Short Term S&P Looks Bearish; March 19, 2009

Attached is the 4hr S&P futures chart. It shows why I think a significant bottom might be in. The projected wave (4) has entered the territory of wave (1) which is a big rule violation in EWP. Are there there other alternatives to still offer a bearish scenario suggesting another major selloff, yes, but this is what we have now so I'm going with it for now. But as you can see, this rally has been pretty straight up and needs to correct before it moves higher..............IF it moves higher. Also notice the MACD momentum indicator at the bottom. There is a major bearish divergence building which acts like a rubberband and when it snaps it will be a strong snap that should shoot this market downward long and fast. So in the short term I'm bearish the stock market will option protection. Once I see the structure of the decline it will help me determine whether it's a correction and the market will move higher, OR if the market has resumed its downtrend. So, to sum up, I"m short term bearish the stock market waiting for clarity regarding the larger trend.

Long Term Chart Shows Significant Bottom May be in; March 19, 2009

Attached is a daily chart of S&P futures which I put a projection of market movement back in January. As you can see, the market has followed my red line very closely. It's quite possible the S&P has formed a significant bottom and will rally for months, if not years from current levels. However, I'm not jumping on big long just yet. The short term wave count would look better with one more new low (below 666 S&P cash), and the social environment just doesn't seem pessimistic enough to think a solid bottom can be in. I am not getting heavily short based on the long term picture, so I will play the short term side while always protecting my positions with options. The rally from the bottom looks impulsive, which suggests the trend has now changed from down to up, but we'll have to see how the decline unfolds as well. If the market rallies in an impulse wave and then declines in a choppy and messy decline with moderate internals, then that means it's time to buy. So we'll have to wait and see the structure of the decline to determine if the larger trend is up or down and that will tell me whether I should be looking for only long or short trades. But for now, the short term looks bearish.

Silver Structure Now Unclear After Fed Manipulation; March 19, 2009

Silver and gold's rally messed up a what was a perfectly unfolding EWP wave count suggest serious downside potential for the metals. The rally was too big too strong and too fast and I was stopped out of half my positions. If silver and gold are going to collapse as expected, then we can label the rally the other day as a wave C of a flat correction, but this means they should both top and reverse to the downside immediatetly.

Silver and Gold are in the Next Decline Phase; March 16, 2009

Gold and silver fell hard today right when they needed to and should be in the next decline phase which should be very very heavy. I'm now fully short both metals again.

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.