Tuesday, September 11, 2012

Stocks Push Higher; Euro Enters Reversal Zone

Stocks continue to levitate, and annoy me, as usual.  It's tough to keep posting "waiting for stock reversal" in every blog post every day.  So I'm spreading it out a bit between posts.  I know some of you want posts everyday, even if the Dow moves 3 points.  But I it just becomes too repetitive unless something new and significant develops.  I have Sept puts on the SPY that are all but lost at this point, but losers have been a recurring theme for EWP stock bears for quite a while. 

You can see on the above weekly S&P chart that the uptrend of the past few years is still well intact.  So getting aggressively long term bearish does not seem wise here.  On a short term basis, I'm still looking for a top and reversal.  It will take long time, and a lot of S&P points lower, to convince me that this uptrend is broken.  But that doesn't mean we can't try to profit from short term pullbacks.  So I'm just looking for short term moves at this point.

Looking a the weekly chart above you'll notice in 2011 there was a divergence between price and the RSI right before a head and shoulders top occurred.  What followed was a 300 point S&P drop that occurred fairly quickly.  Right now a similar divergence between price and the RSI is occuring as well.  But the setup is not confirmed until price turns down and the RSI starts heading lower.  So I'm not jumping in with more short poisitions just because of this setup here....no way, it's not even complete yet.  What it means is that it's something to keep an eye on if stocks do head lower near current levels.  But to be honest, right now I see this as just a waiting game for the bears.  The uptrend, both short and long term, remains intact.

When an Over-Ripe Market is Ready to Spoil

I know many of you wavers out there are as frustrated as I am.  But it's important to keep our sanity and not let the markets dictate our moods in life. So for those of you bummed out like me, check out this puppy:

Cute little guy huh?  If you don't smile when you see this, check your pulse and make sure you're sill alive......bottom line: don't let these markets take control of you, keep your sense of humor and focus on the things that are really important in life.

In my last post I said the EUR/USD would try to rally back to the 1.2800 area before reversing.  This area is just above the prior 4th wave (not labeled) and is in between two common retracement levels (50%-61%).  It is trading in that zone now.  There are a lot of news events this week so be on the lookout for a reversal pattern in the euro.  I will be watching closely and looking for an opportunity to get short.  I may even start establishing very small short positions right now, and add on if continues rising.  But the bottom line is that the euro should be nearing an end to its rally and giving way to shooting towards new lows beneath 1.2000.

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alexander said...


I am as frustrated as you.

Who knows maybe we will set new highs? simply unbelievable considering the global macro economic developments.

My feeling is that we will see a last push higher ...maybe we first need to have people feel comfortable about EU and China again??

I do remain convinced tough that the eventual collapse will be unprecedented....and will create chaos...consider just how "chaotic" the world already is today.


td12 said...

a few charts - let me know what you think...I feel like you are closer then you
think with the top being in place....we have divergences across the board - monthly, weekly, daily on down in the RSI and MACD, a/d lines, lower volume (esp in this last leg), 52 highs and b/n indices.

PrincipleAnalysis_Blogspot_Com said...

I've noticed the divergences for quite some time but they only have value if price turns down and confirms the divergence.  So it's a waiting game there.  I like your triple zig-zag approach you have the best.  Thanks for sharing.

PrincipleAnalysis_Blogspot_Com said...

Bob Prechter has been dead on regarding socioeconomic issues, i.e. riots, municipal bankruptcies, public distrust, the push-pull between governments needing more taxes and the people not having money and fighting those higher taxes.  It's all happening.  But the stock market defies gravity and the predictions to fall.  It's levitated much farther and longer than expected.  I'm just going to sit back and watch.

robin said...

thanks for sharing..