Saturday, August 2, 2008

August 2, 2008; Steve Hochberg

This is a must see interview. Steve Hochberg has made me a lot of money. He's an analyst at Elliot Wave International ( and is the inspiration for a lot of my EWP work. These guys are calling for the economy to go into a depression, yes a depression, and for the Dow to get under 1,000! Sounds ridiculous and extreme, but if you subscribe to their newsletters and forecasts you'll see that they make a very compelling case. Check out his latest interview with CNBC:

Friday, August 1, 2008

August 1, 2008; 4th Wave is a Flat

Attached is the original S&P chart I posted earlier calling for a small 4th wave which should result in sideways movement most of the trading day. This has appeared to have been correct. Below that chart is the updated 3 minute chart showing the details of an almost text book "flat correction", which is common for 4th waves. If this wave count is correct, then we should be headed for a new low on the day very soon.

August 1, 2008; Jim Cramer Confirms Call for a Bottom!!

Jim Cramer again yesterday confirmed his call for a bottom in the stock market. Again, remember he called a bottom in March when the Dow hit the 11,600 area. The market then made a new low beneath that by about 1,000 points in July. He was wrong then. Now earlier in this week on the heels of the huge rallying that took place he's calling another bottom in the stock market. Yesterday on CNBC's "Stop Trading" he confirmed his call for a bottom in this market. He's dead wrong. It's possible a short term bottom is in, but THE BOTTOM is definitely not in.

So far he's 0-1 in calling market bottoms, and I'm 1-0. Let's keep score and see how useful this clown really is. My feelings about Cramer is that he's an entertainer and should be viewed as such. But many people invest and trade based on him and a lot of people lose, and will lose, a lot of money in the coming months based on his advice. His first mission is to entertain you, keep his viewership, and gain new viewership, and his next mission is to try and make money while also entertaining. Entertainer first, stock analyst second. No one should buy or sell stock based solely on what he says. He's always looking for long positions, like most money managers, and he has been right and made people tons of money over the past few years. But we've been in a huge bull market for decades. A monkey can throw a dart at a dart board full of stock ticker symbols to buy and make money. The trick is knowing when you need to protect yourself, or speculate and get short. Cramer isn't doing that. He needs people to watch his show. If he recommended everyone move to cash and buy treasuries he'd have a two minute show and he'd be off the air. So he has to continue to find "buy stories" and entertain you to keep his show going. He's an entertainer and should be viewed strictly as such. I'm upset with him and will rip him on this blog because I know people invest based on his advice, and his advice in the coming months will be toxic for the average retail investor/trader. Here's Cramer's article confirming his call for a bottom yesterday:

The market has not bottomed, and will selloff significantly in the coming weeks.

August 1, 2008; S&P Chart

Here's a proposed wave count, with correct wave degree, on the 15 minute S&P chart. It shows that we are currently completing a small wave iii, and should consolidate with a modest corrective wave iv. Wave 4's tend to be a bit flat and can take up a bit of time before it gives way to wave 5. So I expect the consolidation in wave iv to last most of the trading day today before giving way to wave v down to a new low on the day.

August 1, 2008; Moving as Planned

Jobs number came out mixed, but it doesn't really matter I guess when crowd sentiment has turned down in a wave 3 of (3). They will find a reason to sell, like they are today so far. Yesterday's highs remained intact and pressure remains down with a proposed wave 3 of (3) down underway which will be a massive multi-week selloff of 2000-4000 Dow points!

Breadth is very weak so far this morning with NYSE decliners outnumbering advancers 2:1 and almost 70% of total volume being to the downside. I'd like to see that progress to 3:1 and 90% as the day moves along so it will fit with a large wave 3.

Look for further weakness with brief consolidation periods. Any rally will be met with fierce resistance and should fail to make any significant gains, if any, if this is in fact the big daddy wave 3 of (3).

The USD/CHF is showing some weakness, dropping below 1.0460 before rebounding. I'm still looking for the pair to fall at least 100 pips to the 1.0355 area.

Thursday, July 31, 2008

July 31, 2008; Swissy Still Ready to Fall

Well the USD/CHF looked poised to fall hard, with continuation, today before it rallied strong with the stock market as the morning progressed. However, it did not selloff like the stock market did at the end of the day. I posted an updated chart of the swissy on the 8 hour time frame. You can see the big bearish divergence with the thick yellow lines where the top yellow line is inclined as price rose, however the two bottom yellow lines on the MACD and stochastics momentum indicators are declining. When price rises, but the momentum indicators decline, that's called a bearish divergence and signals a trend is severely weakening and should reverse sharply. There is bearish divergence on all the smaller time frames as well so any upside potential by this pair should be limited. My profit target is still the 1.0355 level because it's the apex of the prior 4th wave.

I have a proposed current wave count with with a and b waves complete, and wave c should decline strongly to the at least the 1.0355 level. Perhaps the Non-Farm Payroll report tomorrow at 530am PST will trigger that wave c dollar decline. The stock market is definitely ready to fall hard, and looks like it will tomorrow. So a bad NFP number tomorrow looks probable.

July 31, 2008; 5 Wave Declines

I said I'd post a chart that shows the 5 wave impulsive declines I saw in today's trading and so here it is as promised (the wave count degree is not to scale). Notice the clean and clear 5 wave drops throughout the day on this 5 minute Dow emini chart. Also notice corrections 2 and (ii) are in three waves, or are choppy and overlapping. These are clearly corrections. So if you have a series of clear 5 wave drops, and the rallies are choppy and/or in 3 waves, then that tells us the larger trend is down.

It may be too early to say that the huge big daddy decline in wave 3 of (3) has begun already. But it's clear the larger trend in the short term is down, and market technicals are weakening significantly.

I will short the market every time I see a 5 wave decline with a stop loss at the recent swing high. I will keep doing this and getting stopped out until I catch the wave 3 of (3) decline. The decline will be so massive and fast that I can gets stopped out numerous times and still make a big profit once the wave gets going. And it will get going soon!

July 31, 2008; Head and Shoulders Pattern

Above is a 15 minute chart of the Dow cash index. You can see a head and shoulders pattern has formed. These patterns show a weakened trend that is now reversing. When you combine this pattern with the bearish divergence dragging on the index with the MACD, RSI, and stochastics, it's quite possible we've seen a top in the market, and wave 2 of (3) is over and wave 3 of (3) down is underway. This wave will absolutley destroy the market and panic Wall Street, the media, average folks, and our government. It's gonna be big.

Today I mentioned how there were a lot of buyers in the market because NYSE breadth was about even. It was like this all day until the final half hour when the market sold off sharply. Breadth weakened substantially as there were virtually no buyers and only sellers in the market at that time. This is encouraging in confirming the wave 3 of (3) down case already being underway. In wave 3 of (3) down, almost no one should be buying stock with 90% or more of NYSE volume being to the downside. If weak breadth continues into tomorrow's trading, then we should see this market fall off a cliff. There's a big jobs number coming out tomorrow in the Non-Farm Payroll report and that will swing the market one way or the other in a big way. The expectation is that the economy lost 75k jobs and the consensue from the "experts" on CNBC is that if we get anything close to that 75k number, then stocks will rally big. I actually see a better number than 75k coming out, but the charts and technicals of the market are setting up for a major fall. So it's possible the number will come out bad. If the number is over 95k, then expect this decline to accelerate.

Right now we have a great risk:reward opportunity to short the market now, or after the NFP report tomorrow morning, with a stop loss just above today's high, with stronger resistance at last week's high at 11,697 in the Dow.

July 31 2008; S&P and Dow Broke Today's Lows

Both the Dow and S&P broke today's lows, confirming the elimination of the flat correction I mentioned earlier. On top of that, both indices are declining in a series of 5 waves, while rallies are choppy. This tells us that at least the near term trend is down.......and quite possibly it could mean THE BIG DADDY decline is getting underway. Continued weakness into the close will cause me to move my Dow emini futures short position to yesterday's high around 11,580.

I will post charts with wave counts later, illustrating my point about the series of 5 wave drops today.

July 31, 2008; Jim Cramer Calls a Bottom Already In!!

Jim Cramer called a bottom in the stock market already being in, here's the article from CNBC:

Those who know me, know that I think is couldn't be farther from the truth. Cramer says we will not test the lows of July, and that folks should buy every dip they can because the bottom is in, and if people don't buy now then they'll miss out on the next big bull run. I completely disagree and think this is extremely dangerous advice. Cramer is an entertainer now, not a money manager (other than for charity). People need to keep that in mind if they plan to follow his advice. Cramer also called a bottom in March when the Dow went to around 11,600. But he was wrong then as the Dow eventually fell about 1,000 points below that level. I think he's wrong here again.

Bottom line: this bear market is far from over, and the next big wave of selling will absolutely destroy the July lows and shave at least 2,000 points off the Dow in a matter of a couple/few weeks, and probably much more. And that still won't be the end of it. We are expriences credit deflation, just look at the housing market which is in a depression, where extraordinarily high prices for things are now coming back down to earth. You can't correct over 30 years of credit inflation in just a few months and a few thousand Dow points. We have much further to go. My price target for the Dow is 7,000 at a minimum, before I start looking for signs of any significant bottom.

July 31, 2008; Selloff Occurred, but Buyers Still Strong

A selloff occurred here in the morning tracing out a 5 wave decline (see chart). This would be very encouraging to the bearish case being underway now, but breadth is not weak enough as it should be if this wave 3 of (3) has started, and it's also very possible to count this recent decline today as a "flat correction" according to EWP. The 5 wave drop I labeled on the above S&P 3 minute chart would be wave C of the flat correction, signaling that the correction is over and a rally to new highs is coming. So we need the market to play out a little more.

The low of the day is 1271 in the S&P, and if the wave 3 of (3) decline I'm is underway now, I'd like to see that level broken to all but eliminate the posssible flat correction scenario. As long as 1271 remains intact, rallying to new highs is a high possibility.

July 31, 2008; Buyers Still Strong

Well right at the open the market was bought up heavily, especially the Nasdaq. Plus, breadth is flat, showing that buyers are still in the market full force. There's no doubt the rally over the past week or so is losing steam, but it seems it still wants to push higher for now.

Regardless of the very short term, this rally over the past few days is just a correction within a very large bear market. Calling tops is very difficult and frustrating, as Diver said. So I keep my risk tight, and knowing the larger trend is down, I'll keep entering short with stop losses at recent swing highs. Eventually one will hit a huge wave 3 of (3) down will begin. If 11,697 is broken in the Dow, it opens the door to further rallying, and the S&P should gravitate to the 1320-1340 area before rolling over.

July 31, 2008; Dow Futures Dropping as Planned

Dow futures are falling nicely this morning as I called for yesterday. The new is talking about the jobs and GDP number for the reason, but I, nor other ellioticans, knew what those numbers would be yesterday but we knew the market would fall. Once again proof that news doesn't move the markets, crowd sentiment and psychology makes the news.

I'm looking for a top to be in-in the markets and a massive multi-week selloff to possibly be underway right now! We'll see. The risk is at the highs of yesterday, so the risk/reward is outstanding.

The above chart is the Dow emini futures and it shows the decline that started shortly after I called for it yesterday after I called it and making a slight new high. Also notice the big bearish engulfing candlestick (circled). If that candle closes like that, it should signal that some type of top is in, if not THE top.

July 31, 2008; Swissy Dropping as Planned

The USD/CHF is dropping just as called for. Notice the big bearish engulfing candlestick (circled) forming on the 2hr chart above. Profit target is the 1.0355 area, but it has much further bearish potential.

Wednesday, July 30, 2008

July 30, 2008; No Top Yet, Obviously

Yes, as Diver mentioned in his comment today, a top was not in yet and they're very difficult to call. The market did selloff right after my post earlier today, but the decline was bought up ferociously at today's close, negating my call. The top of wave 2 of (3) is near though, if not already in at 11,687 Dow, and the bottom line is that the indices are setting up for a major decline, at least 2,000 points will be erased from the Dow in just a couple/few weeks. According to EWP's rules, it's possible a top is in already (Dow 11,687). Once 11,687 is broken, it opens the door further rallying for days, or weeks. But the bottom line is that the market will roll over and undergo a huge decline that will be very profitable for the bears. The trend is down, and all my trades will be positioned short. If the top is in at 11,687 and wave 3 of (3) down is underway already, then the market better selloff first thing tomorrow morning because there is not much more room for any more rallying.

Although the strength, depth, and structure of the rally appears that there is still more rallying ahead of us, the momentum indicators point to a different picture. Breadth declined drastically today compared to yesterday, and the Nasdaq lagged horribly behind the blue chip S&P and Dow; both are signs of a waning bull trend, not the beginning of a new one. Also, look at the attached chart of the Dow emini futures which shows the bearish divergence occuring (see yellow lines), especially on the final rally wave at the end of the trading day. This also shows big weakness inserted in this rally. Can the indices continue rallying? Of course. But the rally is weak, and will soon roll over to a massive selloff; and it will be something we haven't seen in many years past.

July 30, 2008; Swissy About to Fall

The USD/CHF, and dollar in general looks due for at least a corrective pullback. I'm short the USD/CHF at 1.0500 with a profit target of 1.0355 which is the apex of the prior 4th wave (see chart). Also notice that the 5th wave has a bearish divergence with the MACD and stocastics (yellow lines). Bearish divergence on momentum indicators is typical of 5th waves. Now that 5 waves are complete, at least a correction is due. Usually waves return to the prior 4th wave area so that's why my profit target is at the 1.0355 level.

July 30, 2008; Market Poised to Fall.......NOW!

The market is poised to fall right now (Dow currently at 11,510). The structure and magnitude of the decline will tell us if this is the huge selloff in wave 3 wave (3) to much lower levels (about 2000+ point Dow decline).

Tuesday, July 29, 2008

July 29, 2008; Closed Right on Targets

Amazing how well EWP can predict the markets sometimes. The market has now closed and the Dow's target of where wave a equals wave c is 11,392 and the Dow closed at 11,397. The S&P's target is 1263 and it closed right on that number today.

This leaves a high probability that tomorrow will give way to heavy heavy selling. I'm positioned accordingly with heavy shorts in the Nasdaq 100 (QID), Dow (DXD), and S&P (SDS).

July 29, 2008; Targets Reached!

The targets I mentioned earlier have basically been reached. The Dow's target where wave a=c is at 11,392 and the Dow is currently at 11,383 with 10 minutes to close. The S&P's target where wave a=c is at 1,263 and it's currently at 1,262 with 10 minutes to close.

This is a great time to get fully short for the possible massive selloff that might start this week. Stop losses can be placed just above 11,697 in the Dow and 1,292 in the S&P.

July 29, 2008; Quick Update

Wave 3 of (3) may already be underway with the five wave decline completed yesterday. I closed my double long Dow ETF (DDM) for a small profit. I now count 3 waves up in the Dow and S&P and both are in the the area of the prior 4th wave. This sets us up to get heavily short right now (Dow at 11,305).

1) Dow target area is 11,305 or where wave A would equal C at 11,392. Stop loss would be if the Dow rallies above 11,697.

2) S&P target area is 1252 or where wave A would equal C at 1263. Stop loss would be if the S&P rallies above 1292.

3) If wave 3 of (3) is underway, then the upcoming selloff will be the biggest, fiercest and fastest in the past few years. I want to catch it, so I am fully short the Dow, S&P and Nasdaq 100 (DXD, SDS, QID). And my risk is clearly defined as stated above.

The big selloff, which may result in thousands of Dow points being erased, may begin soon!

Monday, July 28, 2008

July 28, 2008; ???

"???", is the title of this post because I don't know what the short term direction of the market is. The larger picture is clear, the market is headed lower. The Dow should gravitate to at least the 7,000 area before a bottom can even be considered. But there are 3 options in the short term, and they all have equal weigting to me so I will stand aside for now.

One thing to note is that there's bullish divergence on the MACD, stochastics, and RSI on the 30min and lower charts. Because of this I bought the double long Dow ETF (DDM)at around 11,200. I'm looking for a pop rally soon, perhaps tomorrow, to reach around the 11,400 level. I will close my DDM position at that time. From there, I'll have to look at the market to see if the next wave of selling towards 7,000 is underway, or if we have more corrective rallying to do.

Right now, I just don't know.

July 28, 2008; Old and New S&P Chart Results

The top chart is of the S&P futures in the 8hr time frame I posted about a week ago. Here I mapped out the path of the S&P as seen by the thick orange lines. This was posted Sunday, July 20th.

The bottom chart is the current S&P futures chart with my prediction still on it. You can see that the S&P has moved almost exactly where I predicted it would, along the orangle lines.