Gold Better Fall ASAP if count is to Remain Valid; May 4, 2009

Gold rallied sharply today which is the exact opposite of what should occur if wave 3 at multiple degrees is unfolding. Gold should not go above $920 and should actually selloff sharply this week for this count to remain valid. My hard stop is at $950 but if I see another strong day tomorrow above $920 I'll most likely exit most or all my short gold position.

Big Picture S&P Futures, More Rallying Then Catastrophic Collapse; May 4, 2009

The above daily S&P futures chart project I laid out about a week ago is playing out. With my stops getting hit, the market is now racing higher and will probably continue to at least the 1000 level. The pace it's moving though is awfully fast though and it's hard for me to believe the market will shoot to 1000 in a week or so and then collapse in a monstrous wave 3 or C down. But it's possible. The larger trend is down and the S&P 2009 cash low at 666 will be broken significantly.

With all this in mind, as I've said in previous posts, I'm no longer going to fight this uptrend and play for a short term decline. I'm now solely focused on the big wave 3 or C down that will bring the Dark Ages back to the world in 2009-2011. So I have about a 20% full SDS (double short S&P ETF) with a covered May call against it. I will continue to add to that SDS position as the market rallies and roll over my covered option positions until I confirm wave 3 or C down is underway. So my stance is to take a "buy-and-hold" short position on the S&P until the big collapse occurs which should happen anytime within the next 5 months.

Gold Should Fall Hard Soon; April 29, 2009

Gold should be undergoing a wave 3 at multiple degrees so it should sell off hard and fast. If my wave count is correct, it needs to fall hard very soon. I remain short

EUR/USD Looks Like Great Risk/Reward on the Short Side; April 29, 2009

The EUR/USD rallied hard recently but after the Fed announcement we see a reversal of possible big proportions forming on the 15min chart. You can see the RSI at the bottom formed a support shelf during the recent rally but after the decline following the Fed news it has since broken down below that shelf, and so far is staying there, indicating that this currency pair is breaking down and may to a huge "after-news-reversal".

The risk/reward is too good to pass up, so I'm short at 1.3300 with a stop at 1.3350. My target is a possible new low beneath 1.2960! So I'm risking 50 pips to possibly make over 1000! See what I mean about risk/reward?

S&P Breaks Above 876 Cash: April 29, 2009

S&P broke above the control point used to see if a short term decline would occur. Again I was fooled. The key I want to remember is the longer term wave count which strongly tells me this rally is a fool's rally, a bear market rally and new lows on the year will be achieved. For that reason, I am taking a conservative short position and adding to it as the market rallies. I have a covered call position on the SDS and added a small amount to it today. The S&P is free to run up to the 950-1000 if it wants to. But again, it's a fool's rally and I will not be a buyer. This market still must undergo its worst and most devastating decline since 1929 and will do so later in the year.

Please view the long term S&P daily wave count on the right of my blog to keep perspective on the bigger picture.

S&P and Gold No Change in Forecast; April 28, 2008

Gold fell as expected to keep the wave count alive and the S&P did nothing. I am still bearish with a very small position with a stop at 876 cash S&P.

Gold Topped, Should Accelerate Lower and FAST; April 27, 2009

Gold appears to have topped at the area of the previous wave 1 extreme at the 918 area. It should now decline in a wave (iii) of (3), so selling should be very fast and ferocious. A reluctance to selloff massively in the next couple days will call this current short term count into question.

I remain short with a stop at $950

Possible Top in, but I'm not Aggresively Bearish; April 27, 2009

The market was strange today as all day NYSE breadth was negative and most of the major indices followed suit. In addition, the risk currency trade fell hard today as both the USD/JPY and EUR/USD declined big last night into today. The fact that 876 S&P futures was not exceeded, the rally from last week looks very corrective, and was done so with all these weakening risk indicators, tells me a top may be in.

I have been fighting this uptrend for weeks and will not get aggressively short. I do have a covered call short S&P position by using SDS which double shorts the market. Outside of that I'll watch the decline and wait for a bottom to get long again, or perhaps jump on the decline as a momentum short term trade. The target for the decline is the 780 area.

A decline is needed before this market goes higher and is worth the risk of getting long. I'm just not going to take anymore big positions on the short side until things clear up.

If I just couldn't resist the urge to short this market now, I would do so with a stop at the 873 S&P futures level, which is the beginning of the 5 wave decline I lable in my attached 4hr chart. As long as that level holds, I do see a lot of bearish potential in the short term.

Requests and Comments; April 26, 2009

Please feel free to comment on the blog and make any suggestions that would improve the analysis/trading I explain. Also, if there are any currencies or securities you'd like me to comment on please let me know.

You can post a comment to this message or shoot me an email at toddsblog@comcast.net

Thanks for viewing!

-Todd

Gold Rally Should Halt and Reverse Soon; April 26, 2009

Gold continues to rally but is still well beneath my new stop loss area of $950. My confidence in the prior posted wave count is very low so I restructured it a little bit. My confidence in this new count is higher, but I am focusing more on basic trend analysis and the fact that gold has broken down from the ascending daily trendline and has broken it's streak of higher highs and higher lows. As long as gold remains in a downtrend status, I am short the metal.

I still feel the metal is bearish as long as it stays beneath the last swing high of $970. But a break of $950 will almost assure us that a new short term uptrend is taking place and so $970 will soon be taken out anyway. So my stop loss remains $950 knowing that I took profits on part of my short position to compensate for extending my stop loss earlier.

In the short term, it appears a series of wave 1s and 2s are unfolding. Of course, with EWP, when your wave count has a series of 1s and 2s unfolding, it lessens the reliability of the wave count. But until the wave count is officially negated, it will stand as is and I'll trade accordingly. Right now we're in a wave (ii) rally which would explain the sharpness of the recent rally. But once this wave (ii) tops and reverses, a wave (iii) of 3 of (3) will unfold which should result in a massive selloff in the metal. As long as it trades beneath $950 then this outlook remains solid in my view.

Let's Look at the Big Picture Again; April 26, 2009

With the short term trade not working out, let's look at what's happening in the bigger picture. Above is a daily S&P futures chart showing a nice 5 wave decline from the October 2007 high. With 5 waves down it tells me the largest trend is down now, and that the lows put in earlier this year WILL NOT HOLD. But after declining so massively over a 17 month period, a correction is due. We are in that correction now, which is one reason why it's so hard to trade it. Clearly the rally from the March low is not impulsive (5 waves), so it's some type of correction, which fits with my wave count on the chart above and the thesis that the March lows will not hold.

So what do I do now? That's the big question. I tried fighting the current trend, which is up for the moment, and shorted this market for weeks. It didn't work. So I want to focus on the largest trend which is down. I decided to establish an SDS (ETF double short the S&P 500) position and sell calls against it real in some premium and give me a little cushion. Plus, it's a longer term trade so if I hold it at the end of the quarters I'll recieve a dividend on it. I know there is slippage in these ETFs, but that's fine, I'm not holding it for a decade. I entered a 25% position of the total position I want to have to get fully short the market in preparation for the next collapse in prices that will break the March lows and send us into the modern day Dark Ages. As the market rallies, I'll add to my SDS position, and as time passes, I will continue to sell call options against he position and collect dividends which will improve my positioning. I'm doing this because for the short term the trend is up, but for the longer term the trend is down. I tried timing the market and it didn't work. So instead, I'm going to short and hold with an easily sustainable and comfortable short position to where I can just patiently wait for this market to roll over again. I estimate this won't happen until the latter end of this year though.

One more strategy I put in is to buy an option butterfly on the S&P just above current levels. This also gives me some protection with my current short position in case the market continues to rise slowly or move sideways.

So there you have it. My new stance is to focus on the long term and position myself slowly with the largest trend, which is down, and PATIENTLY wait for the market to finish this bear market 'fools rally'.

I welcome any questions anyone has. Also, the part about the Dark Ages and the next very massive and destructive decline is inspired by the work of Elliott Wave International and Bob Precther. Please take the time to go to their website and read their material. They have a lot of free stuff and good EWP educational tools. Bob's book "Conquer the Crash" is excellent reading for anyone who wants to know how to protect themselves on this huge decline that's coming later in the year. EWI's website is: http://www.elliottwave.com/

Stopped out!; April 26, 2009

Well knowing the larger trend was up I took a very aggressive approach and tried to fight that trend and short the market using options so my risk was small and well defined. It has not worked out. I was stopped out of the trade Friday as the market continues to rally. I don't want to fight this market anymore so I'm going to either wait for a pullback to get long, or look to short if this market continues higher for the next few months.

My focus will now turn to the longer term picture and doing covered calls, collecting ETF dividends, and waiting patiently for the next chance to strike.

$950 Gold Should Hold, I Remain Bearish; April 23, 2009

Gold rallied hard today before weakening modestly at the close. I am losing confidence in this short term wave count because wave 4 is getting much too large and elongated in relation to wave 2 which challenges EWP's guidline for the "right look". Regardless of the short term wave count, gold remains bearish as long as it doesn't make a new significant high, and that high I determine to be the $950 area. I am straight up short the gold ETF (GLD) and have put option butterfly on the same ETF to profit if gold continues to go up slightly or sideways for the next few weeks.

Bank Test May Trigger Biggest Part of Wave C Selloff; April 23, 2009

Nothing new to report today. The market was wild as the bulls continue to "hope" the market higher but in the end in the big picture, the market has moved nowhere since March 21st. My key level in the S&P futures of 859 held today so I remain bearish and only have one bullish position as a hedge (selling puts on Intel).

The bank stress test will be discussed with government officials and various banks tomorrow morning, and the government will disclose their methodology to the test. I expect it to be a dog and pony show with outstanding results. But the key is the market's reaction to the news. Right now the wave count I have sets up for big wave 3 down within wave C immediately. So I feel that the reaction to tomorrow's news on the stress test will result in a selloff. If for some reason it doesn't, and 859 in the S&P futures (861 cash S&P) holds tomorrow, then Monday the actual results from the stress test will be released and that may hold the big selloff day.

Bottom line: tomorrow or Monday should carry a big selloff taking the S&P toward my 761-780 target area as long as 859 in the futures is not exceeded first. I have all my same short positions and have gotten rid of all but one long hedge position.

S&P Decline Should Accelerate Immediately; April 22, 2009

My stop out point is the 876 level of the cash S&P and despite the bulls valiant effort to extend this multi-month rally, the index stayed below that level all day. The choppy eratic and fractured structure of the market today is the exact market action I expect to see at a top. The bulls knees become shakey and the bears gain confidence at these times. Then both are literally duking it out. As we can see from the last 30 minutes of trading today, the bears won. The bears should continue to gain the upper hand as the S&P should shoot sharply lower in a wave C toward the 761-780 area before I look for a bottom. The first test should be the bottom of the parallel trendchannel which hits the 812 area tomorrow. From there, round number support at 800, and then prior support at 780 should challenge the index's decline.

On the rally today, I closed more of my bullish option positions (options I sold as part of bear spreads) to where I have very little bullish hedging available. So I'm almost fully short the S&P, XLF, and various tech stocks using options.

STOP LOSS: with today's decline at the end of session being so strong, and all the stars lining up for a big decline right now, I think it's safe to move my stop loss area down to the 859 mini S&P futures level, which is just above today's high. After the weakness seen today, if the market shoots above that level in the coming days, it will most likely continue much higher and above 876. So I'm watching the 859 level and will most likely fully exit at the level, but will definitely be all out on a break above 876.