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Friday, March 2, 2012

SPX and RUT Updates: Avoid Trading Only Your Bias

Yesterday's upward reversal gave the decline off 1378 the look of a three-wave correction, so unless it's part of an expanded flat or similar, this pattern is suggestive of higher prices. 

Interpreting this market with any confidence remains challenging.  On the one hand, the preferred count seems to be playing out fairly well -- but on the other hand, I keep thinking "fourth wave" every time I study this move.  The biggest challenge is that the first portion of this rally, back in December, is very ambiguous.  So I'm not entirely certain how many nested first and second waves need to unwind at this point. 

This is pretty normal -- the counts go through phases where they're pretty clear, and they go through other phases where they're open to interpretation.  This is one of the "open to interpretation" phases.

My preferred count is still that the SPX has either completed a fifth wave or nearly completed it.  If it's an expanding ending diagonal, it completed at 1378 (first chart).  If it's a contracting diagonal, it needs at least one more move up (second chart).  Both charts below.



Diagonals can be a pain in the butt and will sometimes run "one more wave" longer than you think for several days. Hopefully, that won't be the case here. In a perfect world, if it's a contracting diagonal, the move described on the chart below would happen today.



Next the 10 minute SPX chart.  The SPX has yet to break down from its uptrend channel, though it has been spending time in the bottom half of that channel recently.


The next chart is the Russell 2000 (RUT), which has a nice trade-able rectangle pattern. 

I know a lot of my readers are bears, but it's important not to get too hung-up on one's "convictions."  For example, a week ago, I pointed out an ascending triangle in the NDX, which targeted 50 points of upside if it broke out.  It has since broken out, and so far, the NDX has captured 45 of those points to the upside -- that's $900 profit per NQ contract.

Another example would be when the SPX back-tested the 1300-1310 zone.  Since then, with the exception of a misfire that cost about 5 points from 1328 to 1333, I've been predicting higher prices up until very recently.  To be quite conservative, let's call it 40 SPX points of upside -- that's $2000 profit per ES contract. 

I bring these two things up to illustrate why I would strongly recommend that bears don't overlook these types of patterns in favor of trading only their biases.  Let the market tell you what to do. 

This rally could go on for longer than most bears are expecting, and if the SPX ends up topping at 1487, you don't want to look back and see that you've missed every cent of action on the long side due to your bias.  Or worse: lost money because you were only willing to short.  I am, of course, not addressing day traders as much as swing traders.

Anyway, back to the RUT.  I prefaced the chart with the above discussion because it shows a rectangle that could be traded long or short, depending on how it breaks.  If the SPX count is correct, it seems probable it will break down -- but why try to anticipate a pattern that's this clear and simple?  Trade it whichever way it breaks.  Or, conversely, trade it as a range: short near the top of the range, long near the bottom.  Either approach can work, because the breakout/breakdown levels are pretty clear, so the market tells you when to stop out of the trade if it's not working.

From an Elliott perspective, the pattern in the blue rectangle is almost impossible to count, but it certainly appears corrective.


Next is a long-term Dow chart, which simply shows some support and resistance levels.


And finally, a chart I found interesting.  Long-time readers know I like to study ratios of various markets.  This chart compares the ratio of Rydex 2x bull funds to Rydex 2x bear funds.  This ratio usually tracks the SPX pretty closely, but has recently launched way out ahead of the SPX.  I like to study Rydex funds to get a feel for the mom and pop investor sentiment, and this chart confirms that small investors (dumb money) are exceedingly confident in this rally. 

It's only come close to being this far ahead of the SPX one other time, noted on the chart.  But so far with this rally, dumb money has been winning this battle for a while.  Don't blame yourself too much if you've been skeptical of this rally:  based on a conglomerate of indicators, smart money has remained skeptical over dumb money by a 2 to 1 margin for some time.


In conclusion, if the short-term wave counts are on-target for SPX, there's a good chance the market will correct soon.  Either the market holding below the recent 1378 high or a false break above 1380 which whipsaws would be acceptable conclusions to this wave, based on the preferred count.   The caveat is if the market can break above 1380 and sustain that break, then the preferred count is incorrect and bears should get out of the way -- if that happens, then a run to 1400-1410 is probably unfolding.

Recall that the SPX has yet to so much as break its uptrend, so bears shouldn't get too excited yet.  Personally, I love trading diagonals in the way described on the second chart.  If there's a false breakout and whipsaw, there are usually only a few points at risk to attempt that short.  If it fails, you're not risking much -- but if it plays out, it's usually almost the exact top.  Traders looking to play either side of the market should also give some consideration to the RUT.   Trade safe.

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

260 comments:

  1. good morning PL.......thank you for your analysis

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  2. eur/$$

    http://screencast.com/t/WzcAjADDtjK

    ES/120 (note that I feel UUP (dollar) has bottomed). Dollar up & $SPX/ES down. . . 

    http://www.screencast.com/users/katzo7/folders/Jing/media/f10bf70d-e777-4261-901f-5b4e72a6f2f8

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  3. Good morning! Wow, I was expecting a more bearish very ST view, given the current drop in ES. Could ES possibly bottom out during the first half-hour of RTH and then reverse upwards?

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  4. You mention NDX gains per NQ contract. What's NQ if I apply to RUT?

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  5. prolly ST bottom here, reset to 70-2, I think down into afternoon tho. . . 

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  6. Huh? 

    Are you asking what the RUT futures contract is?  TF is the symbol for RUT futures.

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  7. Good Morning PL...Great article...I felt like it was personally written for me.... A) I've gotten much better (not cured yet) with the bias problem because of B) the way $RUT is running. It has worked out nicely. Thanks for your work. :)

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  8. Sure.  Or the exapanding ending diagonal could be correct. 

    In either case, I try to ignore ES as much as possible when doing my nightly work.  Paying too much attention to ES screws me up more times than not when trying to anticipate the cash market.

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  9. He's screwing with you :)

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  10. I think he is looking for equivalent value of $RUT to $NQ. . .

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  11. Great answer and great article! Thanks!

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  12. My bad. Sorry about that :(

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  13. PL, I am having trouble understanding your analysis of the Rydex ratio.  I get that small investors are more bullish than most.  What do you mean by "the market forced everything back to the median"?  I'm not clear on what conclusion to draw from this specific chart.  Thanks.

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  14. In other words, the ratio was way ahead of the SPX prices -- but the market corrected that by forcing the ratio back in line with prices.  See how both the ratio and SPX made lower lows in March '09.  I'm not clear on what forward-looking conclusions can be drawn either -- *one* example does not a pattern make.  It's more shown to illustrate how amazingly bullish Rydex investors are -- and especially the fact they're more bullish than they've been since... well, *ever*.

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  15. Here's where I disagree with PL. Up and down Wall Street's exchanges, one thing is, and has been for quite sometime, quite clear: Mom and pop investors are still hiding, in their fetal positions. :)

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  16. truerangeballisticMarch 2, 2012 at 3:57 AM

    PL excellent work as always. Thanks again.

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  17. good post PL, better than yday's where you lost me a bit. I don't understand the ratio-chart and the conclusions drawn from it fully either, but that's OK and only secondary to what we/you anticipate will be the markets next move, which is today. Futures are slightly lower, we'll see how it plays out. I take it day by day now. AAPL also lower; since that puppy has kept most markets up, one has to wonder what happens when it starts sliding.

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  18. Good morning DustDevil,
    thank you for your info about Jupiter. I don't know much astronomy (!) but this chart may just match what you say.
    INDU has made approx 25 points progress per day over this bull run from 19 Dec.
    It looks like we may top out if the chart is correct at 13,090 give or take, which is 110 points up from the close.
    110/25=4 days.What a nice fit!  7th March.
    Needless to say the chart could be nonsense :(  and we could easily make 110 points in a couple of hours but, time will tell.
    I'll be watching how today runs... happy days.
    Kind regards.
    UKDNY

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  19. Morning.  Long ES 71.25.  Let's see if OIL's move yesrterday is mirrored by SPX today.

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  20. you were right on it katzo7 !!  excellent work

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  21. EUR retreating so far after open...

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  22. Thanks for your chart. I was just quoting Furrr on the March 7 date. I don't know much about it either.

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  23. Long 1 ES at 69.5

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  24. Today should be a party. One way or the other. 
    DAX still pretty strong. €/$ short running like a dream (240pips in the pocket), but:DJ should get over the 13K or hell may break loose. The 5h patterns should for the sake of bulls better be left upwards. Or the big bear will rise. Pretty exciting stuff today and the next. If the DJ jumps, then the big bear shall sleep one half year more...

    Good hunting everyone.

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  25. Hi Lena.  Could you explain a  little bit about the 5h patterns?  (When you have time)

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  26. Stop moved up to 70

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  27. The only thing I'm not understanding about your $INDU elliott count is how wave 3 can equal 62% of wave 1. Isn't it a rule that wave 3 cannot be the shortest?

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  28.  So far, DAX is up 35% from its low of last year. If that's a forward guide for SPX, it will reach 1450. :)

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  29. Out of long ES at 73

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  30. Hi again DustDevil,
    I should have pointed out that if the INDU chart has any legs then the absolute upper limit would be 13,190 as beyond that would make wave 3 the shortest. In SPX terms that would be 1380 (maybe 1382) max.
    FWIW I'm basing these predictions on EWT that says; never are all three waves extended - F&P p86.
    In both SPX and INDU both w1 and w5 appear extended thus w3 should be 'normal' and they do look normal with no extensions, therefore you know the maximum w5 can travel:- no further that the length of w3. Handy to know that ;)
    There are ways to predict where w5 will end up but they are not certainties so I just watch the chart and if it looks like it has paused at one such spot I pay special attention. But always wait for the confirmation. 5 down, 3up.
    Needless to say, if the chart is wrongly interpreted it all turns to a ball of chalk!
    It ain't over 'til it's over...
    Happy trading :)
    UKDNY

     

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  31. looks a good prospect A1.

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  32. I am out at 73.  Now looking to short a little bit higher.

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  33. Hi SSUSA,
    just went shopping and the stores were all quiet, even empty.
    Then we passed the AAPL store; HEAVING with people!
    Packed to overflowing. Dozens and dozens buying like crazy.
    ? still some upside in this bubble ?
    It's a market for the superbrave only.
    So, are you in??? :) 

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  34. I meant the patterns best seen in the 5h chart. Sorry. Normally it is a very bullish correction against the long trend as the retracement is not strong, it takes time (building pressure) and we have an impulse down from the top (extra power for up). But it can collapse and all the pressure will go short. It is like the bull/bears are fighting strongly with same power, like WW1. Not much winnings on both sides. They will get tired and who gives the final push will run through the territory. 

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  35. A nice few points there!

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  36. Thanks for your clear explanation. Boy, I do need to read that book!

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  37. I think we both need a reading circle. :)

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  38. Hi Albert,
    crumbs I hope not!
    It is begining to pop in and out of the trend line in place since 19 Dec so I was hoping it would turn down soon.
    Kind regards,
    UKDNY

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  39. Good morning PL,
    another good article from the pen of the ubermeister :)
    I've stuck this piece of chart on as it looks to me that SPX is finishing off an ending expanding diagonal with the last leg in progress.
    Further, if labelled correctly the max travel is 1380 as that is when w3 = w5  (on this chart). But it could be wrong. We'll see.
    If I may, I'd like to comment on missing profits if you're a bear in a bull market, and vice versa. 
    So what? I miss them all the time, go for a coffee, sleep, vacation, eat, play with my grandsons.
    The danger is that by 'missing a profit' one then chases the market it 'to get it back'.
    That way is perdition. You will be eaten alive. No prisoners will be taken.
    To beginner traders I would say: The Market Is Always There - so
    'Trade Safe' - and 'Cash is a position too' as you so rightly say every day.
    So far, it is looking good for your charts, but those pesky subwaves can cause a headache, 
    however it will all become clear soon, you don't have all the information yet and until you do a degree of caution is rightly warranted.
    Kind regards,
    UKDNY
       

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  40. Long 1 ES at 69.25  Stop at 68.5

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  41. Hi Lena_W3,
    if this is exciting I dread to see what quiet is!!!
    Please breathe some life into the markets, pleeeeease :o
    (DAX is slipping out of the 11 week trend. Down. Short it?)
    Kind regards,

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  42. eur/$$ is down .90% now, I last posted it was down .75%, it continues to fall and this will form an underlying basis for stock movement today

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  43. Stop moved up to 69.5

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  44. short 70.75 es, not sure about this entry, be careful

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  45. i've been following the DJI lately somewhat more than the SPX. Attached some triangles emerging over the last 5 days. which one is it gonna be? the bullish or the bearish?

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  46. Out of ES long at 70.5

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  47. should get a drop within the next 10 to 15 minutes, if not my call is wrong, a break of 69 is what I am looking for

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  48. 69 breaks, it looked like it was gunna go up, right? the bass-a-tards, good at the fake out

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  49. Great call, katzo.

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  50. NAS100 turned down 3 ticks short of the target, INDU slipping, SPX slipping, R2000 slipping to a new low, FTSE slipping, DAX gapped down.
    METHINKS SOMETHING IS AFOOT!

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  51. interesting read. even the gurus aren't that great

    http://www.cxoadvisory.com/gurus/

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  52. all i can say is wow....nice drop!!

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  53. Hi Lena_W3,
    could you post a chart, or two, please?
    One picture is worth a thousand words yes?
    Most grateful.
    Kind regards.

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  54.  It certainly bounced off of the newest TL, connecting LOD's of the past 7 trading days. It'll probably hold, imo. :)

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  55.  OTOH, SPY may make a dash for 170 - a round number for OpEx.

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  56. Sitting on that bottom TL. And just below 1,370. The question of the moment is if bulls can recapture 1,370.  If not, it'll be the first battle longs have lost in QUITE awhile.

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  57. next drop setting up, if break of 66 then tgt is 61 again, our old friend of the gap fill line

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  58. es/120 chart brought forward.

    http://www.screencast.com/users/katzo7/folders/Jing/media/f10bf70d-e777-4261-901f-5b4e72a6f2f8

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  59. Good afternoon PL,
    that R2000 chart looks very 4th wavy with that typical quick drop we've just seen.
    And 5 waves too I'm sure.
    Thing is, it looks like it would go nicely with the ZigZag in December in which case we have a lot, a lot, of upside to come.
    On the other hand it could have topped out and be on the way down. I guess the bounce will tell us, ABC or wave 1?
    Interesting times ahead.
    Kind regards.

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  60. Great post once again PL. Thanks for your objectivity and balance, and heads up to da bears like myself. 

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  61. Hi

    Many thanks from RUSSIA for your perfect everyday work

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  62.  PL,

    Great article as always.

    In the last chart you are showing the ratio of RUS (a 2x SP500 fund) to RSW ( a -2x SP500 fund). In a highly volatile period, a 2x fund will bleed money much more slowly than a -2x fund. I believe this fully explains the divergence you are referring to.

    If you want to capture the sentiment of mom and pop I think you are better off looking at the total amount of money invested in long vs short funds instead of the price of long vs short funds. The attached chart shows the SP500 with the ratio of money invested in 2x SP500 mutual fund to money invested in -2x SP500 mutual fund. The ratio shown is a 1 month average. Buy at around 0.5 and sell at around 1.4 seems to work pretty well. We are currently at about 1.45 after hitting a 10 year high of 1.65 last week.

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  63. Why do I just not see bulls giving it up at this juncture?  They ran the table yesterday, clearing out stops below, running back up into the close, tracing out a six point move up during the middle of the session that consumed two and a half hours, and holding a range just below the recent high and not expending more firepower than necessary through all of it.

    And a day later that's all changed? And sellers are going to take the baton? Hmmmm.

    With the fifteen minute chart having bottomed again AND sitting at the bottom of the channel, I'll wait to see a clean break before I take my chances here . . .

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  64. out of short at 67

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  65. at this point there is no such a thing as bull of bear, it is just channel surfing, top to bottom and back up IMO.

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  66. Thanks for posting, giarc.  Where do you look up this information or is it from a paid service?

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  67. unbelievable charting glarc, this blows away my charting. Nice !

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  68.  The data is from Rydex. You can download it into Excel.

    http://www.rydex-sgi.com/products/mutual_funds/info/navs_historical.rails

    They have several leveraged funds. You might get better results looking at money invested in all leveraged funds instead of just the leveraged SP500 fund like my chart shows.

    The chart was made with Matlab.

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  69. my attempt to intra-day wave counting of the SPX. Please let me know if I got it wrong or right. Also note that not all waves are included, just the major once (and that fitted on the plot without making it too crowded).

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  70. http://img820.imageshack.us/img820/3534/worldindiceschartsrealt.jpg 

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  71. VXX/ TVIX tried to break out but there has not been enough volume to support it.   I closed my TVIX position at 16.47, for a 10-cent / share gain.   Will reconsider VXX / TVIX early next week.

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  72.  Brianhut:

    I am not sure you are not just seeing things. I see a lot of bears keep trying to short the darn thing, meeting no seller and then begrudgingly covering - slowly. No? :)

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  73. up 3.5% today  between TVIX and XIV.  waiting for TVIX to break though 16.50 HOD..  getting close.

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  74. break 66 and tgt 61, this would put it outside the triangle TL

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  75. heads up, if this break of 66 happens soon, this would put into the equation a possibility of a good fall for ROD, my self designed timing system is getting alert. . . . 

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  76. chance of a real down swoon. . . . . 

    all about lower lows and lower highs, look on any medium time frame

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  77. Cool.  There are times when I wish I had someone else knowledgeable to trade with me for that type of perspective to add to the mix. Especially in the mix of the moment.

    I have what I firmly believe is a unique, math-based system that is extremely reliable and uses the internal math and structure of the market against itself .  Especially for managing a trade once I'm in it. 

    But with everything it involves once the trade is on, I often lose sight of where the count might be for the intraday structure.  

    I wouldn't go long at this juncture and would want to sit this out though.  Easy to see plenty of downside from here.  But also easy to see buyers' ability to control the tape whenever they please.

    Right now, I think it suits longs better to have a mini correction move down.  So that they can load up for awhile at lower prices before we move back up again.  

    But if you are going to engineer that move it makes sense to make it *appear* that sellers are slowly taking over.  Which is I think we are seeing at the moment.  

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  78. good job t.winn..  i almost sold there also. pushed a little luck . looks like we just punched through 16.53..   this this has energy again..  putting charts and Time n Sales side by side w XIV really helps see the reversals.  Its my new trading strategy for now.

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  79. http://content.screencast.com/users/chartwiz/folders/Jing/media/2389575d-77af-429a-8be8-cfec9e06a696/2012-03-02_1316.png

    @Gann360  Transports

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  80. out TVIX 16.52  . bought XIV 9.01

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  81. that was quite a timely call, 4 points drop, I hope your system is correct, breaking 60 es will be good...things seem slow though, now it is rebounding...let' s how that goes...

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  82. Went long at SPY 170, betting on a short squeeze EOD, :)

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  83. fully loaded short

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  84. The market has been making lower lows and lower highs all morning, RUT is super weak compared to other indexes. Do you think we might actually get a plunge at the end of the day? or the dip buyers win again? 

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  85. thanks for the feedback guys. since i am 100% cash on market related tickers, e.g. SPY, QQ, etc,  I can now do this type of detailed counting. Given that the down moves are IMHO now 5-waves and the up moves 3-waves (corrective), I don't see much buying taking over soon (at least today). Notice that I am now treating this market on a day to day basis, as it's been so flat. Notice also that the RUT and DJI are already deeper in the decline than the SPX...

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  86. Things have been eerily slow and quiet today. With the big drop in Euro, no one seems to care. VIX is still subdued, it does feel like the calm before the storm, maybe I am just dreaming....

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  87. Are we going to see that memorable Friday again when VIX took off out of no where at 3pm, TVIX was up to $21...ahh the good old days....

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  88. Thinking the same thing myself, Albert.  At the very least pros aren't going to carry short positions into the weekend. 

    And this move down is too measured and coordinated in a defined downward channel since 10:30 am to convince me that bears really have anything to do with the move down.  Smart longs want these moves down too.

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  89. It was 2pm?? How come I remembered it was 3? because by 3:15, it was coming down already...or are you saying today at 2pm the big swoosh will come??? how I wish..

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  90. About to break the upside of channel down that we've been traveling since 10:30 am.  Looking for back a quick back test and if we bounce off, then expect to see a rally into the close.  Especially as today's short positions are closed out and those who shorted below 1,370 get burned.

    I won't be going long until longs can prove that they can bounce off any back test of the channel though.

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  91. what time frame is channel?

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  92. decision about mrkt direction should be made my 2 pm or slightly after

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  93. slightly updated wave count as the previous 5 wasn't apparently 5 yet. While counting the corrective wave of the 5 low took shape; increasing my confidence this count is reasonable correct.

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  94. The 2/29 High and the 120 Year Mega crash wavehttp://timeandcycles.blogspot.com/

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  95. The downward channel we've been in since 10:30 am.  We';ve had five touches of the bottom rail and four touches of the top. 

    Didn't even get a back test of it though after moving out.  Looks like the test is going to be simply a recapture of 1,370.  

    The last touch of the top broke through and shorting at that juncture heading into the close on a red candle Friday and after its has held four times already would have been tempting the improbable.I had considered going long at 1,366.5 when we touched it's bottom rail.  And now wish I had.  That was as good a long opportunity as one could ask for on a day like today.

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  96. sold XIV 9.08  bought TVIX 16.32.     will see how it goes

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  97. maybe, but your  last wave 1 is small, so wave 5 could be more extended.  Until your last wave 4 is broken, we won't know.

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  98. Flux indicates potential for big price move in a few minutes. Likely downward. Now 2:34 PM.

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  99. Here's the fixed link

    http://timeandcycles.blogspot.com/

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  100. a break of 66.25 es and careful longs, possible trip to tgt 60-2 es. . . . 

    again if this happens it will put the candles outside my triangle on the 120 es, whether it will be only a ST throw-under or something else, the beginning of something more major, I do not know yet, every other day theory in play

    here is what I do when tradin,' listen to music. No TV, CNBC (contrary nutty busyness cretans), just charts. . . 

    http://www.youtube.com/watch?v=GpGEeneO-t0&feature=related

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  101. Thanks giarc.  Nice work on Matlab.

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  102. Looks like the SP500 is forming a new bottom at 1370. It may sit there a while longer before continuing higher.
    Just look back to how the market has moved up in steps and rested at certain spots (1335, 1350) before moving higher.
    The market was stuck at the 1350 level for almost 2 weeks before moving to the 1370's where it stands now.
    I'm sure all that Euromoney will find a home soon boosting the markets further.

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  103. es & $SPX differential, add .75 to es for $SPX

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  104. My perspective as well, ev.  I don't see ANY evidence that buyers are losing control of anything so far.

    It seems to me that this is just a pause and tracing out the lower parts of the current range before the next big move.  And making it *seem* to those who aren't watching closely like sellers may be able to assert themselves.  I think smart buyers have WAY more to do with these red candle days that sellers do.   

    The moves down are too measured . . . or they are FAST and violent waterfalls which are stop clearing and shakeout affairs . . . from which there is an equally FAST and violent recovery to print a new high very shortly thereafter.

    There is no reason for MM's to be in any hurry at the moment.  Their only objective for today needed to be not lose too much ground below 1.370 and prepare for the next move.  All of which has been accomplished with ease so far.

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  105. VIX option and market activity..  My main guy Jamie Tyrell is out for a week

    http://www.youtube.com/watch?v=XXCcTZoLMS4&feature=plcp&context=C33af5aaUDOEgsToPDskJRMytOPehGsSji2lZXLgDM

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  106. Very nimble, good job!!

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  107. The Russell 2000 advance-decline line has rolled over pretty sharply over the last month.

    http://www.masterdata.com/Reports/Combined/ADLine/Daily/$RUT.htm

    The NASDAQ A/D line has also turned lower, but the SP500 hasn't yet.

    http://www.masterdata.com/Reports/Combined/ADLine/Daily/$COMPQ.htm
    http://www.masterdata.com/Reports/Combined/ADLine/Daily/$SPX.htm

    This isn't a sign of a healthy market.

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  108. I guess the 2pm market decision means UP?? Interesting is that volatility is actually slowly increasing even though we are grinding up again....Unusual for Friday....

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  109. http://timeandcycles.blogspot.com/2012/02/master-cycle-update.html

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  110. Volatility is due for a spike up/down (i believe up)  the Bollinger bands on my charts are squeezing to narrowest since last July.  MACD is sideways for a week.  (TVIX)

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  111. Look where USO is today, 20.80 and the ghost spike I posted yesterday.

    http://www.screencast.com/users/katzo7/folders/Jing/media/252c8338-9287-4671-8d28-13f5781729a3

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  112. no, it meant down. didn't happen

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  113.  Wasn't that rule #2...advancing volatility with a flat or increasing market means VIX wakes up.

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  114.  things that make ya go hmmm...

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  115. are you still short?

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  116. And the 3:30 show starts on time today...

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  117. i jettisoned them at 67 plus stop loss of 1.5. . . 

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  118.  What show?

    That's just run-of-the-mill EOD short squeeze.

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  119. short 70, T1 67.5

    What I think this rise from 67 to 70 was all about is a rest of W%R and stochs on the 15 min. es to provide more downwards thrust power, it was also a successful backtest of that 70 break threw area

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  120. Is it pump and dump 30 minutes show time?? Grab your popcorn!!

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  121. I don't care how murky that crystal ball is....PL, seems like you can see right thru it...kinda like night vision. Thanks for the direction on the $RUT. As you say, take the trades the market gives you, not the ones you "desperately" want. My hats off to you PL, and I'll have a cold tall one in your honor!

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  122. I've been stopped about three times.  Back short at 68

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  123. Katzo, you should also look at the open interest on today's SPY and QQQ options.  They pinned today's close rather precisely to the SPY 137 closing strike, which was where they needed to be to cause max damage to the puts while costing little for the open calls.  

    Closing at 1,370 is also a nebulous spot that leaves everyone wondering what's happening next.  15 min Williams and Stoch are trending down, which makes me think on Monday that we'll see yet another waterfall open of three to seven points . . . which then rockets higher by mid-morning.

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  124. thanks Brian..  if you get a moment, any chance you can run through the VIX options for your analysis ?  thanks in advance if you get to it..

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  125. Sandy, 

    I'd love to help you with the VIX, but my knowledge there is admittedly simply not good enough to be of much assistance.  

    The VIX is not something I trade, and I tend to think of it as more of a lagging indicator unless it is at extreme high or low levels.  So many people have been screwed staring at the VIX the last couple months that in this environment, I steer clear of it entirely.

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  126. Expecting the same.  Only question I have is whether we get another red candle, meandering Monday before the next  move up on Tuesday (what I kind of expect since it lures more bears into the trap).  

    Or does the move back up happen shortly after the open.

    I suspect that we get the move back up more on Tuesday or Wednesday.  This is too good an opportunity for the Street lure in hopeful top believers who want to play the downside from where we sit currently.

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  127. last week I presented a linearity study of some of the major markets (SPX, DJI, COMP). I've updated this little study with this week's weekly data. What it shows is that the markets, when including this weeks data (this week's high, low and the mid-value), is still going up in a linear fashion ON AVERAGE, but that the up trend is getting less pronounced. Which is of course obvious since the DJI put in an almost perfect doji this week on a weekly basis. There're two trend lines: the upper is based on data until last week, the lower on data incl. this week. The slope and r-squares are getting less (though not by much) for each trendline that includes this week's data. Note that all values for this week (high, low and mid) are now under last week's linear trend line for all 3 markets. Stating the obvious: the bull run lost steam this week. This has of course not much predictive value, as I know as much as anybody else on what the market will do next week. 

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  128. imo careful with your entries Juan, pull the levels off of my charts and the Ts I offer. imo avoid going in at half levels. The levels today were.
    76-77 hit last nite, top of TL of triangle, when short there
    70 basically mid point of fall
    65-66 bottom TL of triangle
    60-62 gap fill line, never got there

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  129. ES didn't do much today;  Gold/Silver haven't finished their correction; and AAPL refused to drop!  Understandable why VXX couldn't break through.

    Good news for the bears is that Gold/Silver still have to complete their c-wave correction.  So maybe on Monday/Tuesday, all markets will make a coordinated effort to help Gold/Silver do their job.  And VXX/TVIX may have another go at it. 

    After this, what's there to hold these markets back???  We still haven't ruled out the count with flat Wave 4, and the markets can quickly turn around to kick start Wave 5. 

    In the F&P book, there is a chart (A-8) on page 230 that looks very similar to the SPX daily chart since the October low.  The only difference is that the A-8 chart was done in #years, and we're looking at #days now.  The A-8 chart has an expanding triangle/flat  Wave 4 and then goes straight up with Wave 5.  Even the 'fundamentals' behind that old chart are similar to now:   Iran contra back then versus Iran nuclear crisis now;   Gold/Silver went parabolic then and about to do so now; etc... Can our current rally be a miniature play of the stock markets then?  Only time will tell...

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  130. Anyone notice TZA was up 4.43%. More importantly it jumped over the last high candle on the 120.

    And USO with that Ghost Spike. Look at how important this level is. jb will love this.

    http://www.screencast.com/users/katzo7/folders/Jing/media/783a16bc-469a-45ee-b57c-9eb7cd9b0ce8

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  131. I was watching that. And it's been gaining momentum this week while the TNA is losing it. 

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  132. Nice moves with these VIX plays.  

    VXX/TVIX have been struggling lately, and I'm a little skeptical about them now.   Will probably wait until PL uses his proprietary indicator to call the next market top before I trade VXX/TVIX again.!!..

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  133. Hi SSUSA,
    they're looking very tired now aren't they, tired and droopy.
    good info, nice charts, thanks.

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  134. Good evening Bob_E,
    I'll add my 2 cents to that. This chap drills down to the most amazing detail, mind blowing stuff. Where he gets the time and energy I don't know but boy does he save a lot of work for us guys. Hats off to him,  and an ice-cold beverage sounds good.
    Kind regards,

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  135. Hummmm.

    http://www.screencast.com/users/katzo7/folders/Jing/media/b79e4866-5a99-478a-a580-39f75761d582

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  136. Moody downgraded Greece to the lowest grade possible. How come that feels like old news already? 
    Katzo, if I am reading your chart right, do you think USO is going to drop from here on which will coincide with the market drop next week? (if it will ever drop!!)But TZA did break out today, hurray!! Do you have a short term target for TZA? Thanks

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  137. Hey PL, I can't see the SpeedTrader link on your blog anymore. I was thinking of finally opening an account.

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  138. see the two -3- s on the chart, about 21.6, then maybe 23.80. and about oil, i am not going near it, it could start a run down and Israel could lob a rocket at Iran, good bye, to risky now imo.

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  139. It is in blue on the right, just the name to click on. I use it.

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  140. This was a GREAT call that defined the action for the rest of the day.  A few minutes before your post, I saw activity on the VIX and saw AAPL reversing after a quick uptick that gave me the signal to get out of the ES long position that I was in, but I did not see anything that gave me conviction that a fast down move was about to unfold.  What indicator gave you a signal that there was a high probability that we would move down through the lows at 69?

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  141. Awesome chart Katzo...thank you...when I saw it, such a grand amount of expletives came out of my mouth that my wife wanted to know if she should be worried. Those mutha's and their GD ghost spikes. I'm still waiting on a TZA move...gun shy (plus I dumped mine a couple of days ago.) I did do a little scalp EOD with TNA...It was a lot of agg for 1/2 a point...not doing that again.

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  142.  That's tracking very nicely...Thanks yet again.

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  143. Katzo, what do you think the likelihood of a gap down on Monday is

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  144. thanks. :) i tried something a little new today.  stayed mostly on the one minute and 5 minute time charts. i use XIV side by side with TVIX  in charts  and also the Time n Sales to see the scolls of trades. They work almost opposite and good for confirmation of direction also .  i keep $VIX Time n sales on the side.  I drew my trend lines on higher time schedules and kept my STOCH and MACD in my scan and just played the Bollinger Bands today.  It actually behaved well with reversal candles and hammer n dojis in the range bound BB today.  made 4 sets of trades which is a little faster than i'm used to.  i'm worn out LOL :) 

    yeah, volatility is like flying a kite while driving down the freeway.  not always easy to keep up and ugly when it goes against the plan.  i'm happy w today.  i have lots to learn w Elliot wave and am jealous of everyone's experience.. i agree on PL's indicator for market top.i ready to ride the VIX train up for a change instead of saw tooth down

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  145. Ty, katzo -- btw, I need to get your info from you by email and open a case w/ them -- they never paid me a cent for your sign-up (or anyone else's, if anyone else signed up w/ SpeedTrader -- that's why I took their link down!).  Keep meaning to open the case, but it seems like headache.
     
    DD, it's the last text link under "Free offers from our sponsors."  TY, DD.

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  146. Thanks. Looks like next week will be a fun week. Somehow, it feels like oil was taken down on purpose. Obama certainly don't want everyone pointing the fingers at him for $5/gallon, not on an election year for sure...just my 2 cents

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  147. possibility, have to watch es Sunday nite.

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  148. yeah, finally, perhaps another sign?

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  149.  Great charts katzo.

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  150. Hi katzo7,

    Yes, I noticed.  Have "skin in the game" so to speak.  TZA is up gang-busters, almost 7% at one time today but then it gave some back.  The thing is FAZ barely nudged a gain at ~1.5%.  I wuz hoping the piggies would show some weakness as a sign that all is not well with the industry over the weekend...say a "messy" Greek default ;-)

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  151. maybe. i'm wondering if maybe it's more of a leading indicator whereas tvix is lagging. just thoughts right now since i'm pretty new to all this.

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  152. Thanks. Today was a rough day. Most of my entries except the last one were similar, and in some cases slightly better by a tick or two, but my stops were too tight, so I kept getting stopped out. I keep telling myself not to trade during normal hours anyway. Maybe one day I'll follow my own advice. You said something about a gap down monday. How likely is that?

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  153.  Don't forget 2008 was an election year.  We got $4 gasoline AND a stock market crash right before the election.  It was like a TwoFer Special.

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  154. Very provocative, er.. I mean, evocative, chart. :-)

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  155. This might be a tad long term for the general population here, so the late night post. Something to keeep an eye on.

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  156. You should look at $TRAN & $RUT if you want leading indicators. $TRAN represents the shipping of goods around the country and therefore the health of the economy and has 2,000 stocks in its makeup; the DOW has 30 and $SPX has 500, smaller snapshots so $RUT is more broad based. In my experience the $VIX is a lagging indicator, mrkt drops and then fear comes into picture, not the other way around. And TVIX is new to me, I really do not like its action and predictability so far. Shouldn't it work in context with the $VIX? It does not seem to. Sometimes it seems to lay dead. OR maybe the $VIX has thrown off some false reads and the TVIX is more accurate, saying there is complacency now. I just started watching it.

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  157.  Thanks for taking the time to post and explain your chart. It makes a lot of sense.... and I like the bus system analogy.

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  158. Hey, this is very funny. I am gettin' emails about penny stocks that will insure I will never have to work ever again. And just got one in the US mail. It is a glossy flier on thick paper, 12 pages with of course a subscription page to this guys wonderful calls that I have to have and will make me rich. He is Damn MacShame (name changed slightly). For $595 I can get his newsletters which will "change my life forever." The stock he is pushing is LOGL (STAY AWAY) Here is some statements from his first free newsletter:

    SHORT SQUEEZE !(in big red letters), A $10,000 position today could soar past $30,000 near-term ! Time to buy LOGL right now. Recommendation, buy up to $2 a share. Throw away charts and buy LOGL now ! (I love this one, for me a chartist) LOGL's oil & gas fields could be worth billions. Inside three (the three is crossed our with a four written in script across it) big reasons why this one can triple. 

    Now we look at the chart. How do you think MacShame was positioned on 2/28 (remember SHORT SQUEEZE ! in big red letters), waiting for his free newsletter to hit the public? 

    http://www.screencast.com/users/katzo7/folders/Jing/media/5a23fedf-6bc6-44a7-9b04-0de7db3d7660

    I am also gettin' many emails with similar points, penny stocks that can change my life. My point is that these scammers show up in a period of euphoria, market tops, with their glossy fliers and with multiple emails, all from different ppl (got 4 about the same stock) telling me how they got into #%&@ at ten cents and now it is worth forty cents and I missed that, BUT it is going to $80 prolly tomorrow (get in on Sunday because it will be too late on Monday morning, LOL). A sing of something to come?

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  159. In charting look for a combo of factors that seem to indicate important points of change. On this LOGL/60 chart, we have; 1) a BBB, it goes pretty immediately to the opposite BB, 2) an EW5, and 3) twin pipes and an ending triangle that move into a doji. That is three different factors that say sayonara baby, plus the newsletter received. The problem is locating on which time frame the 'believable and actionable' ones are. I looked on the 15, 120, 240, and DAY, this chart that displays the best is the 60. That is the problem foe me, finding during real time trading, the time frame that provides the best info about what is gunna happen. NOTE: in this case there was no divergence from the EW3 to 5. Rare but found. There is something on the 3 minute I could label a failed EW5 run, actually where that doji is. I can attribute this to external forces (the newsletter) affecting the action.

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  160.  Thanks for your insight.  That is a pretty expensive penny stock at $ .95.  A triple would put it above its all time high. 

    Joe

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  161. Thanks for that one Katzo...dumb question alert about time frames...Is there a set of guidelines you would suggest for determining 'believable and actionable' time frames?

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  162.  Okay...so what I'm seeing is that movement will go to the conjunction of the fib circles and support (eventually), or walk a single fib circle around to each support. Yea or Nay.

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  163.  Thanks. Here's an interesting article on LOGL.

    http://seekingalpha.com/article/404811-legend-oil-and-gas-why-the-sec-should-halt-this-stock?source=yahoo

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  164. No, one just has to keep searching around, indicator candles and patterns can appear anywhere. On the 5 was something else, twin pipes I think. I do a 'gear shifting' kind of thing. When I feel we are near a transition point I shift down to the 3, 5, 8, 10, 13, and 15 (three or four of these). I can run four different time frame charts at once, stack them up next to each other to watch. Sometimes I use even the 1 or 2 minute but there is lots of noise and double top/bottoms on these, their purpose is to shake you out imo, I get faked out too much here. Then when mrkt is in a good run I move to higher time frames, the 5, 15, 120, all stacked next to each other looking for the conclusion.

    Here is what the 3, 8, 15, & 120 looked like at that top I shorted at 19:00. This was a real great slo-mo play, I could watch it unfold step by step slowly that night into the morning of 3/02 and the progression was very logical, a good clean EW move. Look at that alignment of waves across the charts, what is called SuperPositioning of Waves in Physics.

    http://physics.tamuk.edu/~suson/html/4323/super.html

    And

    http://www.youtube.com/watch?v=k2C1Xq9wpAY&feature=endscreen&NR=1

    When ppl discuss fat fingers and flash crashes they do not just come out of nowhere but imo are completely predictable ultimately if one looks in certain places for certain alignments. I have predicted some of the mini-flash crashes quite successfully here based on this method. Many ppl are waiting for the big one, it is out there, there always is one lurking, it is just a question of getting the timing right. Time and price, the two variables, in phase and watch out. Out of phase and in a cancellation node. And I could be looking at the 3, 8, and 120 and the real in-phase SuperPositioning of a Flash Crash could be appearing on the 5, 15, and 240. This is why I jump around.

    http://www.youtube.com/watch?v=szk83cONAqM

    Nodes of inactivity are when you stay out of the mrkt or ST play as EWaves on various time frames are not in concordance with each other, are canceling each other out or are hard to read (unclean EWs). I have never seen, nor would I ever predict, a flash crash off of an EW5 top (DAY); they happen in the EW5 phase or 5 phase, look at aftermath of  911, that event basically initiated the conclusion of an EW5. 

    Two earthquakes in very different regions in phase or frequency with each other will produce a phenomenal tsunami somewhere, there is a video of this happening in a large water tank where two extreme shock waves were produced at exactly the same time, the resulting wave that hit a distant incline (symbolizing the land) was many times the height of the amplitude of each wave,  5 to 8 times higher than the amplitude of each wave. Think it happened in Alaska where scientists were trying to figure out why all the trees were destroyed 50 feet up a mountainside along a coastal waterway. 50 feet up ! Ten to 20 times the hight of normal waves?

    Key take away from below chart is the Divergence, I wondered why it kept on going up (steeply) when the W%R was headed down (8 min.), and a take away that the EW1s & 2s appear across all the time frames. Have to admit, I fudged the 2 on the 3 minute here a bit to fit it on the page. But see it hit 76.25 in both the 3 & 8; the 15 is different, is lower tho (75.5 EW2), no matter, wave unflolded down. And there is your G.S. appearing on three of the charts, showing the path.

    http://www.screencast.com/users/katzo7/folders/Jing/media/c4b11d63-d8c7-4388-b54a-a5461f18d34b

    A lengthy B.S. post to a short question. . . .

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  165. TVIX has been in pancake mode (FLAT!!) ever since CS announced the suspension of issuance of new shares. With this announcement, it is trading at about $2 premium now. Buyers don't want to jump in (yet) when the VIX is doing nothing, sellers are cautious of the supply issue. So at this point TVIX is not tracking anything!! What I see MIGHT happen is when volatility slowly comes back, like on Friday, the premium in TVIX will slowly compress, meaning UVXY will rise more than TVIX, until finally TVIX is not trading at a premium. This may happen sooner than later. I see some people expecting TVIX to drop to meet its premium, but I see it as it will rise slower than UVXY to lose the premium. Lots of money has moved to UVXY due to this issue as evident by its huge increase in volume after the TVIX announcement. (I am one guilty one!!) But when VIX do spike ( wonder when?) they will both trampoline up. my 2 cents

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  166. I was figuring out on my own chart based on yours and Pretzel's, and I think I came up with something similar.  What do you think?

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  167. We may get a gap down Monday morning, a small one then head up to the top TL. IMO this triangle is not finished yet based on my time studies. All pure speculation tho, mrkt can and will do anything.

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  168. Great post...wasn't BS, just thorough...now I think get your interest in wave propagation. I'm gonna take some time to digest it.

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  169. interesting stuff..  energy comes in many forms. when added to human psychology and computers, it can be Really interesting.  Forecasting a 'flash crash' is above my pay grade but was interested in the potential results of one in today's setup. Haven't the HFT's increased since the last big one ? have the 'dominoes' that propel the sequence of chain reactions that 'may occur' increased in size, changing the risk/outcomes of one happening?  wild stuff

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  170. Pretzel, I noticed the NDX put in a higher high on Friday, whereas SPX, COMP, DJI didn't. Those this then rule out wave 5 isn't completed for all these indices too? Or they don't have to follow exactly in sync as they may have different wave counts and patterns? Just curious to know.

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  171. Since this is circular, close to the center it jumps from fib. line to line. When it gets too far away time for another pivot to draw the next circle from. Sometimes I draw numerous circles.

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  172. Been following this site for a while.  Provided I did all that Disqus stuff right this will be the first post here. Been a bit bugged by this market and the bifurcation between small caps and the NASDAQ which typically trade alike.  Been noting the SPX and its grinding descent from the top of the channel to the bottom of the channel.  Quietly awaiting a break in the short term trendline that the thing has been glued to for three months.  I think resolution of the bifurcation is near in that the Russell broke and closed below the rectangle.  Got caught in that one as I was trading the range, i.e. bought the bottom of the range about mid morning and it looked good for about an hour or so and had to hustle to cover long and get short as the breakdown occurred.  Still net long SPY but hedged the position at 138 with puts.   I laughed when I read the posts about LOGL, I get that mail too. I usually roundfile it and rely on my own research for junior oil cos and miners.  Looking forward to reading more from you all.  Thanks for all the useful insights thus far.

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  173. thanks for that info. one of the hardest things to learn in all of this is how much of the information out there is just noise and how much is actually stuff to hold onto. i'm very thankful that you're as helpful as you are and willing to share what you know. 

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  174.  has informative stuff on TVIX  UVXY and all the VIX related ETF's ETN's and charts.  I'm only posting it here to add to our discussions and hopefully  get better educated to help each other make money with volatility for those here on PL's great blog that trade em.  feel free to remove link if not kosher to post here, but i could use more eyeballs to help out and keep all of us stay ahead of the curve.  It is based on S&P and maybe can be useful to some. 
    http://vixandmore.blogspot.com/

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  175. Anyone make sense of this Fib chart of SPX..   

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  176. excellent piece here from zero hedge called   The Lull

    http://www.zerohedge.com/news/lull

    i tend to believe this is as accurate as can be.

    also.......

    Tom Demark most recent i can locate

    http://www.youtube.com/watch?v=MezUk53BX0k

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  177. http://www.financialsense.com/contributors/charles-hugh-smith/if-the-market-rolls-over-here

    charles hugh smith on financial sense...............anyone here familiar with him?

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  178. Anyone going 'long'  TZA?   The  small caps seemed first to roll over Friday..?  Would this be a sign of a top indicator before the big DOW  30 lose momentum.  I'm gonna  get out of a couple of longs and try the TZA bull case on Monday.  Will  Apple and Nasdaq be next to stub their toe w Apple Island Top ?     

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  179. katzo, that's pure a momo penny stock, being "pumped and dumped" as they used to call it. Great profitable plays if you know how to play them: pure price and volume action. No TA in the world works on these gravity defying stocks. Simple play: buy low and sell on strength. Don't be a bag holder and don't drink the cool aid. Sounds like kicking in open doors, but it's just as simple as that. not uncommon to see these "stocks" climb 200-2000% over a few weeks, days. Get your 50-100% and get out. Simple, no TA just follow price and volume. Don't always work though.

    I agree that these type of plays often work best during bull markets. I noticed last year that around spring, March-april, they didn't  work as much anymore, which coincided with the market topping.

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  180.  Good stuff in the ZH.  Thanks for the link.

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