Tuesday, March 31, 2009

What a mess...

Kinda tough tonight...The red bullish falling wedge had an upside breakout and then a retest at the end of the day. There is a possibility that the retest is successful and it makes another run for an intermediate high. There is also the possibility that it gaps below and forms a head and shoulders pattern. At which point we have to see how it goes.

The vix:spx ratio above is interesting as the macd is getting ready cross going up. This could very well point to a multi-day pull back.

Monday, March 30, 2009

Nice pull back...

Nice pullback today with an ascending wedge that formed near end of day. The trouble with small EOD formations is that if there is some sort of news event those get blown out of the water. Barring anymore government intervention I expect we might gap up and potentially hit the 79.5-80 region before finishing this move down to about 77.4.

Stochs have rolled over on the daily and the MACD is about to roll over.

Sunday, March 29, 2009

Inverted Saucer?

Friday we collapsed out of the black ascending wedge and found support at the 81.54 area. Still multiple times through out the day that region was pierced, but still remained as support. The two day formation has now taken on the appearance of an inverted saucer. The gradual decrease in the rate in which the market has advanced on Thursday combined with the gradual decline on Friday lends it self to this pattern. Typically this is a longer term pattern though. I would expect a sharp drop once the support is pierced and becomes resistance.

The daily candles have taken on aspects of a tri-star pattern which is a bearish reversal. Stochs have been overbought for quite some time now.

Thursday, March 26, 2009

Enough is enough...

All sorts of rising wedges on all sorts of time frames...from the little black one to the monster blue one. We did make that run up to the orange trend line and are in a stones throw of the 61.2% retrace of the high set in January. So I think a little throw over to 84.12 tomorrow, followed by collapses in each of the ascending wedges.

Wednesday, March 25, 2009

Just waiting,,,

SPY broke through the rising wedge from yesterdays chart (blue line), bounced off a fib(23.6%) from the 3/6 low to todays high. We could make another run to the orange upper trend line before collapsing through the lower red trend line of another rising wedge. Today's eod reversal has sent stochs on all time levels to extremely overbought. Waiting for below 76 to release puts and buy calls.

Financials look like they may have a small run in them before they fail the wedge. I don't normally track this...but I need a chart to link to for daneric :-P

Tuesday, March 24, 2009

Looking for a retrace...

Currently Looking for a retrace to exit out of portions of my short position. We are oversold on all time frames below 1 day. We are still overbought on the daily. A bearish rising wedge formed with declining volume. I expect a little bit of a bounce/consolidation tomorrow before any continued down pressure. I currently have a retrace down to the 38% area...As this is a wave 2 we could easily go to the 62% area (73.28).

On the dailies we are still a bit oversold on the Stochs as well as MCO. $CPC is sitting at 0.76. At this point I don't know if the FED/Treasury will be able to do too much more. They are printing trillions. The inflation effect on equities might scew forecasts if it starts jumping quickly.
The only tidbit left is mark-to-market. If they remove that, it could have the opposite effect. If removed, the banks can value their assets however they please. In that case, who would invest in banks not knowing what their true worth is?
EW counts are on hold as primary wave 2 counts, GBT/ROB46 wave 1 count and probably others are overlapping.

Monday, March 23, 2009

Wave 1 still alive? but no way to know till a lot later...

Here is a count from GBT and Rob46 over at StockTock.com. This alternate count shows that we are in wave 4. But this one has an extremely high target (around 91.1 for a 38% retrace). My thoughts are that it will be hard to distinguish this count from a primary wave 2 count for quite some time. I don't see anything wrong with this count and it looks fairly natural. KUDOS to GBT and Rob46 for sharing this with us...wished they would have shared it sooner :-P

The daily stochs are still way overbought, so I expect some pullback soon.

OUCH...wave 1 looks like its dead and we are in wave 2...

The rise today was as about as explosive as you can get and clearly punctured into and closed in the original wave 1 down area. So the odds of this being wave 4 are now dead. As you can see from the chart we were in a rising wedge previously and broke down out of the wedge on Thursday. Today's sharp rise retested the bottom of the trend line. So we can currently expect a retrace at some point to exit the short positions.

I just popped over for a quick look at the VIX after I actually published this blog entry...and its in a strange place. I fully expected the vix to be in the 30's...but instead I find it at 43. In fact it is outside the descending wedge (the counterpart to SPY ascending wedge). The Vix did not even make it to retest the trend line.
So with somemore investigation I found the above divergences. Something strange is going on here. The market rallied like mad...but the fear did not go down noticeably?

Sunday, March 22, 2009

It will be interesting...

The green represents possible paths if we are in Primary wave 2 up. The red represents possible paths if we are in Primary wave 1 and are headed to test the last low or bust through it. Also its possible we bounce around this area a bit before we choose a direction.

Saturday, March 21, 2009

If this is still wave 1 down...

There is still a chance for new lows, but if wave 5 is equal to wave 1 (14 points) we are going to finish right at the last low 67 (81 -14). That formation would make a DOUBLE bottom and would definitely kick off a Primary 2 wave very well.

Thursday, March 19, 2009

SRS...Shares for everyone!

SPG (Simon Property Group) is issuing 15,000,000 more shares to raise cash. This is incredibly dilutive and adds to their quarterly dilution of stock holders (they are paying their 10% dividend mainly in stock). SPG is one of SRS's biggest components. This will make everyone wonder if the other REITS will need to raise cash too.

Version 3.0

Ok...Version 1.0 had a few bugs in it. Mainly the Fed dumping 1 trillion in to the economy. We worked that out in Version 2.0 today, where we started our fall.
Tonight, its version 3.0 with new and improved features:
- MCO curling over
- Stochs way overbought on the daily
- Dark Cloud cover candle stick formation on the daily
- Bounced off long term trendline from jan high (almost a kiss of death)
- Bounced down below 50 day MA
- Broke out of the bearish rising wedge down

The end is near...

Wednesday, March 18, 2009

Definitely down tomorrow...Version 2.0

Today was proceeding nicely up until the Fed meeting. We were headed down toward the bottom trend line on the flag. Interesting that even with the sharp spike, we did not exceed the channel for the flag. Stochs and MCO are super high on the daily (even higher than in version 1.0). The day finished right at the 61.8% retrace. We are looking at a multiday pull back. Take a look at the $CPC, there was a lot of call buying today...which again is bearish as the $CPC is a contrarian indicator.

Interesting that while $CPC got more bearish our other contrarian indicator from www.sentimentrader.com became less bearish (ie not as optimistic as before)

I accumulated more SRS calls today. Lets hope we don't have "Definitely down Tomorrow...Version 3.0".

Tuesday, March 17, 2009

Definitely down tomorrow

Its just a bear flag. Volume has been tapering and the Daily stochs are HUGELY overbought. The MCO is also peaking out. In fact this wave 4 doesn't look much different than the other wave 4's we have had right before they turned. The target for the bear flag formation is sub 600.

Many EWers have been flipping to Primary 2, Kenny being at the vanguard was first. All of this due to the fact that the Nasdaq Composite Elliott wave count has violated the wave 1 rule (wave 4 must not exceed wave 1 unless its an ending diagonal). After some debate with a colleague, the final resolution we came to is "why does the Nasdaq have to be on the same count?"

Unlike most world exchanges which have a variety a different industries, the Naz is heavily weighted in certain areas and is completely missing certain sectors. I don't have a break down of the full composite, but the QQQQ's represent the top 100 companies in the composite index and you can assume these have the most weighting. The QQQQ's have a break down as follows:


Industrial Materials





Consumer Services

Business Services

Financial Services
Consumer Goods


We see energy, financial services and utilities are not represented at all...and these sectors have had a huge influence on their respective indices in recent times. So its not surprising that the Nasdaq might have its own count.

*Above table break down taken from Yahoo's Finance section.

Monday, March 16, 2009

Fun with numbers...

Well we hit the target a little early again...I think thats about it. Now its just time to sit on the position and see what happens. Minimum retrace of 38.2% takes us down to 74.11, 50% to 72.91, and 61.8% to 71.72. Wave 2's tend to trace 62.8%.

Ok...lets start counting some chickens...

The equation for a typical complete wave structure is:

1x -.618x + 1.618x -.382(1.618x) + 1x = complete wave move

Assuming that wave 2 retraces .618 and wave 3 is a 1.618 expansion of wave 1 and that wave 5 is approximately the same as wave 1. If we assume wave 5 will be equal to wave 1 (
94.45-80.18 = 14.27), then the above reduces down to:

2.382x = 14.27

So if we assume that this wave 5 will retrace the same amount as wave 1 then we end up with the first wave of the 5 wave structure be a length of 6. The high was 77.96, so wave 1 down should make it to 71.96...thats pretty close to the retrace we are looking for above (71.72). This also means that the final wave 5 low will be 77.96-14.27 = 63.69. Also for those good with numbers...wave 3 of 5 should end at 77.96 -12=65.96...wow right there at the previous low.

Ok...lets say 5 gets a bit extended and is equal to wave 3 (87.7-67.1), then

2.382x = 20.6

Now wave 1 of 5 down will equal 69.31, and the final wave 5 of 5 target will be 57.36.

So we have some idea of what might transpire in IDEAL Elliot Wave terms. Wave 1 should end somewhere between 71.96 and 69.31.

Ok...done counting chickens...lets see what happens.

P.S. This is assuming we have started wave 5 of 5 of primary 1...heck we could be in primary 2 (per kenny)...or still in wave 4 of 5 of primary 1...But heck I have nothing else to do tonight...btw...you noticed the inverted hammer on the daily right? :)

P.P.S. Lets continue this little numbers game...and look specifically at wave 1 of 5 of 5 which should be 6 long from above...if we say it will be a 5 wave structure, then

2.382 x =6
x= 2.52

subtract that from the high and we get 75.44 for the end of wave 1...or if you believe in the extended version then the end of wave 1 will be 74.33...So what does that tell me?
It tells me we might get a small gap down tomorrow somewhere between 74.33 and 75.44...then a retrace up and consolidation for wave 2 (76.57 - 76.94)...Then wave 3 down.

Please take all this with a grain of salt...I may be right but I maybe wrong...I am just throwing this out there...I am not trading it :) My short position has been built over the last 3 trading days, I am just going to sit and see what happens now.

Sunday, March 15, 2009

Another little tidbit...

Normally I only do one post a day/weekend...but there has been some good stuff this weekend from various sources. Again my actual forecast is below...but here is an interesting bit on the weekly moving average from Shanky at Shanky's tech blog.
See how the 100 ma has crossed the 200ma (red dots)...and the 20 crossing the 50 ma...it looks like we still have a fair amount to go. For some more details you can go to http://shankystechblog.blogspot.com.

Check out this excellent analysis...

My forecast for the week is below...but I ran across this EXCELLENT analysis from strictly a volume perspective by Unosuke at Traders-Talk.com.

Volume analysis

Saturday, March 14, 2009

Down we go next week...

Above is a close up of the rising wedge as well as a count for this leg of the correction. The green area was my initial target and the red area would have been the theoretically perfect target according to the channel in the larger view below. Could it be a double top? Maybe...but C might extend to the 77.3 red area. Will it get much higher than that...EXTREMELY doubtful.

Above is a bigger picture view of what is transpiring. We are very near the top of wave 4. Note I said top of wave 4 and not the end of wave 4. As corrections go, its possible to bounce up and down for awhile before actual wave 5 down begins. But I don't think that will happen as wave 4's tend to be the opposites of wave 2's. This wave 2 was a controlled up and down flat. This wave 4 has been a violent spike up and I expect it to tend that way. In non-ew terms, I am simply looking for a retest of the large falling wedge's upper trendline, before the coming rally. Also note the negative divergence on the hourly chart for the stochs.

Above is the reading from www.sentimentrader.com. This is a contrarian indicator. Note that short term it is excessively optimistic, which means we are going to drop hard soon. Longer term, there is pessimism, which means longer term we will rise :) This actually fits exactly into the EW forecast of a bull market after this coming low.

Thursday, March 12, 2009

We are not done with primary 1...

Little extra tonight...I just got finished making my rounds of Kenny, Daneric, Traders-talk, Atilla and Evil Spec's sites. Kenny appears to believe that Primary wave 1 is already over. Looking at the above chart I really can't see how. I spent some time looking at previous counts and still believe that this is correct. Only one way to tell...sit and wait it out...if we rise above 80.18...then the count is wrong and we are likely in Primary wave 2 up. I will trim back a bit if we break out of the channel in green above. But I will be watching that red dotted line. It is about the top of wave 4 for the previous wave 3...its generally where the current wave 4 will retrace too.

I have already forecasted that this C wave up will be SHARP and violent and indeed it has hit its target. So sharp and violent, it has caused many to flip from bear to bull. Until I see different we are still in a bear market as depicted by the down channel.

The sharpest and fiercest rallies have come during bear markets, this rally is no exception. I suspect it will draw more people in and when it starts to fall...its going to be brutal.

Target made...

Well, we made the first target and then some. I have layered in most of my short position with a mix of MAR, APR, and MAY puts. I have left a little in case we head to my red dot (77.18) by Tuesday. The other red dot represents us bouncing around this area until about 3/25 before starting wave 5.

We could start wave 5 down to the low 600's at almost any time between now and the 25th. My preference is immediately since I am in PUTS :)

Lets start dropping tomorrow, afterall we have a rising wedge.

just a chart

no time this morning...but here is a triangle that is possible...per shanky...

Wednesday, March 11, 2009

It ain't over till its over...

Above is kind of the bigger picture of what I see is going to happening. We are in an ABC corrective structure that will take us to about 74.85 (my new revised target). Above is a bit of a close up of the end of the day. Looks like we formed an ascending wedge that will probably break down tomorrow.

Tuesday, March 10, 2009

Retrace a bit...

Its a really messy chart tonight. I think tomorrow we will have a bit of a retrace as today was way overextended. Nice rally that resulted in an all time high TICK of 1603. Whenever the TICK is that high there is usually a pull back in the near future. From the chart above, we see that there are all sorts of rising wedges (bearish). So what are the targets for the retrace? I marked them with the green dots. The 38.2 (70.5) and the 50 (69.9ish) are the most likely targets. I even have some time targets :-P Mainly because we need a retest of the large falling wedge (noted in a previous blog entry) that is denoted by the blue line. The third choice is about 70.14 which is where the bottom of this bull channel crosses the same blue line.

70.5 is the most likely as it actually preserves some ambiguity about the wave structures. The market never wants to make any thing totally clear so by hitting that target, its unclear if this is an ABC up formation or a 12345 up. If 69.9 is hit, we know that this formation is an ABC corrective formation as wave 4 would violate wave 1.

ps If you are on the 12345 count, then wave 1 started at 67.08 and ended at about 70...wave 2 consolidated down to about 68...wave 3 was today and peaked at 72.67...waiting for the wave 4 correction.

pps If you are on the ABC count...then A started at 67.08 and ended at about 70...B wave consolidated down to about 68...and wave C ended about 72.67 today...That ABC structure made up the first larger A up...now we are waiting for B down.

If anyone wants me to label those counts post a comment :-P Otherwise I will label it when it becomes clear which of those counts is correct.

Monday, March 9, 2009

Rally looks close at hand...but maybe over before you know it...

We had a nice Bull flag form today. I expect that we will rally tomorrow. The 60 day 60 minute chart shows that we are in a large bullish descending wedge. Volume is increasing in the wedge, which isn't a great sign if you are bullish. Wedges with descending volume have a higher likelihood of their pattern playing out.

What bothers me today is the ISEE hit a 52 week high (220). Basically 2.2 calls were purchased for every put on the International Stock Exchange. This means sentiment is EXTREMELY bullish. The problem is that its a contrarian indicator.

I expect that this rally might be violent and fast as opposed to wave 2 which was slow and choppy.

Saturday, March 7, 2009

Looks like turnaround Tuesday :-P

The above chart was adapted from the work by Daneric over at StockTock.com. He did it on the $SPX, I simply redrew it for SPY. The ending on thursday was a little confusing to me, which I noted in the blog posted. I had mentioned to a buddy that it might be an ending diagonal but I didn't really see it until Daneric's post Friday night. Sure enough it looks like wave 5 of 3 is finishing with an "ending diagonal" formation. This is where the waves over ap and look corrective in nature.
Still, Friday was an excellent day to build a LONG position, and because we are in the midst of an ending diagonal, everyone has another shot at it on Monday :) Then we should continue on according to the chart below.

We should definitely either turn around some time monday or tuesday. This rally should make at least a 38.2% retrace of the entire wave structure, taking us to the 77.50 area. If we stay in the idealized Elliot wave Channel in Green above, we should hit the peak around 3/16 and then start a decline during opex. This is the tough time, iprevious wave 4's have played out longer than expected. In an idealized situation wave 4 should be opposite in nature to wave 2. Wave 2 was choppy and formed a double top. My guess is that wave 4 will be sharper and more energetic and take less time.
Kemal_1 from Atilla's Xtrends is forecasting 73 as the top for wave 4. I believe he is basing this on the idea that the gap left on 3/02/09 will form an important resistance point which the market will not be able to overcome.
My bet is that the bounce for wave 4 will be sharp and will blow through that gap. The 77.5 area is also the peak for wave 4 of 3 of 5...which makes this a logical retrace.

Anyway I am long with front month calls on SPY. As we rise up, I will layer out of my SPY calls and start buying APR/MAY puts between 73 and 77.

I wonder if one of my favorite indicators above is broken. Afterall how many puts can be expected to trade on AIG, BAC, C, GM, FNM etc nowadays. So is it possible that the ratio is skewed more to calls now? Or is it just no one thinks we can go down any more?

ps. Thanks for catching that Tommyt, I mean Friday was good for building a LONG position and have corrected that.

Thursday, March 5, 2009

If today was the end of wave 3

Then here is my revised target for wave 4.

Ok...fogged up slightly...

While it hit my target area, but the count was very fuzzy in that area. Part of it looks like it might be an ending diagonal. So with the unclear count, it is possible that the 5 wave structure that makes up this 5 of 3 is not yet complete and we could extend further south. Timewise any move should be over tomorrow and we should get some sort of reversal. If we do not, its possible the count is far off and we could extend even deeper into the 6's on Monday.

Regardless, it is probably a good time to start building a long position by layering in the deeper it drops.

Wednesday, March 4, 2009

Much clearer now...

You can see we had a nice bearish rising wedge today with head fake to the upside before collapsing. Wave 4 retraced the perfect amount up to the 38.2% fibonacci level before beginning wave 5 down. Wave 1 was about 4 points (78.35-74.2) and wave 3 as marked was about 6 points (75.58 - 69.6). With wave 4 ending at 72.84, gives us a target range from 66.84 - 68.84 as the end for wave 5 (in red), which also ends the blue wave 3.

After the completion of blue wave 3, I expect a sharp rise and then choppiness till we hit the wave 4 target around 75.5-76 before the final collapse of blue wave 5 down. I expect the blue wave 5 to be a 5 wave structure in itself with a target in the low 600's.
Still no sign of turning around above.

ps. Jobless claims could be the key for the run down to the high 60's. If you are not short right now, you probably just want to hold and start building a long position starting below 69.

Tuesday, March 3, 2009

Still waiting...

I would say we are within 1.5 points of hitting the "temporary" bottom on SPY. This forecast differs greatly from all those portending doom in the next couple of days. It is true that there is complacency as $CPC finished at 0.95, so right now there does not appear to be alot of fear or bullishness. I suspect a rally now will be very sharp and pull all the retail investors in for a sharp spike up, followed by some choppiness to test their resolve and then a final spike up to the 75ish area or higher (but not above 80). Then a massive collapse back down the 600 area.

Monday, March 2, 2009

Wave 3 is about over...

Wave 3 is about over...then we can expect a rally and choppiness for wave 4 before the final low is made.Still no sign of turning up on this indicator...but I suspect it will turn up before the final wave 5 intermediate bottom.

Sunday, March 1, 2009

Time to get out...

If you are short...its getting close to time to get out if you want to catch the 4 of 5 bounce. The calculated target I have is 71.5 based on my count. Please be aware that there are other possible counts. One potential is from Daneric at StockTock, he has the tourquoise 1,2,3 that I have marked as just wave 1 and the bounce that was friday as wave 2...based on his count the target is around 69. Another possible count is that wave 3 ended on friday and that we will gap up immediately on monday.
Regardless, pretty much all the counts suggest we are near the bottom of this move and will experience a move up soon after. For those trading options its probably time to get out Monday or Tuesday. For those trading ES contracts, its possible to hold through the bounce for the final end of wave 5.
Atilla from xtrends is calling for gap under 700 monday, this would fit Daneric's count.
I think the final move will be right around march expiration, basically we need to finish wave 3 and bounce around wave 4 a bit before the final move down this go around :)

Be nimble...all the counts could be screwed up and we could always be heading to hell in a handbasket...do not collect $200 :-P