Silver/Gold Short Running Out of Room and Time to Decline; March 14, 2009

Above is an updated 1hr silver mini futurs chart. The rally needs to end soon, and judging by the MACD and stochastics, that should happen soon and lead to a major selloff. $13.53 in silver and $945 are crucial levels, however even if they're only slightly broken we could still count the entire rally as a "flat correction". However it can only be a slight break in my view. I cut back on half my shorts to lock in some very mild profits and will reshort ONLY when I see weakness again.

The stock market rally is in its final stages. 804 in the S&P is the make or break point as it's the end of wave 1 and cannot be exceeded. I will exit my long positions between 770-780 and will begin to short again with stop above the 800 level. To make a nice 5 waves down over the past few weeks we need one more new low on the year. I'll position myself for that with stops at the 805-810 levels.

Silver Short Position Continues to Look Good; March 11, 2009

Silver continues to fall in 5 waves and rallies in slow, choppy, overlapping waves. The MACD and stochastics are showing a bearish divergence at the tail end of this rally today and it's barely moves a few percentage points to the upside. Once this correction is complete, it will lead to very heavy selling. I remain short and I'm well into a very nice profit as I essentially nailed a top in this metal.

I also have a short gold position on as well. Gold's EWP structure is not as clear as silver's so I'm just posting silver.

As for the stock market, the rally that started yesterday should have some follow through in the next day or so. The market should charge toward the 770 area before meeting resistance and rolling back down to lower levels. We should see one more new low on the year before this big cycle of selling over the past 18 months ends. I have a very small long position on right now with a stop at the S&P 675 area. I will look to enter a strong short position if the opportunity presents itself.

Silver Moving Down as Expected; March 9, 2009

Silver and gold are moving lower as expected. Both have broke below their initial surge up peak, which creates an overlapping of waves, which means a correction. So whether they move higher or not, the rally from $12.79 is clearly a correction. I strongly feel that the declines in both the metals look impulsive so I expect them to move much lower in the very near future.

See the progress of the trade I'm tracking in the past few posts on the 1 hour silver mini futures chart above. My last short entry was at $13.31, near the peak at the 50% fibo retracement of $13.52. I will stop out at a new high just above $13.52.

Silver Short Looking Real Good; March 7, 2009

Here's an updated silver mini 1hr chart showing the rally stopping exactly on the 50% fibo retracement level. The MACD has been declining since almost the very beginning of the rally from the low at $12.42. Gold's momentum indicators are extremely bearish as well. On an intraday basis, gold made 3 slight new highs on Friday but silver actually made 3 new lows! This divergence says "TOP" all over it. I'm heavily short both gold and silver and expect them to plummet soon.

My minimum target for silver is $8.50 (currently $13.38) and my minimum target for gold is $680 (currently at $940).

Do the percentage calculations on those moves and you'll see why I'm so excited about these two trades.

As for the stock market: I have very very small call options in place that I'll let run until their expiration in April if there's not a significant rally. Other than that, I'm standing aside and waiting for signs of a huge rally. The risk of staying short is too great because it's way too crowded a trade right now, and getting long now trying to catch a bottom is a fool's errand. So I'm waiting for an opportunity.

Shorting Silver Looks Promising; March 5, 2009

While I was wrong on the stock market call from last post, I do understand that trying to pick a bottom in a wave 3 down market is a fools errand. I still have some small call option positions in place, but I have no confidence in adding a heavy long position now. The market still looks poised to fall more. And the short trade is quite crowded and negative sentiment extremes are being reached, so the risk of shorting is way too great.

So I look to other markets. Gold and silver look very bearish and very promising. I am short both metals. Silver shows the clearest impulse pattern from its peak. Attached is a 30min mini silver chart show a clear 5 wave drop from $14.62. It's now correcting that drop. If I'm right, it should be on its way to breaking its previous low at $8.47. So that's a 36.5% minimum fall from current levels ($13.30). The maximum stop loss area for this trade is the previous high at $14.62. So I'm risking 10% to make at least 36.5%. That's a risk/reward on a high probability trade I'm all over.

The rally should halt around the $13.26 - $13.80 area. Once it tops and reverses again, the fall should be huge, fast and furious because it should be a 3rd wave.

I'm short silver and gold with a medium sized position.

One More Rally and Decline to New Lows; March 4, 2009

Just thought I'd add my 2 cents with this S&P futures 4 hour chart. It appears like a 3rd wave, within a larger 5th wave, completed yesterday and is now rallying in a wave 4. So far there are only 3 waves down but the past couple large 5th waves over the past 18 months have actually fallen in 3 waves and kicked this elliotician in the twins a couple times already. So I'm on guard for this to happen again.

The chart above shows a prior 4th wave area in the 38%-50% fibo levels at the 750-770 area. If it is a 4th wave, I will probably go heavily short against a tight swing high, and purchase April or June call options for protection. If a triangle appears to form, I think I'll sell March or April options against a short position to try and collect some premium before it thrusts to a new low. Either way, I won't get aggressively short as this is a bit late in the game and the larger structure should be ending any time now and large ferocious rally should ensue for several months, at least.

Anyway, just thought I'd comment.

Gold and silver look to have topped and their 2008 lows should be broken in the coming weeks before they make new highs from 2009.

Huge Five Waves Down, Almost Complete; Feb. 28, 2009

Attached is a daily S&P futures chart showing the huge 5 wave decline that started more than 1 1/2 years ago. With new lows in the S&P and Dow in place, the decline can be considered complete, and at any time a huge multi-month rally that will correct this decline (at a minimum) will be underway. Obviously considering how large and long this decline was, the ensuing rally will be absolutely insane and breath taking. I'd like to catch the majority of it if I can keep risk tight, which might be very hard to do. This rally should last most of 2009.

As for the short term, as I've said in the last few posts I in no way want to get caught naked short now. The market has satisfied all of EWP's requirements for a 5th and final way and can rally huge at any time. I have a 1/4 short position in the Nasdaq 100 protected by call options in place. So if I miss the bottom, the call options will minimize the damage significantly. But looking at two things 3 things it appears the decline is not complete:

1) the Nasdaqs have not broken their 2008 lows, but should do so before this decline ends.
2) the wave structure appears incomplete as I'd like to see a small wave iv and then a wave v to complete it. This would fit into having the Nasdaqs make new lows as well.
3) after a huge 1 1/2 historical decline, I can't imagine a soft bottom be put in this market. I picture a huge selloff starting in oversold territory where almost all traders literally throw in the towel and sell, pushing this market down anywhere from 3%-6% in a day. Then a huge rally ensues from that into positive territory. That is when basically all the sellers have sold and only buyers are left to launch this market to the moon. We haven't had that yet.

So there it is. I'm very very cautiously bearish, waiting for signs of a bottom to get aggressively long.

More Downside Potential, But Staying Short Getting Risky; Feb. 27, 2009

The long awaiting target on the S&P at 741 has finally been reached. I've been pounding the table on this number for months it seems, and now it's finally been broken and closed beneath. However, the bear phase is coming to an end. Pessimism is so extreme that the room to the downside should be quite limited, and the risk of a huge fast and ferocious multi-month rally is just around the corner. Remaining short with no protection is not wise in my view because the risk is way too high and the additional potential for further losses is minimal.

I covered half of my half short position at the lows on the day (rare) but still have some Nasdaq shorts left because I still feel that the Nasdaqs will break their 2008 lows as well. I still have my call options in full strength and am situated to either make a small profit if the market rallies strong, or make a big profit if the market continues to fall.

The next big opportunities will be shorting gold and silver, and waiting to get long the stock market.

Market Should Make New Lows Soon; Feb. 26, 2009

I woke up this morning and saw that the market was amazingly up strong while the Nasdaqs and small cap high risk indices were all lagging big, along with the structure of the rally from the past couple days being very choppy and having overlapping waves barely making any real progress. It was a gift from the market gods this morning. I re-entered my short 1/2 short positions with the S&P around 773. And again, after the early morning the market trickled down all day, still proving that this market is not ready to bottom and that the larger trend is still down. Once a new low in the S&P at 741 is broken, the market is at serious risk for a huge bottom and rally that will rip your face off you're not careful. So very cautious trading here is warranted. I'm using call options to protect myself from a strong rally, especially if it starts in overnight trading when I'm unable to act.

As far as I'm concerned, two things need to happen before I will seriously consider getting heavily long the stock market:

1) The Nasdaqs need to break their 2008 lows
2) Some type of "wash out" decline should occur, i.e. a Dow down 400+ day followed by a huge rally into positive territory on strong breadth.

Until then, I'm still cautiously bearish the stock market.

I'm also currently short gold as well, with a stop at a new high on the year above $1,004.

Stronger Than Expected Rally Underway, Then Lower Levels; Feb. 25, 2009

The corrective rally has extended this afternoon almost breaking above the start of a 5 wave decline which now opens up much higher levels to be achieved potentially. As I said before, I don't feel a significant long lasting bottom is in the market yet so the larger trend is still down. So the market can crash at any time. I posted a 4hr S&P futures chart above to show a large 5 wave decline that should hold as long as the trend is still down toward lower levels.

On the chart I have the fibonacci retracement levels mapped out and project a rally to the 38% fibo area at 790 which is also the area of the previous 4th wave, which oftentimes halt the correction. If it breaks out form that congestion area, then the 50% fibo will be in sight at the 806 area. The market should not rally much higher that this area here. Any strong rally and close above 820 will call into question the bearish case that new lows will still be achieved in the short term.

With today's rally into positive territory I exited all my short positions near break even. Once the market hits my target areas I will begin to reshort again. Until then, I'm on the sidelines watching.

5 Wave Decline and Correction Should Be Over; Feb. 25, 2009

Here's a chart of what I was talking about the last post. In the 30 min S&P futures chart we have a clear 5 wave drop and a 3 wave rally, SO FAR. As long as that holds, the near term move should be down to lower levels...........and possibly much lower levels. I do not feel any significant bottom is in place.

I'm currently half short.

Rally Good Shorting Opportunity; Feb 24, 2009

Today's rally makes a nice 3 wave rise following a clear 5 wave decline. As long as the 800 level, and especially the 815 level in the S&P cash stay intact, I'm shorting this rally.

This morning, the market did not sell off hard creating a "wash out" like I would expect if a major bottom was in. Instead, it trickled down slightly and then rallied all day on strong internals. We may see some follow through tomorrow, or even the rest of the weak. But gains from here should be hard faught and eventually reversed.

I am now half short again and am stopping out if the S&P rises above 792. The fact that the market didn't "wash out" today and rallied instead is the worst the bulls could hope for. In means that most likely this market will absolutely tank in the near future bringing the S&P into the low 600s.

Market Requirements Satisfied, but a Bottom in?? Feb. 23, 2009

The market has continued to decline as expected, and I've been pounding the table in the past few dozen posts over the past few months saying that new lows will be achieved in the indices. The Dow certainly has, the S&P is inches away, and the Nasdaqs have a little ways to go. However, this is the final move in a large almost two year bear market, so I do not want to get caught heavily short when this thing bottoms and reverses. If the market continues lower from current levels, I would be very cautious of a bottom and huge "rip your face off" rally that will immediately ensue and last for most of 2009. It's because of this I'm not short at all right now and have closed ALL of my short positions. If the market rallies from here, it's quite possible it's just gearing up for another charge lower so I will probably short the rally. I do have a gut feeling that this final segment of this long leg down will finish itself with a huge wash out selloff, i.e. Dow loses 500+ points in a day, or loses 200+ points a day for a week. Until that happens, and wave structure supports it, I will still be looking to short rallies.

If no rally occurs, then the next major opportunity will be to get heavily long. The rally from the bottom should be fierce and quick and should last several months.

Market About to Make Big Move; Feb. 18, 2009

The market internals suggest a huge move coming most likely Thursday. The market closed flat today but the Dow was up with the S&P and Nasdaq Comp. down as well as the NYSE. NYSE breadth was negative with more than 2-1 decliners to advancers. Various indices and sectors were up and down today illustrating an unstable and fractured market. Usually when this occurs, the market moves violently the next day. My wave count above suggests that-that move will be to the downside. However, in case I'm wrong, I want tight stops on up to half my position to protect myself from a violent temporary rally. I plan to start stopping out my positions on a solid break of 802 in the S&P. Most likely if the market is going to move violently to the upside then it will probably be due to some kind of news event. So I'll be watching for news releases out early in the morning and watching the markets' reaction to that news. If nothing comes out, and the the markets tank, then the next heavy downward selling phase should be underway.

Bottom line: a violent stock market move should occur tomorrow, either up or down, so I'm prepared to protect myself to the upside and profit big on the downside.

Possible Alternate Interpretation Calls for Rally; Feb. 15, 2009

After looking at this structure over the weekend I have come up with an alternate count which is just below the count listed in my previous post. The reason this count I'm showing now is not on equal footing is because of the heavy selloff that occurred minutes before the close on Friday which may signal what will happen first thing Tuesday morning in preparation for the stimulus bill reaction; and also because the decline on Friday is very very choppy and not impulsive. Now we've seen this same choppy widening structure just before the October selloff which I chalk up to extreme volatility as the market gets real shaky and panicky before it tanks, but it does not really fit into an EW count. So my alternate count calls this choppy decline a "b" wave within wave (2). So a strong "c" wave rally should ensue soon. A break of 841 in the S&P futures will confirm this is in fact occuring. However with momentum indicators so weak and suggesting further weakness, along with various internal technical indicators suggesting weakness, and the the projected wave count being a large wave 3, a sharp "c" wave rally will be nothing more than a golden opportunity for the bears to add or establish strong short positions. I am currently only half short, and will short much more if a rally on Tuesday occurs. On the flipside, a break of 804 in the S&P futures will cause me to add to my shorts as well because that will confirm the downtrend is in fact underway, and it should waste little time breaking the 2008 low of 741.

Bottom line: any rally above 841 I'll add to my shorts and any decline beneath 804 I'll add to my shorts.