeks since the latest signal.  The similarities in behavior during the two weeks subsequent to the signal trigger are quite noticable in the current markets compared to the 2007 markets.  I have highlighted both time periods in blue.



Another warning sign yesterday was the Volatility Index (VIX), which was up for the second day in a row while the SPX was also up.  In about a third of the prior cases where both indices were up for two consecutive days, the market launched into a decent size correction.  The most recent time this happened was right at the December top.

So... on one hand, the short term wave counts suggest to me that, at the minimum, there should be another leg up left in this rally.  On the other hand, there are numerous sell signals arguing against that.  I suppose the two aren't necessarily contradictory, since indicators frequently lead prices.

In a "normal" market, I would say the preponderance of evidence suggests a meaningful correction is due.  But this market has proven to be unusually resilient, and as a result, I'm slightly favoring the wave counts over the indicators -- so I suspect we'll see a sharp correction into the 1335-1342 zone, and then another leg up before a more meaningful decline.  

It's a very tough call, though -- I'm sure now you can see why.

In conclusion, where the wave counts and indicators agree is that the rally is now getting quite stretched to the upside, and the risk for long positions continues to increase substantially.  However, just in case I haven't driven this next point home enough over the past few weeks: until the market starts printing some closes beneath its major trendlines, there is no confirmation of any significant trend change.  There are more hints and allegations, but in the end, sometimes the market just doesn't care.  Trade safe.

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

371 comments:

  1. Morning all.  :)

    Another grueling update.  These are always tough -- when the futures are down 12 points, but I'm suggesting the market's still going to go up some more -- or vice versa.  The temptation is always to look at the futures and say, "oh, yeah, that's it, game over" etc.  But this one was particularly tough because of all the top signals.

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  2. PL, great analysis and I appreciate the warning of not getting ahead of the market.  As you have said many times, cash is a position.  Investing is risky and if we are at a market top, there will be plenty of  time to participate after the direction of the market has moved from rising to declining.  Keep up the great analysis.

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  3. Ah - now that's the bearishness I remember - of course all the bear floppers are the ones that triggered the top.  My only position is a leveraged VIX play which I had been monitoring :)

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  4. As the great Christopher Walken said on SNL, "I got a fever, and the only prescription is..More Charts!" Or something like that. 

    As usual, a great job PL.

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  5. Really excellent work PL, thanks for sharing. Since that "Pre-Heating Oven, Marinating Crow" post, you've been in top form.

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  6. lmao

    http://www.bing.com/videos/search?q=youtube%2c+more+cowbell&mid=1CC1042CBEED253C8E641CC1042CBEED253C8E64&view=detail&FORM=VIRE1

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  7. Try that again...

    http://www.youtube.com/watch?v=q4royOLtvmQ&feature=player_embedded

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  8. Tough to get over-excited by a down start though as they've been bought back up to neutral every time.  When we get a day that starts down and stays that way - that'll be the start of something

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  9. More cowbell.

    Anatomy of an ED, don't get confused, this is a completely different time frame than the megaphone analysis. I use one time frame to confirm or deny action in the other on many different indexes and time frames, ES, $SPX, $RUT, $TRAN, $VIX, UUP, etc. Watchful for a cross of the 20/50 MA to verify on the 120. See the count, a break below my tgt area will serve to break this EW3 count and relabel and finalize it as a completed 5 up. UUP needs to get above that plateau.

    http://www.screencast.com/users/katzo7/folders/Jing/media/4176f01f-648a-4567-b51e-19fa022dceba

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  10. trust (your indicators) but verify. 
    -the actor Pres. Ronald Reagan

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  11. Me, bearish?  But... but... what about my "another leg up still coming" uber-bull projection?  I'm practically a perma-bull!  :D

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  12. Beautiful analysis PL. On your second SPX chart, I am thinking the possibility of blue wave iii positioned at your red wave (iii), blue wave iv positioned at your red wave (iv), and the ending diagonal completed the blue wave v and also blue wave 5 to form a top.  Please let me know what you think about it.  Thanks.

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  13. Thanks for another great update...You have inspired me to remain in cash...and trust me when I say that it used to be painful...a shout out to Katzo for providing some rules that I am following....discipline.

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  14. Great work PL - appreciate the effort. 

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  15. Another view, yesterday aft failure, sudden, unexpected, very few signs. Have to know where to look.

    http://www.screencast.com/users/katzo7/folders/Jing/media/c6e1f451-f179-4c83-b1de-5e2ef2bdf2c4

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  16. Agree. Jan 13th and Jan 30th were gapdown days rejected and reversed later. I still see this as blue iv with another painful leg up for bears. First trading hours today shall give a good hint of what is to come. 1330 (cash) is the key level that may invalidate all this.

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  17. I suppose an extended fifth is possible with blue (iii) at the red (i) position, but based on other markets, I suspect my labeling is roughly correct.  It's a tough call, though, like I said.

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  18. Out of JPM Feb. 10th 37 puts at $0.12

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  19. CAVEAT ~ with macd/120 under the neutral line this has potential to continue its fall at any time. My intraday flash crash warning came true yesterday, remember? Timing was off tho, get the direction or timing right, rarely both.

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  20. Did you get my e-mail yesterday?  I went out last night and got you 3 packs of Kona coffee (Sunrise blend, standard, and vanilla mac nut), along w/ a package of chocolate covered mac nuts I need to send ya in return for the TastyKakes.  :)

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  21. buy this dip. they will take it up again.

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  22. $VIX up 7.94% BUT a gap up which leads me to believe that there will be a partial or full gap fill today and for today it will be harder to resume the down immediately. BUT gap fill could be put off for a while, don't actually like that idea, would feel better and am partial if it was immediate.

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  23. Everything's down, but Apple. This is really an NBA market - Nothing But Apple. :)

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  24. like the gap up call from yesterday?

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  25. Don't you think SOMEBODY wants to be the first to say s/he bought AAPL at 500?

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  26. we reset to 1339 ES, just shy of my 1338-44 level (15 min. chart), then impulsive down.

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  27. I guess he might have committed to his own call...

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  28. Thank you soooooo much. Email is in your inbox.

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  29.  Look at the bright side ....

    Without APPL, the market would have tanked, big time. Looks like AAPL wants to go to 500 today. :)

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  30. hey i was right 2 out of 3. gaps are hard to call and my indicators are not greekproof.

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  31. AAPL has gone parabolic. At some point it should tank... and take the market with it.

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  32. TVIX levels brought forward for your convenience.
    TVIX levels ~ 19.29, 21.63, 28.93

    TVIX up 12% (don't buy now if not in)

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  33. I am sorry, I apologize, thought you might have been someone else.

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  34. From the DeMark Sequential file:
    Both INDU and NYA closed yesterdays trading at a Setup 9/ Countdown 13 reading...and that was true of XBD and RUT on Wednesday's close. This doesn't obviate the possibility of a wave 5 up...but it makes one wonder.

    From the VIX file:
    I posted two or so days ago that the Russell version of vix ($RVX) had risen above its 10 dma for the third day, and since the RUT is sometimes an early 'tell', that it bore watching . As of Thursday's close the NYSE VIX popped above its 10 dma (simple) as well.
    The take away is, add moving average analysis to the Bollinger Band analysis to gain further perspective that the minor trend may continue.

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  35. Am listening to an analyst saying that AAPL at 650 is cheap. That must be a signal of some sort!

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  36. lol -- I just read the part of the article where I said the "similarities are... quite similar..."  DUH.  Fixed it.  ;)

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  37. thank you agaiin Katz0.......im sittin here with order ready to sell....almost just did at 18.25............almost to hit 20pd mov avg

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  38. "Trust God, but tie your camel." -- Middle Eastern saying.

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  39.  Good stuff, thanks for sharing.

    Can you save me the research and provide a brief understanding of the DeMark system?  Thanks.

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  40. Must be hard writing in Hawaii when the sun goes down. I don't know how you get any sleep. :) Great blog. Keep up the good work!

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  41. You should always have your stuff edited by the Department of Redundancy Department. That's what always, always do. :)

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  42. They get "hero" status (or baggie).

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  43. I would gladly broker the transaction and sell AAPL at 650 to him immediately. Valuations, valuations.

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  44. If I'm being redundant, please allow me to repeat myself.

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  45. Just some news...This was just a matter of time....

    http://www.zerohedge.com/news/greek-police-threaten-imf-arrests-due-austerity-demands

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  46. Please do....I swear I have to get to work now...gotta pick up some steel, and do some of that thar job-creatin'.

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  47. Thanks.  :)

    I don't get much sleep -- since I started the blog, I end up having to sleep when the market's open.  Thank God for 24-hr futures markets and Taco Bells.  :)

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  48. On your chart, what is "XTL candle recognition" that you refer to?

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  49.  You left out "again" at the end of the sentence. :)

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  50. XTL is a propriety feature of eSignal. It stands for eXpert Trend Locator.

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  51. 'Whenever AAPL decides to pay dividend, I'll willing to paid up to $1,000. It's still cheaper than gold. Which doesn't grow. It just sit there looking pretty (depends on your esthetics) and doesn't pay you to wait.

    As a matter of fact, you have to pay vault fees.... :)

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  52. Nothing new there.  They are never going to follow through on anything.  I guess in the US, if China came in and said you now had to live and run your country like the Chinese, we probably wouldn't be thrilled either.  It's insulting really 

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  53. Great post. Ty.

    This may all end badly before March 20th.

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  54. Don't be too complacent... be alert... Different day different environment.

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  55. Taco Bell will put you in a permanent E-coli/samonella induced slumber. 

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  56. Taco Bell will kill you!  Stay away from it.  I did that for a while with bad results...

    Now its Lean Cuisine frozen dinners when I don't have time for anything better...

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  57. It seems that it might day the day theat everyone here was looking for...

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  58.  Sequential is way too complex to discuss here. But in short, it can be said to be a system that measures exhaustion according to a defined set of sequential steps.

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  59. I'm actually just kidding about the Taco Bell.  Closest Taco Bell is 40 minutes round trip from here.  But it sounded good: 24-hour futures markets and Taco Bells.  :)

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  60. The tape action this morning certainly suggests that buyers remain in firm control of things.  The forces behind the perma-bid under the market aren't going anywhere soon.

    Price action this morning also suggests that the market expects that latest Greece hurdle is just another headline that will soon pass.  And this rundown and quick stab below 1,340 to 1,338 was pretty much obligatory and took us to the bottom of the triangle. 

    This also gives pro shorts their window to get out and wrap up recently taken positions, so it's rather convenient.  The short crowd who has played this rally properly has had PLENTY of opportunities to make their money.

    For the rest of the session, I am expecting a range in the high 1,330's to mid-1,340's.  A rather narrow range day.

    Meaning I think longs will be saving the majority of their bullets for the recovery and to reach new highs next week.  Today they can unwind short positions and take new positions for next week's recovery.

    In the meantime, there is no reason today for longs risk that the Greece issue disappoints over the weekend, which means just holding this range is what I think is most likely.  And buyers will do that easily.

    May be a good day to take off from trading and call it quits early.

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  61. It's very funny, let's see...

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  62. PL great work as always. Do you still think that SPX 1000 is the formal QE announcement level as you have stated in previous discussions?

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  63. That's hilarious, that people want to be repaid by the Greeks for the money they've already borrowed and spent wastefully, is somehow blackmail?  That the Greeks will default is a foregone conclusion, it's just a question of when and how much good money gets thrown after bad before that happens.

    I still say the Greeks don't need 130 billion by March 20th, they only need 14.5 billion and I expect they may get the 14.5b, or some part of the 130b, while the 'negotiations' drag on.  This will allow the Greeks to avoid default in the short-term, and allow EU to see that Greece actually implements the promised austerity after the April elections.  Win-win for everybody, which means it probably won't happen :).

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  64. jbg, did you read the fraud and technicals article as well? Interesting reading.

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  65. ty--  I think the game has changed a bit since then, but 1000 is probably the minimum level the market would need to reach for QE3 to become a serious potential.  I don't believe the Fed would even *consider* QE3 with the market anywhere near these levels, despite all their talk.

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  66. The Greeks Don't Want No Freaks...

    http://www.youtube.com/watch?v=vVNbD1nySlw

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  67. I was not thinking in the short term here but rather if a 1100 level might be something to trigger it. Obvisously we are way off from there. Thanks again.

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  68. Great post as always, PL.  The indicators you have provided over the past few weeks are stacking up and hard to ignore.  

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  69. Quick chart of SPY to keep a watch on. I believe the top is in, and that a trendline from May 2008 has stopped this rally in its tracks. There are now two trendlines of support that need to be taken out before the bears are truly in control.

    http://dl.dropbox.com/u/59021800/SPY%202012-02-10-TOS_CHARTS.png

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  70. Pure speculation:  I think we close the day/week at last Friday's high which is around SPY = 134.60 and ES =  1341, and we print a doji for the week.

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  71. That was a lucky escape from a trade gone bad.

    I should have bought the JPM Feb. 10th 38 puts at around $0.10 at yesterday's open, but I couldn't stomach or justify such a short term risk of the position going to zero within a couple of hours.

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  72. Greece's Deputy Foreign Minister has resigned per MarketWatch.com
    Their articles says that makes six ministers who have resigned in the last two days.

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  73. Had to share the photo...A woman suffering from teargas passes a defaced Bank of Greece sign during protests against planned reforms by Greece's coalition government in Athens, February 10, 2012. REUTERS/John Kolesidis

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  74. I need to get some zzzzzzz's.  GL everyone.  :)

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  75. Would be amusing to get a top immediately after everyone stopped looking for one

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  76. sorry about the bs.but it wasnt coming from me. ive been attacked saying my calls were wrong this and that, even with charts. saying i bought goog and gap up. ive never said gap up in my life and never bought goog in my life.... a few didnt like my bullish calls to 1350 1360 area from 1290 and were hurt by market. he will pick out my top call at 1333 but when it was busted i went right back to bullish calls. guess what, he called a top too. sticking with a bias is not good and detrimental to your wallet. anyways looks like a pullback from the target so market is in no mans land so no opinion here. watch tape for end of day. dunno who wants to hold stocks thru weekend. greek to me! anyways i like pretzel site. he is fair and balanced. good luck.

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  77. 1330 es is a spot to buy pullback and overslept. @#$%^& it

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  78.  I hate conjunctivitis of Uranus, even if it is Venus doing it ;)

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  79. Remember, boys and girls .. *Always* trade safe!

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  80. ppl are smart enough to believe the truth, you do not give them enough credit. Billyboy. You showed up here with multiple personalities immediately attacking me. Sure, you are innocent

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  81. A  bot is programmed to buy/sell VXX at 27.15 +/- pennies?

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  82. The popular view seems to be that March 20 is the latest date to which the drama can push,  but I don't necessarily see it that cut and dry.  The very powerful idea of "La Revolution" will not simply die away with some signed documents delivered to the Troika.  The debt holders and markets might breathe a bit easier if  a deal is reached, but the protests and rioting might understandably escalate into a full blown revolution if the austerity deal is approved - ideas don't die away with the stroke of a pen. 

    I can realistically imagine a scenario where an austerity package is approved, bailout funds exchanged and the Greek parliament is stormed and overrun and overthrown effectively defaulting, and crashing markets worldwide.

    Not saying I expect things to play out that way, but this may not end on March 20. 

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  83. lol. ty guest for the like. no, it wasnt me

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  84. Made my first successful trade since I started taking interest in the markets a few weeks back. I funded my account and started swinging for the fences with some out of the money puts. I learned my lesson quick. I suppose we all have to.

    The lesson I learned today was to take profits. Bought FEB 18 SPY 136 puts yesterday near close and sold them this morning for 60% profits. That felt real nice.

    Now looking for the next trade :)

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  85. Past Guest post aka Billybob aka chic7 aka brittany aka ooops aka fergalicious aka six more identities (WTF would someone get into this, multiple personae? you think we cannot figure out who this is?) 

    Katzo7.
    Dude you have beenshort since last year onthis blog. How the hell do you have any money left. All I see you say is gap down or short. You short from lasft week and didn't mention it after underwater. Save the crew here and play some long or sit it out. You try hard but always seem. wrong. Permabear is not the way to go thru life. Paper money and broke anyway. I remember you on a couple sites you were banned from for criticizing other peoples calls and jealous of their right calls. Your continuous. Short calls are tiresome and wrong since I went to pretzels site. I see he can change his idea. Learn from others and not be so stuck in a bearish frame of mind. Good day

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  86. Agree with the theory - as to timing?  Well, the building up of tension into that first hit - 6/24/12- of Uranus in Aries (revolution/war/sudden aggression) square Pluto in Capricorn (entrenched institutional power, debt, taxes and death) is sure to have an explosive impact somewhere.
    Between now and June, we've got a lot of astro territory to cover - I'll post some notes over the weekend.

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  87.  Congrats .... :)

    Your first option trade?

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  88. Eurozone "extraordinary" meeting scheduled for next Wednesday 3/15.
    Hmmm, 3/15 - Venus sq Pluto.   That's very much about money and power.

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  89. My first successful options trade. Im still sitting on some march puts that are down quite a ways since I bought them. Hope is a creature that can be your best friend and then kill you. With options I am learning you have to put hope and fear  out of your mind and just make the trade with a plan going in.

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  90. Ty.  Do you have a link to the meeting announcement?

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  91. its prolly someone else speaking their peace. btw i never use caps! im small letters. anyway pretzel asked we ignore each other so good luck sir/maam. ;- )

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  92. It was a comment by a CNBC "contributor," so I'm looking for a supporting news source.

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  93. I have some Katzo secrets. I know on good authority that
    he prefers $5 car washes to $500 ones!!!!!!!  LOL

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  94. Calling the bond bulls' bluff for $1. Shorted TLT.  :)

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  95.  Isn't that obvious? You need astrology for that. :)

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  96. rotflmao. got to cut back where one can, two kids in college.

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  97. Thank you for the kind words.

    I would also like to thank every member of this community for their opinions. This is a great site for learning and guidance.

    Thanks Pretzel for not charging, yet. I hope the advertising and page views continue to grow.

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  98. Try having that square, along with Uranus aligned with Venus, at 2 prominent points in your own chart! Yeah, c'mon over to my house and taste the adventure!

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  99. Great analyses PL! I am as confused as you are. So I figured I'd add something that maybe can shed some light on a minor pullback vs a correction. That quickly brought me too AAPL, since AAPL has been the story pretty much since it announced it last Quarterly results and  rocketed from 425 to 450 overnight and yesterday blew again all stops and even today is UP 0.6% while all major markets are DOWN 0.7% So what may that tell us. 

    In summary: 
     it boils down to the fact that AAPL at it's current price level is WAY above it's weekly upper Bollinger Bands (BBs) as I discussed yesterday. (see attached plot) I compared this action with the SPX, going back three years (see attached plot) and each and every time this has happened to AAPL (closing this high above the upper BB), the market experienced severe pullbacks or correction the weeks directly following after (red circles and red arrows), except in 1 case (blue circles, blue arrow). However, in that one case the market was only 4 weeks past it's '09 low and not even close to its upper BB's as it's been like this time and those other 4 times. Hence, I'd say a pullback or even correction over the next 2-3 weeks (both for the market and AAPL) seems very likely.Given that since the '09 low the markets have been kept up and alive on QEs only I don't see why now (market up on "stealth EU-FED-ECB QE) would be any different. Here's my detailed analysis: AAPLs daily candles, especially yesterday and even today's have been closing much above their upper BB's and the weekly candles of the last 3 weeks closed above the weekly upper-BB too. This week's candle is almost entirely above the upper BB, and AAPL needs to drop below 470 today, which is a 5% drop and thus impossible given today's action to close the weekly candle below the upper BB). 

    On a weekly scale this pattern of several closes above the upper BB has happened 5 times over the past 3 years, and in 4 of those occasions AAPL was due for a correction, often to it's 50dMA, or mid-BB level, depending on the severity/strength of the prior uptrend, which on a weekly scale are currently at 376 and 406. On a weekly scale the RSI is now at 73.38, a level not seen since spring 2010. On a daily scale the RSI is now at 85 (!!!), a level last seen in July 2011 and spring 2010. We all know what happend late july/early august with AAPL last years : a $50 drop in 2 weeks!!

    The uptrend of march-may 2010 resembles the current uptrend since Dec -arguably since Nov, most. That spring 2010 uptrend ended within 2 weeks by AAPL going from almost 275 to 200 (intra week): -27%, and to a 235 at close of week: -15%. At current levels of 495, that would equal a correction to ~360-420... OUCH. Note, that the suggested 360-420 range is perfectly within the current range of the 50dSMA and mid-BB level on a weekly scale basis (376-406).SPX lost anywhere between 50 to 200 points after AAPL closed this much above it's weekly-based upper BB over the last 3 years, QEs or not. 

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  100. Daily VIX Options report from da pit..  

    http://www.youtube.com/watch?v=JnnwTeaMiXs&feature=plcp&context=C38c2ba3UDOEgsToPDskI34taj0Z9dAhnClITeAwyO

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  101. It's getting Juicy

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  102. Seems you're more than familiar with astrology - I imagine the situation is getting quite volatile. 
    If you'd like a quick consult, ask PL to send me your email.  

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  103. XLF, KRE, XHB, IYM, and FCX continue to show the way.  AAPL is in beast mode trying to reach $500.  Once it turns, the Nasdaq will have to follow.

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  104. S&P has downgraded 34 of 37 Italian banks it monitors per CNBC.

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  105. Thank you, sandyone44.  Please keep these coming.

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  106. Ty. Great post, soulsurferusa.

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  107. That is absolutely the key.  Any time the AAPL:NAS ratio turns south, the NAS heads south 100% of the time.  Here's a brief article that I wrote on that topic about 6 months ago.  I've been meaning to dust it off, spruce up the charts a bit and put it onto my own blog.  Just haven't had the time.  But the analysis is as valid today as it has always been.  Good observation bud:
    http://seekingalpha.com/instablog/357305-albertarocks/219393-the-leadership-of-aapl-and-the-illusion-it-creates

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  108. Thank you, Furrrr.

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  109. ugh looking at tvix makes me sick. I bought it at 15 and sold it at 14 ironically out of fear. Now its at 18+ which would have made me even again. downnerrrr

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  110.  I've only heard of "frank" describing heated diplomatic exchanges.  Pointed?  They must have been shouting obscenities at one another. 

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  111. I thank Pretzel for not charging yet too.  This bull run has broke me, lol.  Not to mention a little $300k bath I took in the Edmonton real estate market.  Can you believe my luck... I missed pulling all that cash out by one month.  One day a real retard realtor who had 10 condos in a project under construction panicked when the market turned south and dumped all 10 of her condos on the market at a 30% discount to the price I had just had my unit appraised at the week before.  Poof!  The entire 100 unit project instantly fell in value by 30% and everybody involved in it lost all their equity in a heartbeat.  Damn her oily hide.  If I had just put all that money into the stock market instead... I would have probably lost it faster, lol.

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  112. Debating going long here at 1,339ish.  Though a late session fakeout push down to 1,335 ish to make it *seem* like sellers will push outside the triangle boundary is something to keep in mind.

    Looks like the bots are creating buying opportunities for themselves at the moment.  And creating the illusion of sellers being able to dictate price action. 

    Today's tape should make it abundantly clear who still controls this market.  Sellers have really only accomplished what bulls will allow them today, and holding around 1,340ish is really the only goal that longs need to keep in their crosshairs for this session.  That's been a piece of cake so far.

    Also thinking that there should be an EOD melt up and short positions are closed out heading into the weekend.  Which will coupled with the expectations that Greece / Europe will deliver another 'solution' to the current 'crisis'.

    All bets are off on the above scenario is Greece blows up over the weekend and doesn't accept the EZ's demands though.  Which is why I won't be holding a position over the weekend either way.

     

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  113. Oh yeah, before I forget - FOMC minutes also on 2/15.

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  114. Jumper, believe it or not, your odds of making money in options are far better if your account is strong enough to "write" them instead of buy them.  You would be more at risk, but that is mangeable.  But the odds of you being able to "keep" the premiums you get when you sell those options are about 90%.

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  115. Yup read that one too...I think the cat may be out of the bag (at least for some folks). Mom and Pops are gonna get killed by this BS.

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  116. bear flag may have just finished up

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  117. Does that mean you are expecting a bounce from here, katzo?

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  118. Having been in enough Greek diners one thing is for certain, they gotz a temper. It is fun to watch. As my Sicilian mother-in-law reminded me, "The Greeks don't give a rat's ass."

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  119. no, lower, bear flag.

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  120. Thanks, AR.  That means a lot coming from you.  I read your blog frequently.  Maybe that's where my AAPL stance comes from? Some good stuff on there. Keep up the good work.  And thanks for providing great real time thoughts on this board.  PL has created quite the forum with some serious market heads that provide great input.  He definitely sets the tone with great analysis that is clearly communicated. 

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  121. The one thing that has struck me this morning is the question of "where is the volume?  Where is the follow-up down volume"?  Maybe it's yet to come, but if it doesn't show up, the odds are probably stacking up in favor of your hunch.  Mind you, the way the CAC, FTSE and DAX ended their day was very bearish.  They put on a good show for the final two hours but it all cratered in the final 30 min.  They weren't even able to provide the illusion that they were off to another rally next week.  Still... without some serious volume on these little pullbacks, I'm not overly convinced that anything really bearish has begun yet.  But I'm sure getting sell signals other than that.  What am I talking about "these little pullbacks"?  This is only the second one in 36-37 trading days, lol.

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  122. leader of leaders the tranny has been lagging major indices.

    http://stockcharts.com/h-sc/ui?s=$TRAN&p=D&b=5&g=0&id=p21760313971

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  123.  Agree.

    It is better to be the insurer than the insured, financially. :)

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  124. Thanks and good to know.  I assume you are talking about the triangle / pennant that's formed on the hourly chart over the last five days then?

    If so, I don't think it's going to resolve lower myself.  The bid that is under this market has controlled price the ENTIRE way through its duration.  And it has created a nice floor to bounce off of while allowing for incremental new highs and advances.  And also allowing for the needed rundowns through it all. Hence all the movement inside it's boundaries.

    It's the perfect set up for longs to control price and clear out sellers and stops along the way.  While also making those watching think that we are in a bearish and topping pattern. 

    The ability of longs to dictate upward movement (either quickly or slowly) belies the notion that anything bearish is actually occurring though.  

    What I find rather telling are the periodic violent surges upward right after the short waterfall moves.  If sellers were in control of anything, those runs back up wouldn't be so easy and fast.  The slow wrenches upward are rather telling as well.  In either case, they tend to not be marked by a lot of the 'normal' two to three point retraces along the way.  Meaning they are all about destroying short positions and blowing through stops. 

    And without a lot of retrace waves on the runs back up, retails shorts cannot average to get out.  It's takes a market pro's buying power on the way up to weather it all and then sell when the window to jettison is briefly opened.

    Given that we run into a lot of overhead resistance at the top of this pennant, the current triangle is also rather perfectly placed.  Will be curious to see what happens over the next few sessions.

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  125.  AAPL will see 420 before it sees 650. AAPL is just a strange fruit.

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  126. At 500 ....

    APPL is now more valuable than Microsoft and Google. Combined. :)

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  127. Paolo Giacobbe PiolFebruary 10, 2012 at 9:35 AM

    Hi PL, yesterday you shared with us SPX was about to reach 1500.I though you where writing about NDX as the attached is the statistical view which is saying we are on a TOP and goog luck for next bottom

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  128. Thanks Dave.  I'm honored in fact that you read my stuff and find it of any value.  I'm just a normal guy like everybody else here, except that I fell in love with markets and TA (and therefore gambling, lol), not to mention beer and  girls and sports at a very early age.  So I really do understand TA very, very well.   I'd put myself into the category of a relatively smart guy who has been a shitty trader.  Shitty because of my biases.  I'm not too old (not by a long shot) to correct my evil ways.  I think I'm actually very well armed now.  Experience is the toughest factor to earn... a very, very expensive factor.  In fact, consider my evil ways as having been corrected.

    For sure, I have absolutely no doubt about where this site going.  Pretzel, if you read this... let me give you a graphic of where your website is today relative to where you're headed.  Please don't forget about me when you hit the big show :-)

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  129. keep buying guys: 
    http://www.cnbc.com/id/46342278 LMAO

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  130. VXX up 10% while S&P is down less than 1%.   ?????

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  131.  Selling stocks, buying calls.

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  132. Buying calls in VXX or in stocks?

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  133. VXX short covering? Or is there a massive event (Greece) in the very near future?

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  134. That huge 'Plastic' tasting 3 lb lobster the market has been gnawing on since roses n cream puffs was offered on JAN 1st, 2012,  has got to put a little load of panic into their accounts about NOW..  Like a few have mentioned that they are not likely to sell off all shares , the VIX, VXX, TVIX , are doing what they do best..  Hedge or bust.     thank you, thank you, thank you.  :)

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  135. Major VXX short covering..  after major spikes in VXX, it's  a short lovers dream, until the last batch gets caught like today.  Duck,... Duck,...GREEEECE.. 

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  136. I wonder why? All they make is a bunch of phones, computers and mp3 players. that's it. In the last 3 yrs all they could come up with was an updated iphone (4G, not even the anticipated 5G; as the 3G was already introduced in '08) and the ipad (Version 1 and 2). That's it. Computer wise? Nothing new really. Just bigger, lighter and better. Hmmm, over-valued??? Nahhh.... Oh I forgot the icloud -where Jobs (rest his soul) now resides in TRON fashion- but which isn't anything new either as clouds have been around for a few yrs now. So keep on buying guys, AAPL is a bargain at these level... NOT... ignore all TIs screaming over-bought and hyper inflated prices beyond anything seen since May 2010 (RSI is now as high as May 2010, days before AAPL went from 270 to 200....).

    ps: don't get me wrong I've made good money out of holding AAPL stocks long term (1+ yr) and I don't hold anything against them. But technically I don't think current prices are healthy or realistic. Yesterday was likely an exhausting gap, Jan 25th a continuation gap, or better a break away gap. Gaps tend to be filled...sooner or later. Given my analysis here today on AAPL and a likely decline to 360-420 area, then that would nice fill those gaps. Upward from there on imho. 

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  137. VXX looks way overbought right now...

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  138. This rally over the last 2 months has totally castrated me.  I just stare at my charts now like a deer in headlights.  I don't trust anything.

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  139. Bought UVXY @ 5.75 and sold @ 7.81.  One of the better trades in awhile 

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  140. Great trade. Congrats.

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  141. Not much to trust. Some CB injection should be coming with this movement.

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  142.  You are not serious, are you? :)

    APPL makes 100 billion a year. If you buy a share today at, say 500, you are actually paying 400. Because they have about 100 cash a share. If you hold it for a year, then your net cost would only be 300 and so on.

    It is better than gold. Which looks pretty, but does not grow. :)

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  143. Thanks - 2 day hold.  The beauty was the VIX was going up whether the market was up or down so there was no risk - the big down day today - boom

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  144. Yup!  I learned that one the hard way too, lol.

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  145. ...Unless we are about to hit a waterfall decline like the one in August, 2011. 

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  146. Statistics count by themselves and I like it! that's it

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  147. AAPL at $500, what a bargain... hahaha.

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  148. I get that trade and just added some calls myself. The way I figure it the rest of my portfolio is set up for doomsday anyway. If the market is obliterated on Monday I make money. If its all blood in the street today and happy times here again on Monday or Tuesday next week I make money with these calls.

    Pretzel's support held today for the wave iv down to higher highs. That is the logical bet.

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  149. Yeah, I expect it to totally calm down next week, with new highs made in the indexes. I will gently ease in positions then.

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  150. " hold it for a year, then your net cost would only be 300 and so on"

    I take it you learned math in the public school system somewhere?

    Hold it for a year, you don't get to count that cash twice, as if they were dividend distro's.

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  151. it's a bull market. it's easier to play the long side.

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  152. WOW.  everyone is a bull on this board now.  2 weeks ago when i left everyone was a desperate bear, counting the top at every tick.  THAT IS SIGNIFICANT!  The retails bears have finally been broken...

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  153. Well that went about as well as one could ask for . . . if you are following the bullish script. 

    Buyers got a day to buy stocks in this range.  Shorts got minor gains to lure them in and get at least something out of it.  Melt up at the end as short positions are closed out. 

    And now ready to take back up next week.  Or if Greece / Europe disappoints over the weekend, then buying power was not wasted today fighting the gap down.

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  154. It needs lot of patience (waiting for sure breakout signal) to trade in this market otherwise it's very easy to fall into traps...

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  155. AR...please do not go telling  everyone that you're normal...YOUR NOT...You're pretty exceptional though. And man-oh-man don't ya wish you knew way back what you know now. I feel quite fortunate knowing that I can tell my 4-year old all of the best lies that I know, then send him your way so he can finish his education in how to be "a lady's man", and a better trader than I'll ever be. Katzo will get him on the weekends so that we can create the SUPERTRADER OF TOMORROW. LOL....and PL will be on Bloomers pretty soon, since he's too objective for MSNBS. Then we'll have to call him Mr. Pretzel.

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  156. I think it's as simple as everyone has a thorough understanding of what CB dumping accomplishes in the immediate term.  I am LT bearish as I more than recognize that this is monetary policy shell game and is utterly unsustainable. 

    But if CB's and the PTB are going to dump a few trillion new dollars into the market AND create the worldwide perception of endless liquidity and free money for all institutional comers AND put a perma-bid under the equities market . . . well this long term bear isn't going to reason (or trade) against that. 

    The bearish position against the fundamental world financial backdrop IS a sound and rational one but not in the immediate timeframe.  I think that's the shift you are seeing here.  It took me a minute, but less than sixty days is hardly a long time.  And in the meantime, I did well going short now and then while mostly going long.  The same is probably true for many others here.

    Longer term though, this market is fucked. About that I have no doubts whatsoever. And what is happening now will only make things a lot WORSE when it all unravels. 

    In the meantime, I am mostly trading long and see a progressively rising market, which I don't think longs care so much about taking it higher so much as taking as fleecing as many investors as possible and the current trajectory accomplishes that rather nicely.  Which means also recognizing that the market is making routine and relatively brief stabs downward to not make any of this too easy.

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  157. I think it's as simple as everyone has a thorough understanding of what CB dumping accomplishes in the immediate term. I am LT bearish as I more than recognize that this is monetary policy shell game and is utterly unsustainable.

    But if CB's and the PTB are going to dump a few trillion new dollars into the market AND create the worldwide perception of endless liquidity and free money for all institutional comers AND put a perma-bid under the equities market . . . well this long term bear isn't going to reason (or trade) against that.

    The bearish position against the fundamental world financial backdrop IS a sound and rational one but not in the immediate timeframe. I think that's the shift you are seeing here. It took me a minute, but less than sixty days is hardly a long time. And in the meantime, I did well going short now and then while mostly going long. The same is probably true for many others here.

    Longer term though, this market is fucked. About that I have no doubts whatsoever. And what is happening now will only make things a lot WORSE when it all unravels.

    In the meantime, I am mostly trading long and see a progressively rising market, which I don't think longs care so much about taking it higher so much as taking as fleecing as many investors as possible and the current trajectory accomplishes that rather nicely. Which means also recognizing that the market is making routine and relatively brief stabs downward to not make any of this too easy.     

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  158. I postulated around noon (pure speculation) that I thought the market would close (4:15PM) right around last Friday's close of SPY = 134.60 and ES about 1341, and we would post a doji for the week.  That's exactly where we were at 4:14PM.

    This is further proof that prices are dialed in to whatever market makers or the powers that be want them to be.  Based on where the market was at 3:12PM, it could have ended anywhere, but "here".  Yet, it ended "here".

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  159. This was a reply to anderavov two posts below, but it showed up here.

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  160. Yep, I thought it would be a doji for the week also. No way in hell are the bulls gonna let the world see any weakness in the newspaper headlines. And unwind oscillators at the same time. It's a beautiful upward trend channel. Does it mean I am bullish? Not at all. I just know that it won't break yet.

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  161. What does it take to get a 1% down day around here?  LOL!  30 trading days since the last 1% down day for S&P - this is the longest stretch since 37 such days took place ending on 1/19/11.  

    Eventually, the S&P will follow the ones that got us here (XLF, KRE, XHB, IYM, FCX).

    VIX intraday today marked 40% up this week - breaking out of falling wedge (forming inverse H&S?)
    Gold dropped out of rising channel that started early January
    Dollar is breaking above resistance with clearance to about 80.50

    Something has to give.

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  162. Arnie,

    I think you miss the forest while examining what you think are unremarkable trees:  more people like and want and use and BUY those seemingly unremarkable products than the producers of alternative options. 

    This isn't a comment on what I think the company is really 'worth'.  Value is ALWAYS relative to what a market's participants are willing to pay for it.  Hence athlete's salaries.  And what we pay for clean water and the air we breath, which is objectively more valuable and necessary than the electronic devices that any company sells.

    And in this market, Apple supplies a lot of value to various parties:  it's end users can make the emotional feel-good purchase, value investors can look at their cash, P/E and balance sheet; fund managers can buy with the herd and believe that the stock enjoys strong price support; even industrial growth investors can look at it's continued performance and future expectations.

    I suspect that Apple's share price will reach a crescendo soon enough, but the current valuation of that company does not surprise me.   

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  163. Based on today's price action and up move toward the close, I think we'll see a downside gap on Monday.  But who knows?

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  164. Up move at the close was short positions being closed out.  I wouldn't read too much into it beyond that. 

    The fact that bulls held this narrow range (only five points) tells me that they remain in charge.  And if we see a gap lower on Monday, then I'll assume it's because market movers WANT it.  Rather than because sellers are actially in control of price. 

    If the Greece /  Europe issue produces another 'bad headline' event, then of course we head lower to start next week.

    But if we get another 'resolution' to this round of the crisis and the Greeks get their money (which they will eventually anyway), then I think there's little chance that we'll see additional meaningful downside.  Today already accomplished what was necessary. 

    Sellers have still shown no signs of being able to force the market to do anything other than fall for a day or two. And I'm not convinced that it's actually bears and sellers who have been behind those moves down.

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    Replies
    1. In the past few weeks, sellers had been squeezed shxxless. They are afraid to go all in unless there is some genuine and news, from what I have read on blogs. A lot of people who want to short are still waiting , afraid to get their face ripped off again

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  165. I agree with you on all points, and believe that bears have no control at all. Down days are merely the bulls taking the foot off the gas pedal for a moment. Probably AAPL will provide the cue when things start to change.

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  166. Do you feel the light volume again has not given the conviction of a turn? I know volume has been pathetic but once a down move starts I would like to see more conviction, imo. I appreciate any insights you have.

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  167. They bought up the ES to my 1340 at EOD, that is a kiss of the bottom of my ES ED TL. The RUT and TRAN were down huge at 1.41% and 1.04% respectively. Here is what a bear flag looks like, or pennant. TVIX up 17% and VIX up 11.59%.

    http://www.screencast.com/users/katzo7/folders/Jing/media/5f39e986-b519-47d2-82aa-c88c0e18ea16

    Here is the bear flag on the ES I was pointing out. It double tapped the LOD right after that.

    http://www.screencast.com/users/katzo7/folders/Jing/media/a4558cce-e04e-4cae-a183-ace4b3638f24

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  168. I agree with you AAPL indicator. I would be interested to see how much institutional buying took place in AAPL today

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  169. Per brianhut's thesis, the MM took price down so "they" could buy the dip. Net money flow was positive. http://online.wsj.com/mdc/public/page/2_3022-mfsctrscan-moneyflow.html

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  170. Congrats to those who bought tvix at 14 this week. I had to be out all day so I set a sell order at 18.6, thinking that should be good enough after 2 10% up days. When I finally had time to check my jaw dropped, $21!!!!!! Seriously. And I sold at 18.6. Well a profit is a profit. Guys. What happened at 3pm est the market dropped but didn't even make new low, what caused the huge spike in VIX and tvix?

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  171. Katzo, do you see VIX back testing it's falling wedge trend line next week before launching higher again? Do you think today is a true break out for VIX?
    As for TVIX it went through 19 like it was nothing, what does the chart say? Btw it had the highest volume today since inception.

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  172. DD, please see my post about AAPL and SPX earlier today. I think it's pretty clear. I've added the "study" here again. Should be self explanatory. 

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  173. I have looked at this post of yours before. Very interesting and thanks for the info. Has this money flow number ever correlated to a move one way or the other? Or just a continuation of the currnet direction?

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  174. T_winn, I guess my estimate of 24 for tvix was way too conservative when Spx hits 1300!! Look at today it got all the way to 21 when Spx was at 1238!!!

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  175. Wish there is some way to download the historical data and feed it into our charting software for a comparative study.

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  176. Apple may now be viewed as a save haven stock.  They are sitting on a pile of cash - cash on hand is valuable when deflation begins.  Just a thought.  Thanks for sharing your chart.

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  177. keen observation.

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  178. The leaders for the past 30+ days were/are FCX, XHB, IYM, XLF, KRE. They continued downward today.

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  179. Since 12/20/2011, the trend has been remarkably linear, Pearson R value = 0.969. MMs have not given up today. They have merely rewind enough to stay on track. See chart. And can someone tell me what MM stands for? Market makers or market manipulators?

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  180. With this tough ride to the top of the market, I”ve been learning a lot from PL, Katzo, et al. and reading up on EW over the past few weeks and want to share what has worked for me.   But first, PL, a donation will be on its way shortly.
    I  usually swing trade and hold positions a few days to a few weeks so I use daily and/or hourly charts.  Only been practicing day-trading ES for this past week.  So here are a few do’s and don’ts for a non-nimble trader like me.
    1.       Do set stops and trail those stops to protect the gain.   The shorter the time frame, the more important this is.   As a newbie in ES trading, I’ve been doing this and able to be net positive.
     
    2.       Don’t short when in Wave 3 on a 5-wave up-trend, based on the chosen timeframe/chart.  Only short when the top of Wave 5 is complete. (Read PL’s charts carefully to know which wave labeling is applicable to your time frame).  Be careful when using time-decayed vehicles to short like inverse ETFs and Puts.   I got stopped out of a put for a small loss even when I was on the right side of the trade.  It turned out I shorted Wave 2 down which quickly came back up after a few days.
     
    3.       Do consider shorting when at top of Wave 3 on a down-trend, however.
     
    4.       Do hold long stock positions until at least when Wave 3 (on a 5-wave up-trend) is complete.  Can be better if hold until Wave 5 is complete.  My biggest problem has been exiting a long position too soon. Based on fundamentals, I can buy the dip pretty well, but often I exit too early in Wave 3.   Now I know how long I need to hold based on EW.
     
    BTW, I had a successful TVIX trade this week.  And I noticed that when PL pulled out his proprietary indicator to call the market top like he did on Wednesday, that was a good time to buy TVIX / VXX.  These ETFs tend to bottom a day or two before a market top and PL’s indicator may be a day or two early, so it works out quite well.   The time to sell TVIX/VXX is when we have rising volume with rising price like today.
    These are things that have worked for me.  No trading suggestions in anyway.

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  181. t-winn, I am gonna buy you a drink on this Friday nite. Thnx for the ES rules, only one I disagree with it to play the EW4 (short the top of EW3), the ABC in these usually screws everything up.

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  182. "triangle / pennant that's formed on the hourly chart over the last five days then? "" No this is a ST call

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  183. Ah yes. Nice "study". I had saved your long post for later reading, but the chart is clear enough. The only question is, will AAPL at $700 be the breaking point? lol

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  184. I found a beautiful AAPL chart that uses EWT; going back 22 yrs!! I added today's candlestick (not 100% accurate, but for illustrative purposes only) to the plot to show the trend-line since '00 as resistance and that a top forming. No need to say anything more. 

    available at: http://chart.ly/symbols/AAPL

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  185. ...another sell signal, bat wings repeat. Will this be the one?

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  186. Actually, I used your ES target number this past sunday and gain a few points on ES.   So it should be me who send you some good Chinese food from San Fran China Town instead!

    Shorting EW4 (top of EW3) is good, more for the nimble traders like you.  EW4 can be too tricky for the non-nimble folks. like me.  So this pullback we're having now which is a EW4, probably for the next 2 weeks before the next leg up, can be a good opportunity to short, but will need to quickly cover those shorts.

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  187.  They cut out early on Fridays I think.

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