Bear Momentum Very Weak, Bulls Should Make a Comeback Attempt; Euro Headed Above 1.3861

The internals today show the momentum waning for the bears inside this market.  The bearish intensity continues to decrease with every passing day.  For example, here are the amount of decliners exceeding advancers on the NYSE:

Tuesday = 2364 more decliners
Wednesday = 897 more decliners
Thursday = 204 more ADVANCERS

Here are the percentages of selling volume out of total volume:

Tuesday = 89.7%
Wednesday = 64.8%
Thursday = 57.1%

So you can see the declining bearish strength as the week moves on, and with the wave count mature at a Micro degree level, it suggest the bulls have a chance to strike here and shoot this market higher short term.  Now this is merely a momentum analysis, and the above data along with the RSI show that momentum is waning, but that doesn't mean the bears can't come in and smack this market down.  Momentum is a backward looking indicator.  But it does offer us a clue as to how strong the current trend is and whether we should lighten up on our positions or not until the bearish momentum can re-enter the market.  My money often goes with the largest herd, as that herd gets smaller and smaller, so does my position size.  Right now the bearish herd has become quite small, from a momentum perspective.

This is my preferred count, although my alternate which I posted yesterday and below here is a very close second place.  The decline to new lows today was a surprise, but it was extremely weak and I never thought it had any legs to sustain the decline.  The rally into the close should be the start of a Micro wave ((2)) that should take us to around the 1320 level tomorrow and maybe Monday before topping.  Like I've said before, the risk/reward favors the bears here in my view, and any gains from here I'd look at as a good opportunity to get short with a stop just above last week's high.

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This is my alternate count, although it's still in very high contention to be my preferred count.  It suggests that today's new low was a Submicro wave (B), and that Submicro wave (C) is now underway and near complete.  Most likely (C) will top out around 1315 tomorrow, and either late tomorrow or Monday should bring even heavier selling to this market.  So I'm a seller on a move above 1315, and especially above 1320.

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The euro's break above 1.3743 yesterday confirms that the decline from 1.3861 was a 3 wave move, which is a correction.  Because of that, the euro shoudl move above 1.3861 fairly soon.  From there I'll be looking to get bearish again since I still see the long term trend for the euro to be firmly down.




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.

Stocks Continue Lower but Losing Momentum; Euro Should Go Higher

Internals today were fairly weak suggesting the bears still have good control of the market.  However, they are not nearly as intense as yesterday’s.  Yesterday had 2364 more decliners than advancers while today had only 897, and down volume yesterday was 1 billion shares (89.7% of total volume) while today had only 862 million shares (64.8% of total volume).  So the intensity of the decline sure waned from yesterday, suggesting today was a 5^th wave, and ending wave.  We may get a little follow through to the downside tomorrow, but I wouldn’t be surprised if we get a pop higher soon.  I definitely wouldn’t get long here, but a pop higher would be a good opportunity for the bears to get short at better levels with a stop just above last week’s high, in my opinion.

I am not in love with the wave count, believe me, but it’s the best shot at what I think is unfolding that makes sense with both the internals and momentum which has started diverging after my posted Submicro wave (3).  Looking for diverging momentum is a good clue of where to look for labeling the end of 3^rd waves.  As the above count shows, any rally from here would be a great shorting opportunity with a stop just above last week’s high.  The risk/reward is very desirable, especially considering the potential move lower that should get to at least 1275 short term, 1190 medium term, and possibly much much lower over the long term.

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I left you all a Valentine’s Day present on my February 14^th post in the form of a wedgie.  And I don’t mean for anyone to get any high school flashbacks here, I’m actually talking about the ending diagonal-like structure that comes in the form of a wedge.  It’s not textbook, but the slow choppy grind higher at the latter end of a long uptrend suggests a quick and sharp selloff to occur once the formation is complete.  Well, this wedge has appeared to have completed.  At the time I originally posted this last week I stated, “Once the uptrend breaks down, the move should be sharp and deep, at least initially.”  Well a 40 point S&P drop in two days classifies as “sharp” and “deep” I’d say.  Although not technically an ending diagonal structure according to EWP, if it’s to follow the basic tenants of the structure then we should see a quick move toward the 1275 level.

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Above is a chart documenting the trendline I’ve been following lately in order to get clues that a top may be in.  It connects Minor waves 2 and 4 (not labeled).  Today you can see that price respected the trendline as it hit it and then retreated higher.  With the evidence suggesting a move to 1275 soon, after this current little correction higher is over, I expect a strong close beneath the trendline once the bears can regain their strength, which shouldn’t take long at this point.  Doing so would put another checkmark on the board for the long term bearish count to play out, i.e. Primary wave ((3)).

Lastly, keep an eye on my longer term chart I posted last week (click here).  If last week’s highs are taken out then a push to the 78.6% Fibonacci level at 1377. 

The euro surged above 1.3743 without a problem.  Doing so has made the recent decline a clear 3 wave affair, and therefore a correction.  I now expect a move above 1.3860 soon.  After that we can then look again for a top and resumption of the downtrend. 

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.

Stocks Collapse

Stocks tanked today and the internals suggest it was broad based and ugly.  The bears were in full control today and the bulls didn't even really attempt to enter this market after this morning's mild push higher failed miserably.  News headlines suggest Libya's unrest is the cause for stocks falling but as extreme and overbought this market has been the past few weeks, it could have been knocked over by Paris Hilton announcing a new BFF. 

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The count from the high is ugly if it's an impulsive decline, but imperfection this early in a trend change is not unusual.  I'm unsure where Submicro wave (5) should be placed, but at this point any meaningful rally would get me on the short side with a stop above last week's high.  Sure this could be another fakeout, we've seen plenty, but the risk/reward here is way too desirable.  Whether it's Primary wave ((3)), or just a correction in a bull market, an S&P move of 100-150 points lower is likely in my view once we can confirm a top is in fact in.  So whether it's Primary ((3)) or not, there's money to be made on the short side.  A close beneath 1275.10 would confirm that a top is in.

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My forex software is not cooperating with me today but nothing has really changed from yesterday's post.  Things looked good for the bears last night but this morning we saw most of those bearish gains taken back by the bulls.  The wave structure is unclear but with the long term trend still down, I favor the short side as long as it trades beneath 1.3743.



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.

Stocks Extremely Stretched, Intently Watching for Opportunity to Strike

Only 1 billion NYSE shares were traded on Friday which is extremely light for an options expiration day.  But the market continued to float higher and there were no real signs of a top so there's nothing much to say or do for us wavers other than to wait on the sidelines for now.  Optimism as reported by EWI's services is at an extreme, momentum as shown by the RSI above is also at an extreme and diverging from price, and the wave count suggests the rally will end at any time.  But look back through the past few weeks of my posts and you'll see that these statements are nothing new.  The market has been extremely resilient and is probably trying to squeeze as many shorts out as possible (if there are any left) and suck in the last of the last of the sidelined folks to the bullish side before giving out.  This process, as usual, is taking quite long.  This is why I haven't recommended shorting into strength the past few weeks.  I feel that the downside will be great enough to where we can patiently wait for solid evidence of a top before we attempt to get short.  Anything other than that would just be "guessing".  And guessing will lose you money in the long term.

Above is a long term S&P count.  I wouldn't be surprised if this market pushed toward the 78.6% fibonacci level at 1377.55 before topping, although I wouldn't bet on the long side that it will happen.  The RSI tells us the whole picture, it shows an overbought and diverging market.  When stocks top, the reversal should be sharp, deep and fast.

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Drilling down to the 3min intraday charts you can see a nice 5 wave decline from the highs established Friday with a 3 wave corrective rally into the close.  EWP would have us conclude that the larger trend is now down and that hard selling to new lows will occur Tuesday and also maybe Wednesday at a small degree 3rd wave.  But these small timeframes are not reliable enough for me to get short right now.  If the trend in fact turned down on Friday, this decline will be part of a larger 5 wave move down to where I can get short later on with better evidence to suggest a top is in.  Without a sharp move down Tuesday, the count above would be extremely doubtful and we should look for higher levels.  But if the market does shoot lower on Tuesday, then needless to say it would certainly get my attention to track the count and structure closely.

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The euro is not looking good from neither the bullish or bearish side right now.  We have a bunch of 3 wave moves flip-flopping all over the place.  I still lean toward the bearish side because the long term trend is still down, but for the medium term 1.3743 needs to hold or it will confirm that the recent move lower was only a 3 wave drop and a new high above 1.3860 will be acheived.


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 Decline Looks Corrective, Look for Higher Levels; Euro Still Correcting

I don't have time for a normal post today but with the weakness in the market today I wanted to at least post something to update the action.  The decline looks like a clear three wave drop suggesting new highs are still on the horizon.  The key levels and trendlines I've been posting are still key for the bears to take out in order for a short position to be considered.  Internals today also don't support a top and new downtrend starting off with only 927 million shares traded on the NYSE, and only a slight bearish bias for decliners and down volume.  Not a convincing case for a major top being in place, so I have to assume the market will continue higher.  I remain on the sidelines.

As for the euro, it appears to still be correcting the previous impulsive move down.  Once the correction is over, the euro should move down hard.

Posting will probably be light this week since I'm on the road.  Good luck 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.

Stock Volume Continues to Plummet; Euro Dips Down to a New Low Again

The market did nothing today so price action tells us nothing new.  But volume tells a lot since today was one of the lightest volume days I've seen since the holidays at only 815 million shares traded on the NYSE.  The market's uptrend is still intact, but enthusiasm and momentum for the rally has waned significantly the past week or so.  The upcoming decline should be sharp and deep.

The wave count is the same and leaves us waiting for the Minor wave 5 to top.  The subdivisions of Minor wave 5 have us finishing up Minute wave ((v)) at any time.  But with no evidence of a top in placel, we have to expect higher levels.  That doesn't mean I'm getting long, it just means there's no "execution" to the short trade in place yet and so I'm still going to wait and be patiently bearish.

The 30min S&P chart above shows a "wedgie" structure for the price action lately, and momentum and internals support this lethargic behavior as well.  Once the uptrend breaks down, the move should be sharp and deep, at least initially.  A close below 1311.74 would be a good signal that a top might be in and aggressive traders might want to consider getting short.  A break and close beneath 1275.10 on strong volume would be a very strong sign that a top was in.

I'm not sure that the upcoming top is that of Primary wave ((2)), but even if it's not, a correction to around the 1180 level (prior 4th wave) is still very likely.  Either way, waiting to get short seems to be the best play here in my opinion........as painfully boring as it may be.

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The euro continued falling to fresh lows last night and the bearish count and outlook remain on track.  I'm unsure as to the very short term wave count so I'm not including it.  But right now I see no reason to abandon the bearish stance.

On the Docket: The Case Against Diversification

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.

Stocks Shaky but Uptrend Still Intact; Euro Weakens

Internals today match the price action in that it they were slightly bearish.  Volume kicked up a bit today but still light at just over 1 billion shares on the NYSE.  The internals and price action suggest the weakness this week is just a correction, but if it is a correction then I think it's likely a very small fourth wave that one slight quick pop higher to a new high should mark a top.

The wave count and momentum (RSI) suggest the rally is in its final stages.  But what's new, right?  I've been saying that for a week or so and the market just floats higher.  That's why I wait for confirmation or solid evidence a top is in instead of just trying to "guess" when a top is in right in the middle of uptrend.  Without any evidence of a top, I have to expect higher levels to come. 

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Despite the lack of an impulsive decline or convincingly bearish internals, the chart above shows how today's action might end up being quite bearish since the late day rally was able to close the gap at the open this morning.  Continuation to the downside tomorrow morning would be very much welcomed by the bears and suggest that a top may be in.  On the other hand, if the market makes a new high instead, I still believe that high will be very short lived and reversed.  Either way I feel the bears should have the fingers (paws) on the trigger ready to get short.  But as always, patience is key.  I want the market to come to me and play into my rules, not the other way around.

The euro count I posted yesterday looks good after today's downside action.  If the count is correct, there should brief, short rallies and selloffs should be big and strong.  I am firmly bearish the euro at this point, and bullish the US dollar. 

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.

Stocks Have Not Broken Uptrend; Euro Correction Looking Mature

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Monday, Wednesday and Friday - Brief summary posts
Tuesday and Thursday - In-depth posts

We got a little more volatility and volume in the market today, however I should underline little since that's the best way to describe the increase.  Today the NYSE hit 947 million shares, which is more than the past two days but still very light volume.  Declining volume was slanted modestly in the bears' favor and there were 721 more decliners than advancers on the NYSE.  The S&P internals show an almost flat index with the bears having a slight edge.  After such a long uptrend that looks severely exhausted in price action, wave structure, momentum indicators, volume and other internals, I am expecting more of a "wow" event for a top to be in place that what occurred today.  Today feels like a small correction of the uptrend and the Dow's structure looks almost certain of that.  Until we get a big gap down or breaking of the uptrend technically, we have to expect higher levels.

Addendum (6pm EST): Cisco reported worse than expected profit margins and the stock is getting punished by over 8.5% in the afterhours session right now (http://data.cnbc.com/quotes/csco).  Cisco often acts a good bellwether for the overall stock market's upcoming quarter, and their CEO, John Chambers, often tells it like it is.  If this holds true, the stock market has a good chance of selling off tomorrow starting the long awaited 100+ point S&P decline over the next few weeks/months.  Watch Cisco afterhours, the stock market should follow its lead.


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The euro count appears to show a rally in its final stages.  I'm unsure of the medium term wave count at this point but I'm an overall long term euro bear so the impulsive decline from early this month has me liking the short side here for this pair.  It looks like a double zig-zag correction has unfolded and nearing an end with a couple of small flat corrections in the mix.  If correct, the euro should fall hard soon.  Stocks should follow.  1.3861 is the key level for the bears that must hold.  Today's rally makes the risk/reward here even more enticing on the short side.

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.

Bulls Surge on Light Volume; Euro Still Correcting

Yesterday I said, “I would not be surprised if Tuesday brings us a selloff…” As a result, today the market did this:



Yep, the market went straight to the moon and didn’t look back. However, immediately after saying that I said this, “… with no evidence suggesting a top is in there is nothing I will do for now.” In other words, I thought the market would selloff today, but with no signs of a top I’m not going to put my money where my mouth is. So in that respect, I can save some face here. Until the market shows us it’s likely a top is in, I have no intentions in trying to predict the future and call a top while the uptrend still remains well intact. So I’m still standing aside, waiting for an opportunity to short when I see one. That opportunity will arise when I see a big reversal day on solid volume, a gap down day that’s sustained throughout the day, and/or a close below the trendline I’m following (see below).

Internals today were fairly strong, although not dominant on the bullish side. Up vs down volume was only slightly in the bulls’ favor and there were 841 more advancers than decliners on the NYSE. So a bullish day, but nothing jaw dropping. What is of note in the data here is the low volume again. So that’s back-to-back days of very low volume on big up days, with today coming in about the same as yesterday staying well under 900 million shares. So price continues to go up, but enthusiasm and momentum are waning. That doesn’t mean the market will top right now, it just means that once we see signs of a reversal, I feel the risk/reward advantage lies in the bears’ hands (paws) and shorting should be the preference.

The S&P has a trendline in place on the daily chart that I want to see broken soon. A close below it would be a good sign that the uptrend might be broken. But a close below 1275 would give us a convincing new low and provide even more evidence of a top. I know that level is far away, but depending on risk tolerance and trading style, I also wanted to note the trendline where more aggressive traders might find it as a more viable level to watch. I’m waiting for a big reversal day, or perhaps a big gap down day to get my attention prior to the levels I mentioned above. But until then, I’m waiting patiently on the sidelines.

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As you can see from the above charts, momentum has already been bleeding from the rally lately. The NYSE composite chart shows how volume has tailed off the past few days. And as Elliott Wave International has been pointing out the past week or so, the Dow Industrials and Dow Transports are diverging right now as the Transports have failed to confirm the recent Industrials’ high. So Dow Theorists are taking note and some self-fulfilling prophecy, if anything, could lead to a selloff just on that setup alone that could help fuel a larger selloff. Lastly, you can see that the RSI is still failing to confirm the new highs in price on the S&P as well.

So the market’s structure looks weak and ready to fall at any moment. But until we get signs of a reversal, I’m not touching this market.

On the Docket: The Case Against Diversification

Lastly, the euro declined in a nice impulsive 5 wave this month telling us that the trend has returned to down for the short term at least. Most likely a flat correction is finishing up with wave c in its final stages. If the count is correct, a sharp selloff should occur soon, and most likely it will coincide with a decline in stocks since they too are setup to fall off a cliff at any moment. Shorting the euro now looks like a good risk/reward trade with a stop just above 1.3861. But if that’s too much risk, a short with a stop just above today’s high could be established if we get a new low on the hourly chart.


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.

Bulls Roar, but Volume Extremely Light, Bears Have a Chance to Strike

Internals were very bullish today, however volume was extremely light as only 877 million shares were traded on the NYSE.  It's either a hangover on Wall Street after Superbowl parties last night, or the air as really come out of this rally.  I would not be surprised if Tuesday brings us a selloff, but with no evidence suggesting a top is in there is nothing I will do for now.  But today felt like an exhaustion burst higher, and those usually end with sharper moves to the downside soon after.  I'll be watching closely for a shorting opportunity Tuesday.

Nothing new really on the euro since it hasn't moved much overall.  You can count five waves down complete so a larger corrective rally MAY be underway now.  But the larger trend appears to be down for now so I'd be looking for shorting opportunities.

Full post tomorrow.

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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.

Stock Rally Shows no Signs of Reversing; But Euro Appears to have Topped

Internals today were flat, usual for a Friday, although I expected a little more volatility on a jobs report day.  Currencies certainly moved big this morning, and the euro declined in five waves, but it seems like most market participants went home early for Superbowl weekend because after the morning action, the markets were fairly flat.  Volume supports this theory since only 919 million shares were traded on the NYSE.  The market's rally has lost enthusiasm but that doesn't eliminate the possibility of another upward shot Monday, but it does mean that the risk is to the downside and the next big sustained move will probably be down from here, not up.  With no evidence of a top in place, I cannot get short yet.  I can only wait for evidence to surface.

Closing below the trendline I drew here would be a good start to calling a top and trying the short side.  The trendline hovers around 1275 early next week, so we'll see what the bears can do.  Momentum is still diverging from price during the S&P's 5th wave as seen by the RSI.  So the wave count and momentum suggest this rally is ready to turn.  A close beneath the trendline and/or a nice impulsive 5 wave drop with solid volume would also be nice for a bearish trade to be executed with confidence.

Enjoy the Superbowl!  I like both teams and believe both equally deserve the victory this year.  But if I had to pick a side I'd have to go with the Packers since I think they are playing superior defense right now, and they'll get to Roethlisberger all night making it very difficult for Pitt to get anything done on offense.  Cheers!

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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.

Euro Declined in Five

The euro declined in 5 waves and broke below the key level of 1.3569 in the process.  I mentioned the 1.3569 level as a key level yesterday.  A close beneath 1.3569 today would be very bearish in my view and any resultant rally next week would get me to pound the short side of this currency.  The rest of the majors look bullish the dollar as well, other than the AUD/USD which I think is in an ending diagonal and should drop in a dollar rally against it soon.  With a clear 5 down and breaking to a new low in the process, the euro is worth the risk/reward to short on rallies in my view.

More on stocks later if anything develops.


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.

Waiting for Unemployment Data Reaction; Euro Decline Shows Bears Still Have Life

Not much to report on a “do-nothing” day. Market participants appear to be waiting for the big unemployment number coming out tomorrow morning. So expect some volatility heading into tomorrow’s US market session. The internals today show a flat market on low volume and basically tell us we need to wait for tomorrow’s jobs report to get a better idea of short term direction. With the market so overbought and outstretched in price, optimism, the wave count, and momentum, the odds favor that volatility tomorrow will result in a downward move. However that’s just an educated guess at this point since there are no signs of the uptrend being broken in stocks just yet.

The wave count remains the same in that the S&P is in a Minor wave 5 that should be in its final stages. This is supported by the diverging momentum as shown by the RSI trailing downward while price continues higher, and the weaker internals on each rally with light volume mixed in, all suggesting the rally is tired. Now we’ve seen tired rallies before continue on and on and on upward for days/weeks, so jumping in short here is a risky move. I’ll leave that to the high risk speculators and day traders. But for swing traders like me, I’d like to see some evidence of a top with a clear and close stop loss level to control risk. I don’t have that yet, so I have to continue to wait. Perhaps tomorrow’s jobs report will give that to me.

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Amazingly, the Nasdaq Composite still has not yet made new highs like the Dow and S&P. Normally I would consider this a very bearish development for the overall market. But as it sits right now, if the Composite were to decline from current levels it would mean a triple top was in place, and triple tops are extremely rare and shouldn’t be counted on at all in my view. So I’m not counting on that happening. This suggests at least one more upward pop before a top and reversal can occur. A failure to make that new high and then declining below 2677 would be extremely bearish in my view and suggest there is so much weakness in the Composite that it couldn’t even resolve the triple top affect properly before topping.

So in summary, it’s a waiting game until signs of a top enter the market and we can control risk with a high confidence short trade. I’m going to wait for the market to come to me and play into my setups, not try to impose my will and impatience on the market and get in too early. So I’m waiting.

Trendlines: How a Straight Line on a Chart Helps You Identify the Trend

The euro did exactly what it needed to do if the remaining bearish potential were to remain alive by declining hard today and closing near the lows on the day. The decline looks impulsive, but needs a few more new lows to make it more of a certainty. A daily close beneath 1.3569 would be extremely bearish in my view and get me to pound the short side Sunday night.

Let’s see what action follows the employment report tomorrow and see if there’s a play to be made…

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.

Markets Took the Day Off

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Tuesday and Thursday - In-depth posts

Stocks took the day off today and just flip-flopped sideways on very low volume (934 billion shares NYSE), although the bias internally was bearish since more declining volume hit the tables than advancing volume, and especialy in the S&P there were a lot more declining issues than advancing issues.  When you add it all together it fits well as a 4th wave at some small degree.  The Nasdaq Composite still has not made a new high along with the Dow and S&P which I mentioned yesterday, and it has been lagging the two big indices the past couple weeks.  I'm doubtful that divergence will hold though, and if the S&P is in a 4th wave then it all adds up to at least one more push higher to new highs for the market before we can even think about a top again.  Yesterday's big up day on solid volume and internals leaves me very cautious of being too aggressive too soon on the bearish side.  Oftentimes those types of days act as launching pads for the next week or so unless the bears come in and push the market down convincingly in price and internally.

Once the market tops and reverses we should see at least a 100 point S&P decline so trying to catch the absolute top seems unnecessary and foolish to me.  Once I see a evidence of a top, and especially confirmation of a top, I can again try getting short.  Until then, I wait.

As for the euro, the rally haulted today but has not made a convincing decline to suggest a top is in place.  Although a top can happen anytime, until there's evidence to suggest it's in, I'm staying on the sidelines for now.

Full post tomorrow....

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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.

Dow and S&P to New Highs Means it's "Scotch Night"

It’s days like today that I end up curled up in a ball, underneath a blanket, on the cold linoleum kitchen floor sobbing next to a half empty bottle of scotch as my dog looks on at me like I need some serious counseling.  But I’m able to pull myself together and crawl out from under the kitchen sink and face the music.  Today’s new high in the S&P was very discouraging.  The evidence was quite overwhelming and promising that a significant top was in.  I’m not saying the Primary wave ((2)) top was called, but at a minimum a 100+ point S&P pullback looked good.  But no dice!  At least not yet.

I’m down, but not defeated.  Let’s get hookin’ and jabbin’ again.

The internals today were extremely bullish and basically matched the intensity of Friday’s selloff.  Although volume was very high at 1.09 billion shares traded, of those shares 87.2% traded to the upside and there were a whopping 1,943 more advancers than decliners on the NYSE today.  It seems quite obvious now that Friday’s selloff was probably mostly profit taking after a large and long rally to round number resistance (12,000 Dow and 1300 S&P) on the back of the Egyptian unrest.  Since the bears went back into hibernation, the bulls were able to come back to take control of the market again.  With internals like this it’s hard to call a top here with any evidence to support it.  Doing so would be a guess, and I don’t put my money on guesses outside of Las Vegas.  Barring an immediate, and just as strong, reversal to the downside tomorrow, today’s push suggests further upside in the coming days.  There are several possible scenarios for the next few days, and sharp ups and downs with little upside progress is definitely a possibility as it would represent  an ending diagonal which is quite common at the end of overstretched trends.  So today’s rally doesn’t eliminate the bigger bearish case, it just puts it on hold and hits the “reset” button to make us wait until the evidence suggests the bears might come in again.

The S&P count remains the same; it’s in the final stages of Minor wave 5 which, when complete, will lead to at least a 100 point S&P selloff.  I’m not going to try and pick a top in the heart of the rally, I’m simply going to wait for another sign of weakness for an opportunity to short when the evidence supports it. 

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Despite the strength in the Dow and S&P, and even the Nasdaq 100 that pushed them to new highs, the Nasdaq Composite has still failed to do so.  Now I doubt this will hold since it would mean a triple top is in place and as I’ve said many times triple tops are extremely rare.  But the lagging in the higher risk tech stocks supports the lagging RSI indicator, which all still supports the 5^th and final wave scenario. 

Interestingly enough, a VIX buy signal executed yesterday since it closed above the upper Bollinger band Friday, and then closed below it yesterday.  Stocks wasted no time at all getting their resultant rally underway telling me that the trend is still firmly higher.  Barring a sharp and just as strong reversal tomorrow, I’d stay out of this rally’s way for the time being.

The euro’s 3 wave looking drop has come back to haunt me.  The weak recent rally, the Australian dollar’s impulsive decline, and diverging momentum, all suggested the pairs would fall and the dollar would rise.  But that 3 wave drop in the euro on the daily chart always nagged at me and it looks to be the one signal I should have focused on.  After making a new high and taking out most viable resistance areas, the 1.4281 level looks vulnerable here.  As in stocks, I’m stepping aside and waiting for weakness to resurface before I make a move on the euro.

Trendlines: How a Straight Line on a Chart Helps You Identify the Trend



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.