1/17/12

Announcement:  There will be few if any posts on the week of January 23-27.  The reason for this has nothing to do with certain anagrams of soap, but rather due to the fact that both my Internet access and my ability to have a stretch of uninterrupted time long enough to conduct a full analysis will be up in the air.


The market technically went up today, but relative to its gap-up open on what frankly I consider to be absurd ebullience.  I find it amusing that the word "ebullience" has "bull" in the middle.

The move up from 1202 looks like this now.  Notice that each successive high occurs on an increasingly shallower slope, and that we are once more under the thick orange line that had stopped most of the previous retracements of this move.  Yes, we gapped over it today, but failed to hold it.  This indicates that the market no longer thinks that line is important. 

Today's high went above the 1301 target.  That's okay, because it is still within the .786 retracement range of 1301-1307 - not to mention it reached this value with the help of a gap up, which results in stops triggering, shorts panicking and covering, etc.  The market may want to hold on through opex earnings week, but I think this reversal - even though we closed higher - means that risk isn't exactly as on as it was during the festive holiday season.  Yes, we rallied late in the day, but we also hit short-term oversold conditions, so that wasn't so surprising.

Several of the banks are not looking good.  C gapped down and crapped.  It topped on the 12th, but is showing improving 10-minute technicals and therefore probably should correct fairly soon.  BAC closed down ($6.48).  MS closed down.  WFC closed up - it should be worth noting that Wells Fargo's reaction to the 2008 decline was quite interesting.  They were trading at around $30/share until it happened, blipped down to $7 a share and then skyrocketed back up to around $30/share where they still trade.  (I.e., they recovered much better, but I'm not sure how much of that is due to absorbing Wachovia.)  Goldman Sachs, the bank everyone loves to hate, was down as well.

I think we could be done here.  I think.

1/13/12

The market went down today.

Obviously, it turned out that 1292 was not the Minor 2 top after all.  I have updated my "Targets for Minor 3" count to adjust for this assuming that 1296.66 is the top as I have it here.

It may not be - in particular, if the market were to hit 1301.26-43, it would be pennies away from an interesting Fibonacci confluence:  1301.26 is the log-scale .786 retracement of the move from 1370.74-1074.77, and a 3/C = 1.618*1/A move from 1301.43 would, on a log scale, put a target at 878.00, which just so happens to be the .618 retracement log-scale of the entire move from 666.70-1370.74.  This would work well with a "medium term bear, long term bull, super long term bear" count in which we are in or have just finished Intermediate (B) of Primary [2] of a Cycle V ending diagonal.

However, we dropped below the channel line that had heretofore limited our retracements, and failed to get back above it.  Notwithstanding the permabulls' or neo-bulls' cries that the fact that we retraced the opening's down move means we are in a New Bull Market, it looks more like a mini-wave 2 than anything else.  Not to mention the fact that it stopped at just about the .618 retrace of today's down move (1289.41; 1289.34 would have been exact.  The .786 is at 1292.56), and the fact that the 5-minute chart is showing bearish RSI divergence on this afternoon's up move already.

The main downside for bears is that there was a gap down, which may want to fill and would do so dangerously close to the high (above 1295.50).  Still, in late July the first wave after the interim top at 1347.00 retraced to roughly 1346.99.

1/11/12 - Looking at Divergences

I know there are some people who don't like using divergences, but...

The market still looks like we're in a complicated topping process.  In particular, the wave count since Dec. 29 is quite tricky to figure out.  So I have instead decided to look at RSI divergences in various markets.  These are all RSI(13), the Fibonacci value I typically post in my charts, not RSI(14).  I look at XLB mostly because I am now long SMN, but that's beside the point.

Bearish RSI divergences (bullish for the VIX) are present at the 60- and 30-minute levels on all of these.  Many of the highest values occurred in the powerful New Year's thrust up.  The two markets I looked at that have yet to make a new high on lower 10-minute RSI are the SPX and RUT.  The SPX closed today at 1292.48, four points below its high set yesterday morning of 1296.46.

This may suggest marginally higher highs tomorrow morning before a selloff - I'd be highly amused if the market topped at 1299.99.  Many of these indices are very close to their late October Minute [w] (or Minor W) highs and will not need much more to get above them.

1/9/12

The broader market decided to stay still today, much as it did Friday.  It's probably tracing out a triangle of some sort.  About the only thing that seems clear to me about the past couple of days with respect to the SPX is that the move from 1283.06 (Thursday 1:40 p.m.) to 1274.55 (today 11:15 a.m.) looks a lot like a flat.  To which I have to say:  Pick a direction, market, and go in it.

So instead I'm going to look at Netflix, which has been explosive the past couple of days, rising nearly 14% today alone.

The weekly chart for the past year does not look particularly good.  From this it looks as if the recent surge, powerful though it may have been, is simply a backtest of the 200-week SMA which it gapped through in October.

Speaking of gaps, NFLX's history is full of them.  Let's take a look at the daily chart, highlighting the gaps.  (Blue = gap up, red = gap down.)

Currently it looks as though the stock is trying to fill the massive (largest on this log scale) gap it left when it plunged overnight from 115 to under 80 a share.  NFLX is already daily overbought (RSI(13) at 75), but may have a little more room to run.  An operative question is whether this dramatic upturn is the C wave of a correction, or 3 of A (or 3 of 1 of the new NFLX bull).

IF the broader market is about to have a major crash, I would find it hard pressed for NFLX to continue double-digit daily rises.  On the other hand, if such a crash is still a few days or weeks away (market making a topping process ultimately to reach the 1310-1330 range), NFLX may power through to at least fill the gap at 115.  I find it difficult to believe it would fill the higher gap at ~200 soon, though, as the 200-day SMA is at 185.60 (about the bottom of that gap) and declining.  If the market is still ascending, NFLX may, however, try to challenge this SMA in a wave 2/B.

On the other hand, if a crash is due, now (or soon) would be a good time for NFLX to reverse.  Of course, it is always possible that the stock may hold up through Minor 3 (i.e. not go below 77 causing 4/1 overlap), rise in a 5 of A during the broader market's Minor 4 filling the gap at 115, fall in a B-wave during the broader market's Minor 5, and rise to meet its 200-day SMA somewhere in the 150s (?) during Intermediate (2) before filling the gap in the lower 50s during Intermediate (3).

NFLX is severely overbought hourly, but the structure suggests that even if this is NFLX's C wave, there still needs to be a 4 and 5 of C.  A pullback of some kind is likely; it's just a matter of how strong and long-lasting this pullback will be.  I may consider buying shares of NFLX in the near future, possibly within the next 72 hours.

1/5/12 - A Tale of Three Indices

Let's look at the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite all together, shall we?

The primary count in the SPX is that we are currently in Micro [5] of v of (c) of [y] of 2.  If so, the SPX should not go much above 1288.50 and the DJIA should close no higher than 12,467.  Unless the DJIA and SPX are on separate counts, which is not out of the question, and assuming the primary is the correct count, Micro [5] on the DJIA should truncate, terminating below Micro [3] (Tuesday's high).

On the Nasdaq we do have a new high above Tuesday's high.  Micro [3] on the Nasdaq is longer than Micro [1] (88 vs. 86 points), so Micro [5] is not limited in how high it can go before invalidating the wave count (well, besides 2887.75, its May 2 top).

On the SPX and DJIA, we had negative RSI divergence with respect to the December 27 and January 3 highs.  The Nasdaq did not confirm this, as its January 3 high had higher RSI than Dec. 27, but we have lower RSI on a higher high for it here.  All three indices have lower MACD highs (though it's hard to see on the Nasdaq so I have helpfully included the values).

What does this mean?  It means the market's tired.  At the very least, it will likely undertake a significant correction soon (down to the lower 1200s at least).  More bearishly it means we may be only a matter of hours before Minor 3.

The above chart adds credence to this view by suggesting that the entire move from May 2 so far is fractaling the action from May 2 through the end of July.  In such a case, we are at the equivalent of Point 5.  In July, the market topped and then began to oscillate near its top making steadily lower highs and lower lows before finally collapsing to point 6.

1/3/12

The market went slightly up today.

1288.50 did not break, and therefore my count remains.  Additionally, we have lower 30- and 60-minute RSI and MACD than earlier in this seasonal rally despite the shell-shocker of an opening, suggesting it may be just about to peter out.

One argument against the immediate bearish case is that what would be the fifth wave on the Dow Jones Industrial Average is now longer than what would be the third wave (which was shorter than the first), meaning this may just be Micro [3] of Submin iii instead of Submin v itself.  That may or may not be the case.  If it is, and the SPX confirms, the indices could make a 4-5-4-5 pattern, topping at around SPX 1301-07, which is where the 78.6% logarithmic retracement of 1370-1074 is.

On the other hand, indices need not always confirm, and there is a third option as well:  Micro [5] of v on the DJIA could truncate, finishing below today's intraday high of 12,478.86 and - critically - no higher than the v=iii point of 12,468.71 (yes, just 10 DJIA points lower). 

As for the new bull market scenario?  Certainly, it's a possibility, but a lot of this talk has been from aggressive (perma)bulls and/or capitulating bears.  My preferred bull-market scenario is that P[1] up ended in May 2011 and we are currently in Intermediate (B) of P[2] (Int. (A) was the trip to 1074).  The (C) wave of this move would probably look very similar to wave 3 down in the bear counts; its bottom has the potential to be a significant bear trap.

12/28/11

So I technically declare hiatus, and then the next day I come back with a post.  But today's market action was too compelling not to comment.

The path of least resistance is, of course, to assume that today's downward action was [C] of "iv" of (c) of [y] of 2.  1242.82 didn't break (creating 4/1 overlap), so this is still a perfectly logical count, and full-blown invalidation would be at 1229.51.

If this is the case, wave "iii" (39.86 pts) is slightly shorter than wave "i" (40.45 pts), meaning that wave "v" should be shorter still.  The theoretical maximum would be 1248.64+39.86 = 1288.50 SPX.  This is below the 1292 October 27 high - wave [y] would truncate below wave [w].

However, it is worth pointing out that the consolidation last Thursday afternoon (the 22nd) might instead actually be Submin iv itself.  Consider that timing-wise, this would give a one-day wave "i", followed by a clear half-day wave "ii", followed by a wave "iii" that also lasted about a day (maybe about 7, 7 1/2 trading hours) from Wednesday lunchtime to Thursday early afternoon, followed by a half-day consolidation and then a wave "v" that lasts, again, about a day.

Additionally, such a wave "iii" subdivides well into a wave [1] up from 12:30 Wednesday to 1:00, an extended wave [3] from ~1:40 Wednesday through 10:00 Thursday (with an extended Submicro (3) from 2:30 to 3:30 Wednesday), and a wave [5] up from 10:45 Thursday to sometime between 1:30 and 2:00.  Wave [2] of "v" would have been the consolidation during the 10:00 hour Friday, with wave [4] of "v" being the significant rightward move Friday afternoon. 

Lastly, such a third wave would, in fact, not be the shortest wave--even if we place the wave "iii" high at Thursday morning's 1252.25, it would still be 22.74 points compared to wave v's 21.83 up from 1247.54.  Placing the wave "iii" high at the higher 1255 afternoon high, of course, simply makes wave "iii" that much longer.

And it certainly does look like five down from 1269.37...

12/20/11 - Santa Claus in Town After All?

There will not be a post tomorrow.

The seven waves down from 1267 was followed by an explosive up move.

Today's action provides strong evidence in favor that this is in fact Minuette (c) of [y] of 2, or even (iii) of [c] of 2, or if you're a permabull, (iii) of [iii] of 3 of (1) of P[3] up.

I do not think the move from 1267 counts well as an impulse.  In order for it to be a "five", the span from what I have labeled Micro [3] of "e" all the way through the "f" top would have to be [4] of an extended "v", which means "c" has to be "iii" and it would be the shortest wave.

Assuming the HOD is the top of wave "i", and with 5- and 1-minute technicals weakening throughout the afternoon there is no reason to assume it can't be, we notice a peculiar parallelism to wave "i" of (a) of [y]:  "i" of (a) ran from 1158.67 to 1197.35, a 38.68-point, 3.34% rise, whereas "i" of (c) ran from 1202.37 to 1242.82, a 40.45-point, 3.36% rise.  The rises are almost exactly the same in percentage terms, which might suggest A=C on a log scale.

If this is to be the case, since wave (a) was a 9.35% rise from its 1158 low, we would expect wave (c) to be the same, which would put it the target at 1314.85, which is near that 1370-1356 trendline I keep talking about.  Minuette (a) took 8 days to reach its peak; if Minuette (c) does the same, it would place the top on the final trading day of the year.  Happy New Year, everybody!

12/19/11

Let's eschew the actual degrees of the subwaves following the 1267.06 high.  We can clearly see that there are seven waves down of significance.

If this is the first significant wave down of Minor 3 (either Minuette (i) of [i] of 3, or Minute [i] itself), then we would expect there to still be an eighth and ninth wave of the move.  Given that the most dominant motion of the move was the downswell on 13-14 December, it would not be unreasonable to consider that the 3rd of 3rd and therefore that what I have labeled as Submins iii, iv, v, vi, and vii are really Micro [1], [2], [3], [4], and [5] of iii.

The more bullish (at least for now) possibility, is that we are in, or have just finished up, Minuette (b) of [y] of 2 (or, if you prefer, Minute [b] of Y of (2)).  If this is the case, we have room for a marginal new low, provided we do not go above around 1215 before making it.  If we go above 1215, one becomes hard-pressed not to consider any new low to be of significance, which would make it wave "ix" of the down move severely weakening the bullish case (unless another mild 4-5-type move comes into play, in which case you could consider it an 11-wave correction, but...)

One of the things favoring the bullish possibility is the SPX having made a lower low on higher hourly and 30-minute RSI and MACD.  It is also just about touching the 100-day SMA, which has acted as support in several instances recently (though, oddly, not as resistance when touched from below) - March, mid-July, and early November.  An A=C bounce from today's lows would get us into the 1310s, which is rather close to the major resistance trendline from 1370-1356 (which is now in the lower 1320s). 

On the other hand, the fractal similarity between the move from 1292 and the month of July doesn't bode well for the markets... what if Santa really is just your parents after all?

12/15/11 - Shiny Yellow Metal

I'm going to talk about gold today.

It looks as if gold is in a significant correction in an overall secular bull market.  This is the left-hand count.  Based on the length of the waves, we probably had a top of at least Intermediate degree.  (If it was an Intermediate (5), of course, then a Primary wave down is now underway and the right-hand count is in effect.

The main point of order is that the late-August/early-September move in gold looks like a "three" rather than a "five".  StockCharts does not show intraday on precious metals, but I have trouble counting it as five waves in the absence of any intraday data.

These charts suggest there is still more downside in gold to come, even if it's just a correction.  How far?  Well, the channel parallel to 1917-1804-1767 and crossing through the Minor A (if it is that) low at 1535 currently is in the 1430s.  If there's an overshoot, and/or Minute [iv] lasts a while, it could theoretically see sub-1400 before turning back up again (either in the next leg up of the bull market, or in Minor 4 of a new bear market.)