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Sunday, February 5, 2012

SPX Update: Do-or-Die Week for the Big Picture Wave Counts

On Friday, the Dow Jones Industrial Average (INDU) came within 6 points of its 2011 high.  If this high is broken, this would be an extremely significant event for the counts, since second waves cannot exceed the beginning of first waves.  Monday is a critical day for the Minor Wave (2) count, and if the market doesn't reverse lower pretty much immediately, it will be time to rule that count out and consider some alternates. 

I continue to favor the Minor (2) top here, but there is now no room for error.  Since I've been wrong before, and Monday may be the bears' last chance for the Minor (2) count, I've looked at a number of alternate possibilities this weekend, and have now decided on my main alternate long-term count.

The Minor (2) count isn't dead yet, and it's still my preferred count.  But in the event that it's way off-base and Monday opens higher, I'm going to present my main alternate count below for reference.  This count considers the possibility that the 2011 decline was an (a) wave, and the current rally as part of a (b) wave. 

On Friday, the S&P 500 (SPX) closed just below a significant overhead resistance zone, as did the INDU.  The bears need this resistance zone to hold.  If this zone can't turn back the rally, then it puts the 1370's, and even the 1400's in play. 

This appears to be a critical pivot point for the market.  My preferred view is that the market heads lower right from Monday's open and doesn't look back.  However, if that doesn't happen, my main alternate count is shown below.  This count will move into the preferred role if the INDU trades above 12876.

If there's no pause at this resistance level, bears may want to stand aside and wait for the market to break its uptrend before taking further actions.  I've said it many, many times before: cash is a position too.

There is really no need to fear "missing out," as I've also said before.  If a big decline is still in the cards, it's not all going to all take place in one day.  Certain posters on my blog have suggested a "flash crash" is around the corner.  I've never been of this opinion.  While anomalies are always possible, I see no signs of such an event in the current charts.  Even the flash crash came after the market broke its uptrend line and started trending down -- not while it was still trending up.  Sudden crashes almost never start from this type of market position.  Patience is a virtue in trading.

In any case, as I mentioned at the beginning of this article, the Minor Wave (2) count isn't dead yet... it's just on severe life support.  Below is the short-term SPX chart, which shows my preferred Minor (2) count. I will continue to favor this count unless the Dow makes new highs above 12876. 

Friday's preferred targets were all hit nicely on the chart below -- in fact, the targets were originally suggested on Jan. 24 as an if/then equation, which is often how the market functions.  Those targets are still shown in the call-out box, which has remained on the chart since the 24th.

The move can be cleanly counted as a complete five-wave rally, to complete c of (y) of Minor (2).  Whether this is indeed the case will be revealed by the market directly.

If we combine the two charts above, we can see there are three major upsloping trendlines that the bears need to break before we can have any confidence in a significant trend change.  The first warning shot to bulls will be a break of the short term channel shown above; the second and third will be breaks of the larger channels in the first chart.  No trend line break equals no trend change.  As I've also said previously, until such time as the market breaks down, the benefit of the doubt should go to the established trend. 

My job, as I see it, is to project the potentials as best I can (including targets when possible), warn about the possibilities of a trend change when I see them, and suggest potential pivot zones so readers can be prepared.  Potential trend change zones are areas to consider taking profits.  If no reversal materializes, one can consider adding to positions if the market breaks through a resistance zone.  Actively betting against a trend is tricky business, and traders must realize that. 

Personally, I attempt quick stabs at counter-trend positions and either make a few bucks, lose a few bucks, or get lucky with my best educated guess and nail the exact top or bottom.  Less nimble intermediate-term swing traders should generally either wait for confirmation of a trend change, or be able to close positions without hesitation if they front-run a reversal that doesn't materialize, and critical support or resistance levels are violated. 

For example, in my opinion, this is another very good zone to attempt some counter-trend shorts, since the market is just below overhead resistance, and the risk/reward potential is good.  But in order for the risk/reward equation to work, one has to be prepared to close positions if resistance is broken and the market doesn't reverse.  If one is going to hold and hope forever, then the risk becomes astronomical, as the market could just keep right on rallying.  Trading is all about managing risk; and betting against a trend is always risky. 

As another example, due to a number of indicators, I was looking for a top back when the market was below 1300-1310.  It's fine if you want to try and play that possible top, but once 1300-1310 was broken, and especially when it was back-tested and held as support, then it was time to look up, not down -- and the daily preferred count this week pointed to higher prices and targets the entire way up from that zone.

There are certainly lessons here for those traders who have front-run a top without using stops.

Anyway, back to the market.  There are signs that momentum actually increased on Friday.  For the short term, the bears primary hope is that Friday was an exhaustion gap similar to October 27 -- and this is indeed a possibility.  As is so often the case in the market, we simply won't have an answer to that question until the next session.

Something small the bears have in their favor is that on Friday, the VIX touched its lower Bollinger band for the first time in several sessions.  This first Bollinger band touch generates at least a short-term pull-back in the SPX more than 77% of the time -- although it isn't necessarily a trend changer, it just means lower prices from where the signal occurred in 77% of prior cases.  However, over the past several weeks, the market has not worked out according to most of the historical odds.  It has blown up indicator after indicator, despite past averages.  In fact, VIX touched its lower Bollinger band in a similar fashion twice already in this rally, and the market kept right on rallying anyway.

Below is a short-term version of the VIX chart to illustrate some examples.  The occurrences on this chart do not equate to the 77% figure -- that figure is based on a much broader market sample.



The market's last chance for Minor Wave (2) is at hand.  If that count still holds any water, the market needs to decline more or less immediately at Monday's open.  The SPX and Dow are both facing significant resistance levels, so the bears have a potential opportunity here -- and even if Minor (2) gets knocked out on the Dow, this is still a significant resistance level and represents the market's next hurdle, with or without Minor (2).

The final chart was originally presented last week, and this study is still valid and something to consider; as is the fact that the Bullish Percent Index is at all-time highs (see Wednesday's article). In the study below, in 2007, the SPX continued higher for two more weeks after the signal triggered.  It has now been one week since the recent trigger.


In conclusion, back on Jan 24 I warned that if the market held the 1300-1310 zone as support, then it was likely on its way to 1330 as the next test... and if it got through that, it would head to 1345-1350.  Those things have come to pass.  The market is now facing its next big test.  If the bears can't put something together here and now, and stop the rally from breaking through 1350-1360 SPX, then it's likely that the rally will continue for at least another week. 

I continue to favor the Minor (2) top -- however, ultimately that's just my best analysis; it's not a guarantee.  The market poses the questions, and the price action provides the answers.  If my preferred Minor (2) top is valid, then the market should reverse almost immediately on Monday, and the current highs should hold for a long time to come.  With only 6 points of upside left before the Dow knocks out its count, we shall have our answer shortly.  Trade safe. 

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

302 comments:

  1. hey PL. Nice post, covers it all. 

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  2. ty katzo.  So close to the KO for Minor (2), seemed like I needed to provide info for what I'd look for next if it's violated.

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  3. Would rather read your post than watch the Super Bowl. Thanks.

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  4. Hi PL,
    great post, always a pleasure to read.

    How bout SPX 1348,77 which should be 75% retracement of okt 2007 high - mars 2009 low?
    (if not miscalculated, night here and Im a bit tired feel free to remove post if to silly).

    If 3P&DH still in play, couldnt we be around no 21 and then 22 down, and then 23 up untill 30 april? I read somewhere move from points 14 to 23 takes 7 months, and 8 to 10 days which should be point 14 mid september and 23 at the 30th of april. I mean 7 months and 8-10 days seems pretty specific, and it seems like were a bit far away?

    So my unqvalified tired guess,
    # SPX 1348,77 high this week (ECB Meeting 9 feb? - greece have finally signed the agreement - personally Im certain they finally will. Germany has to much at stake to let Greece go and put a dent in the trustworthy Euro). 3P&DH point 21
    # Downhill feb (the greece agrement didnt help the world, reality hits - the major problems still there). 3P&DH 22.
    # Upwards again 29 feb -april (ECB will do yet another major moneyprint to the banks 29 febr, and the "Them" wants to keep the values of the companies up, have the companies dividends and then sell - think like a criminal). 3P&DH 23.
    # 30 april - the fun begins. Greece elections april, and no one nows what the people who invented democracy will do. Problems spill over to Portugal, Spain, Italy, the euro will

    Im having my eyes on silver and gold (thank you fried Anon).
    # The last SPX leg down didnt silver was the first to tumble 3 or so months ahead (Awkfull/Awkwward? had silver at the ABC correction after wave 5 at the moment and predicted/guessed a new bottom at 20?). First sign - this week?
    # Then gold 1-2 month ahead of SPX leg down (Katzo didnt you mentioned you predicted/guessed a ABC and then wave 5 up, then maybe down we go again?). Second sign - gold up wave 5 feb-apr, then down.
    # Then EVERYTHING! (Kudos Anon20).

    But hey, what do I now, just a bit of a ranting from a tired ol´ bear...
    So no trading advice - I really dont now what Im talking about here, just the human behaviore of trying to organize reality in an disorganized world to kid myself into believing Im in control. Not the freakin´ market. Or my mom.

    (Katzo/PL, I would really like to hear if you have any comments on my more serious notes regarding SPX 75% 1348,77 and the 3P&DH at the moment point 21 instead of 23, and i so - could 23 in theory be just a slightly higher 21, for example a double top retest 1377?).

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  5. What do you all think about the Super Bowl Stock Market Theory?  A win by the champion of the National Football Conference (NFC) predicts an up year for the stock market, while a victory by an American Football Conference (AFC) team indicates a down year.  This has a 82% accuracy since the very first Super Bowl in 1967.

    Just checked the score a few minutes ago:   Giants 9,  Patriots 10.

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  6. What a cliffhanger!! I guess we will just have to wait and see. PL, if it is the start of wave 1 of C (big IF), what will be the target before the rise of wave 2, 1260?

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  7. Demark 1-30-12 on bloomie said SPX could spike intraday to 1360-70 intraday but close around 1338-42 for the day..........if so this is where i will add TVIX and TWM............on the 30th he said market should top in a week to 10days which is tomorrow thru next monday.

    formally known as infidelserf

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  8. Investors Intelligence NYSE Bullish index up 1.6% for the week, at 71%.

    http://www.investorsintelligence.com/x/free_chart.html?r=101

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  9. previous day low for rth is 1333.25..........almost there

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  10. indeed. may have been a day early and 12 points off on my top call. but lets not get too excited here. 1320 is the support. that needs to be broken on a closing basis. gluck

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  11. So NYG won, up year for stocks?? what might happen in between the year is anyone's guess....

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  12. Pl,

    You can't buy those kinds of kudos!  Me, I had to wait until after the game.  Now, I will suffer withdrawls until mid summer...but it was a great game.   BTW....great post!

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  13. There will be some seriously hungover traders tomorrow!

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  14. Checked Bloomberg. Cannot find Demark Message for 01/30/2012. Last message was 01/20/2012. He said 1338-1342 would be the top.  Can you post link??

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  15. I agree Jim.  PL, great post as usual.  Will be a big day tomorrow, either way!

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  16. Pretzel,

    This post is...prescient.  It's almost like you've gotten in the head of all those swing traders that have been on the losing end since I don't know when.  Whether people make money following your advice or not, you are an exceptional blogger, teacher and individual when it comes to transferring your knowledge of the market.  Thank you!

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  17. Bullish Percent Index is what could bring it down. short term anyway

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  18. thanks for all you do pretzy! another gem of an article this evening. 

    hope everything is ok and you were able to enjoy your weekend. 

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  19. Great analysis as always PL, lets see what happens.

    Maybe the Greeks will come thru and deliver us by refusing to give up their 13/12 pension check, their bonuses for doing nothing, their do nothing public service jobs, their massive disability fraud racket that features 10% of an island suffering from blindness. . . . . etc.
    Hard to imagine that the press misled the public and kept telling us that a deal between the troika and Greece was hours away for the past month.  When the reality was that the troika figured out the massive corruption at all levels of greek government and said no immediate cuts no cash.

    As far as those phony jobs numbers go, if it was so great, it should have sent the market up 300 points not that whimper on Friday.

    For those of you who missed the link on Friday, the Wall Street Examiners deconstruction of the job growth myth. http://wallstreetexaminer.com/2012/02/03/deconstructing-the-massive-beat-in-employment-data/

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  20. T,

    Not buying it.  And I am a pro football junkie.  Somebody, don't remember who, did a great tongue in cheek piece on this suggestion a few years back.  Don't remember much, except it was funny and shot holes in the whole theory.   Fun to banter about over a beer.  :)

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  21. Since the market rose on *bad* news all the way up, maybe now that news is good, it'll get a case of "sell the news." 

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  22. PL, in your 1st chart (main alternative), is this flat leading to an (a)..(b) that is still coming off a B that is pegged to 5/2/11?

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  23. lol, yeah, those are pretty good kudos. 

    Of course, being a Steelers fan, with the Eagles as my second team (PA born), it was hard for me to take a huge interest in the game.  The Pats having caused me to hate them when they knocked the Steelers out of the AFC championship in whatever year that was (too lazy to look it up now), and the Giants being mortal enemies of the Eagles.  I took my kids to a video game parlor instead. :D   First Superbowl I've missed in at least 20 years. 

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  24. Ah, yes.  Good question.  I am still working that out as to my preference, and haven't dug into it because *it counts best as a friggin' 3-wave B*.  If Minor (2) gets KO'd, I'll dig into it deeper.  The main options I see for the 2011 peak are:

    (y) wave
    (x) wave
    (a) wave
    some type of more complex correction.
    or
    *very low probability* (IMO):  some type of developing impulse

    TBD if the highs are taken out.  :)

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  25. btw, I didn't toot my horn in the article about last weeks ST counts, but I did nail each coming day dead-on in the prior day's projections, going back to last weekend.  Sometimes even when the larger counts are getting hazy, EW still works great on shorter time frames.

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  26. Battle just above the 33.25 sell stops.

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  27. Yes, we noticed. Great work. Just a minor and hopefully irrelvant point - My charting softare has an intraday high on May 2nd of 12922.7. Is that wrong and would it make you more comfortable about the Dow count?

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  28. Umm... doesn't agree with my data.  I assume it's wrong.

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  29. Thanks, bastiat.  I did have a nice weekend w/ the kids.  :)

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  30. Thanks, WS.  I try to assimilate what I'm hearing from various posters and suggest whatever little things I can to help out here or there.  Ultimately, all I can do is suggest ideas based on what works for me -- in the end, everyone needs to figure out what works for them.  :)

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  31. If if if.  ;) 

    But IF... then Minute 1 target would be below Oct. lows.

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  32. This sounds like fun!  Maybe I'll work on my own take on that.  :)

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  33. No late night dumpster divers here?  Overnight is the new day....

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  34. modest gap down came true. levels I am gettin' are es 29 where we might get a bounce and 22. this appears to be a EW4 down on the 120 so could be one more run up.

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  35. even a blind squirrel find an acorn once in a while. lol

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  36. 37.25 has to hold this rise up otherwise we fill the gap and possible head to the highs. bounce level was 30, not 29. GLD headed lower will break away from mrkt direction for IT, no longer connected. employment nos detached relationship IT. WWW taking credit for top calling a big concern, may provide a bid under this mrkt.

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  37. REMEMBER, I know Jack Schitt.....

    http://jack.zunino.net/knowjack.htm

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  38. definitely going higher to a gap fill

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  39. Whats a Super Bowl  - sorry Australian humour. In fact we watch any sport and it was a great game. Great post PL - the trading advice is an invaluable reminder for us learners who need to have reinforced that the market will do what it does and we need to learn how to trade that. 

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  40. Hi Pretz, Firstly, really good write up today. It just all makes sense, especially the cash on sidelines thing. I have learned so much from your blog. Thanks. I am entering short positions when its safe to enter, breaking of trendlines, etc. Any profits I make - donations will be coming your way. Sorry I have not donated so far - this crazy rally was so unexpected and has lost me money :( May be soon I will get a chance to make money if EW3 happens a expected. We will see.

    Question on EWT re the new alt charts. I thought that after a clear 5 wave decline, then a retracement can't go more than 100%. What I mean is last years decline is clearly 5 waves down - implusive 3 wave quite clear to see. The rally has been and looks corrective in nature. I know Bernanke is playing is games which would affect the charts in a small way, but the next wave must be down because of the 5 rule identifying direction. At least another 5 down then 3 followed by a final 5 wave decline to find bottom. The new alt pattern even tough i have considered it myself just does not look right, especially that 5 down to wave B. 

     

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  41. long 32.75, sloppy entry

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  42.  http://2.bp.blogspot.com/-Ri4QijMAWIM/Ty-AXO6M_JI/AAAAAAAAAYQ/Pj_lcTi_mCI/s1600/02_Feb_05_2012_KRTT_BBTL_SP500_daily.png

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  43. How does this count work around waves 1 and 4 of the rally since March '09 crossing the same price territory?

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  44. Hi, michael, thanks.

    I agree that the decline off 2011 looks more like a 5 than a 3, which is why my preferred count has remained that it's a 5 with further downside to come.  But ultimately, the market is always right, regardless of what we think.  :)

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  45. No comment on the 3 P&DH pattern... not an expert.

    75% is not a terribly common retracement, but nothing's impossible.  More common nearby % targets are 50%, 61.8%, 78.6%.

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  46. Getting back out if they can't hold it down here...

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  47. yeah,  ishoulda taken that +2 offered, 

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  48. PL, next drop settin up, 

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  49. Hi Pretz, Thanks for your reply. It is a very exciting time for Elliot minded people. I will remain on sidelines until this Primary wave gives us more evidence of direction. I hope its not still in correction from 2007 high which would mean that any price up to SPX 1569  (100% correction) is viable. I'm with you - my preferred count remains same as yours, although if it breaks above the 5 wave decline level of 2011, then I'll be scratching my head for the count! I just can't make a bullish count that makes sense to me from the 2009 low.

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  50. tgt 29, this is tough here to read tho

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  51. My bullish alt EWT outcome. I have been looking at a 30 year chart of the Dow. Maybe its a megaphone top? It sure looks like it from a pattern perspective. Implications are if im correct - bullish run (not a straight line of course) to Dow 16000 before it drops hard in an ABC to mega lows. I dont believe it from a fundamental perspective, but that's what the pattern looks like from a purely chart pattern perspective. Any views anyone?    

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  52. ALT Bullish count. Megaphone top chart attached. Target Dow 16000 ish. Any views?

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  53. been lookin' at the same thing michael, a break of 1370.58 puts tgt of SPX at 1600, top of megaphone

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  54. Thanks for feedback. Yes, I agree. Glad its not just me that see's it. Have not put any counts on it at this stage.

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  55. Watch out for US 10-Year bonds ....

    It has been rising. Now, it is 1.9+%. If it stays consistently above 2%, then that's all you need to know - buy buy buy for stocks, sell sell sell for gold and silver. :)

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  56. That's Wednesday, right?

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  57. What's ES up to? I looked at it an hour ago and I thought it looked headed for 1337 - 1338 for the open regular trading. Now it seems the mood has passed. Of course, everything I see in futures markets is so 10 minutes ago.

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  58.  No clue ....

    But GLD and SLV are not waiting. :)

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  59. Pats lost, Giants did win. Agree? :)

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  60. Home builders are on fire ....

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  61. So is Semiconductor ....

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  62. So based on what you said last week, you wouldn't be expecting a pullback right about here in SLV to form wave B of the correction and then up again to make a C?

    This calendar says there's a US 10-year treasury note auction on Wednesday, FWIW. But I'm still unclear on what's a bond and what's a note and what the relationship is between them.

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  63. Hi PL, great article.  You mention that SPX closed just below overhead resistance zone and bears need this to hold.  Can you clarify what that level is?  It's hard for me to tell from the chart, looks like 1358-ish?  TIA

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  64. morning guys, hope you guys aren't hungover from the superbowl like I am

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  65.  Bond and note are the same.

    The debt market is ginormous - much more so than equity. Every now and then, UST dumps more onto the market. But is usually snapped up quickly.

    My take is that the market is on risk-on mode. So Gold and Silver is losing their luster.

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  66. Dollars were going up with the equities markets too. On the other hand, silver is an industrial metal as well as a "safe" haven so a positive outlook for industry could be more bullish for silver than for gold, no?

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  67. Been a Broncos fan for over 20 years and watching them beat pit was a highlight (for me) of the playoffs.  Didn't have a team in the hunt this year, but love to watch the game. 

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  68. Entered JPM Feb. 10th  puts @37 for $0.15.  Not trading advice. Could go to zero very quickly.  Manage your risks and trade safe.

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  69. Silver is not as much as an industrial metal as you might think post WWII. It is used, but in only a *small* percentage of what it used to be used for.

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  70.  Industrial use of silver is very limited.

    It's the poor man's gold. And attracts a lot of retail traders. Consequently, it is far more volatile than gold. I personally like to trade SLV more than GLD.

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  71. Here is something, I guess interesting.  The VIX is up 4% + - yet the stocks that track it - VXX, TVIX etc are down - whazzup with dat ?

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  72. God help me, I was sorely tempted to try shorting the SPX again on the bounce this morning. I was looking at SDS and thinking that if I bought it right at the early morning low, my stop would only have to go about 10 cents below that...

    Then I zoomed out an realized that my first price target would only be about 25 cents above that and the next one maybe another 15 cents above that. Round trip commissions and funds tied up for 4 days after closing out either way... not much of an enticement I guess, unless I loaded up, and/or moved up to a triple short fund, both of which strike me as a little dumb at this juncture even for me. Gotta work on my bloodthirstiness.

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  73.  I turned off the TV after the Pats lost their first catch near the end of the 4th Q.
    So, no hangover. :)

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  74. third and last short car added at 38 ES (34+35+38)

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  75. I think it may actually be the rise again. I saw an article a while back predicting industrial consumption by 2015 to be up by like 1/3 again over 2010.

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  76. VXX measures 30-day expected volatility of the S&P 500 Index, implied by near- and next-term VIX futures contracts. Since "near-term" futures must have at least one week to expiration (according to VXX standard operating procedure), VXX "rolls" to the second and third VIX futures contract months before the near-term futures have less than a week to expiration. This rolling causes price erosion.  Avoid buying the VXX or options on the VXX between the 8th and 5th day prior to futures/options expiration - that's when the rolling takes place.  This puts a downward bias on prices.

    http://www.ipathetn.com/product/VXX/#/overview/profile 

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  77. I hear ya. That's what made me perk up my ears when you made that comment the other day.

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  78.  "...a little dumb at this juncture even for me."  LOL!  I feel that way too often.

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  79. Is your count still in EW4 down? If so, what's your target before EW5 bounce up?

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  80. The LT investment question: SHOULD YOU STAY MARRIED TO GOLD?

    I still like her!

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  81. Note that this doesn't mean that if the market tanks, VXX and TVIX won't rise.  Of course they will, but if nothing happens, they will lose value at a faster rate than normal due to being in the midst of the rollover period.

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  82. around 29-30 ES but mrkt acting strange, could be real fast spike down, then up

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  83. PMs are always fun...

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  84.  Thank you for sharing your work. This jives with your chart over the weekend (can't overlap the 127 right?).

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  85. LOL...don't get me started. Scottrade even sent me a gift card for my birthday this year..."Free Haircut for frequent fliers."

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  86. From here, it should be 5 waves down before Minute 1 is finished? 

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  87. Thanks Pl, very instructive/educational post!

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  88. New interpretation for low $VIX ,,,, The market is very undecided and so can only move sideways, more or less.

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  89. too many buyers on dips i see. maybe headed to 1350. need one last mash up then down intraday reversal should do it. will buy some short in 1350's iffen we get there

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  90. Out of JPM puts @ $0.16

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  91. My understanding of the action this morning is that there remains a strong bid under this market and buyers are currently toying with sellers. Seems that gap lower then the mid morning push from 1,342 down to 1,339 were just a fakeouts to lure bears. And buyers can still make up lost ground whever it pleases them.  Sellers haven't even been able to get near the bottom of the trend channel, much less test it.  That should have been easy this morning. 

    I still don't get where the buying is coming from. I don't believe that it's the private marketplace that's behind it though.  Rational bulls don't buy like this and with every commonsense and overbought indicator under the sun arrayed against them. Everything about what is going on in the current environment feels like there is a coordinated and capable larger entity behind the curtain.

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  92. demark mentioned the 1360-70 area and swift reversal i believe for the last move........i know one his key indicators was pegged at 9 and the other was at 10 as of jan 30th......he said the second one at 10 could get to 13 before its over....correct me if i am wrong please

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  93. WWWCI, staying short. . . 

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  94. excellent observation..........they....them....well you know?  really trying to keep it up.......and succeeding at this point!

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  95. Hey Brian, do you find this market playable at all?

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  96. dont know dmark. but moving averages say more up. cant even crack the 20 day.  many ppl go with the trend til cracked
    while some say down and short for last few months. trend wins
    http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=0&mn=2&dy=0&id=p32181931012

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  97.  The only active TD Sequential major indices on Jan 30 were GLD and NDX, that is valid Setup of 9 days plus a Countdown of 12 days. GLD advanced to a count of 14 on 2/1 and began a decline on 2/2. NDX has continued to proceed in its countdown and as of 2/3 equalled a Countdown of 15 (will not expire until CD=18)

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  98.  correction:
    should read GLD advanced to a count of 14 on 2/2 and began a decline on 2/3.

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  99.  Post game day market is usually very lethargic. :)

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  100. S&P 500's biggest down day all year is still just -0.57% from January 26

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  101.  SPY is the ETF for S&P500 ....

    Its options' Implied Volatility is consistent with your observation. It is around 16-17. That means its market makers are expecting around 0.4+/-% movements daily, on average. :)

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  102. WWCI=??? THNX ahead...

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  103. truerangeballisticFebruary 6, 2012 at 7:26 AM

    I agree. Look at Europe. Hardly down at all. This just feels strange. I would not be surprised to see a lower close today with a gap up tomorrow.

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  104. That's Katzo7's nickname for billabuster, who displays troll-like characteristics -- I think many of us have noticed that. I think Katzo's been observing Billa's prouncements and have found them nearly always accurates as a counter-indicator. So the nickname means Wrong Way Wanda Contrary Indicator.

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  105. That little uptick at 12:32 was a bot switching on.

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  106. katzo7

    Did your mentor, Attila, ever mention why he thought engineers were the worst traders??  I am an engineer and would like to know, so that if it's true, I can overcome it.  :)  Part of that psychology of trading thing.

    TIA

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  107. Think CB Swans, in droves.

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  108. short one es at 1339.25   they only did 102 at the 39.75 level

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  109. Look at AAPL.  Almost $465.   Maybe it has to come down for market to come down?

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  110. Are the setups and countdowns in days?

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  111. That was my EW teacher at eSignal that said that. Atilla came after that training. Engineers like everything perfect and in the mrkt, one needs to provide certain latitude for it hitting, or even passing the tgt levels. This is what he said, not me. In engineering if they do not get it exact the building or bridge might fall down so they have to be precise. Mrkt is not precise.

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  112. dunno if your talkin about me but i said inverse headn shoulder plays to 1360 and golden crosses on all indices so be careful shorting this thing. think small if countertrending a play is my idea. trend is your friend as a friend once told me. gluck

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  113.  Yes.......setups and countdowns are in days, the setups must be consecutive while countdowns do not have to be. 13 is the idealized countdown completion, but as some of the wiser heads here have been suggesting....the price action must show subsequent proof that the Sequence has been completed.

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  114. throwing of dojis, many dojis

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  115. like watching paint dry.....prolly not good for my short......at 40.25 to cover n limit loss if have to

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  116. Daily VIX option trades..  This has been crazy low volatility hasnt it?

    http://www.youtube.com/watch?v=ga7-pcJzRQA&feature=plcp&context=C3bdf0a3UDOEgsToPDskI34taj0Z9dAhnClITeAwyO

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  117. last car ES at 39 (34,35,38,39)

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  118. Well, if you are willing to play the market gratuitously and recklessly long, then certainly it's playable.  Ha, ha.

    But yes, this market HAS been a challenge for me since the start of the year. Though I don't think it's impossible.  I have gotten MUCH more careful about picking my entry points, which is probably a good thing for me anyway. 

    And I am now up nicely since opening the first trading day of the year with my largest-ever one day loss (by almost triple my previous 'record'), but since that time I had RIGHTFULLY passed on one seemingly rational and well-reasoned entry point after another that I would have jumped on just six weeks ago. 

    And it's good thing that I've gotten much more careful about picking my entry points (especially going short), since I would have gotten myself into a pickle on too many occasions had I entered the trade.   So my entry points especially for going short tend to be much more careful.

    Going long has been a bit of a mindfuck for me ever since we crossed 1,270 (remember back then?).  I've got more trades long than short the last couple weeks, but there is something about knowing that the market is just so damn overbought and overvalued that makes me less than comfortable, even when I do see the never-ending-bid under the price action. 

    The problem for me though, is that many long trades defy my sense of physics and gravity. Like going long at 1,338 this morning after the open for  example.  Nothing in my realm of understanding says that should have been a good idea. Sellers had the wind at their backs this morning.  And a LOT of incentive to push down to 1,230.  So where did all of those buyers come from in the face of all of that?  Makes so rational sense.

    One thing that is also undeniable as well:  I have had more 'stick save trades' this last month than the last couple months combined. 

    By stick save trade, I mean when the trade moves heavily against me and to 'save' myself I play the expected snap back or retrace move by doubling, tripling or sometimes even quadrupling down on my position.   Meaning I am taking on massive amounts of risk to get back to even.There is more to this than I am explaining here, because stop loss orders get triggered on the original buys as well, which is no reason to not trade the expected retrace.

    I HATE trading this way though.  It's incredibly nerve-wracking. Eventually have the odds will not work in your favor. And if it means that I'd have to always get myself out of a jam as much as I have had to the past month, then I'd probably just not trade much at all.

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  119. Huh? iirc You said 4 days ago "TOP is in.. for now anyways. took profits. selling. rip. Shorting is the PLAY".. You also said something about too many bulls on the bus. I can dig it up in my emails if you really want to compare notes. ;-)

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  120. STAT400 Probability & Statistics may be used to reinforce your trader's mentality if you've taken it in ENG undergrad...

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  121. that is what my teacher said, i do not necessarily agree with it, have no experience or objectivity determining that. stereotypes are always faulty.

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  122. think 1339.25 is a ceiling (appears a sell program located there) or EW4 upside stab, the EW5 move to come. . . should be very fasttgt1329-30 ES is pure tgt but may not get that low, a break of that level and a good extended sell off to follow

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  123. I hear ya on "nerve wracking."

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  124.  Katzo: target in mind?  Thanks,  John

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  125. covered at 1337.75 my one short at 39.25

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  126. well....my cover was an all clear for those still short!!  lol  vwap at 1336.43 on my 5min

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  127. Entered JPM Feb. 10th puts @37 for $0.15. Not trading advice. Could go to zero very quickly. Manage your risks and trade safe.     

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  128. Cashorectomy soon.....

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  129. Never under estimate man's ability to steal defeat from the jaws of victory.

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  130. Engineers that build operating systems, on the other hand, have to prepare for unlimited random events, in unlimited combinations and time frames. Yahoo! 

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  131. it cannot go above 38.50

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  132. Can't
    Shouln't
    Wouldn't
    ?
    :)

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  133. +3.3 for cash

    I would like to see it not break 38.5 on the 120 ES chart

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  134. remember there is a gap up here that measures to 38.50 ES

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  135. if it breaks, do you see it going higher?

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  136. are we building the right shoulder on H + S top?........wud be nice to   still only 102 cars up at 39.75

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  137.  i think it broke it

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  138. that gap is at 39.50 isn't it katz?

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  139. 5 min neckline at 37 to 37.25...............only 988,000 cars today....very light vol......just some good selling would get her movin.....but we are coming into last hour...........we will c

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  140. I'm expecting ES to be at 1338 at the cash market close today.

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  141. Out of JPM puts at $0.13

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  142. double top so far and only around 100 more cars at 39.75

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  143. On the WSJ money flow page, does anyone know what the DJ U.S. TSM (float) measure is? 
    http://online.wsj.com/mdc/public/page/2_3022-mfsctrscan-moneyflow.html

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  144. With Europe closed and volume thinner than a bulemic teenager, they may try to run some stops into the close figuring that of those playing today, many have to be bears hoping to catch the top.  I am not going long in anticipation of it, but have some sell orders at 41.50 in case things get crazy.  Having traded around my position today, I am now short from 39.36.  I will take 1/3 position off if it gets down to 37.50.

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  145. TSM = total stock market, not just the industrials or transports etc

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  146. FWIW, re: Tom DeMark, tweet from B'Berg's Adam Johnson:-

     "Tom DeMark: $SPX, $QQQ, $RUT all hit my targets. Going to cash, may go short if intraday rally to 1375 on headline. CAC & DAX nearly done $$"

    &

    "DeMark also: trading top in for gold and Euro. He likes Dollar. Still short Bunds but will cover when DAX peaks, he says coming soon $$"

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  147. The key for me dismissing the bullish EWT is from 4 Oct low to 27 Oct under most bullish counts is wave 1. Now, correct me if im wrong, but it looks like a ABC correction to me. Defo not a 5 wave advance on an impulsive wave count. Also, wave 3 decline June last year is defo a wave 3. Therefore, I have confidence in a DOW triple top scenario. I think Greece is going to be the key and judging my the public's anger over wage cuts and taxes, I see a steep decline following that news. I have entered a small short with a stop loss at 12925. Fingers crossed. Just my thoughts not trading advice.  

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  148. Do you know of specific Greek deadline looming?

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  149. on the 120 ES chart put an EW5 at the top at 14:00 Friday, an EW 1 at the doji at 4:00 today, an EW2 at the doji at noon today 
    so we should transition into the 3 down now or soon. . .  spent about 6 hours up here filling that damn gap and looking for upside horse power, now the real direction will appear, maybe in after hour trading, bad news after-the-bell?

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  150.  Thanks for posting!  How can I follow this on Twitter to see DeMark's updates?

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  151. As I discussed with the board on Friday's night, the gap down as I expected on today's morning is just wave (c) of the correction of the big wave up on Friday. From the info of today's close, it seems that the market hasn't completed it correction yet (read side way direction). There seems a trap to go up more than likely to gap down.

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  152. Closed out 3 open TF contracts from Friday for a +12.9 points.  Want to leave open but dont trust this market.
    Should have closed early this morning but hopes of market turn fooled me again.  Sick of this bull!

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  153. Heard a rumor that T.Demark will be on Bloomberg this afternoon, saying "$SPX, $QQQ, $RUT all hit my targets. Going to cash, may go short if intraday rally on headline."   Haven't seen the video on Bloomberg yet...

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  154. Hi Dust Devil, there was supposed to be an agreement yesterday, but talks are continuing. I think March 20th is the deadline for the interest on the debt to be paid, but, basically, an agreement is needed this week in order get the administration sorted out.

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  155. well if i was able to pick tops i prolly wouldnt be on a blog with all you other knuckleheads ; ) 

    maybe top up here in 1350 to 1370 if i get a 2nd try. but trend is up so any short i play are smallish

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  156. Just saw RolfT's about the same thing down below.

    The more I think about it, the more it seemss like Demark manipulates the market to benefit his big clients like G.Soros to me.  He predicted 1345 back in early December, early enough to lure bulls in.  Once the market hits this target for the top, his big clients (Soros, etc.) will sell.   Then he goes on the news to confirm his target so his smaller clients who subscribe to his newsletter can get out early.  Then he'll predict market bottom, and a whole bunch of people will sell.  Once the market hits his target for bottom, Soros will buy.   And the cycle repeats itself !!!

    We're better off sticking with EW.

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  157. Interesting thoughts, t_winn. I wonder if Demark uses a proprietary HFT platform?

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  158. Hello PL, I've been following your charts regularly and faithfully for a couple of months -- very, very interesting!!  I am totally a newbie to Elliot Wave theories, but have read extensively on trading, technical analysis and historical trends.  How does the possibility that the Dow and the S&P 500 have formed double tops and are heading lower ASAP, fit with your EW discussions?

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  159. and the black kat has been saying short since he  has been on this site, so he has been going opposite of me.  whateva. he didnt like my bullish calls from 1290. so good luck with that counter indicator

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  160.  It is Adam Johnson you want to follow  at AJInsight 

    Joe


    .

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  161. I still have yet to see a cogent explanation of where the perma-bid that is under this market is coming from.  This morning's tape would be a rather helpful Exhibit A (or rather more like Exhibit W) of the tape 'defying gravity'. 
     
    Let's see if this makes sense to anyone: We have what the pros who understand financials and who run the Street properly understand is a bullshit and cooked jobs number that leads to another blow off high.  The futes overnight are consistently red and the market gaps lower to open.  Sellers have both the wind at their backs this morning AND a LOT of incentive AND all of the ST and IT indicators pegged tot he max (again) to at least see a push down to 1,335 AT THE VERY LEAST.
     
    There is no fucking rationally collective group of buyers in a truly free market who steps in a bids stocks up at 1,338 this morning under the above scenario. 

    Forget E-wave theory and counts and trend lines and indicators all that for a moment.  Because none of those can explain what we are seeing.
     
    Please show me the pro market bull (or group of market pros either separately or collectively) who steps in and buys stocks with conviction at 1,338 at 9:45 am this morning under THESE CONDITIONS. Or show me the rational human-written algorithms whose computers and bots would collectively submit buy orders that easily overcomes the incoming sell orders under that scenario.
     
    But buyers just mysteriously showed up on the open anyway.  And put a bid under overbought equities that just had another gravity-defying run up on a fake jobs number that no one really believes.
     
    So who's doing that kind of buying?  The kind of buying that didn't allow sellers to push the market down more that ONE AND THREE QUARTERS OF A FUCKING POINT after 10:45 am this morning? 

    No one has ever offered an answer for this tape action that makes sense or is believable.  Not one that I have read.  Other than CB money.  But even then, that CB money if put into a private buyer's hands wouldn't have rationally done the buying that showed up this morning.  The rational buyer steps in to buy stocks lower and after the correction has occurred.  There was no reason for the rational buyer to be protecting 1,240 today.
     
    This is a sincere question, not some lame complaint about market manipulation.  I didn't lose money today either, so that's not it.

    The answer to where this bid is coming from and HOW MUCH CASH IS REALLY BEHIND IT is the answer to this market.  And I still have yet to see an answer to that question.
     
     

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  162. This doesn't answer as to who but all I can come up with is that not enough of the gullible money has come back into the market yet.  Bills, bonds, gold, etc is still getting the bulk of the money.  My guess is inflows need to increase so MM's can let go of inventory.
    Just my two cents worth.

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  163. It's proven that there is a day trader that bought at 9:30 then sold at 10:05 and then bought with conviction at 10:45. Believe it or not...

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  164. Except that 'gullible money' wasn't pouring into equity bids at 6:45 am the morning after the f-ing Super Bowl. The only money that was awake this morning was the smart kind who knew EXACTLY what it was doing. The kind that KNEW it could overcome what sellers would throw at it in the open and would calmly buy anyway. There is no private rational entity that would have done that. Computer driven or otherwise. You'd have to KNOW that you have to know going in that you do in fact have the sheer fucking dollars and bullets to have bid this morning's market up if you were even going to make an attempt at it. It sure as hell wasn't someone who was gullible.

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  165. Maybe there is just a lack of sellers.   The longs are holding on to their shares.  New longs (as few as there may be considering the low volume today) can only get a sale at a high price.  Not sure about it, just a thought.

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  166. I have been losing my a$$ for six months waiting for things to fall apart.  I finally learned futures a couple of weeks ago.  I have no clue who or what is supporting thius market but I agree it makes no sense.  My conspiracy theory has been that the Fed is involved some how so things stay strong until the election.  But what do I know except how to be on the wrong side of a trade.  Something does smell though.  Doomsday is coming and once it starts bids wont be found.

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  167.  Heard it from the pro's ....

    Fund managers are systematically squeezing the shorts to make up for their performance or lack thereof. Typically, they'll buy up large blocks of shares ahead of the operation to soak up potential supplies. They then slowly tighten the vice - a slow squeeze results.

    Without supply, there is only one way for the market  to go, :)

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  168. Wonder if it could have been a preventive measure in case Greece came to an answer for the Troika.  The expectation was that there would be some kind of consensus from Sunday.  If that came true, the logic would have been to buy as much as possible into the market regardless of the potential Greece agreement.  So the purpose was not to raise the market, but to prevent it from tanking if there were some kinda of official agreement.

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  169. Interesting thread guys.  i have same questions also..  anyone personally know someone who works at a MM firm?  shady thoughts come to mind..   wherever there is money, people are out to get it.. all of it..

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  170. Elder said that statistically, the two professions that are most attracted to trading are engineers and farmers. So if 9 out of 10 people who try trading turn out not to be good at it and a lopsided percentage of the people who try it are engineers and farmers, then I guess it stands to reason that a lot of the people who suck at it are going to turn out to be engineers and farmers.

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  171. Any day trader who bought this morning's open with any kind of significant position is a fucking retard who's going to lose his ass over time, no matter how well today's tape and action worked out otherwise.

    There have now been SO MANY nine to fifteen point waterfall declines in the CURRENT market just after a new major high has been reached that the trader in question would have had to be truly blind and unaware of the significant risks involved to have gone long on the open this morning.

    What you are describing is the trading equivalent of stepping off of 100 foot ledges because you can see that others are somehow levitating with regularity . . . and so you start to believe that the 'normal' forces of gravity have been permanently suspended.  Pros don't believe that shit.

    And then you start to think that defying gravity has become 'safe' . . . and even profitable.  That's the nonsense that the gullible start to believe.

    And even if there were a few traders who went long this morning, if you line up 1,000 seasoned professionals who are Market pros with a firm sense of what makes sense to do and not do in any given situation, I don't havre to wonder what their choices would have been. 

    You wouldn't have gotten to even fifteen percent willing to risk going long in any major way and who would have been looking to pile on the short bandwagon for at least today. Because it's neither safe nor rational to have bought with any kind of significance at 1,338.

    And most would surely tell you that you wait for at least 1,335 to be tested before buying ANYTHING. 

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  172. truerangeballisticFebruary 6, 2012 at 2:15 PM

    Maybe the answer lies in who has the most to gain from keeping this market artificially inflated. Hedge funds work of volatility so they are out, at least imo. MM need to generate gains to maintain drawing in the herd but that would take a coordinated effort on a mass scale, so they are out. That only leaves CB's with their printing presses and conduits. I am in agreement with you here. The SPX should have taken out 1335 no problem today. It appears that going thru each of the 500 stocks to see who was buying might be a start. Then again I have heard on low volume days the market is easily moved up or down. Like during holidays. I have been asking myself your question for a few weeks now. Europe was barely down so who is buying that stuff. Is it all LTRO and, if so, how are they making the trades? Or is it banks that have been fattened up on the FED's operation twist? Maybe I am way off base here but if the markets stay up things appear better. This is just an observation and I welcome any criticism on it. Wish I had a who, when and where.

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  173. Yup. I have the same questions. The answer may lie in "who has that much money". Fund managers might, for awhile. Is it the Fed or their minions? Could be. Especially on behalf of our dear gov't. Gotta look good this year, no rockin' the boat. Someone, somehow is clearly out to prop up the market, to throw all the shorts out of the treetops, and keep the indices up,up,up. Another interesting question is, if the Big Buyer is willing to put a rising floor under the market, are they big enough to risk losing it all if the market manages to turn on them? 

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  174. It's just a basic simple of applying EW theory for today's tape. It's NOT complicated at all. What's kind of pros is that? lol.

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  175. Engineers that build anything really. Engineers joke about perfection but have to try and build things out of materials they can actually get. They do their best to optimize but perfection is always out of reach.

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  176. lmao -- you're in rare form today.  :)

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  177. It would fit well with the Minor (2) count.

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  178. Agree with you on CB's. Who else has not only the money but the ability to risk it all in the event that the whole scheme blows up on them? 

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  179. Oh and btw, my saying that no one has offered a rational explanation for what we are seeing in this environment in no way is dismissing or calling into question Pretz's work or counts. 

    I think he is contending with forces that all models and theory (EW or otherwise) have never accounted for.  EW assumes a sufficient number of private and disparate market participants, none of one of whom unto themselves determine marketplace outcomes and prices.  It depends on the essential assumption of rational group choices and behavior amongst private and discrete participants responding to natural market forces. 

    CB money created out of thin air and pumped into the market is by definition not 'natural market forces' already. 

    And if you were to add in a coordinated effort by some participant or group of participants that is unknown to the rest of the marketplace that is able to put a perma-bid under that market that is sufficient to simply direct the market's prices inexorably upward, well then all EW theory and modeling is rendered unable to describe that market at all. 

    The model then would simply be:  what is the perma-bid entity's 'plans' for how it all turns out.  And how does that entity time and determined when it turns the bid cycle gets switched to on. And when it turns it off.

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  180. http://www.zerohedge.com/news/presenting-rise-hft-machine-visual-confirmation-how-skynet-broke-stock-market-us-downgrade-day

    http://www.zerohedge.com/news/lowest-non-holiday-market-volume-past-decade

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  181. astro $.02 - Timeline - all times EDT
    Tues. 2/7: 
    -  Mercury conjunct Sun in Aquarius 4:03 am (agreements/contracts between leaders are complex in this sign of equality and independence)
    - Saturn retrograde 7:43 am then quincunx Venus at 3:01 pm (just plain irritating as rules/managers try to control esteem/cash flow)
    - Full Moon in Leo 4:54 pm (a culmination of leader's efforts)
    Wed. 2/8:
    - Venus enters Aries 1:01 am  ("...hot blooded, check it and see...")
    Thur. 2/9:
    Venus conjunct Uranus 9:29 pm (uhhhh, something unexpected - relationships also may get volatile under this transit)

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