Advantage Bears

There are still various options for the medium/long term but the short term showed its hand a bit today and slanted the probabilities in favor of the bears. I gladly stopped out of my last half of long positioning on this morning's decline. I added a quarter position short right at the close because I thought the Dow's reversal pattern on the daily charts was compelling enough to do so, and the market had rallied solidly off the lows allowing me an opportunity to enter at a good position.

The internals today were only slightly to the downside, however they're finally down instead of always being at least somewhat positive. And again we had a down day where volume exceeded the 13 day moving average, something the bulls have had a hard time doing on their rallies. So not overwhelming bearish at all, but bearish nonetheless.




I don't want to over-analyze or over-write today. I want my charts to do most of the talking.

The above chart is the biggest reason I took a small short position into the close and feel the bears have regained control of the market for the time being. Although it didn't close below yesterday's intraday low (10,463) that I cited earlier today, it did close below yesterday's open. So we had an intraday spike to a new high this morning that was not confirmed by the Nasdaqs or S&P, and then a close solidly beneath yesterday's open. And all on decent volume. That's bearish to me and signals that the bears have taken control of the market at least in the short term.



Other pieces of bearish evidence lie in the short term structure as seen in the 5min 3 day chart of the Dow. The decline this morning was clearly impulsive and much sharper than the ensuing rally. And that rally seemed to run out of steam into the close, suggesting it COULD be the start of the next leg down. The only thing that is potentially bullish in this chart is that the rally late in the day appears to be a 5 wave move as well. But the fact that the 5 wave decline was not completely retraced yet, and the declining wave this morning is much stronger and sharper than the late day rally still lend itself to the larger trend being down in my opinion.




Lastly is the less likely bullish potential that I'm adding onto from yesterday's chart. This is supported mainly by the intial decline from Tuesday's high being a corrective looking wave. Now the Dow made a new high so perhaps the Dow is leading the rest of the market as far as wave structure goes, but when looking at the S&P and Nasdaqs, their declines starting from Tuesday's highs look corrective. So it's possible that today's 5 wave decline was just a wave C within a wave iv. If so, the market should continue rallying higher in the coming days/weeks according to the above count. But as long a today's high in the Dow remains intact, I'm bearish.







Lastly, above are some currency charts. The top chart is of the euro which is sporting a potential topping pattern. The bottom chart is of the Australian dollar vs. the US dollar. It shows a nice 5 wave decline and correction that should have ended today. These may be two small hints that a large top is in place, which would mean that a US dollar bottom was in. If so, the dollar could be at the beginning stages of a major rally. Doing so would put a lot of pressure on equities and commodities.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Bears Need a Close Today Below 10,463

Just a quick note on what I'm watching into the close. Only the Dow made a new high today which caused a nice intermarket divergence between the Nasdaqs and the S&P since they did not make new highs. Of course this is a big bearish sign, and makes the overall market look toppish. Also of significance is the big reversal after the open that might have the Dow close below yesterday's low at 10,463. If the Dow rallies to a new high today, then reverses to CLOSE beneath yesterday's 10,463 low, it would be a very very very strong signal that a significant top is in at least for quite a few days. If it looks like the Dow will close strongly below 10,463 I will be getting short.

PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Regardless of Larger Trend, the Recent Market Rally is Ending

So the market's structure has cleared up a bit, at least in the short term. The larger picture still looks like a choppy mess on the daily charts and I don't have confidence in a solid count.....yet. The short term appears to have two possibilities, both of which could have a quick pop to new highs tomorrow, followed by a large drop for a few days at the least.

The above count is obviously very bullish and should have the market reaching a new high soon, probably tomorrow, before correcting the 5 wave rise we're completing. Seeing as that it may be part of a wave (iii), corrections downward might be quick and shallow. So I'd just use a pullback as an opportunity to get long, instead of trying to outright short this thing. A good bottoming point right now looks to be the 1100 level which is round number psychological support as well as the level just beneath the previous 4th wave, which is where corrections often end. A break below 1088.96 would severely damage the likelihood of this count, and a break below 1056.88 would completely eliminate it. I'll wait to see the structure and strength of the upcoming decline to determine if I will get long, or aggressively short as the count below would suggest I do.




Now this count is slightly less likely at this point because if it's just a 3 wave rise then it must correcting an impulsive decline somewhere. The nearest impulsive decline starts just a few points away from the current high here, so that's very deep of a correction, and therefore it makes this less likely. But as long as the S&P stays below 1131.23, and the Dow and Nasdaqs stay below their equivalent June highs as well, then this count remains on track. A break below 1088.96, especially before yesterday's high is broken, would raise this count's likelihood substantially and hoist it to become my most preferred count.

This count also suggests another pop higher before topping out and perhaps undergoing an absolutely massive decline. The euro and precious metals also appear to be on the verge of major declines as well, so this stock count above fits well with other elements of the market too.

So if you're a bull, I would look to start shorting on any pullback while using extreme caution if 1088.96 is broken, and definitely exiting outright if 1056.88 is broken, in my opinion. If you're a bear, then I'd be looking to aggressively short right now and hold those shorts unless the Nasdaqs, Dow and S&P all break above their June highs, in my opinion. Right now, I still have half my long positions in but will stop out if today's low is broken (1103.11). The behavior of the market tomorrow and/or Friday will help me determine which way I trade this market in the short term.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Market Struggling; I Closed Half my Long Positions

The market rally is really struggling at this point. The higher risk Nasdaqs are well into negative territory while the Dow struggles just into positive territory. The internals of the NYSE show quite a negative slant as well. This market rally appears to be tiring. Now whether the result is just a flat sideways move for a few days, or a major decline phase, it appears the easy money on the upside has been made. I closed half my long position and have the rest to stop out at almost breakeven just below 1100.








Another sign of upward exhaustion is the comparison in the major indices. The Dow is surging higher while the S&P lags a bit and the Nasdaq Composite (and Nasdaq 100 - not shown) lags even more. This tells me that risk appettite is tepid, and combine that with the weak volume on rallies lately, it tells me the bulls are running out of gas. If the Nasdaqs were leading the pack higher then this would mean nothing. But when the Nasdaqs and higher risk indices lag the rest of the market, I see that as bearish. Precious metals and commodities are tanking too, even though the euro has rallied to new highs overnight and is stable so far this morning.

Also, despite the mixed session so far, the VIX is up over 2%. So there's a bit of caution out there right now which are signs of a potential top. And there is a possible major top that could happen that we don't want to miss out on. So this is something to watch closely.





One bullish potential is the possible inverse head and shoulders pattern in the XLF. It almost broke out above the neckline today to confirm the pattern but hasn't done so yet. A break out here should lead to a big rally in financials. And a big rally in financials would mean a big rally for stocks overall as well.

But the aggregate of evidence right now lies with the bears in that the rally over the past week appears to be at its end.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.

Bullish Above 1100 Unless the Bears Can Close Below 1100 Tuesday

So the bulls did surge the market well above 1100 turning me short term bullish. Right now there are only 3 waves up from the July 1st low, but you do need to start with 3 waves to get to 5 waves. But I'm not sure the market will get there. NYSE total volume has not exceeded the 13 moving average since June 25th. So that's a whole month with subpar volume. And the selloffs over the past few months have been done on big volume spikes. This is concerning for the bulls since they can only rally the market when barely anyone is participating. Rallying on weak volume is typical of bear market rallies, not of new bull runs. The bulls need to show they can rally on big volume, and going over a month without doing so does not instill confidence in the bigger picture bullish case.

The fact that the S&P closed on its highs suggests there might be further upside tomorrow. The S&P needs only 16 points to break the series of lower highs after making a new low that started way back April 26th. Doing so on strong volume would be more evidence for the bullish case. Failing to increase volume would continue to call into question the foundation of the rally altogether.

I'm not posting any charts or counts today because at this point the possibilities are numerous and I have low confidence in all of them right now. It's possible that a large B wave triangle is in the working that started May 25th. This count would be negated on a new high above 1131. It's also possible we're in a large flat correction which would lead to a short burst above 1131 before a massive reversal. It's also possible that a combination correction from the April high is complete, and we're in a 3rd wave to new highs on the year. And on and on and on. There are just too many possibilities will little definitive breaking points or certainty right now. So I'm riding the momentum for now. I'm short term bullish and will stop out at about breakeven just below 1100. If the market can close below 1100 tomorrow, I would not only exit my long position, but I'd enter short as well.

The bottom line is that I'm unsure of what wave count is probable right now but I do see the momentum to the upside as long as we stay above 1100 tomorrow. A close below 1100 tomorrow would get me short term bearish again.


PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.