Tuesday, May 31, 2011

05.31.2011 Update Up, Up and Away...

Not good news for the bears, sorry.

Whether we have a rocket that's going to explode into pieces and fall back to earth or we have a rocket that will head into orbit.. we have a rocket and they will both go up for at least awhile.

Everything except the XLF is back above all moving averages on a close. The XLF made it back over the 200dma and there's a lot of room between the 200 and resistance at the 100.

The Russel 2000 and DOW Jones Real Estate are both approaching a level where they will naturally pullback some here, the S&P is not quite there yet.

I suspect we'll open higher and let the S&P and DOW Industrials top out the stochs and catch up with the Russel and Real Estate. Then we'll probably have a pullback.

After that though, unless the pullback turns into a rout and we head back under moving averages in a hurry, we are going a lot higher.

Looks like 1354ish is an immediate S&P target, then a pullback, and then probably taking out 1370 and going higher. I give the S&P a very high probability of taking out 1400, maybe as high as 1450.

Here are the charts;

S&P



Russel 2000 (IWM)



DOW Jones Real Estate (IYR)



Sorry bears, all you can hope for is a violent reversal in the next 3-4 days.

GL

Thursday, May 26, 2011

Update 05.26.2011.. At Resistance..

We are at an important juncture here. I will cover both the bullish and bearish items.

Let's start with bullish items;

1) Today's internals were much stronger than it appeared on the face. IWM (the Russel 2000) was up 1.4% which is double the NAS and more than triple the S&P. Same for IYR (Dow Jones Real Estate), also up 1.4%. XLF even outperformed the S&P today, it was up .52%.

2) The daily stochs on the S&P are bottoming. This almost always results in a upswing in the market. It may be a temporary upswing that ends with another plunge, but I've never seen the daily stochs swing up and the market not go up at least some.

3) Friday and Tuesday are the last 2 trading days of the month. And then Wednesday/Thursday are the first 2 trading days of next month AND before and after a holiday. End of month/beginning of month always leans bullish and this is especially true before/after a holiday weekend.

o.k. so those are the bullish things and they make a pretty strong argument.

Bearish things...

1) Every sector that made a big move today stopped RIGHT ON resistance. And very important resistance at that.

*Disclosure here, I went short today by shorting TNA and going long DRV. I have pretty tight stops because we are literally sitting on resistance here. We either fail here or we take it out, in which case I quickly switch sides because we'll rocket ride most likely.

Here's the charts.. the speak for themselves;

IWM (Russel 2000).. stopped right at both a trendline and the 50DMA;



IYR (Dow Jones Real Estate).. Stopped right at a trendline and top of the bollinger bands;



XLF (Financials sector ETF).. Stopped right at the 200dma.



and the S&P 500.. stopped right under the bollingers and just under the 50dma that it bounced down off of intra-day;



So there you have it. Plenty of things for the bulls to feel good about today.. but man the market is sitting on some heavy resistance right here.

Put yer hard hats on, the next break one way or the other is probably going to be pretty violent.

GL

CJ

Wednesday, May 25, 2011

05.25.2011 Update.. backed a little off the ledge..

So the market decided to follow the rules and spend the day correcting an oversold condition.

What that tells us is that the market is probably not ready to collapse here quite yet. It was a perfect place for it to happen and instead it rallied in the face of awful durable goods numbers.

The Russel 2000 managed to get a close back above the 100dma. Which was an important piece of stopping a landslide from happening here;



The S&P's situation has not really changed from yesterday. We had a false head fake lower below the 100dma on the open, and the rest of the day was green. We closed right in the middle of the 50 and 100dma's;



So the Russel and S&P are over the 100 dma and holding with the daily stochs, RSI and MACD looking oversoldish. We also have a typically seasonly strong period after memorial day for a bit.

Lets get to the bearish items. The sell off at the end of the day felt a little bearish. Up 9 or 10 on the day and closing near HOD and closer to the 50 would have felt a lot more bullish.

The XLF is still ugly, ugly, ugly. It did not really participate today and actually touched the 200dma from underneath and failed and sold back off. The XLF is below all moving averages. Not just the 50 and 100.. it's below the 200 too;



Going back to my short term S&P chart from yesterday. We pretty much followed the possible path to a T. We rallied right up to the 50dma, then hit and sold back off. Now the question is whether we head back down and take out the 100 or head up and take out the 50. That will answer all our questions about what direction the market will be taking in the mid-term over the summer.



One last thing to mention;

Before you get too beared up here, the market traded today very logically. It was slightly oversold, it corrected that oversoldness, then got overbought and corrected that.

The VIX is back below all moving averages.

So while we do have lots of leaders appearing very weak here, like Tech, the Russel, and Retail, this market is trading very logically and with not much fear. This is not an impulsive fear driven market yet.

That could be bearish or bullish depending on how you look at it. You could see it as the market being much too complacent or you could see it as no one is scared and the bull trend is going to resume.

I tend to think it's short term bullish but longer term very bearish. We will see though... just watch those Moving averages.. that's all the matters at the moment. If the S&P closes under the 100.. the market has a problem. If it gets back over the 50 the rally is not done yet.

GL

CJ

Tuesday, May 24, 2011

05.24.2011 Update... On the ledge...

Lots to go over tonight, so I will try not to go off on tangents and keep to the point.

I will start off with the short term S&P chart. (60 min/6 weeks) I have a direction laid out for where we might head short term, BUT I am hesisitant at all to even post it, because I'm not very confident in it. The main reasons I have for a bounce dead ahead is the stochs, MACD and RSI are all oversold on the 60 min. chart. In addition, the stochs are oversold on the daily as well, with the RSI and MACD approaching oversold, but they have some room lower. The problem with that is Oversold during violent sell offs, just become more and more oversold. So take this short term direction prediction with a heavy grain of salt;



O.k.. that's pretty much all there is for the bull case at the moment. The S&P is still over the 100dma which is important. But it's stuck between the 50 and 100 right now. Below the 100, things get hairy fast. We may have that oversold bounce, but i'm really only 50/50 on it here.

Moving on.

XLF... ugly ugly ugly ugly.. for those that don't know. XLF is the tracking ETF for the financial stocks.

This chart speaks for itself;



Let me just say, with this kind of action in the financials, those with more access to information than most of us have know more than we do. We can guess, as I certainly have lately, but the market is telling us somethings wrong. Don't forget David Tepper abandoned his huge positions in the financials recently. Tepper is a cocky dude, so to admit he was wrong, he probably knows something.

Moving on..

IWM is ugly ugly ugly... just like XLF, it is below all moving averages. So we have both IWM and XLF that could potentially get a death cross going forward here. Ouch.



The Russel only looks uglier than the XLF because it had run up so far. The Russel looks like a bubble set to collapse. It could maybe bounce off the bottom of that megaphone, but man.. that's an old megaphone.

Now back to the S&P on the long term. As mentioned, we are stuck between the 50 and 100dma's. Like I said, we are oversold, so most of the time, i'm going to say we have a bounce coming and it sort of fits into a short term EW count. But, we have the financials and small caps that are closed under ALL moving averages. That is bearish as all get out. Financials and small companies are 2 of the most important pieces to the economic puzzle and they are both looking like potential collapse.

The DOW and S&P obviously look more healthy than XLF or the Russel. But I think that is nothing more than the multi-nationals still trying to hold in the DOW, and consumer staples and other defensive areas catching a bid while some of our leaders from the rally are rolling over and dying.

Here's the long term chart showing different area's of support down to about 1239. Below that, we could go cliff diving in a hurry.



I will say this much.. the bears case is getting stronger and stronger and if the XLF and IWM don't get back above some moving averages, this market is doomed.

GL

Monday, May 23, 2011

05.23.2011 Update Threatening to breakdown

Today we had a pretty broad based sell off. Nothing was being particularly smashed while others based. The Russel 2000 took it on the chin a bit worse than most, but otherwise it was a pretty even sell off.

Speaking of the Russel, I'll jump right on that first. Ugly breakdown in the Russel today, it closed under both the 50 and 100 dma's. It also appears to have broken well below support of any type going back 12 months. Pretty nasty.. have a look at that first;

(btw, in case anyone isn't aware, if you click on the image you get a large version)



Pretty ugly eh? Charts don't get a hell of a lot more bearish than that looks.

The S&P did a bit better job at holding onto support today. It's still in the down channel and while it did get below the 50dma, it bounced off of the 100dma, so at the moment the 100is still holding. The 100 will be key for further weakness here. Break the 100 and we almost certainly will test the 200, which is all the way down at 1240. I think we lost the Russel, but the S&P is holding on for dear life;



The DOW, not surprisingly, is holding up the best. The smashing of the dollar and pain at the gas station for us all has done wonders for the likes of IBM, Caterpillar, 3M, McDonalds, etc. When your products and services become cheaper across the globe, obviously you'll sell more of them as you become more competitive. Unfortunately, this has come at great cost to the American middle class and retiree's who don't enjoy paying 4.25 for a gallon of gas or 15$ for lunch at TGI Fridays. The DOW stopped at the 50 dma and reversed. So it's still above all moving averages. However, the dollar is doing some serious rallying, which obviously is not going to be good for continuing to grow profits at the mega multi-nationals.



Last but not least, we have our favorite giant turd IYR. It's threatening the bottom of it's very old wedge. It's becoming more and more apparent to me that the combination of a re-collapse of commercial real estate, double dipping residential real estate, popping of the emerging market bubble, popping of the Chinese, Austrailian, Canadian and recently London real estate bubbles all with the mega-banks at multi-year lows of loan loss reserves is what is going to re-smash the financial system and re-start the global collapse that we started in 2008. Remember, THEY'VE DONE NOTHING TO ACTUALLY FIX THE PROBLEMS. The can has been continually kicked down the road. You can't fix debt problems with more debt. You can't charge your mortgage on your credit card. It'll work for a month, but then what? You're fucked worse than you were before.



Elliot wave doesn't give us a lot of clues at the moment because there is possible long term bear and bull counts. The only thing I can say is that there are more long term bear than bull counts at the moment.

But other signs are flashing.

Sunday, May 22, 2011

05.22.2011 Weekend update.. back down and then what?

In typical fashion, the market didn't give us the couple points on Friday and the trading made it difficult to get short especially on OPEX.

But we are heading back down again, so now the question is where are we going and what kind of move is this. I still believe this is a correction, but my opinion is slowly shifting and I will list the evidence I see that is making me think otherwise.

First, below is our S&P Chart. My complaint with this chart from a bearish perspective is that there isn't really a good way to make this a channel. You can, but you have cut some corners to do it and assume that we have a couple false breaks already. It looks better as a bullish falling wedge. So that is glaring at me right now and the main thing that is keeping me on the path that this is a correction and we still have a move to potentially new 52 week highs coming.

Chart;



As far as Elliot Wave is concerned, this move could either be an ABC (correction) or a 5 wave move down. A 5 wave down would probably take out 1320 and close there. That could potentially change our long term count and everything becomes more bearish instantly. If it's an ABC, we've got 2 moves down left and we'll probably take out 1320 (cash market.. my targets are always cash not futures) but only intra-day and possibly on a questionable break lower close, such as 1318. A close below.. but not convincing.. a head fake.

The bears have a chance here. But before I get into the things that are glaring at me from the bearish side, I want to show you another chart.

IYR.. everyones favorite insane index. Ooohh.. commercial real estate, how I love you.. let me count the ways. .. This shit is so overvalued it's insane. Major REIT's are basically at 2007 real estate bubble highs. CNBS even had a real estate mogul on last Friday talking about NYC office building and multi-family properties back to bubble prices. It's all yield reach. Remember my last discussion of Retirees, Pension funds, Trust funds, etc., having a hard time getting their 6-8% they need? REIT's pay a dividend which at the moment exceeds most CD rates. On top of that, you have foreign money flowing out of the middle east (the middle east elite don't want their money in the banks there during the turmoil in the region) and you have the paper money is trash crowd that want hard assets. Result, a new commercial real estate bubble. Yippee...

Gee.. i wonder if that has anything to do with the financials getting smashed lately? Financials had another ugly day on Friday. Don't forget, the banks have been drawing down loan loss reserves to pump up their earnings and have spent large amounts of cash trying to pay back the FED loans. Those reserves are supposed to be for LOAN LOSSES NOT PROFITS. What happens if we have a re-collapse in commercial real estate in conjunction with our double dipping housing market?? Prepare yourself for another round of bail out nation.

Here's the IYR chart... we've got a 7 month long bearish rising wedge with 2 false breakouts. How much you want to bet the next breakout is actually a breakdown?



On to my list, these things are causing me to get more and more bearish;

1) Volume on the sell side is ALWAYS higher and much higher, although this has been the case for a long time. But it's just not normal is a bull market.

2) The financials are falling apart lately. They are pointing to another round of 2008 problems dead ahead.

3) Russel 2000 is not leading anymore. It's rolling over and looking almost as ugly as the financials.

4) The previous leaders are not leading. Retail is breaking down, small caps are breaking down, technology is breaking down, the SOX is ugly, .. the area's that do look o.k. are defensive areas like consumer staples.

5) The moves have flip flopped. The moves up had been bleeding higher and higher over a period of time and the downmoves were hard and fast but over very quickly. We have switched to downmoves being slower and bleeding while the counter rallies are furious and over quickly. That is indicating a major change in trend.

6) real estate is obviously double dipping in a lot of the country. this means a majority of the buyers that bought in mid-2009 to end of 2010 are now probably underwater including transaction costs unless they put more than 10% down. Considering that something like 90% of those purchases were FHA, most of them were probably 3.5% down or less.

7) Commercial real estate, emerging markets and residential real estate in Canada, China and Australia look like bubbles. Again.

But as always.. we'll watch the market. It will tell us if bad things are coming down the pike.

If we do re-collapse,.. Bernanke's tool chest is very empty and the political will to throw another 4 trillion dollars at the problem is probably not there.

I expect to hear more and more and more threats of Armageddon coming from Geithner, Bernanke, Dimon, and everyone else in the I love bankers club.

GL tomorrow.

Thursday, May 19, 2011

05.19.2011 Update.. Couple points and back down

We had the broad based rally yesterday but today really fizzled out. Not much follow through there. In fact it was weak enough that we fizzled out right at a very small channel (red in the chart) inside of our larger blue channel. Pretty weak.

Based on today's action, I am now leaning towards the highest probability is that we nail the top of the blue channel here, with maybe a slight fake breakout tomorrow or Monday, and then head back down to the bottom again. So, I'm leaning towards this correction (if that's all it is) not being completed yet.

At this point though, I'm only 60/40 that we head back down, the scale has not tipped that much, but if we climb up 3-4 points tomorrow, it wouldn't be a bad place to go short again with a tight stop to protect from a breakout.

Tomorrow is OPEX (options expiration for non-options folks), so I wouldn't expect to many fireworks tomorrow. It would be classic for a market to really make a major turn on an OPEX and have a major move, I've seen it happen at major tops quite a few times, but I do not expect that tomorrow. IF this is a major top that has been forming, as opposed to we haven't quite yet topped out, it takes a lot of time. Remember after we topped in 2007, the market fuddled around only losing about 15% over the next year until the real collapse came very suddenly after a death cross and getting under the 200 dma. We don't have a death cross and we aren't even close to the 200dma, so realize there is lots of time still to build this top before a collapse occurs, and it will eventually. The market will tell us when it's near.

Here is updated chart with the current larger channel (blue) and smaller channel (red) you can see we failed today at the red channel, which is a bad sign for breaking out of the blue channel. Also note on the chart that the Stochs are very overbought and the MACD and RSI are rolling over;



How about Linked In today (LNKD)? Internet bubble much? That is what happens in this market when nobody can go short to balance the trade. It goes straight up to a point that an IPO is trading at 1200 P/E. That is super high even for the Internet bubble. The scramble to put money into something is really at a fever pitch here.

If you are a retired person with 800K in savings to live off of, you would be doing great with interest rates up around an historical average of 6% and you could get a comfortable 5% out of CD giving you an income of 40K a year without draw down. But with CD's at 2.5% and savings accounts at ZERO.. the BEST you could do is maybe 15-20K a year, off 800K!!!. This is where the cash buyers for rental property is coming from, in case you were wondering where all the cash buyers showed up out of nowhere. If you are afraid of the stock market and only can get 2% from a CD.. you might reluctantly become a landlord.

Now expand that general principal to Pension funds, Trust Funds, General Funds, anything that NEEDS 6-8% a year safely in order to maintain long term goals. They can't get that 6-8% safely. They're being pushed, much like retiree's, into riskier assets because they have no choice. This is what Ben Bernanke is doing, he is forcing them to take on more risk.

Does anyone think it's smart to force retiree's, pension funds, trust funds, and general funds into riskier assets???

NO!, of course not. This spells one thing... pending disaster during the next market sell off.

Tomorrow I will do some detail on how to technically spot a market roll over well ahead of time. Because sometime in the next year, we will be in the midst of one.

GL

Wednesday, May 18, 2011

05.18.2011 Update ... Lookin done

It's looking and feeling like the correction is done. However, we are still in the down channel, so you can't call it over for sure yet.

We are in one of those situations where the market can break out higher and run or it can touch the top of the down channel here and then head back down again. We are really still in a situation that is really a roll of the dice.

The market rally today was pretty broad based which would be typical of the start of a new rally leg.

Really tough to tell, I'm not going to spend too much time analyzing it at the moment because there's no way to tell.

I've got a new chart now showing the 2 possible paths, we will get into a lot more detail when this channel we are in is broken one way or the other.

S&P 60 min / 10 week;



The Stochs are getting overbought, but the MACD and RSI still has room.

GL tomorrow.

Tuesday, May 17, 2011

05.17.2011 Update Not quite done?

Today we appeared to smack right down on the trendline, actually straight to the bottom of my target zone at 1320 and then bounced up. It is still following the projected path pretty well.

I want to point out though, this is a dangerous area where you are doing nothing but gambling on a direction if you play it.

I do though think that we will test the trendline one more time. That's going to be the make or break in the short term for this market. If it holds, there's a very high probability that all the dip buyers load in and we are going to new highs. (for what I think will be the last time we see new 52 week highs in a very long time) If it doesn't hold, we will have to re-evaluate longer term Elliot Wave counts and determine what is highest probability path.

I've updated the chart i've had running for the last couple weeks;



The market appeared weaker than it really was today. We had HPQ weighing on the Industrials, but the S&P 500 was never down more than 7 or 8 points, I think it touched down 9 points for a millisecond as we BARELY peaked below the trendline. The financials of all things seem to hold up the fort today. JP Morgan up 2%, Wells Fargo up 3%, US Bank up 2%, Bank of America and Citigroup did their standard barely move as they just slosh around in Zombie nobody will admit they are insolvent land.

Going forward here, I suspect we will have a small bounce and drag in some BTDer's, then head back to the trendline for the ultimate test. At this time, I expect it to hold and for new highs to come over the next couple months. But really, the rest of this week is sort of a wildcard, we could go either way with a lot of economic data deteriorating.

GL

Monday, May 16, 2011

05.16.2011 Update Almost done... (I think)

The market once again made me a little nervous in the morning and it felt like we were going to reverse on a dime, but realize that is what we've all been trained to feel at this point. It's why everyone knows what BTFD stands for now. So, from experience, I felt we were still making lower highs and lower lows on a 5 day chart and felt my target was still valid.

By the afternoon, we were obviously still heading south, but we closed at 1329 on the cash, so we are awfully close to my target zone here. We are also oversold on the stochs and MACD on a hourly chart. Oversold can get more oversold and more oversold, don't forget that, just as overbought can get more and more overbought.

I'm curious what will happen tomorrow, the futures are down. It's possible we hit the target area in the futures and never see it during trading hours, but just a feeling from experience, we might tank tomorrow and drop well below 1320. That is a dangerous area, if we do that and you've been short, I would take some profits and wait to see what plays out. We very well could see something like 1310 intra-day and then close back up above 1320 and inside the channel again. It's definitely a bear fake out zone here.

A close convincingly below 1320 on the cash could mean a lot more downside is on the way. We'll re-evaluate if that happens tomorrow. It would change some of the longer term EW counts.

The key here is we caught the majority of this down move, the bottom of the channel or below intra-day is a very logical place to take profits and see what happens.

Here is the chart I've had going for awhile, we are still following the path quite well;



Some other things from today. Consumer stocks took a whacking today. Take a look at AMZN, down almost 5%, HPQ is getting hit badly AH, Walmart reports tomorrow after close, we'll see what happens there. In the tech world, we have CSCO doing record layoffs, AAPL and GOOG were down 2% today.

From a leadership perspective, we are losing a lot of leadership here slowly. The SOX (Semiconductor Index) got hit for 1.4% today. The Russel 2000 is also taking a beating and was down 1.4% today as well.

All this does not mean we can't have another leg of the rally up, but it does mean that we continue to look more and more like we are within some type of topping process in the market. What used to feel like every dip will be bought is slowly but surely starting to feel a bit tenuous.

One other chart i'd like to share with you tonight. IYR, the tracking ETF for Dow Jones US Real Estate which is composed of a lot of REIT's or Real Estate Investment Trusts, appears to be in a multi-year rising wedge which is fast running out of time. From top to bottom of the wedge is now only 4$ in IYR, which is only about a 7% move. It is sitting in the middle of this small range right now. It will not take much of a market scare to break down out of this huge wedge. Commerical real estate will obviously suffer if consumers pull back spending and more spaces begin to empty again. Even worse for CRE is going to be if the FED does not continue it's treasury bond buying spree and if the deal reached on the debt ceiling does not bring any signifcant changes. Left on it's own, the treasury bond market is only going in one direction and it involves rates going much higher.

IYR;



GL tomorrow.

And also don't be afraid to leave comments or questions. I'm not easily offended. ;)

Sunday, May 15, 2011

05.15.2011 Weekend Update

By the look of the futures tonight, it looks like we are going to be on track to be heading towards the 1320-1325 target area on the cash market.

Below is a repost of Friday's chart, there's no changes at this time and look for a reversal in the target area. If we end up closing below 1320 on the cash, there may be need for some re-evaluation and the near term outlook could become significantly more bearish.

Friday's Chart;



For this weekends update, I'd like to talk a bit about where we might be going long term.

Dr. Robert McHugh of technicaltradingindex.com, most of you know who he is or have heard of him. He recently changed his long term outlook from the market having topped a very long term supercycle wave (that started after the great depression) and us being in the middle of that correction with one major wave down left, to a forecast in which we have not yet topped that wave and we have been a topping process since 2000. He theorizes that we actually are topping a Grand Supercycle wave, which is theory because while supercycle waves can be historically tracked, a single grand supercycle lasts hundreds of years, so the start of that wave occurred sometime around the signing of the declaration of independence. Topping a grand supercycle wave would be a very very dire forecast, as correcting a wave that is hundreds of years long would most definitely result in the stock market going to zero.

This is Dr. McHugh's recent view of the Dow Jones Industrials. This is a 24 year chart and shows a broadening bearish megaphone top that has been forming since 2000. We would be in the final E wave inside of that megaphone. This pattern would allow for the market to either finish and collapse at any time, or go as far as new highs before the break down hits. This is the pattern that allows for the possibility of new highs, but it is also the most dangerous pattern to confirm for the long term. Targets of confirming this pattern and breaking down out of it are in fact targets of Zero. My guess is either a breakdown of global fiat monetary systems or a global depression caused by the end result of all this debt in the global system would be necessary to cause such an outcome.

Chart of potential industrials megaphone top;



I don't really share this view with Dr. McHugh, although I must concede that it is possible. I think it is more likely that we have in fact topped the Supercycle wave and have been in the process of correcting it. In this scenario, we have completed 5 supercycle waves, and we have finished the A and B part of an ABC correction.

Chart of what is IMO the more likely path and was Dr. McHugh's original thesis;



That thesis also meshes well with the very long term trendlines of the market;



This all gives us a long term target of about 475-500 on the S&P 500 and 4000-4500 on the DOW. A tremendous decline that would practically wipe out quite a bit of middle class retirement accounts and would probably bankrupt quite a few pension funds. It would be ugly.

But as ugly as it would be, it would not be nearly as ugly as what Dr. McHugh is now predicting.

If you look around the globe, it's not hard to see where all this damage is going to come from. It's going to come from massive debt loads at the government level that is world wide and we have central banks around the world attempting to continually bail out and hide all of it. When practically every country in the G20 has the same problem, they are all currently in a race of who can devalue their currency the fastest.

There's one problem with this solution. You CANNOT fix a debt problem with more debt. This is like you putting your mortgage on your credit card. That works until the bank says you can't put any more money on your credit card or until the interest on all the debt exceeds your income. This is the state of the US, England, Europe and Japan.

The technicals say what is obvious. This ponzi scheme we currently are running to fund our tremendous deficit spending is unsustainable and the hangover from our over indulgence is going to be quite painful and potentially disasterous. Hopefully we just take our pain medicine soon and move on. If we continue to bury our heads in the sand the debt only gets bigger and the outcome worse.

Friday, May 13, 2011

05.13.2011 Short update

A quick update tonight because blogger was down since Wednesday. There will be full weekend update posted on Sunday.

We are still following the outlined path and I'm still expecting us to finish this correction in the 1320-1325 range.

After that we should head north on our final rally leg of the rally since March 2009.

As of this moment, I expect that the final rally will reach around 1410-1430, but it is possible that we see new all time highs before we head back down, but it is not the highest probability at the moment. Following that rally, the forecasts get pretty dire and I will get into long term targets for that this weekend, but the last scare we had may feel like a cakewalk compared to this one.

Here's the S&P chart showing us following the direction I had outlined and it looks like we will hit the bottom of the channel on Monday or Tuesday. That is our reversal spot. If we break below that channel (below the blue line), we have to re-evaluate the longer term Elliot Wave counts and consider that we may have already topped the rally from March 2009, but that is only an alternate view if we happen to collapse below 1320.

S&P 20 day / 30 minute;

05.13.2011 Blogger was down

I appologize that blogger has been down, so I could not post an update for yesterday.

They have also temporarily removed Wednesday's post.

I will try to post a short update tonight for Friday the 13th and post a longer weekend update for release on Sunday.

Thanks,
CJ

Wednesday, May 11, 2011

05.11.2011 We plunged... now what..

Turns out my analysis yesterday that we had some big downside coming today was right. Intra-day it was starting to look like our correction was over and we were on our way up in the last hour to start the final wave north.

After a closer look, I do not believe that to be the case. I think we'll head north a bit tomorrow (or maybe just float around flatish for a bit) basically just to burn off some short term oversold condition. Then we will continue to finish our corrective pattern all the way to the bottom of the smaller channel around 1320-1325.

* Note though that Initial claims, Retail sales and PPI are all reported tomorrow morning, so the results of this could trump any analysis here. Bad data could just plunge us straight to the bottom of the channel, good data could cut it out all together.

The small channel in the chart below is inside the larger channel that I posted last night as part of the long term S&P analysis (last night blog only for TF folks). We won't talk about targets for the larger channel unless we break below this small one. Which I don't expect at the moment.

The following chart shows my short term view on a 60 min chart;



I think we could run up as much as 6 or 7 points burning off oversold, then we should continue down to finish this pattern. That should complete this correction around 1325 or a little lower and then we will embark north to finish the rally from March 2009.

The following chart is a daily chart that shows the channel clearer and where our target is;



IF we were to plunge below 1320 (on the cash) and close there, then there are a couple alternate EW counts and views that I have for what may happen. They both involve targets to the downside of at least 1220. But I won't bring those up until/unless we close below this current channel.

GL tomorrow.. be careful with positions ahead of the data tomorrow

Tuesday, May 10, 2011

05.10.2011 Update Plunge tomorrow?

I want to preface this with the fact that I of course could be TOTALLY wrong and we have every reason to just rocket higher here. But the good news is that it would not take much north to blow my short term theory here and we just go higher. So it's not a bad spot to throw on a short and see where we are at in the morning.

If we get over 1365 on the cash.. my short term call here is probabl blown.

Based on the short term EW count, we followed my path north of the 2 options yesterday pretty exactly. We also ended at the trendline precisely where I thought we would. We also have what looks like 5 waves in the C part of a correction. (the correction of the correction from a few posts ago). So I think we do a 180 here and do a little plunge trip straight down to the bottom of our channel around 1312 or so.

Here is the short term S&P chart (20 day / 30 min.) it includes my current EW count and what I think are the important trendlines and the fact that we are at the tippy top of a rising wedge and the MACD and Stochs are overbought;



Long term... I've gone back and looked and it unfortunately (if you are a bear) is possible that we may in fact have not even topped the 3rd wave of Supercycle C wave. We could do quite a plunge for what could be the 4th wave and still be in the rising channel for Supercycle C. This is not my top count, and I haven't seen anyone really even mention it as a possibility, but to me, it has to be considered as a possible ALT.

So to offset the bearish enthusiasm that we might plunge starting tomorrow for a bit, i'm including this chart to illustrate that we may in fact be many months from completing this rally. We would have to fall below the large channel to discount its possibility.

Chart is a Daily / 2 year;



GL tomorrow.

Monday, May 9, 2011

05.09.2011 Update

Short update for tonight. Not a lot of new things happened today.

We pretty much followed the outlined path, although there's a chance that we may not go up as high as 1356 before completing the correction. I show that in tonights chart, which shows that we are at the tip of a pennant and the resolution to that pennant will happen tomorrow.

If we break upwards out of it, I expect we will complete the previously outlined path and head up to about 1356, maybe a tad higher, and then head back down to complete the pattern and fill the gap. If we break lower out of it, we'll just go ahead and fill the gap and hit the bottom of the channel and then be ready to start the final wave up.

The reason I give the pennant a chance to break south is because the MACD and Stochs are looking a little toppy here on a short term chart, but as usual we can break north and roll along the top to a very overbought state and then head back down.

We should know tomorrow by lunch.

Here is tonights chart; S&P 30 min / 20 day

Sunday, May 8, 2011

05.08.2011 Weekend Update

We are still in a situation where there is no clear short term direction for the market. I suspect we are going to rally a bit more and then head back down to finish our trip to the bottom of the big channel. (see 10 week S&P Chart)

It is possible the correction is done and we'll just go ahead and rip higher to finish the rally from March 2009, but I don't think so. I think we finish our trip to the bottom of the channel and also make sure we fill the gap. (see 20 day S&P chart)

It is even still possible that we have in fact topped the rally from March 2009 and this rally is the first corrective wave of the trip down, but I definitely put this option as the lowest probability.

Here are the S&P charts;

10 week;



20 day;



The bank stocks have not participated much in this rally and are obviously still weak, as mentioned in the last post, this is not a good sign going forward and a sign of brewing problems.

I also took a look at IYR this weekend, which was weak on Friday despite the rally. If IYR starts rolling over, we will take yet another leader away from this market. Leadership is narrowing. Important areas like Banks and Semi's are not doing well. We are in a topping process, but it must be allowed time to play out. Tops can take awhile to form. The 2007 top formed for almost a year before the plunge finally hit.

Here's the IYR chart showing some weakness recently, that lower trendline is important for IYR.



Hope everyone had a happy Mothers Day!

GL tomorrow.

Thursday, May 5, 2011

05.05.2011 Redo in Banks coming?

As everyone is aware, we had a pretty hard sell off in commodities today. Which oddly is arriving after we've seen the 10 year treasury yield continue to plunge, even on up days in the market. We also have the IRX almost down to a flat zero.

Something is afoot. It's not just today's commodity sell off either, it's a combination of many things lately that do not make sense.

But first, lets just look at what the market is telling us. I had to pull out to a 10 week chart, from the 20 day, but we can see that the S&P is still inside of a solid rising channel. We have a bit more room on the downside to reach the bottom of that channel and the bottom should be some strong support. I would look for us getting close to 1310. But, this is still a correction until proven otherwise. A break below the bounderies of the rising channel would obviously be cause for re-evaluation. Until then, we have finished 3 waves, are completing the 4th wave and have 1 more wave up to go.

Here's the S&P chart with the channel;



Now.. on to other things that are signaling trouble in the future. I'm sure you've seen all the good earnings and wonder where a top will come from or what the next crisis will be. I think we are getting hints right now in the big banks. As has been mentioned by Reggie Middleton of boombustblog.com, the banks have been pulling down their reserves to make their profits look fatter. It's left some of them with some lean reserves. You may have also noticed a lot of the real estate in this country is double dipping pretty hard right now. That could be a problem, a big problem.

I think we are seeing it in the bank stocks. When looking at the following charts, please keep in mind these are the same time period as the S&P chart with the rising channel. So obviously much higher over the last 10 weeks, despite the recent sell off.

The XLF is also sort of flatish.. here's the XLF;



Now look at some of the individual big banks over the last 10 weeks..

Wells Fargo;



Bank of America;



U.S. Bank;



Morgan Stanley;



Those charts are not trending up like the S&P .. in fact they are all trending down and down very quickly. The broader market may take another few months to notice while the S&P finishes it's EW pattern, but this type of action in the big banks is waving it's hand at us telling us something is very wrong.

GL tomorrow.

Wednesday, May 4, 2011

05.04.2011 Update Crossfire

We flirted today with breaking our important trendline, but ended the day closing above it.

The Elliot count could go either way right now, so it doesn't do us much good. We could be done with only A of an ABC and we started B this afternoon. Or we could be completely done with the full ABC correction. There's simply no way to tell, which is often the case with short term EW analysis.

We just have to watch the market here and see what happens. This is typically a good place to be flat and just watch and wait. Regardless of the above EW count, we should continue bouncing a bit into tomorrow. Whether we are finishing B or the the full ABC is over.

After that becomes a split decision, continue with the correction or we shoot higher to continue the rally. The decision will probably be made tomorrow and the next move up or down (after drifting higher a bit tomorrow), will be a pretty strong move either way.

First chart tonight is the S&P, showing how we closed above the important trendline, how I believe we will drift higher and then reach a decision point of where the market heads next. The important trendline will remain key;



Second chart is the Transports. They took a whacking today, about double the loss of the other indicies. Transports were up strong when oil was rallying and now today was very weak with oil down 2%. More than a bit confusing to me, and it's still important to track what the transports do here going forward;



A thrid chart for tonight is IYR (DJ Real Estate ETF), it appears that it has put in some type of top. It's definitely in a down channel now and below that down channel there is not much support on a 20 day chart;



lets see what happens next.

GL

Tuesday, May 3, 2011

05.03.2011 Update Correcting the correction

We are still in the middle of the expected correction. Looks like we finished a clean 5 waves down for A of an ABC pattern correction. We started B up at the end of the day. I think we might open down a smidge tomorrow as a fake out and then rip up a bit for B, that should about do it for tomorrow. After that will be C down.

C down gets a little dicey. In both the S&P and Trannies, the C wave of this correction must stop at the blue line in my charts. It would mean the C wave needs to be pretty weak. Below the blue lines get dicey and I will have to pull out further than a 20 day chart to figure out where we might go from there. We would have to close below those lines.

IF that happens, we'll re-evaluate and create new probably paths. For the moment though, I would assume we'll hold those lines, finish this correction and then head back up for another big wave north. I'm still targeting something around 1430 as the top of the rally from March 2009.

The charts for tonight are just updates of what I posted yesterday, the market pretty much followed the paths that I had outlined today.

2 things could happen tomorrow. We could follow the paths outlined in the charts, or we could just collapse below the blue line. If we collapse below the blue line, I will attempt to post an intra-day update with a quick update of where we might go and potentially how to play it.

This is the S&P chart, following the projected path so far;



This is the DJT chart, it broke down out of the megaphone top and should follow a path similar to the S&P;




GL