Saturday, March 21, 2009
After the Fed news on Wed. and me watching a nice short gold profit evaporate in less than a minute, gold has had little follow-through. This is bearish. Now look at the 1 hour gold mini futures chart above that shows a MACD bearish divergence (bottom indicator) and the classic bearish head and shoulders pattern price is forming.
I'm short gold again with a stop at a new high. If I'm stopped out, I will re-enter again on weakness.
The S&P is moving just as expected. It was repelled by the 800 level and had no follow-through after the Fed announcement on Wed. Some type of top is in the market in the short term. Momentum indicators are showing major bearish divergence on the 1hr-4hr charts so this decline could be significant. I'm not certain it will take the market to a new 2009 low because the rally above 800 should be a wave 4 but it violated the previous wave 1 so it can't be. It's possible this final wave down is much larger than I previously thought and we're undergoing a very large wave 3 down right now, but I'll let the market prove that to me first and not assume it. Right now I'm a short term player only, because that's what's clear to me. The market has rallied too high and too quick and momentum indicators suggest a large pullback is in its early stages.
I'm short the S&P and Nasdaq 100 through ETF options and will stop out with a strong break above 800 in the S&P. I'm also short the gold ETF.
Friday, March 20, 2009
Attached is the 4hr S&P futures chart. It shows why I think a significant bottom might be in. The projected wave (4) has entered the territory of wave (1) which is a big rule violation in EWP. Are there there other alternatives to still offer a bearish scenario suggesting another major selloff, yes, but this is what we have now so I'm going with it for now. But as you can see, this rally has been pretty straight up and needs to correct before it moves higher..............IF it moves higher. Also notice the MACD momentum indicator at the bottom. There is a major bearish divergence building which acts like a rubberband and when it snaps it will be a strong snap that should shoot this market downward long and fast. So in the short term I'm bearish the stock market will option protection. Once I see the structure of the decline it will help me determine whether it's a correction and the market will move higher, OR if the market has resumed its downtrend. So, to sum up, I"m short term bearish the stock market waiting for clarity regarding the larger trend.
Attached is a daily chart of S&P futures which I put a projection of market movement back in January. As you can see, the market has followed my red line very closely. It's quite possible the S&P has formed a significant bottom and will rally for months, if not years from current levels. However, I'm not jumping on big long just yet. The short term wave count would look better with one more new low (below 666 S&P cash), and the social environment just doesn't seem pessimistic enough to think a solid bottom can be in. I am not getting heavily short based on the long term picture, so I will play the short term side while always protecting my positions with options. The rally from the bottom looks impulsive, which suggests the trend has now changed from down to up, but we'll have to see how the decline unfolds as well. If the market rallies in an impulse wave and then declines in a choppy and messy decline with moderate internals, then that means it's time to buy. So we'll have to wait and see the structure of the decline to determine if the larger trend is up or down and that will tell me whether I should be looking for only long or short trades. But for now, the short term looks bearish.
Silver and gold's rally messed up a what was a perfectly unfolding EWP wave count suggest serious downside potential for the metals. The rally was too big too strong and too fast and I was stopped out of half my positions. If silver and gold are going to collapse as expected, then we can label the rally the other day as a wave C of a flat correction, but this means they should both top and reverse to the downside immediatetly.
Monday, March 16, 2009
Gold and silver fell hard today right when they needed to and should be in the next decline phase which should be very very heavy. I'm now fully short both metals again.