The Wait Continues

Internals today were a bit unusual.  The advancers vs. decliners in the NYSE and S&P were both very bullish, yet volume and up volume was quite timid compared to the advancers:decliner ratio.  If a little more volume came into this market it probably would've resulted in a much greater advance for the day.  But volume didn't come in, and the market flattened out after the initial morning surge, leaving us with a fairly solid close higher today.  Again, the bulls are having trouble pushing the market higher and sustaining it, the internals support that.  But on the flipside, the bears aren't doing much either, so the market is still able to float higher for now.  This is typical behavior for this time of year though, so without signs of a reversal, we should expect higher levels and wait to get short in my opinion.

The wave count has us waiting for Minute wave ((v)) to end.  With the holiday season and typical light and bullish trading until after the New Year upon us, I could easily see this market holding up until early January.  It's certainly not my prefered outlook, but definitely possible considering the typically bullish time of year we're in now.  I would steer clear of short term long positions here and either establish shorts now with well defined risk, or wait until a good shorting opportunity arises that allows for managing risk properly.  The bottom line is that for the short term, I think the next good opportunity will be to the downside.

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The euro challenged the congestion area surrounding 1.3200 I mentioned yesterday which I said could act as temporary support.  It did just that today, and now is pushing higher up off that support floor.  In light trading it might be hard to bust through that support level, and it's possible to count 5 waves down on the intraday charts suggesting a bounce is do, but eventually I do feel that it's likely the 1.3200 level will be taken out handily in the near future.  Doing so would instill more confidence in the aggressively bearish count above.

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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 Looking Very Vulnerable

Don’t look at the Dow.  I’m not sure who still follows the Dow as a market barometer anymore, but if anyone still does, don’t look at it today.  The true story is in the S&P, and even the NYSE today.  You can see the true bearish picture I’ve mentioned this week as it’s starting to come through now with a solid down-day in the markets today.  Volume was solid for the holiday season today, but still relatively light compared normal days.  Decliners and down volume were both solidly bearish, which continues the trend we’ve been seeing all week, despite how prices in the major indices closed.  Internals were and market action overall was quite bearish in my view.  The market looks very weak and vulnerable right now.

Also note that bonds have been selling off ferociously lately causing interest rates to rise, signaling fear entering the bond market.  I read an article last week on CNBC that stated the Freddie Mac 30 year fixed mortgage rate hit its lowest level in like 40 years at 4.17% back in early November after the QE2 announcement.  Today, Yahoo Finance reports the average 30 year fixed mortgage rate is at 5.00%.  Also, notice that the TLT which tracks the 20 year treasury bond has fallen off a cliff in an impulsive 5 wave move, interest rates move opposite to that.  Many folks feel that the bond market is often a leading indicator since bond investors tend to be more long term and prudent than equity traders, so the bond market tends to lead the equity market.  If so, equities are about to fall off a cliff just like bonds have.

Today’s decline appears to be a “breakdown point”.  We’ll only know if this is true in the coming days, but looking at the wave count, the diverging momentum as seen through the RSI above, and the action in the price bars, one can logically conclude that the market’s odds are heavily leaning towards the bears.  Regardless of the bigger picture, and whether this is the Primary wave ((2)) top or not, the short term picture strongly suggests that when the market does top and reverse, it should fall hard and in a hurry.  I would not want to be in a short term bullish position in the S&P here at all.  So I would think that the bears should start positioning themselves for a decline.  We don’t have confirmation that a top is in yet, so risk must still be controlled to account for a possible rally to new highs.  But the bears should be putting strategy to work here and get ready for a slide downward soon.

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My euro comments didn’t come through yesterday for some reason and I didn’t notice it until this morning so I posted a brief summary of what I originally wanted to post then.  Sorry about that.

The euro’s decline recently is very encouraging for the bears.  Although I’ve been mentioning that my wave count does not instill a high amount of confidence since Minute wave ((ii)) which  is one degree smaller than Minor wave 2 is actually much greater in both price and time.  This is unusual and makes me a cautious bear here, but I still remain a bear as long as 1.3785 remains intact.  The euro is trading at a very strong congestion area that MAY act as a floor temporarily at the 1.3200 level.  A solid breakdown of that level will negate the bullish implications of the strong rally we got from earlier in the week, and also make the rally off the 1.3000 level a confirmed 3 wave move, which is a correction.  So I would become more aggressive on the bearish side once we get that solid breakdown of 1.3200.  The bearish action the British pound and precious metals is also an encouraging sidebar for the euro bears as well. 

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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.

Scrooge is Creeping in....

Internals today on the NYSE were bearish despite the closing numbers on the major indices.  There were more decliners than advancers, and more down volume than up volume on the day.  So internally there are signs of weakness to the rally, and it’s also diverging from the internals we saw during Minute wave ((iii)), which is typical behavior for a 5^th wave.  So I like the wave count we’re tracking now.

If the above count is correct, Minute wave ((v)) can complete at any time, but more importantly it would mean that Primary wave ((2)) may complete at any time as well.  Along with the internals, momentum is also diverging during this 5^th wave as you can see from the RSI on the daily chart above.  A nice one or two down days should drop the RSI and confirm the divergence.  I see no signs of a top in place now, but it can happen at any time so I’m waiting and watching closely.  The decline that occurs after the top should be large and strong, whether or not it’s Primary wave ((3)) or not.  So I feel the best opportunity ahead is for the bears to look for positioning, and that the bulls should be taking profits here.

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Despite the Dow and S&P’s two up days lately, the higher risk indices are not following along.  The Russell 2000 small caps and XLF financials ETF have both had two fairly big down days in a row.  So behind the scenes we see the internals are looking bearish and the higher risk indices are starting to falter.  So the signs are there that a big selloff is coming, it’s just a matter of when.  We’ve seen this before though, where all the signs are there but no confirmation occurs and we end up with higher levels for quite a while.  So I don’t want to jump the gun, especially when it might hard getting a selloff during the holiday season here.  But as long as the signs are there, we should be mindful of them, and be ready to strike when the opportunity presents itself.

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The euro needs to get moving to the downside real quick to keep the bears hopes alive.  It's already looking unlikely that a wave 2 that's two degrees smaller is much larger in size than Minor wave 2.  But it could still be possible.  As long as 1.3785 remains intact, I feel the bears have the upper hand.



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.

Is Today's Late Day Reversal Meaningful? Euro Bears Beware

Just a note: with the holidays upon us, my posting schedule will be a bit light until after the New Year.  If something significant happens then I’ll make sure I post something.  But for the most part, posts should pretty much be from Monday –Thursday and a bit short until something big happens.

And on that note, we go into the analysis of another flat closing day.  Gee, what a surprise, a do-nothing day, at least as far as price goes.  Volume was light as it came in under 1 billion shares on the NYSE, yet despite a steady float higher all day in price by all the major indices, the NYSE decliners beat advancers at the close on the NYSE.  Up volume still exceeded down volume, but the fact that more stocks participated in the downside reversal this afternoon MAY be a very quiet sign that a top is occurring.

My patience is running out for the wave count I’ve been tracking to be held with a high degree of confidence.  The Minute wave ((iv)) is getting quite long compared to Minute wave ((ii)), especially since Minuette wave (c) hasn’t even started yet.  The other problem is that when I count it like I am above, then Minute wave ((iv)) is quite small compared to Minute wave ((ii)).  So, neither of these counts are very appealing here.  The market won’t unfold perfectly though, so I want to remain flexible.  At this point in the market’s rally I’d be very cautious if I were a short term bull though.  And short term bears should be gearing up for opportunities to get short this market.  Today’s sharp afternoon selloff MAY be a sign of further selling coming up this week, so be ready.  Depending on the speed and strength of the decline coming, I’ll be able to put one of these counts as top choice over the other.  But for the short term, no matter what the count is, the market looks very toppish at the moment.

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Another thing to note is the action in the higher risk markets like the Nasdaqs, XLF and the Russell 2000.  These two have been shooting straight up lately, well exceeding the S&P and Dow’s rallies.  But today they showed weakness, and sharp reversals greater than that of the Dow and S&P.  Just look at the daily chart on the XLF how it shot higher to a new high during the day, but then closed lower than Friday’s close by the end of the day.  That mildly bearish indicator may be a whisper in our ears of a top in place.  It obviously can’t be confirmed yet, but it’s something to watch. 

I don’t like to short the S&P when I see high risk indices still in full bull mode, but I do like to at least think about getting short when I see high risk markets reverse and/or show weakness. 

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As for the euro, it rallied sharply, in an almost straight line up, breaking the trend of lower highs and lower lows.  More importantly, it broke above my key level at 1.3430.  If the euro is in a Subminuette wave (ii) like I have it labeled, then it will be extremely large in comparison to Minor wave 2 which is two degrees larger.  So this is unlikely in my view and it makes the bearish stance on the euro much less desirable at this point.  The euro needs to embark on an extremely sharp decline real soon to get me short term bearish again.  But right now I’d like to be only half short for long term trading, or have no position at all.    

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.