NAV's market analysis

No more blog updates

2011-11-07T18:17:00.000-08:00

Last update for a while: Breakout above SPX 1235 has put my weekly back on a buy signal. So the next logical move is a challenge of the 1370 highs.

I am closing down this blog indefinitely. I have too much trading responsibilities to make timely blog updates. Besides, the intellectual stimulation of analyzing the markets isn't there anymore, to me. I have reached a point in my trading career where i feel that analyzing markets and trading the markets have got nothing to do with each other.

Analyzing the markets is a intellectual game, trying to determine the most probabilistic path based on a set of parameters. Ascertaining the future with precision is no guarantee of trading success, as the markets can gyrate wildly before reaching the intended target, in the process stopping out a good trade. Conversely, lack of future insight is not an impediment to trading success. Good trading is all about simplicity. Knowing the trend, finding a spot to enter, having a reasonable stop and taking profits along the way and recharging when out of positions.

Good trading is not about good charting either. Good charting is more of artistic work, while good trading is more like performance sports. Pouring over charts into the wee hours of midnight and analyzing ten thousand market indicators is a charting obsession. Trading is all about execution. Simple TA techniques based on systems with minimal degrees of freedom can do the job. As for me, mere price candles are enough to trade any market - Yes, absolutely no indicators, not even a moving average or a trendline. In fact i know a few people who don't even look at the charts, just plug-in numbers into a Excel worksheet at the end of the day and trade far more effectively than those who watch every price tick and countless indicators all day long.

Many enter the trading arena with a false notion that there's something mysterious element about the markets, which can be unlocked with technical analysis or fundamental analysis and the futile search for the holy grail begins. This constant search for perfection and some holy grail formula or indicator is what keeps a trader obsessed with charts and technical analysis, taking away the focus from the trade execution. I am no way dismissing the utility of technical analysis, but i think technical analysis plays a very small role in trading success than it's given credit for. Proper trade management and execution is far more important. When the whole world is melting down and your system gives a buy, it requires enormous faith in one's system and mental conditioning and discipline to take that trade. It's much more difficult than pouring over charts and making calls and prophesying about the future.

Trading based on questionable fundamental information or widely known fundamentals is even worse and far more a dangerous game. They belong to the message boards, for folks with day jobs, looking for evening entertainment.

Anyway my point is that charting and technical analysis do not simulate me as much as it did in my early years. My trading responsibilities are growing and i am focusing more on trade management and money management. Making timely updates on blog becomes an obligation and i do not want to be tied down by any obligations, given that i have other things to worry about.

I won't be deleting the blog as i have nothing to hide. There has been some spectacular calls made by me as well as some spectacular failures. It was a great intellectual journey for me. In life priorities and perspectives change and one moves on.

I will try to post some stuff on traders-talk.com when time permits. Even that would be minimal, going forward.

Good luck trading !

Long Term Sell

2011-08-07T20:39:00.000-07:00

On Aug 3, my system triggered a long term sell signal and now S&P enters a bear market based on that signal. I have not updated my blog for a while. I posted the signal in real-time when S&P broke 1249 on Aug 3 at traders-talk. More later....

Long term Sell on S&P

Daily buy signal - June 21, 2011

2011-06-21T18:17:00.000-07:00

My system gave a buy signal today on SPX at 1293. Weekly remains on a sell.

Now here's the big question. Is this just a dead cat bounce before the 1249 levels get taken out ? Only if the market characteristic has changed. Recall during this entire bull market from March 2009, every time a daily sell was generated and the market got oversold, it was time to buy. Bears who used to take the sell signals on the daily charts used to get clobbered. In other words the daily sell signal and oversold conditions in the market was a accumulation point for the big money. If we have entered a bear trend, then that characteristic would reverse. That is, every overbought condition with a daily buy signal would be used as a distribution point by the big money or in other words a daily buy signal would mark a top instead of creating a buy-the-dips context.

But given that the 1249 level is intact, the bull market remains intact for now. So i would give the benefit of doubt to the bulls here. But to avoid the trap i mentioned above, in case the market character has changed, i would avoid any breakout type of trades and focus on buying only the dips.

Daily and weekly back in sync

2011-06-05T19:33:00.000-07:00

My daily buy signal on May 31 turned out to be a massive whipsaw. With the break of SPX 1311, it's back on a sell. Well, the weekly sell from 5/20 survived by a point. The million dollar question is now whether we can break the 1249 lows or not ? If we do, my system will generate a long term sell signal similar to the one that i posted on this blog when we broke 1370 back in Jan 08. Until 1249 holds, we will have to treat this as a correction in a bull market.

I will update again when the daily flips to a buy.

Good luck trading !

Daily buy signal on SPX

2011-05-31T23:20:00.000-07:00

My system has fired a buy signal on SPX daily charts as of close today. So we are now back to uptrending mode, based on my definition, and hence buy-the-dips mode. The last sell signal on daily from my system was on May 5. A close below SPX 1325 is now required to invalidate this buy signal. I will updtae again whenever this signal changes.

Weekly is still on a sell. It will be invalidated if SPX trades above 1347. If the weekly also flips to a buy, then it's high odds that SPX will challenge the April highs or exceed it.

SPX Weekly - Critical juncture

2011-05-22T20:41:00.000-07:00

On April 29, i wrote

If we get a daily sell signal at any point now and a strong selloff, it would leave a nasty diveregent top on the weekly charts. It would also produce a daily/weekly combo sell. Now i have no clue whether that will happen or not. It's just a hypothesis at this point. So i call it a wave C and a terminal wave of this bull market. No Ifs and buts. Now i ask the weekly RSI to prove me wrong.

I got the sell signal on daily on May 5, which i posted on traders-talk.com. Sorry i have not been actively updating this blog as i am very busy with my trading .

Daily sell on May 5

SPX is at a critical juncture on the weekly charts. So i thought i would post an update to my April 29 post. If we break below SPX 1318 this week, then my system will go into a weekly sell this week. A daily/weekly sell combo is a dreaded thing. If SPX has any intentions of making a new high, 1318 is a must hold this week. Otherwise the back of the bull market will be broken. Trade safe !

Final bull market wave in progress

2011-04-29T21:36:00.000-07:00

My April 11 call for a daily sell was good for 30 points, but it turned out to be a minor consolidation in the ongoing wave C, as opposed to test of 1249 which i was expecting (which i have noted in the charts).

I have a daily buy again at SPX 1332, which i could not update in a timely manner as i was on a vacation.

Here's a weekly chart of SPX from March 2009. Every new recovery highs in S&P on the weekly charts have been followed by a new high in the RSI. This is the first time since the rally begun in 2009 that a weekly RSI has started to negatively diverge with the price. That's a wave 5 or a wave C phenomenon, not a wave 3 phenomenon as some analysts who have been labelling it. Now the burden of proof lies on the RSI to prove that it's a wave 3 and not a terminal wave of the bull market. If RSI does make a new high in this leg, then the bears will have to go to hibernation, not for months, but for more than year. It's a historic juncture for sure. Since we are talking about weekly charts here, this current rally may continue for a few more weeks before topping out.

If we get a daily sell signal at any point now and a strong selloff, it would leave a nasty diveregent top on the weekly charts. It would also produce a daily/weekly combo sell. Now i have no clue whether that will happen or not. It's just a hypothesis at this point. So i call it a wave C and a terminal wave of this bull market. No Ifs and buts. Now i ask the weekly RSI to prove me wrong.

Now as for the ST, SPX is on a buy-the-dips mode and i would keep playing only the long side until the daily issues a sell.

I will post the next daily turn in real-time here, as it could turn out to be a very important one.

Quick update - Daily sell

2011-04-11T18:53:00.000-07:00

Just wanted to post a quick update that i have a sell confirmation on the daily charts. This has implications on the wavecount, which i will update during the weekend.

"V" Bottom ?

2011-03-27T08:28:00.000-07:00

My Feb 23 post called for a turn at SPX 1307, for end of wave 5. That also completed a wave A from the Sep 2010 bottom. The call turned out be a good one and since then SPX lost about 60 points into SPX 1249.

The reversal from 1249 was brutal and caught me by surprise. There was no bottoming action whatsoever. March 24 close at 1311 turned my trendicator on daily charts from downtrending to uptrending. So minimally we have a challenge of the 2/18/2011 highs at 1344 and possibly higher than that. Now just because my trendicator turned to uptrending does not unequivocally say that a "V" bottom is the case. But i don't like using alternate count to hedge myself if i am wrong. It is what it is. As a trader i need a firm bias to trade. From a trading viewpoint, SPX 1311 close was a buy point. Any dip can be used to add more. A break below the March 24 low at 1297 would be the stop for the trade and would also put a "V" bottom in question. For now both the hourly and daily are trending higher and the trade is long. If anything changes, i will post a quick update here. Here's the updated e-wave chart

Turn - Feb 23

2011-02-23T19:40:00.001-08:00

In my Feb 02 update, i had called for a rally extension to a max of SPX 1360. Looks like 1344 is all she wrote ! Today's action generated a sell signal on the daily charts, which means the wave 5 extension is likely complete. I will posts the updated e-wave charts later...

- Good luck trading !

Wave 5 extension

2011-02-02T02:52:00.000-08:00

That violent reversal on SPX invalidates my 1/18 turn call for end of wave A. I will have to file that under "failed call". I have noted that accordingly in the chart. The turn ended up as a minor consolidation in wave 5 instead of wave a ending and starting a big correction. So the wave 5 extension continues. If we are in a fifth wave extension, we could go all the way up to SPX 1360. I will not make a guess on the targets. Instead i will post an update when the next turn occurs. So now the context switches back to buying-the-dips.

Good luck !

Market thoughts

2011-01-30T17:52:00.001-08:00

There is no change to the wave count since the turn call i made last week. 1/18 remains the top of wave 5. If the 1/21 to 1/26 move was impulsive, i could have moved the wave 5 top to 1/28. But it's clear to even a non e-waver (look on the hourly charts) that the move from 1/21 to 1/26 was a corrective 3-legged structure. So technically 1/28 is just a irregular top in the ongoing wave b correction. Anyway, labeling apart, it does not make any difference to the implications of the ongoing correction. Corrections after a 5 wave rally retrace to the wave 4 area. wave 4 area in this case is between 1227-1173. So the market should find support somewhere in that area before the next up leg i.e wave C begins, which should run into the spring/summer.

I had made a call on Gold near $1315 that GOLD would drop about $200 based on many technical warning signs on the daily and weekly charts. There were barely any bearish Gold technicians then and when Gold dropped into a wave 5 bottom last week, there were a barrage of bearish postings on GOLD on many message boards. The brutal reversal on GOLD cleaned out all the late to the party folks. GOLD is still not out of the woods. If we trade above $1358 and hold last week lows, then it will confirm that a bottom is in place in GOLD and we should see new highs on it. More on that next week.

Good luck !

Turn - Jan 19, 2011

2011-01-19T17:43:00.000-08:00

In my Jan 5 post, i had mentioned that wave 5 top was still pending and i will update once a turn occurs. There were a couple of hourly sell signals since then, but no damage was done to the daily structure. Today finally i have a sell on the daily charts and a completed wave structure. So the back of the uptrend from the Sep 2010 can now be considered broken. A multi-week intermediate term decline should now be the expectation.

From a e-wave perspective, wave A of the rally has topped and wave B is in progress now, which should ideally take us to the 1160-80 area.

Good luck !

SPX e-wave - Jan 5, 2011

2011-01-04T17:57:00.000-08:00

The wave count that i posted in my last update remains in force. Wave 5 is close to completion, but a turn is unconfirmed yet. SPX 1251 is the key pivot to hold at this point. We may have another day or two or sideways consolidation and one more upthrust after the payrolls report, before heading down in earnest. So the trade is still "buy-the-dips" above the 1251 pivot. Whenever the turn occurs, i will post an update at the EOD.

E-wave count for SPX - Dec 28, 2010

2010-12-28T05:02:00.000-08:00

Sorry, i have not been actively blogging the last few months. I will try to post the e-wave count for SPX going forward, both on a weekly and daily basis.

On the weekly charts we are close to completing the wave a (currently in progress). After this a multi-week correction should be the expectation. But this is not going to be the end of the bull market. There will another leg up after this correction into the spring of 2011 before the fat lady sings.

On the daily charts, we are approaching the end of wave 5, which should kick start a multi-week correction. Use extreme caution here, if you are long. Tighten the stops to the SPX 1232 pivot. I will update here when the turn is confirmed.

SPX LT Oscillator - Close but no cigar !

2010-09-05T06:46:00.001-07:00

Here's a long term Oscillator, which i have been showing on this blog for many years to track the LT turns. Well, since my system on SPX is proprietary, i cannot display any of my trading charts. So I decided to at least post this long term Oscillator for the benefit of those who are into LT investing. This Oscillator is not of much use to a trader as much as for an investor. But it certainly can be indicator to demarcate bull and bear markets.

The rules are pretty simple.

1) For a bear market, we need to have a lower high and lower low on the weekly price charts and the Oscillator has to cross below zero.

2) For a bull market, we need to have a higher low and higher high on the weekly price charts and an oscillator crossover above zero

This week, the market was on the brink of a LT breakdown, but escaped marginally. What the LT bears would not like to see here is a curl up of this MACD above the signal line, which would give back control to the bulls.

In my last post, i had said that the strong rejection from 1130 pretty much nailed the 9 month cycle top. Now the failure to break the SPX 1010 lows and a strong rejection from there pretty much neutralizes the situation. In other words, we are back to square one. My guess is we will double top around the SPX 1130 area and start the next leg down into the 9 month bottom lows due late Oct. But that's just a guess at this point. In a week or two, the market should start giving additional clues.

Good luck trading !

9 month cycle top confirmed

2010-08-12T06:28:00.001-07:00

There was some ambiguity as to whether the May top at SPX 1173 or the the June top at 1131 was the 9 month cycle top. The strong rejection from 1131 pretty much confirms the 9 month cycle top. We should head into the 9 month cycle bottom from here, due in late Oct-Nov

My trendicator also moved to a sell yesterday without a CIT. It's going to be very hard trading this coming volatility with the daily charts(or daily trendicator). By the EOD, a lot of damage can happen. I will start posting the hourly buy/sell signals on traders-talk.com, for those interested.

I will post occasional updates on the daily trendicator here and some big picture thoughts.

Quick update

2010-08-10T19:22:00.000-07:00

The trendicator remains on green status.

Given that S&P is trading below 1131 June highs, it still remains ambiguous as to whether the May 1173 or June 1131 highs constitute the 9 month cycle top. S&P has been forming a triangle over the last few days on the hourly charts. Triangles precede terminal spikes. So we could see most likely see a celebratory spike over the next few days above 1131, before we say adios to this rally.

In the event i get a CIT warning, i will post an update here.

9 month cycle thoughts

2010-08-02T18:36:00.000-07:00

On July 28, i wrote

If today's lows gets taken out, then it would generate a sell with a projection to about SPX 1080-85. I don't see any projections beyond that, at this point.

We acheived that projection. But the trendicator moved from a sell to a outright buy today, without a CIT warning, in a shock and awe style upmove.

We have a 9 month cycle bottom which is due in late Oct - early Nov 2010. Every 9 month cycle bottom after the Oct 08 bottom have made higher lows signifying a cyclical uptrend in prices. In May 2010, we broke the 9 month lows of Feb 2010, and consequently the cyclical uptrend, which indicates that the next 9 month cycle low will potentially be a lower low.

The 9 month cycle crest is amibigous here. It's either the May 2010 top at 1173 (if the cycle was left translated) or the June 2010 top (ideal top) at 1131. Now we are 4 points away from the June 2010 top. Will it hold ? If it was a 9 month crest, it should reject prices strongly here. If not, it would confirm that May 2010 was indeed the 9 month crest and prices should move towards there for a retest and then fail there for a downmove into the 9 mont bottom due late Oct.

If SPX 1173 gets taken out, then the bearish case is over. That would mean a extremely right translated 9 month cycle and the implications are ultra-bullish.

The trendicator is on a buy. So we are back to buy-the-dips mode. But keep an eye on the 1131 and 1173 resistances and watch how the price reacts there. If we see volatile back and forth action below the resistances, then it's a clue that a potential top is getting built.

Good luck !

Trendicator moves to red

2010-07-29T19:08:00.000-07:00

Trendicator moves to red, following the CIT warning yesterday.

CIT warning

2010-07-28T21:14:00.000-07:00

My trendicator has given a CIT warning. CIT warning is not a definitive sell signal. But usually a CIT warning translates into a sell signal the next day, if the low of the daily candle that triggered the CIT, gets taken out. So if today's lows don't get taken out tommorow, then it was much ado about nothing. If today's lows gets taken out, then it would generate a sell with a projection to about SPX 1080-85. I don't see any projections beyond that, at this point.

Well, the upcoming 9 month cycle bottom due in Oct-Nov timeframe is in the back of my mind. But it's too early to say that this is the start of that big decline. Weekly has to turn down before such forecasts are made. At this point the weekly is pointed up. So i will treat this as a correction in an uptrend.

No change

2010-07-27T19:21:00.000-07:00

Power uptrend continues...

Power trend

2010-07-22T21:36:00.001-07:00

Just a quick update. We had a big up day as i posted yesterday. My trendicator has entered a power trending mode now.

Here' some quick details on what a power trending mode means. Power or strongly trending markets are those, where the odds of sucessfully executing a countertrend swing trade becomes extremely low. It does not preclude one from intraday countertrend trades or quick scalps, but is unforgiving when it comes to trying to swing against the trend. Power trend does not measure the size or duration of the move. The move could run for months or end even after a day. It just attempts to charaterize a trend which is in a high momentum zone. So it pays to wait for a potential CIT or actual CIT before any countertrend swing is attempted from this mode.

No change

2010-07-21T20:16:00.000-07:00

The action on the hourly charts today was ugly, but my trendicator failed to produce either a sell signal or a CIT warning. I would have at least expected a CIT with this kind of action. But surprisingly, i did not get one. So the trendicator remains on Green. If the trendicator is right, we should get a huge up day tommorow. If not.... :-)

Daily buy signal

2010-07-20T18:33:00.000-07:00

The signal changed today from strongly downtrending to uptrending, without a CIT warning. Not surprising, given that we had a key reversal day on the daily charts. The next upleg has begun....

NAV trendicator

2010-07-20T04:17:00.000-07:00

Here's a visual look at my system. My system uses no cycles, e-wave, astro, magic numbers, support, resistanace, Fibonacci or for that matter even interanls (breadth, vol, high/lows), Put/Call, VIX, fundamentals, news, earnings, bull market, bear market, cyclical/secular trends et al. It is based on purely price action, price trending rules and price based momentum. Price trending rules and momentum rules are used to charaterize the trend into different phases as

1) Trending
2) Strongly trending (power phase - no countertrend trading should done in this phase)
3) Downtrending
4) Strongly downtrending (power phase - no countertrend trading should be done in this
phase)
5) Potential CIT (Change in trend) => At this point, trend traders should take profits or tighten their stops and swing traders start probing positions against the trend.

Last but not least, this is not a curve fitted system (which are dime a dozen in this industry), with optimized parameters to make the past look good. The system only attempts to characterize the trend and not optimize the buy/sell points. No it won't pick the exact bottom and top tick, if that's your obsession. You would miss one or two candles at the top/bottom. The system also does not have a vision for the future . Consequently, it does not attempt to guess the amplitude of the move or the duration of the move.

Taking a break.

2010-07-05T00:35:00.000-07:00

I will be a taking a break from blogging for a while. Good luck trading !

IT and ST thoughts

2010-06-21T20:33:00.000-07:00

We are in a ST rally in a IT downtrend. The IT trend turned down after we broke the Feb 2010 weekly pivot at 1044 on 5/25/10. The action is reverse of what happened when we broke the 943 pivot in June 09. Once a weekly pivot is broken, the market cannot repair itself in days and rally to new highs. When the weekly pivots were intact, there were bold statements calling for the TOP of the bull market on the message boards. Now that the weekly pivot is gone, there are bold statements about possible new highs on SPX in the coming weeks. Broken trends don't turn on a dime. If it did, there would be no trend traders around. I hear comparisons of this decline to that of July 07 decline and subsequent rally to another high in Oct 07. Well, the July 07 decline did not break the prior weekly pivot at 1363. So the weekly uptrend was intact then. What we have now is a broken weekly trend which needs to be fixed.

I see two ways this can be done:

1) Complex bottom on the NYSE MCO.

or

2) We establish a weekly pivot in the SPX 1130-1150 area, go down and make new lows and then rally back up and break that pivot.

Until one of these happens, all ST rallies are bound to fail and the IT downtrend will continue. We are in the sweet spot of SPX 1130-1150 where this rally could fail. Currently the ST is on a buy, but keep an eye for a rally failure from this area.

Complex bottoming action required

2010-06-06T20:59:00.000-07:00

Needless to sat that the buy signal from 1085 failed on friday and we are back to sell mode. The NYSE breadth MCO will have to put in a complex bottom, with positive divergence with price, before we see any sustained IT rallies. Until then, all these ST buy signals will produce minor pops and fail. Will update if anything of significance happens.

Hourly buy signal - June 2, 2010

2010-06-02T20:47:00.000-07:00

For the first time, since this decline started in April, SPX has generated a Short term buy signal on my system. The short term buy got triggered at SPX 1085 today. Technical objective for this buy is about SPX 1140. Will reassess the technical picture if and when we get there.

Reading the price

2010-05-06T21:06:00.000-07:00

Last week i posted that we are in a sell the rallies mode and the status quo remains. However, i personally have not sold any rallies so far, given the way the decline started - with a huge gap-down and no decent rallies to position short.

Although the exchange has busted all the trades below a certain treshold, what remains on the chart is a big wide range bar (100 points wide) on the daily charts. We should continue to see many inside bars within this wide bar range, for the next few days or perhaps weeks. The resolution out of this wide range bar will determine the price direction and targets for weeks to come. If we get a daily close above 1167, then we have seen a bottom today and we should head up to SPX 1270. If we get a daily close below 1065, then SPX 950 becomes the downside target. It is very easy to say the trend is down here, as easy as it was to say the trend is up, just 3 days back. The reality is we are in a highly unstable trading zone. I guess it will be lot's of fun as we whip around in this 1065-1167 area the next few days, before the market makes up it's mind. Trade safe !

Sell the rallies mode

2010-04-28T21:54:00.000-07:00

Lots of yo-yo action in the last two weeks. With the break of the 1190 pivot, we are back to sell the rallies mode on the hourly charts. So far there is no evidence of any bottom to go long. If there's any, i will update here.

Preliminary sell again

2010-04-21T20:12:00.000-07:00

I had said i would update if there's any change in the trend resumption scenario. As i said in my last post, we resumed the trend upwards, but today we had a momentum failure near the highs. Momentum failure in itself is not a sell signal. It can just cause a high level consolidation before the move up. But when some key EMAs crossover along with momentum sell, it suggests that the correction can be something more than just high level consolidation.

For instance, today we not only had a momentum failure but the 3/13 ema pair on 30-min crossed over as well. That suggested that the downmove was going to be something more than just a high level consolidation. Even that EMA crossover is not an indicator of trend change until we make lower lows on the price. So if one is shorting against the trend, as i said in one of my posts 2 days back, either the DTL or the pivot has to be honored. In this case the pivot is at 1211 and any move above that is a signal to reverse long. If one is a miser on the stops, they could even get out on DTL break on a closing basis or a 3/13 crossover back above. I use pivots to reverse my position though. At the close the 3/13 was in a backkiss configuration on the 30-min charts. Now the big money folks can easily perform a crossover with a gap-up. But will they ?

Bottomline, aggresive traders can go short with the above mentioned precautions, using the preliminary sell. Others can close longs and stay in cash until SPX 1211 is recaptured.

Correction over ?

2010-04-19T18:58:00.001-07:00

Odds are about 70% that the correction is over and a slingshot recovery is in progress. One of the cardinal sins of countertrend trading is remaining short when a downtrend line is broken. Yes sometimes, false trendline breaks happen. Those happen once in 3-4 months. If you are betting on such outcome, it's your money We made a divergent bottom on the hourly and broke the DTL. That should be sufficient indication to hop on the long side in a bull trend. Too many are expecting SPX 1225. So odds are we will overshoot it this time. If anything changes in the trend resumption scenario, i will update here.

The trend is still up....

2010-04-18T20:12:00.000-07:00

But the warning shots have been fired. This is the 4th VST sell signal fired by my system since the Feb 2010 bottom. This selloff has been the largest fastest decline since the Feb bottom, which means it is likely that this is more than a one day wonder. If the market were to maintain the current trend structure, then it has to perform a slingshot recovery to the uspide. If it's a slingshot recovery, we should see big volume coming at the open with green candles. Barring that, the slower moving averages on the hourly charts will start curling over, leading to a more deeper selloff. If the volume is anemic on any bounce from here, i will start scaling into shorts between the SPX 1195-1205 area. A move above 1214 is required to invlaidate the sell setup.

IT and VST sell signals

2010-04-14T20:44:00.000-07:00

The IT run which begun in Feb has produced three VST sell signals on my system. The first sell produced a max profit of 20 points from the sell trigger point. The second sell was good for 8 points and the third sell was even worse. Well, it only goes to reinforce the lows odds nature of countertrend trading.

Low volatility gives a false security of limited upside risk and hence draws the short sellers. And then divergences are too juicy for the countertrend cowboys to ignore. It's not a crime to short an uptrend, provide one follows some simple trend rules.

1) Don't short a divergence unless, it's accompanied by a trendline break or a pivot break.

2) Don't short a momentum crossover like MACD or Stoch, unless accompanied by a trendline break or pivot break.

3) To take it one step further, don't short any kind of sell signal, unless accompanied by price confirmation in the form of a trendline break or pivot break for the given timeframe traded.

4) Even, if the above rules are followed, strong trends can create pseudo trendline/pivot breaks and reverse. So after shorting, draw a downtrendline and get the hell out of your shorts, if the down trendline is broken, and reverse long.

5) Trendline and pivot breaks should be on candle closing basis, to avoid false breaks.

These are simple TA rules that everyone knows, but ignored, carried away with esoteric TA or personal ego. Then they foolishly state that divergences do not work or Oscillators do not work or TA does not work.

As i posted on March 26, a break of SPX 1181 put us back on a buy signal. The IT picture is not showing the necessary loss of momentum to call any sort of top here. But then the market always looks strong at tops. It's this contradiction that "market does not show any signs of top" and "market rarely shows any weakness right at the top" makes it a futile endeavour to pick tops. When a top of any significance occurs, it will be written in BOLD letters. Yes, you may miss the top 1%and the GURU title, by not picking the top. I will update here, when i see either signs or confirmation of an IT top. Until then, enjoy the trend...

SPX sell again ! - 3/26/2010

2010-03-25T18:10:00.000-07:00

SPX flipped back to a sell at the close today. This whipsaw between sell-buy-sell typically occurs at key reversal areas. That leads me to beleive that this sell signal will run deeper than most think. My strategy here would be to start scaling into shorts from this level and add on any bounces, with a stop at SPX 1181. A move above 1181 will put us back on a buy signal.

SPX - March 24, 2010

2010-03-23T21:08:00.000-07:00

SPX taking out 1170 invalidated the sell signal and puts us back in a buy mode again. This is probably one of the crummiest sell signal in terms of number of points gained, in the recent months. The sell signal was triggerred at 1161 and the best price the signal could attain was 1152.89, which is about 8 points. Typically these hourly signals generate anywhere between 15-50 points. Again just to be clear, i am not talking about the potential trading profits of this signal, but the maximum points acheived by the signal from the point where it was triggered. In fact, this would have been a losing trade, had one played it for a swing trade. The shallow correction that the signal produced says a lot about the strength of the market, from a pure price perspective. So we are back in buy-the-dips mode, until the next hourly sell gets triggered, which i will post here.

$WTIC (OIL) remains on a daily sell signal.

SPX enters a ST sell

2010-03-22T04:43:00.000-07:00

Sorry, i was busy with some business matters and could not update the blog for nearly a month. Finally i have some time on my hands and will actively start updating my blog. I will continue to post the hourly buy/sell signals on SPX and Daily buy/sell signals (instead of weekly) on Gold/OIL/Dollar etc. Sorry, the weekly stuff takes too long to generate signals and is not working out for me.

The last time SPX generated a buy signal was at 1056, which i posted here on the blog on Feb 12. On Friday my system generated a hourly sell on SPX at 1161, which i posted on TT at

http://www.traders-talk.com/mb2/index.php?showtopic=117286

Stop for the SPX sell is 1170.

Along with SPX, $WTIC (OIL) also entered a sell at friday close, at 80.97. Stop 83.36

I will try to post updates on signals at the EOD each day, if there's any change to the signal.

Weekly signals - 1/19/2010

2010-02-21T18:53:00.000-08:00

Weekly trends

OIL (neutral)
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.

Dollar Index (neutral)
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold (Buy) - Gold issued a buy signal this week.
Buy 1/19/2010 GLD 109.47 stop 102.28
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds (buy)
10 year yields on a buy signal since 11/30

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX - Remains on a buy signal

Weekly signals - 2/12/2010

2010-02-14T02:44:00.000-08:00

Weekly trends

My system remains neutral on all the assets. Stay tuned for a fresh signals next week.

OIL (neutral)
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.

Dollar Index (neutral)
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold (neutral)
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds (buy)
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

SPX issued a buy signal this week, with SPX 1056 as the key pivot. Above 1056, the market will remain in a bullish configuration. A break below 1056 will reverse the bias to bearish. Whether this is a countertrend rally or the beginning of a new upleg is unclear at this point. No projections for the rally yet. Enjoy it while it lasts...

Weekly Signals - 2/5/2009

2010-02-07T07:01:00.000-08:00

Weekly trends

With that surge in dollar, all of those assets inversely correlated with dollar got stopped out. OIL was the last one to get stopped out this week. My system remains neutral on all these assets until the next buy signal gets generated (or a continuation sell as the case maybe).

OIL
Buy 12/24/2009 USO 38.20 stop 35.22 - Stopped out.

Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

Gold
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

SPX remains in an intermediate term sell. Given the speed at which it came close to the SPX 1030 pivot, there are two possibilities for this 9 month cycle bottom due in March. Either we are going substantially lower than SPX 1030 or we are going to see some volatile bottoming action beween the SPX 1030 - 1105 area over the next 3 weeks. I guess it all depends on how the debt situation in the third world countries of Europe pans out. Trade the volatility until a bottom is carved out. Good luck !

9 month cycle thoughts

2010-01-31T19:56:00.000-08:00

On Dec 23 i wrote,

Projection

The current e-wave structure displays a potential triple zig-zag, with two upside targets - SPX 1168 (c=a) and SPX 1215(c=1.618*a). The crest of this last 20-week cycle (of the current 9 month cycle) is due end of January 2010, which is where i expect this market to complete it's e-wave formation. After that, it gets bearish as we plunge into the 9 month cycle bottom sometime in mid-March 2010.

Well, we undershot the time target by a week and price target by about 18 points. As i posted here, break of SPX 1131 pivot was the get-out-of-longs signal. The next 9 month bottom is due mid-March. There should be cyclical pressure until that general timeframe. Of course we will zig-zag up and down into that March bottom. Currently i don't have a technical projection. We need a countertrend bounce after which targets can be arrived at. But an educated guess would be the key weekly pivot at SPX 1030.

The entire web is now buzz with the "End of bear market rally" theme. If the next 9 month cycle low comes above the July 2009 lows, which will maintain the bullish cyclical structure, then another high in the SPX is almost certain. It's too early to have an opinion on that. Will update it when the appropriate time comes.

Good luck !

Weekly signals - Jan 29, 2009

2010-01-29T20:11:00.000-08:00

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Pullback in a weekly uptrend. Buy signal remains on a slippery slope.

Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

My system is neutral on dollar right now. It remains on a A-B-C countertrend rally with an uncompleted wave C.

Gold
Buy 1/8/2010 GLD 111.37 stop 105.30 - Stopped out

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

SPX violated the dubai panic lows of SPX 1083 which i mentioned last week, now putting it in a intermediate term sell. The next logical test would be the support at the weekly pivot of SPX 1030.

SPX is now in a weekly buy, daily sell and hourly sell. The key bull-bear pivot is now SPX 1100.22. All bounces below SPX 1100.22 should be used to sell short. The selloff will likely end in a selling climax in the coming week.

Good Luck !

Weekly trends - 1/22/2009

2010-01-24T19:13:00.000-08:00

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Pullback in a weekly uptrend. But, remains on a buy signal.

Dollar Index
Sell 1/15/2010 USD 77.36 stop 78.78 - Stopped out.

The sell signal on Dollar got violated this week by a break above 78.77. I still beleive this week's dollar surge was a wave c of an a-b-c correction, rather than a beginning of a major leg higher. My system is neutral on dollar right now.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

No change from last week. But the buy signal is on a very slippery slope right now.

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX

The dollar surge last week unleashed some violence in many markets. SPX failed to acheive the measured move objective at SPX 1165. 1150 was all she wrote. Violation of SPX 1131 pivot was a close-all-longs signal. Since the SPX has broken the 1131 pivot, the selloff has been very steep without generating any continuation sell or even counter-trend buy signals on the hourly charts. The Key 20-week low pivot at 1085 held this week. If it holds and we generate a buy signal next week, then the ST selloff is over. If SPX 1085 cracks for any reason even by a tick, then the selloff will morph into an intermediate sell, with the next support coming at the weekly pivot at SPX 1030. The coming week should provide more clues....

Weekly trends - 1/15/2010

2010-01-15T20:38:00.000-08:00

Weekly trends

OIL
Buy 12/24/2009
USO 38.20 stop 35.22

Last week i said that OIL hitting the weekly bollinger band is usually a place where ST traders typically take profits. But the profit taking was stronger than what i expected. It's now in a retracement in an uptrend, but on a weekly buy nevertheless.

Dollar Index
Sell 1/15/2010
USD 77.36 stop 78.78

Dollar index issued a sell signal this week.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

No change from last week.

Bonds
10 year yields on a buy signal since 11/30
It's now in a retracement in an uptrend

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX remains in a weekly and daily uptrend. The selloff after Intel earnings has put pressure on the hourly uptrend, but remains on a buy nevertheless. The SPX 1131 pivot continues to hold any selloffs. If the hourly flips into a sell, i will update here next week.

Weekly signals - Jan 8, 2009

2010-01-08T21:06:00.000-08:00

OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22

Oil remains on a buy signal. USO hit it's weekly BB bands which is usually a good spot to take profits. If this market is in a trending mode, we should see the bollinger bands flare up next week.

Dollar
Countertrend buy

Dollar marginally missed a sell signal this week. It remains on a countertrend buy.

Gold
Buy 1/8/2010
GLD 111.37 stop 105.30

Last week, i was looking for a buy on gold and we got a confirmation this week.

Bonds
10 year yields on a buy signal since 11/30
No change from last week

Disclaimer: All signals are experimental and for entertainment purposes only.

SPX remains in a daily and weekly uptrend. We are heading towards the SPX 1165 target with ever decreasing volatiltity. Before excpecting any meaningful correction, we should see the volatility pick-up. Until then all short attempts will be futile. No need to overanalyze here.

Weekly signals - Dec 31, 2009

2010-01-01T19:18:00.000-08:00

OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22
No change from last week

Dollar
Countertrend buy
No change from last week. Looking for a sell signal this week

Gold
Countertrend sell
No change from last week. Looking for a buy signal this week

Bonds
10 year yields on a buy signal since 11/30
No change from last week

Disclaimer: All signals are experimental and for entertainment purposes only.

One of the readers question was whether the entry is based on week ending price or opening price next week. For intermediate term positions, it's irrelavent, unless the next week opening happens to be a massive gap-up. But then, many a time, it also gaps-down offering better entry price. I tracks these signals based on end of week closing price basis. To be fair, i will try to post these signals 15 minutes before the closing, end of week, if time permits and does not interfere with my trading activity.

These weekly signals will not be published for the SPX, as the stock market is an entirely different beast, which i will continue to anlalyze seperately. There is no change in SPX outlook. We remain in a daily uptrend from the Dubai lows, pullbacks on hourly charts aside.

Dammit, is it a buy, sell or hold ?

2009-12-27T00:36:00.000-08:00

After reading newsletters for many many years, i finally threw up my arms in frustration in 2000, when i started developing my own systems.

A typical newsletter writer's recommendation goes like this "While the dollar index is in a major bottoming formation with overwhelming bearish sentiment, we should be on look out for a buy. But i don't rule out another low sometime next week. Although given the current configuration, a low may not be required and we could just bust out of the gates. A move here can be explosive, but the declining long term moving averages can put pressure on any upmove. The LT direction remains down and so does the ST, but the ST is on the verge of moving up. Caution is urged for shorts. Any move below xx.xx will mean the downtrend continues. Any sustained move above xx.xx would mean the trend has turned up"

My silent response has always been, "Dammit why don't you just tell me if the move is trend or countertrend, and is it a buy or sell. If it's a buy/sell where should be my stop ?". My system development efforts over the years have been focussed on these three things. Although my focus has always been on ST trading on S&P, i have been trying to develop some systems to trade the intermediate term moves on various sectors/commodities. I have posted some random signals on this blog over the years on Dollar, Gold and Bonds, but not on a consistent basis to track their long term performance. I have done some significant work this year, spending countless hours backtetsting them, which looks promising. But then, everything looks promising during the backtesting. The proof of the pudding lies in the real-time testing.

I will post all the signals from my system, during 2010 on Gold, Oil, Bonds and Dollar. All signals will be end-of-week basis. The signals will be based on weekly charts and for multi-month intermediate term moves. Countertrend moves will not be traded.

OIL
Buy 12/24/2009
Long USO 38.20 stop 35.22

Dollar
Countertrend buy

Gold
Countertrend sell

Bonds
10 year yields on a buy signal since 11/30

Disclaimer: All signals are experimental and for entertainment purposes only.

Potential e-wave structure

2009-12-23T20:40:00.000-08:00

The current e-wave structure displays a potential triple zig-zag, with two upside targets - SPX 1168 (c=a) and SPX 1215(c=1.618*a). The crest of this last 20-week cycle (of the current 9 month cycle) is due end of January 2010, which is where i expect this market to complete it's e-wave formation. After that, it gets bearish as we plunge into the 9 month cycle bottom sometime in mid-March 2010.

Bears failed !

2009-12-03T03:50:00.000-08:00

Bears certainly failed this week to exploit a setup that was presented to them. We had a whole basket of divergences from price momentum divergences to A/D line divergences. And there was the pesky 20-week low due end of November. Not only did the 20 week low turn out to be a non-event, but we also erased the A/D line divergences by breaking out above the Oct highs on the NYSE cumulative A/D line.

The Dubai scare was probably the 20-week low. Or one could also argue that the Nov lows at SPX 1029.38 was the 20 week lows. It's hard to say which one was it, until further price action. Any corrective action here breaking the Dubai lows would mean that the 20-week lows came early in November. Instead if we rally from here holding above Spx 1083.74, then Dubai event was the 20-week low. Either way now we have a bullish cyclical structure with the 9 month lows above the prior 9 month lows and the 20 week lows holding above the prior 9 month lows. Of course there can always be non-cyclical forces causing selloffs. But the key going forward is that the November 1029.38 lows should not be broken for any reason. As long as we continue to hold up above that, the bullish intermediate term rally will continue.

20 week cycle thoughts

2009-11-26T22:38:00.000-08:00

Last week i wrote,

The 20-week low is still ahead of us, due end of November, as i mentioned in my last post. If the above mentioned negatives play out, we should see a severe decline starting next week. Where the decline stops, will determine the next phase of the bull or bear market, as the case maybe. If SPX 1030 cracks, then that is all she wrote for this mini-bull run....

Well, this whole Dubai news causing this worldwide selloff is a joke. When did Dubai become the economic center of the world? Since the bulls pushed the envelope to the far end of the 20 week cycle, there was little time left for an orderly decline to occur. Hence we are seeing this ugly 1-day mini-crash type of event occuring as we speak in the S&P futures. Given the nose bleed momentum, it's unlikely any bottom will occur on friday. The bottom should likely come on Monday, Nov 30, which should coincide with the 20 week lows.

Now if this 20 week lows happen to be a trend turning event, then we should see the SPX 1030 swing lows taken out, like a hot knife going thru butter. If not, this will have bullish implications. An important cycle low like the 20-week, occuring above the prior swing low and mainting the existing bullish trend structure, can only be bullish. I will reserve my opinion here until next week, to see where the 20 week cycle bottoms, before calling this an important top.

Who are these happy-go-lucky buyers ?

2009-11-15T07:18:00.000-08:00

MACD triple divergence. Volume non confirmation.

Summation H&S breakdown. Threatening to breakdown from the ledge and below the zero line.....

Summation H&S breakdown. Threatening to breakdown from the second ledge...

Add to this the big-kahuna divergence of the A/D line not confirming with the new price highs on SPX and emerging markets like India and China not making new recovery highs.

With all these technical negatives, it makes you wonder who are these happy-go-lucky buyers holding the market at new highs ?

The 20-week low is still ahead of us, due end of November, as i mentioned in my last post. If the above mentioned negatives play out, we should see a severe decline starting next week. Where the decline stops, will determine the next phase of the bull or bear market, as the case maybe. If SPX 1030 cracks, then that is all she wrote for this mini-bull run....

SPX and Dollar

2009-10-30T22:03:00.000-07:00

Dollar index issued a weekly buy signal by closing above 76 this week. A multi-week rally in the Dollar has begun.

SPX has started it's descent into the 20-week cycle lows in mid-late Nov.

On of the comments i received was....

"You were clearly expecting a 9 month crest in March and it turned out to be a low".

My Reply

It's useless to deduce anything from the 9 month crests. It's the lows that tell you the story. 9 month cycle (40 week cycle) crests coincide with the 20 week cycle bottoms. So there's bound to be some kind of lows heading into the 20 week lows. And in a dontrending market, you are bound to get a lower low heading into the 20 week lows, which should not all be surspising to a cycle analyst. That's what happened in March. It was the 9 month crest and the 20 week lows.

Like i said, it's the 9 month lows which always tells you the story. I was expecting the 9 month lows into July-Aug 2009 to break the March lows, which did not happen. Instead we got a lower high in July 09, which was an indication that the trend had turned up.

9 month cycle thoughts

2009-10-15T21:54:00.000-07:00

Back in Aug 08, i was calling for a 9 month cycle bottom in Sep-Oct 08 timeframe which turned out to be hugely sucessfull call, both in terms of time and price. The next cycle bottom, which i was looking for in July-Aug 09 came in the proper time window, but turned out be non-event in terms of price. I was looking for a break of March 09 lows for the cycle bottom during July. Far from it, it could not even touch the lower BB of the weekly which was around SPX 800 at that time. The strong rise out of the July bottom, made it clear that July was the 9 month cycle bottom, and the breakout above SPX 956 confirmed it. The next 9 month bottom is due in March-April 2010.

Now within the current 40 week cycle a.k.a the 9 month cycle, we have a 20 week cycle bottom due by the end of the November. How the price reacts into this time window will give us more clues as to the strength of the current uptrend. After the 20 week bottoms in November, the next rising 20 week cycle will be contending with the 9 month turning down from it's crest, which would mean a muted low volatile rise at best. The juicy part of the bull run maybe over.

For now, my LT indicator remains in the bull context, with the weekly, daily, hourly and every timeframe measurable trending up. I am on lookout for an opportunity to get short for the upcoming 20 week cyle lows.

LT update

2009-09-07T03:23:00.000-07:00

In my last update, i posted my LT indicator along with a time-momentum model which was supposed to have expired after 24 weeks. Well, we topped out after 25 weeks (+/-1week tolerance). But the bad news for bears is my LT indicator turned above the zero line, switching us into a bull context.

Now what this indicator says is that we are in a bull context. So buy any weekly oversold condition going forward, as long as the indicator stays above zero.

Well, one could argue that the move above zero was a headfake. But the onus of proving that is now on the bears. So to get any bear case going here, we need to turn that indicator back below zero again. Unless the bulls can really build some strong momentum here, it does not take much to pull this indicator back below zero again. The Weekly RSI(10) turned down below 70 indicating ST to IT term weakness. If the weakness materializes into a big selloff, then odds are my LT indicator will turn below zero again.

So the million dollar question here is "Will my LT indicator stay above zero when the next weekly oversold condition materializes ?". I will be watching with interest.

LT Time-Momentum confluence

2009-08-15T00:23:00.000-07:00

LT: Down

The context still remains a bear market as i explained in my last week's post. There's a lot of noise that a new bull market has begun. All we have done is a 38% retrace i.e a 350 point rally, after a 900 point drop. And the bull crowd is back in the town crowing their acheivements !. My last LT sell signal came on the break of 1380 and since then we remain in a bear market.

LT Sell in 2008

Now this market juncture reminds me of the June 2006 when most bears were convinced that the bull market was over. Then we began one of the most spectacular advance over the next 12 months. I think we are near the same juncture in this bear market where most bulls are convinced that the bear market is over. They were sending me hate mails on this blog calling me a perma bull then. Now they have started calling me a perma-bear. This is a funny business.

LT projection to SPX 1620 in Sep 2006

While the jury is stil out on that, let's look at some intereting facts here. My time-momentum model expired this week i.e both time and momentum have reached a equilibrium here. The last CCI overbought peak in April 2008 to the oversold bottom in Oct 08 took 24 weeks. Then we double bottomed on March 2009 and we reached the overbought condition last week. This week marks the 24th week of the rally. So we have oscillator symmetry, time symmetry and a 38% fibonacci retrace of the rally.

The Oscillator at the bottom is close to the zero line i.e a bull-bear demarcation point. If we breakdown here for a few weeks, then we won't likely take out this top for a while and would confirm the next leg of the bear market. The sentiment here is ripe for the resumption of the next bear leg. Bullish arrogance is back in the town. Folks who had dissapeared for years, closed business, deleted their blogs in shame are now back on the message boards and the blogosphere, twittering the bull theme. Now whether we take out the zero line and start a new bull market, i have no idea. I will leave that to the prophets who can see it coming. Odds are we are ending a bear market rally here. I will give the market a +/- 1 week tolerance on that 24 weeks count. That means either we topped last we week or we should top by the end of next week. We shall see...

IT: Firmly Up and reaching an exhaustion.

VST: Down.

1018 is a VST swing peak. Until we remain below that level, i will keep shorting and covering. My VST hourly trades typically yield anywhere between 20 - 60 SPX points. My last 5 trades have all yielded below 10 points, which tells me that the market is not yet ready to go down in earnest. Sooner or later we are bound to see some real ugliness hitting the markets. We could see a gap up on Monday to SPX 1012-13 area, which would be another good shorting opportunity. Only a gap-up above 1018 on Monday will get me bullish VST.

Good luck trading !

Still a bear market

2009-08-09T09:15:00.000-07:00

I am not arguing here. But just posting the same chart i have been posting for years. The indicator i have shown in the chart has called most bull/bear markets of last few decades. While pundits are arguing about the beginning of a new bull market, peppered with their usual caveats and equivocations, it always makes me wonder if these folks have the tools necessary to call bull/bear markets with conviction and objectivity !. Now why the anxiety ? If it's a bull market it's not going to end after a 5 month rally. It will last a few years. So i will wait patiently until my indicator crosses the zero line.

I need to see three things to happen before calling a new bull market.

1) My indicator crossing the zero line (has not yet happened). Ideally for strong odds this indicator need to start with divergences, although not strictly necessary.
2) Weekly uptrending (we are currently uptrending on the weekly)
3) Potentially completed wave pattern (optional)

We are pressing against the weekly BB on the SPX, which is usually the area where we get IT sells. As for the ST, the daily RSI is cautioning a sell approaching. We got close to a ST sell last week, but the setup got busted after the jobs report. We may get that ST selloff starting anytime next week. NDX not making a new recovery high with the SPX on friday was another warning shot. Not to mention that the emerging markets like India and China are already showing cracks. We may get a hourly/daily combo sell on the SPX sometime next week, with a possibility of that being a IT top as well. Stay tuned....

Primary degree wave A bottom confirmed

2009-08-02T20:44:00.000-07:00

I was on vacation last week and could not post any updates. The breakout above SPX 956 last week got the weekly uptrending and has now confirmed that a primary degree wave A of this bear market ended in March 2009. We are now in a primary degree wave B of this bear market. Wave B should typically consume 1-2 times the time taken by wave A, which means we are looking at a market top to occur sometime in the fall of 2010. It's hard to project the top for this wave B until we get a large mullti-week correction, once the first leg of the wave B concludes. Preliminary guestimates would be in the range of SPX 1150-1200 for the ultimate wave B top.

Again guessing the wave B pattern is a futile affair as it can take many forms. But looking at how it evolves, some educated guesses can be made. If we move breathlessly to the 1150-1200 region without meaningful pullbacks on the weekly charts, then it is likely that the wave B would take the form of a triangle. In that event, since the price targets are met in a short amount of time, the rest of the time will be spent meandering sideways. On the other hand if we get a large sideways-to-down move from the SPX 1000-1050 area, then wave B should take the form of a FLAT correction. We'll cross the bridge when we come to it. I have marked both the speculative scenarios in the chart.

I think for the intermediate term bearish traders, it's going to be a frustrating market for a while. And for the investors, many of years of subpar returns. Given that the VIX is now in the 25 area, and lack of panic in the markets, it will be a purely technicals driven market. Great environment for ST trading - The boyz are back in the town !

Good luck trading !

An important event last week...

2009-06-22T08:51:00.001-07:00

The 10-year yields triggered a intermediate term sell last week. This has deflationary implications for the economy. Once the market realizes that all these trillions of unproductive money that's thrown around by the government cannot generate inflation, panic will set in. The bond yield sell signal also lines up with the IT sell in the stock market, i posted last week.

Stay safe...play safe...Good luck !

Done fooling around ?

2009-06-15T07:42:00.000-07:00

Three charts - Says it all !

LT - Far below the zero line for a bull market to begin

IT - H&S on MACD

VST - False breakout and backkiss on MACD

Weekly momentum hooks down

2009-05-17T22:27:00.000-07:00

It's been a while i have updated this blog as i was on a business travel.

The market throws a curve ball at you right when you think you are completely in sync with the market. I was completely in tune with the market for more than a year, until this take-off from March. That's what makes the markets fascinating. I was wrong in my assesment about the size of the rally. Despite the relentlessness and the size, we could not take out the Jan 6 highs on the SPX. Something bizarre happened with the cycles. The 9 month cycle right-translated more than i thought. Both timewise and pricewise the rally overextended. But it did not change the overall trend charateristics.

Now finally the weekly momentum has hooked down on the NDX and DOW charts. SPX is hanging by a thread. The daily is uptrending on the all the three. Hourly is downtrending on all the three. What this tells me is that we have started a multi-week pullback. The question as to whether March was an IT or ST bottom will be answered in the next few weeks. If we get oversold on the weekly charts and hold above the March lows ( or put it differntly, if we do not break the March lows by end of July), the 9 month cycle would bottom above March lows, which would be IT bullish. That would mean another upleg to follow after this correction. On the other hand, if we crack the March lows, then this whole rally was another ST affair and the downtrend will reassert itself.

So in the ST, i will be shorting rallies on the hourly charts, until the weekly charts get oversold and provide more clues.

9 month cycle cresting !

2009-03-30T06:41:00.000-07:00

My last call for a 9 month cycle top was back in Aug 2008.

http://nav-ta.blogspot.com/2008_08_17_archive.html

We promptly made a 9 month bottom in Nov 08.

Based on the above phasing, we are due for a cycle top here late March to 1st week of April. Price topping window should be SPX 830-870. We already have tagged the lower end of the projection. Whether we tag the upper end, needs to be seen.

The real acid test for the IT bottom comes here. My own opinion is/has been that we have not seen an IT bottom and this was a ST rally in the IT downtrend. My expectation is for break of the recent lows and head to high 500s on the SPX. I am expecting this 9 month bottom to come late July - early Aug. If for some reason, the 9 month bottom holds above the March 09 lows, then those calling for a March IT bottom would be right. But i seriously doubt it.

Trends : Both the hourly and the daily are uptrending at this point. A break below SPX 766 will crack both the hourly and daily trends.

Good luck !

IT thoughts - SPX 780 taken out

2009-03-20T06:24:00.000-07:00

We have good news and bad news, if you are bullish.

The good news is that SPX took out 780. This has the SPX now potentially uptrending on the daily charts and in a confirmed uptrend on the hourly charts. The bad news is we have rallied right into the resistance - the upper BB on the daily charts. So we should see some kind of a pullback starting here. Now to make a bearish case here, we need to get the hourly downtrending again and break below the SPX 730 pivot to get the daily downtrending. There's gonna be some fight before all that happens. But the no-brainer bearish case is gone after the breakout above 780.

The case for an IT bottom has been made based on the strong breadth and 90%+ up/down volume days. But to me in a bear market that's a measure of how fast the bulls have spent their money. If anything the MCO spikes have all marked tops in this bear market and have not been continuation signals. Now we have this breadth surge into the dialy BB resistance. Have the bulls run out of coins ? We will find out. Also i have been talking about the 9 month crest potentially mid-to-late March. Now cyclically it's bearish all the way into the fall ! But trend overrules cycles in my book, so i will be watching as to how the trend unfolds here.

Bottomline VST i am bearish, looking for a pullback. Once that pullback leads to an hourly oversold condition, i would be a buyer to see what kind of firepower the rally has. If that raly fails, i will return back to the bear camp.

FOMC statement - March 19

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets.

This is by far the spookiest statement i have read so far. Bernanke is fully commited to test his academic theory that a deflation is not possible in a fiat regime. So a purchase of 1.25 trillion in agency mortgage-backed securities and $200 billion of agency debt and $300 billion of longer term securities. That 1.75 billion. Add to that the government's 1.75 trillion in federal deficit. That's a cool 3.5 trillion we have created without a sweat on the brow!! Whew ! Now who's bigger - the Government or the Fed ? We have a socialist government and a autocratic Fed. Do i see the light at the end of the tunnel ? Nope.

VST, ST and IT thoughts

2009-03-16T05:18:00.000-07:00

Well, it would be foolish to say that nothing changed since my last update on 3/9/09. The hourly which has been downtrending since 2/9 has now started uptrending. Since we have not had any meaningful pullback since this bounce started on 3/6, it's hard to come up with upside targets for this move at this point. But clearly the big resistance is around SPX 780.

The ST and IT trends are unambigously down. Many claim that we seen an IT or a LT bottom here. But those are just claims, until proven right by the market. I did not see any bottoming action based on my indicators on 3/6. A high volatile move suddenly morphing into a low volatile bottom is not something typical. Had the market put a high volatile wide range reversal bars, leaving most behind, then it would been a signature of a long lasting bottom. But this bottom seemed to accomodate everyone !

Let's first get the daily (ST) uptrending and then we can discuss about the IT. If SPX takes out 780, then the ST(daily) would start uptrending, suggesting that the market has legs. But for a ST or IT trader the trend remains down and shorting seems to be the safer, high odds bet (until 780 is taken out).

This week's market action should provide more clues. Will post an update next week.

Elevation of degree of bear market

2009-03-09T21:05:00.000-07:00

Initially when i made the LT sell call in Jan 2008 at 1380, i thought it was a primary degree bear market. Then after the break of 1170 and the CYCLE degree channel, i elevated it to CYCLE degree. Timely elevations and updates are all on this blog.

Now here's something that i had not looked at, for the last few weeks.

The last CYCLE degree bear market in SPX had it's largest correction during 1973-74, of about 48.5% from it's top, in about 22 months. The current bear has lost about 56%in just 18 months on the SPX. So this qualifies as the largest, fastest drop after 1929. So the odds are we are now dealing with a degree higher than the 70s bear market, higher than a CYCLE degree bear market. I am elevating this to a SUPERCYCLE bear market.

Again, this is not what i think. It is what it is. It is what the market is saying. Absolute definitions of degree can be argued, but the relative aspect is clearly visible on the charts and amenable to measurements. That makes it an objective observation, rather than my personal judgement or decree.

All divergences erased

Price trends, breadth and momentum are my primary tools. Recall when i called the top in January i was looking for a test or break of Nov lows. At that point it was not clear whether we would get a retest or a break. But before SPX broke the Nov 08 lows, the NYSE MCO broke it, implying that SPX would. I have been hearing about these gut wrenching bear market rallies since the Jan top, because of all the divergences. Now let's get the fact straight.

1) NYSE and Nasdaq MCOs broke the NOV 08 lows
2) NYAD (cumulative bredth) made fresh new lows both on daily and weekly cumulative basis
3) NYUD (cumulative volume) made fresh new lows both on daily and weekly cumulative basis

So where's the divergences ? Bulls are making the same mistakes that bears made during that persistent advance post june-2006. Sentiment seems to be the hook here again. What's the point of looking at AAII i.e what the suckers are doing/thinking when the big money is voting for a down market, which is amply visible on the breadth charts ? How do we know if these AAII folks are even actively involved in the markets ?

As for the 9 month cycle crest, the only conclusion i can come to, given that we did not get any rally into the crest is that it may have severely left translated. If that is the case, then we may be looking at a July bottom (a la 2002). But that's pure speculation. Let the market tell the story. The downtrend continues....

Update

2009-03-03T00:03:00.000-08:00

On Feb 20, i made 1001 arguments as to why there was a potential for a ST bottom and a rally. It took one day for the market to crush all those beautiful arguments. If there's one thing i have learn't from markets, resist from making calls against the daily trend when the hourly is still in harmony with the daily. In other words, wait for at least an hourly turn.

On Feb 23 (the very next trading day), i followed up with an update on this blog and went bearish. Not because of what the price did, but because of what the NYSE breadth MCO did. I said, Nov 08 lows on SPX will not hold since the NYSE MCO has broken the Nov 08 lows. Nasdaq which has been giving the illusion of strength should also break below the Nov 08 lows, before all said and done.

Now here's the question that's bothering me. Why did we not even get a bounce into the 9 month cycle crest ? Did the crest come early ? Did we severely left translate ? If so, we could be seeing something like the action in 2002 where we got a July bottom. Now with the current breakdown, this becomes mostly an academic question. It really does not matter anymore whether SPX produces a sharp bounce into the 9 month top or not. The risk of a bounce should be handled with stops, in case it does materialize. If the move into the cycle crest was this bad, then what would be the scenario going into the 9 month cycle bottom in fall ? This market structure is very bearish and i am not sure what will/can turn it around.

Sorry, i don't have anything useful to say here, other than i am bearish and will continue to short bounces and cover oversold. That is, until some new information flows into the market.

Setup invalidated

2009-02-23T21:50:00.000-08:00

The Setup for a ST bottom from Friday got invalidated today, with the NYSE and Nasdaq MCOs cracking the Nov 08 lows. So price should follow. Back to shorting rallies mode.

ST Bottom ?

2009-02-20T21:34:00.000-08:00

I think so ! But that's just my opinion. The daily and the hourly trends are still down.

Since i called the Jan top, a day after it topped, i have been consistently bearish and have been calling for the retest/break of NOV lows. I did not find any trades on the long side worth playing from a swing perspective and so never played them.

Now today, based on my technicals and the way i view them, i would call the retest of Nov 08 lows complete, which i have been pounding the table for weeks. Now how the restest happened, gives me clues as to whether the Nov 08 lows will hold or break. Firstly it has not been an impulsive downtrend from the Jan highs, rather a torturous sideways to down trend. It was a struggle all the way down. We have not broken any of the NYSE MCO divergent lows so far, despite the DOW already having made a low and SPX coming close to it today. The VIX today peirced above the upper daily BB and closed below it. The P/C ratio again which pierced above the upper BB and closed below it. The volume on SPX was climactic. With such humongous volume one would have expected a wide range bar on the daily which did not occur. So someone clearly was absorbing all that volume. The NDX touched the lower BB on daily and smartly reversed. Now why didn't the VIX explode? Are the options folks stupid ? These are subtle clues. They never ring a bell at the top or bottom. Did they during the Jan top. How many really beleived that we would test the Nov lows back then ?

On the sentiment front, from a subjective viewpoint, what i have been seeing on the web is extreme bearishness. What i found rather interesting is many folks are now using the catchphrase "The trend is down !". That bravado at the bottom, when the SPX hit the 3-sigma lower band on the daily and the lower BB on weekly ?? That kind of bravado rarely plays off. The trend traders would be biting their nails in anxiety at these junctures or taking partial profits at the very least.

All this to me says that it was a wave B or wave x, with a wave C about to commence to the upside. That is also consistent with the 9 month cycle cresting sometime in March.

I normally don't comment on the VST stuff on this blog. But i could not help noticing the divergent low on the hourly and turn up. The 10-min charts gave a continuation buy, suggesting a gap-up on Monday. If we gap-up above 780 on Monday, that would also constitute an island reversal and would also produce a hourly buy signal. There are many big IFs at this point, which should all be resolved Monday morning.

Dollar and Gold

Looks like the dollar index topped out today for the ST. This would mean a trip back to the 78 levels again. I think GOLD will also commence a downtrip along with the dollar. I am still an IT bull on the dollar and think it will hit 100 sometime this year.

Good luck !

Heading into the 9 month crest

2009-02-17T23:46:00.000-08:00

In my Feb 7 update,i wrote,

From a ST timing perspective (daily charts), the current momentum has about 2-3 days of rally power left. If that rally tags SPX 880-900 area, i will be looking to short that area. Or if we breakdown from here and take out SPX 840, then i will be shorting into weakness.

We topped 2 trading days after my update. Now we have broken SPX 800. On one hand while that looks bearish, on the other hand we have the 9 month cycle heading into the crest. So it's not going to be a straight-down kind of an affair here, i am afraid. Rather i would expect some kind of a sharp bounce here, another bear-flush-out rally, as we head into the 9 month cycle top, which i am expecting around mid-March. I still beleive that this top would hold below the Jan 09 highs.

Once the 9 month cycle crests, then it's down all the way into the fall. Cyclicaly and from structural perspective, not to memntion the trend, the market looks very bearish heading into the fall this year. Trade safe.

Bottomline, i am expecting some kind of a sharp bounce here over the next 1-2 weeks before the big kahuna bear resumes with full force. VST bullish. ST - IT bearish.

Happy Trading !

IT Update and the upcoming 9 month cycle top

2009-02-07T21:59:00.000-08:00

This week's action was mildy surprising to me from a ST timing standpoint. I did not expect this bounce. Or to put it differently, i did not expect this size a bounce. I had thought we were consolidating between SPX 810-840 on the hourly charts. The breakout above 840 came as a surprise to me.

This is called trend trading hell !. The hourly starts uptrending. You look for a pullback to enter long and the pullback goes so deep that it starts downtrending. Then you look for a bounce to short and then the bounce goes so higher that it starts uptrending. Rangebound traders rule this kind of market.

Now the SPX hourly has started uptrending. But the daily charts of most indices SPX, DOW, RUT and the XLF are all downtrending, with the exception of NDX which is uptrending.

Now here's the dilemma. If you beleive a new upleg on SPX has started, then you look for the next pullback on hourly to buy on the SPX. If you have faith in the daily downtrend on SPX, you short the next overbought condition on SPX. Now which one is safe ? Looking at this bear market over the last one year, shorting hourly overbought has been more rewarding then trying to buy the pullback on hourly. Again, the next pullback on hourly, if it falls below 840, then the hourly uptrend is history.

This looney sideways chop can go for another 3-4 weeks wearing out most traders trying to trade the trend, which is down. The reason being that Nov was the 9 month cycle bottom in my work and the next 9 month cycle cresting would come in the late Feb to early March period. Now the downtrend is fighting against this upcycle which is moving into it's crest, which is producing a sideways trendless market. Until the 9 month crests, this sideways cause building can continue, before another large collapse. I still beleive that the 9 month cycle top will be a secondary top below 1/7/09 on SPX.

From a ST timing perspective (daily charts), the current momentum has about 2-3 days of rally power left. If that rally tags SPX 880-900 area, i will be looking to short that area. Or if we breakdown from here and take out SPX 840, then i will be shorting into weakness.

GOLD
One of the commnets on my blog last week was from Greenie as to how Gold is rallying in the face of a deflation. I disagree. Gold is not rallying, but is in a large sideways consoldiation on the weekly charts. Well Gold is certainly not collapsing as it would in a traditional deflation. Because, it knows that the morons controlling our financial destinies will start monetizing this mountain load of debt. This will surely happen at the bottom of the deflation when desperation will overrule sane thinking. Then i think, GOLD will have one of the biggest rallies of our lifetimes !. I also think we will witness the greatest bloodbath in the U.S treasuries, when the monetization starts in earnest. Gold is topping both in the ST and IT and should make a trip below 700 area again based on my work. Dollar index is headed to 100 in the IT.

Good luck !

IT Update

2009-01-30T19:59:00.000-08:00

In my last update on Jan 9, i had said that we would visit the 850 area and then i will reevaluate the next course of action depending on the price action near the 850 area.

We tagged the 850 area and after a brief consolidation between 810-850, much to my surprise we broke out above the horizontal consolidation, pushing the hourly trend up, while the daily still remained on a sell. And we gave back all that gains in two days pushing us back into the horizontal channel, confirming a failed breakout. Now everything is back in harmony - hourly, daily and weekly are all down. So to keep it simple, the next bounce on the hourly is a short.

The raging discussion these days is the amount of sideline money that will start a rally from hell !. Well if there was so much sideline money, what's this distress in the global economy we are talking about ? Why this drastic slowdown in consumer spending ? Why these massive foreclosures ? Maybe all these problems are related to the sub-prime of the society - the poor suckers. There must a section of the society totally unaffected by all these, waiting with of wad of sideline cash to throw into the value that this market has created. Bring it on - we need ya !

From the book The Plungers and the Peacocks

During the 30s

There was this businessman who was highly profitable during the boom. Several months before the crash, he had the intuition to get out. Even after the 1929 break, when his stock had fallen to ridiculous levels, this man still felt its price was too high and refused to nibble. But then, it tumbled to the point where it was providing an 8 perecent yield and he bought a heavy block of it. He refused to have any truck with margin operations. The price continued to slide and the stock skidded to a level where it was yielding 12 percent. Then, and only then, did our man think to take on another big block of stock. The stock continued to fall and twelve months later it was yielding 20 percent. Having no more margin to put up, he was sold out by his bankers.

Such is the reality of value investing in major bear markets. Now let the value buyers chase the market all the way down. I will keep repeating this. We have broken the cycle degree channel from the 70s. A cycle degree bear market will not leave a section of the society unaffected, creating a value buying opportunity for miilions. Rarely does a secular bull start with millions riding on its back. There's just no wall of worry for a bull to start here. There's only hope - like the TARP, the bailouts, Obama, Fed, Bad bank, sideline money et al.

This is not an investment environment, but a trading enviroment. As for trading, there's nothing much to say - short the next bounce on the hourly.

Good luck trading !

2009

2009-01-09T18:43:00.001-08:00

LT update
Like the Zen philosophers say

"Sitting quietly, doing nothing, spring comes, and the grass grows by itself"

A sustainable LT bottom will take time and the cycle needs to run it's course and then a new bull would start by itself. We don't need no stinking beaurocrats or politicians to do that job for us. The first signs of a LT bottom will become apparent on the weekly charts and weekly indicators. I will keep updating my LT indicator every few months to see where we stand. In my last post, i showed that we were nowhere close to a LT bottom, let alone a IT bottom.

All those folks who have been spared of last years massacre, have started asking again as to what's the best area in the stock market to put their money to work. A cycle degree bear market woudn't leave a section of the society unaffected, letting them catch the bottom of the bear market without pain. In other words, the next cycle degree bull will not carry a few million value investors, wannabe Warren Buffets on it's back. Most of these value investors will be financially and psychologically destroyed before the next major cycle degree bull begins. Investing and trading interest will dwindle to zero as has been the case with all other cycle degree bear markets. I really have no clue at this point whether we will simply zig-zag down or we do a large consolidation around the 700-1000 levels in 2009. It would be pure speculation. But one thing is writen on the wall. 2008 was the worst year in many decades for the stock market. 2009 will go down as the worst year for the economy, of the last many decades. Paying bills will take precedence over buying stocks. Cash will remain the best investment IMO until this deflation cycle runs it's course.

IT update

Before i left for my vacation, i said that a minor low was in place and we should see some sort of rally on the daily charts. And we got that minor rally to the SPX 940 area.

To save a few keystrokes, i wrote this on traders-talk 3 days back

I have many reasons here to beleive that we would fail on the daily charts i.e see a strong rejection on the daily charts. I can state them, but it's putting the cart ahead of the horse. We peirced the upper BB on the daily over the last two days, but closed below it. Now in a bull market, the next logical step would have been that the BB would have adapted to the rising prices and flared up. But this is still a bear market by all measures and the logical resolution would be a rejection from this general area with the upper BB acting as resistance. Looking at the MCOs, phenomenal amount of money has been thrown at the markets in the last 30 days against the intermediate trend. But with all that ammo, the power of the rally in terms of price momentum has not even been half of that 12 day decline from 11/5 top. We'll see...

Now we got the rejection off the upper BB on the daily charts. I have some VST projections to SPX 850 area and if that does not hold then a trip to retest the Nov lows or a breakdown below it will be in order. We are on a swing sell here. I will evaluate again, once we reach the 850 area.

The NYSE MCO superpike has been the discussion in many TA forums. I am still of the opinion that it was good money thrown after bad. All the money that flowed into the markets were thrown against the intermediate trend, with the hope of turning the intermediate trend. In a bull market the MCO spike is a precursor to the rally to follow, as that additional money flow would only accelerate/continue the uptrend. In a bear market, it would at best neutralize the downside damage. Like a scuba diver reaching neutral bouyancy, using a combination of his weight belt and BCD, this market will achieve it's neutral bouyancy sometime in the coming months. That should be apparent in the weekly divergences. If and when that happens, i will respect any spikes in the MCO. I am still waiting for that.

Good luck everyone.

LT update - Dec 8, 2008

2008-12-08T19:34:00.000-08:00

In my Last update on Oct 10,2008 i said we would break the Oct 02 lows marginally and start a bear market rally.

It's been a while since i posted my LT indicator. Just thought i will update where we are, to add a little bit perspective to many LT bottom calling that are happening on the web with little to nothing technical evidence to support their calls. There's also a lot of discussions going on as to how we are almost close to a bottom similar to 2003. Nothing is further from truth (technically speaking) as the charts speak for themselves. Look at the massive base building that occurred near the 2003 lows with some nice divergences on my LT indicator.

This indicator called the onset of bear Sep 2000, onset of bull in June 2003 and onset of bear in Jan 2008. Again this is not an IT indicator, but a LT indicator. So one is bound to miss the bottom 10-15% of the rally, if confirmation is needed from this indicator. But if one is playing the LT, why the uncontrollable anxiety of missing the bottom 15%, on what would turn out to be a multi-year rally, i ask ?

One look at the indicator says, where we are now and what is required to create LT divergences on this indicator and how long would it take to build such a long lasting bottom. Any serious technician worth his salt can make some educated guesses on that.

As for the ST, today's action took out the prior swing high on the daily charts at SPX 916. So that confirms that a minor low is in place on the daily charts. That does not mean one can go and buy the strength here, like one would have done in bull markets when the monthly, weekly, daily are all uptrending. In a bull market, if you err on the daily, the weekly trend would bail you out. If you err on the weekly, the monthly would bail you out. Currently with only the daily uptrending, if you err on the daily, you would get killed by the weekly. In other words, at this point, one has the latitude to err only on the hourly charts and get bailed out by the daily. That to me, means, wait for the next hourly oversold condition with divergences and hop in on the rally until it exhausts itself. If the next hourly oversold comes near the prior lows or below that, too bad ! :-). Looking at the NYSE MCO itself, the bulls have probably used up all their ammo already. We'll see...

As for the economy, things should only start downhill from here. The worst of the economic conditions is always past the stock market lows. This whole infrastructure spending is nothing more than another crappy measure by the government IMO. Mimicking the bygone era solutions to new age problems only shows the lack of ingenuity. Moreover, if one believes that infrastructure spending got us out the Great Depression, then yes, i would also believe that Al Gore invented the internet. The cycle needs to run it course. Until then all this government spending and bailouts is throwing good money after bad, throwing precious liquidity into inefficient goverment enterprises. Sorry, i keep forgetting, capitalism as we knew is dead.

Enjoy the rally. I will be back next year after my holidays.

LT - Higher degree trend change !

2008-10-10T21:08:00.000-07:00

Last week i warned of a higher degree change, if SPX 1040 was cracked. The first warning shots of a higher degree trend change were fired when SPX cracked 1170, the wave 4 support of the impulse from 2002-2007. If 2002-2207 was a cycle degree advance, we should not have seen the SPX 1170 broken on a weekly closing basis and a strong rally should have emerged from that point. The last technical projection was 1040 as i posted last week and it's a virtual air pocket from there with no support until Oct 2002 lows. So the market action is loudly saying that this is longer a primary degree decline but a higher CYCLE degree decline and Oct 02 lows will be taken out by the time this bear market ends. So a CYCLE degree wave 4 is in progress at this point unless proven otherwise.

Click on the chart to enlarge it

A little bit of history and perspective. This is all again of no trading value and is of only academic and intellectual interest. If you are not interested in that, please skip the following section.

There were calls that 2000 ended a secular bull market. Nothing could be further from truth. The only sector which made a secular top in 2000 was the tech. Most other major and minor indices took out the 2000 top after the bull started from 2003, some marginally and some by a large extent. Fortunes were made in virtually every sector of the market globally, while the permabears were crying bear market rally for 5 years. While the term secular can be subjectively intrepreted, e-wave does not allow that luxury. It's hard to categorize a top as secular when more than 80% of the sectors make their lifetime highs.

The advance out of 2002 mean't two things

1) A major cycle degree advance has begun from 2003, which is what i beleived.

2) The primary degree wave 5 of CYCLE III was in progress.

In hindsight, it is now apparent that 2) was correct and we were concluding the large secular advance from 1975. The 2002 lows never broke the CYCLE degree channel from 1975, leaving the CYCLE degree advance intact. We have now broken that CYCLE degree channel, which means 2007 marks the CYCLE wave III top and a CYCLE wave IV is now in progress. The LT support for CYCLE wave IV should come near the lower degree wave 4 (primary degree wave 4 of CYCLE III) which is the Oct 02 lows. We will probably undershoot the Oct 02 slighly before the bear is over.

This is a chart i posted on my blog a few years back. Given that this bear has progressed to a higher degree, i will have to make a structural adjustment by moving the CYCLE III top from 2000 to 2007.

Very LT count

Click on the chart to enlarge it

Since this is a CYCLE degree bear market as opposed to the Super Cycle degree bear of 1929, the economic conditions during this decline will be no where as worse as 1929. We are dealing with a wave of degree less than 1929. Nevertheless it's going to be tough times for the next few years. Cash will be king. A major value buying opportunity will arise in the months and years ahead, but irony of every major bear lows is that folks will be scrambling to find money for their next meal and buying stocks will be the least of their worries/priority, when it presents itself. Stay defensive !

Once again, wild projections like DOW 4000 and DOW 400 are getting thrown around. It doesn't cost money to make such wild projections. Can it get there ? Who knows ? But do we have technical projections for that ?. Nope !. To come with LT downside projections, we need a intermediate term multi-month rally here, which fails on an intermediate term basis. Right now we are in a free fall with no bottom in sight. The bottom could come anyday, between here and SPX 700, after which a intermediate degree bear market rally should begin. VXO hit 100+ and the volatiltity is insane. Trade Safe ! Good luck.

IT/LT update - 10/5/2009

2008-10-05T19:55:00.000-07:00

I was completely wrong in assuming that a major wave A had ended and wave B had begun. That cancels all my upside projections for now. 9/18 bottom was as good as it gets. Horrible sentiment. A violent price move out of that. A kickoff move on the NYSE Vol osc. And the price finding support a LT wave 4 support and a technical measured move. But none of this was sufficient for this vicious bear. I was expecting a 50% retrace of the 9/18-9/19 move and a rally after that. I was cleary proved wrong.

It's very concerning that the market failed to hold at the previous wave 4. It's very concerning that the market did not hold the double top measured move projection to 1170. It's also very concerning that weekly candle hammer was reversed with even more violence.

Now given that the double top projection to 1170 did not hold, the next measured move projection comes from the (2/1, 5/19) double top, although not a perfect double top. Depending on whether you use 2/1 or 5/19 for the projection, we get two targets - 1040 and 1070. If 1040 does not hold, then there are no further technical projections at this point in my work. That to me would mean a larger degree trend change may be in works. Too early for me to jump the gun on that and make bold sorry projections. Just to give a clue on how overextended the market is here, look at the weekly bollinger bands. Price close way below the weekly BBs and failed to mount a reversal out of it. In the last 10 years we have seen two instances where this kind of configuration presented itself - the week after 9/11 and July 2002.

Bottomline, i will be watching SPX 1040 with interest for clues on possible larger degree trend change. For now my wave count remains the same, except that the intermediate wave that i thought bottomed on 9/19, continues to extend.

P.S - BTW, i closed my SPY positions that i opened last week for 60 points gain, which i posted on traders-talk, since i think we are at the crossroads of a possible trend change of higher degree.

Good luck !

Da plan

2008-09-29T12:39:00.000-07:00

The market action today clearly proved me wrong. Period !

Now the question is how do i exploit this opportunity. I don't trade when VIX is above 40, which is currently around 48. My trading account is fully in cash.

But this is a great time for investment or so i think. I bought a 25% position in my retirement account around SPX 1115. Will buy another 25% if we go down to SPX 1015, which is a big "IF". That would put my average position around 1165, with a stop around 950. A 10% stop. In the worst case, my investment losses would be around 5%, if i get stopped out.

That's da plan. I am in 25%. Let's see how this goes.

IT/LT bottom update

2008-09-27T23:25:00.000-07:00

I posted last week that we made a LT/IT bottom and a multi-month rally lasting 6-8 months should begin. Many are still calling for Oct lows. I will have to respectfully disagree with them. What we saw was historical off-the-chart volume at the lows. It just blows my mind ! Then looking at the NYSE vol MCO, we had a kick off move on the MCO off the lows. That combined with the price action out of the bottom says in no uncertain terms, that we have put in a major bottom here. Now if we go up and take out SPX 1265, that would be the confirmation that a new uptrend has started. The kickoff move out of this bottom has been bigger, faster and violent than of 1/23, 3/17 or 7/08. That means we are starting a wave which is "higher in degree" than any of those waves that emerged out of 1/23, 3/17 or 7/08. Consequently the time and size of this wave should also be bigger than any of those ST moves. I posted the projections for this wave B in my previous post and i see no change to that.

Now as for the sentiment, this is by far the worse LT sentiment that i can recall in a while. The news of death of America is once again exaggerated. As i said last week, the asian regional newspaper journalists who think Freddie Mac is a hambuger, also have realized the impending death of America. When you get historical volume and a kickoff move on the NYSE Vol Osc out of this kind of extreme sentiment, it can only be a major IT/LT bottom. Time will tell...

LT Update - Voila !

2008-09-20T21:52:00.000-07:00

On Aug 23, i wrote that we would head into a major 9 month cycle bottom and we did. On Sep 15, i posted that we should end the climactic phase in about 1-2 days. In my Sep 17 post i said that Sentiment was ripe for a major bottom and the pattern,price and time was ripe. Now one could blame the bottom on the Fed/Treas intervention etc. Yes, but that's not technical analysis. Hasn't the Fed treasury been intervening constantly over the last few weeks. Why did the market choose to bottom on a particular day ? Well, if one is a technical analyst, it would have been hard to miss this bottom. 2 days prior to the bottom we had nasty breadth plurality, with decliners exceeding 3000+ on the NYSE. During Thursday morning trade, the advancers were running around 2000, while the market started to plunge. Decliners never went above 2000 during the selloff. Not to mention the capitulation volume over the last few days. Tell tale signs of an approaching bottom. Of course, the advance out of the bottom got exaggerated with the annoucement of the short selling ban. But point is, if you are TA guy, you would have been prepared for this assault. That's what i had been preparing for, with my posts over the last few days on this blog. Many are calling this as a ST bottom. But i disagree and i am going out on a limb and calling this a major IT bottom. A multi-month rally lasting 6-8 months should begin from here.

My LT projection for SPX was 1170+/- 20 points and we acheived that this week. The market progressed pretty much in the way the pattern was projected. An a-b-c-x-a-b-c.

Prior LT projection

Given that this was the largest, fastest 1-week rally since the bear market begun in Oct 2007, the post market action out of the bottom loudly says that the first leg of the bear market is likely over !.

Now to the fun part on the projections. Assuming wave A is over, Wave B typically retrace 50-78.1% of the wave A rally. Given the fast nature of the rally out of the bottom, and relative to where the price now is w.r.t to the weekly Oscillator, there's ways to go before the weekly charts get overbought. So it's unlikely that the 50% retrace will mark the end of the wave B rally. Timewise it took almost 12 months for the wave A rally. So the wave B rally should last at least for 6-8 months. Given the time requirement and the room on the weekly momentum charts, i would say the target for this Wave B rally should be at least the 61.8% retrace, which comes around 1407. That's my prelimnary projection P1. If we exceed and hold above that, we could tag the P2 target (1470), which is quite remote, but nevertheless possible.

The necessary divergence on the NYSE MCO is in place. The necessary momentum divergences on the weekly charts are in place. I dont' see a case for a retest. I only pray that the bears don't get caught in another gap-up over the weekend. A lot of psychological damage has been made on the bears in the last 2 days. The outrage over the govt intervention and disbeleif in the rally, will ensure that the bus will never get loaded on this upleg. Keep an open mind and trade well ! Good luck.

Sentiment

2008-09-17T22:24:00.000-07:00

Sentiment here is appropriate for a major bottom (no i am not talking about a ST bottom). What a contrast ? It was just 8 months ago when the chinese housewives were buying the Shanghai with both their hands and the Indian housewives went nuts, all plunging into the Reliance IPO when BSE was at 21000.

When S&P cracked 1380 back in January, i posted the LT sell on the S&P with a target of 1170+/-20. There were no talks about the implications of the U.S market breakdown. It was all about how the emerging markets were immune from the U.S developments. BSE was at 20,000+ and SSEC was somewhere around 5500 then. Now that the BSE is close to it's LT objective of 12300 and Shanghai now below 2000, stories about the death of U.S is appearing on the front pages of the asian newspapers, written by journalists who think AIG is an index and S&P a stock ! And mind you, the stories are appearing even on the asain regional newspaper frontpages !

Time to get bearish was 2 weeks back when the trend turned. At the tops and the middle of the trend, there are plenty of trendlines, forks, bollinger bands, fibonanci, pivots, etc to provide support and a slope to slip down on. When all supports are broken and there's nothing to hang on, then the raw fear takes over, like now. The crash topics take center stage. Newsletter writers warn their subscribers of the dangerous volatility and ask them to stay in cash (and you need to pay these newsletters folks to learn to stay in cash. Amazing !). Folks, it's nothing new here. I bet every major IT bottom has felt that way. Most typical of a 9 month cycle bottom.

Now this is neither an advise to bottom pick nor a passage about my knife-catching abilities. Just a sentiment read. I don't trade these bottoms. I am just not interested. I just scalp the volatility, beacuse unless one has the ability to take 50-100 SPX points drawdowns calmly, they have no business trying to establish positions here.

Time, Pattern and Price are ripe here for the completion of the first leg of the bear market. Now let the market speak....

9 month cycle update

2008-09-15T20:12:00.000-07:00

Since my Aug 23 update, the market has been severely pressured by the 9 month cycle. Given that the cycle is on track, i would expect the lows to come sometime the end of September. Negative breadth climaxed on today's selloff and the volume rose as we broke SPX 1200. We are entering into the selling climax phase of this decline, which should last a couple of days, which means some nasty volatility and wide range bar days. I still expect the market to bottom in my LT bottom projection area of SPX 1170+/- 20 points. If the market puts in the internal bottom in the next couple of days, then we should see a bounce and retest towards the end of this month. That's just a guess at this point. Until the daily trend turns up, think shorting the bounces, not picking some elusive bottoms. Supports mean squat in strongly downtrending markets ! It's "Slipping down the slope of hope". It's gonna be one hectic week. Will post an update, end of this week.

Good luck !

9 month cycle bottom

2008-08-23T21:10:00.000-07:00

I am not a cycles guy and i don't watch short-term cycles. But i do pay attention to the 40 week-cycle, i.e the 9 month cycle. One of the most powerful and reliable cycles IMO.

Ideally the cycle is due the end of Septempber. If it right translates, the way it did the last time, then it's due end of Oct to first week of Nov.

There are wide range of opinions concerning the LT scenario. Opinions range from a dark bear breaking the Oct 02 lows to a LT bull which has already resumed. Some remain in the middle camp which are calling for a cyclical bear. I continue to remain in the middle camp i.e a primary degree wave 2 from the Oct 07 top (Wave 1 being the primary 1 from oct 02 - oct 07).

The coming 9 cycle bottom would give more clues about the intermediate picture. Ideally we should break below SPX 1200 and put the necessary divergences on the weekly to end the primary degree wave A of 2 and start the primary degree wave B of 2.

On the other hand, if the 9 month cycle lows hold above SPX 1200, then it would mean that the primary degree wave A of 2 terminated at SPX 1200 and we are already in a primary degree wave B.

The coming 9 month bottom will provide strong clues about the IT scenario and put to rest all opinions, as the market will once again assert itself, leaving behind all opinions in the dust !

Weekly Trends - Aug 20, 08

2008-08-20T20:29:00.000-07:00

Gold and Dollar - My call on July 27 was spot on. Gold plunged below $800 and Dollar tagged the 77-78 area. Now Gold and Dollar are at key LT pivot points. If the bull market in Gold is alive we should start a screaming rally and take out the March 08 highs. That would be the expectation of a trend follower. However, given the concerted co-ordinated efforts among the central banks across the world to combat inflation (many of the asian bloc countries already in a run-away inflation mode), it's possible that the inflation cycle has peaked and so has the commodity bull cycle. That's just my opinion. I will let the market speak for itself.

SPX

Nothing has changed since my July 21 update. We were at 1260 then and we are around the same levels today. SPX probably topped at 1313. If not, there are two key resitances overhead - 1327, which is the May 06 highs and the 200 SMA, currently around 1365. 1365 also happens to be a key horizontal res (March 07 and Aug 07) bottoms.

As far as the daily charts goes, it's a tough choppy market to trade here. It's the hourly charts where the action is. How do i play this? To me, it's simple. Currently the daily momentum is down. So keep shorting the bounces on the hourly charts. If the daily momentum turns up, keep buying the dips until either 1327 or 1365 is reached.

Good luck.

Weekly trends

2008-07-27T21:41:00.000-07:00

SPX - I presented two counts in my LT update last week, one in pink and other in blue. Both the counts are equally probable at this stage. There's not enough information to rule out either scenarios at this stage. A retest of SPX 1200 with either a higher or lower lows with divergence (count in blue) would be intermediate term bullish. If the count in pink materializes, then we should rally to about SPX 1335-40, before the next downleg starts.

Dollar, Gold - The weekly trend on the Gold remains up and the Dollar down. I got a countertrend sell on Gold and coutertrend buy on Dollar on the weekly charts, end of this week. Dollar index should rally to about 77-78 before it peters out. In the meantime Gold should drop to about $800, before the next weekly uptrend starts.

LT Update

2008-07-21T20:42:00.000-07:00

Back in January, i made a case for a bear market

http://nav-ta.blogspot.com/2008/01/big-picture-lt-sell.html

So far the progression of the bear seems in line with the big picture. My LT indicator remains in a deep bear territory, which will take a while before it recovers above zero. As i belong to the confirmation based school of TA, i will wait for that indicator to cross back above zero and a potentially completed wave pattern to call the beginning of the new bull, whenever that happens.

In the LT update i had a projection of SPX 1170+/- 20 points for a bottom. We hit SPX 1200 last week, 10 points above the high end of the projection.

From here the market can take two paths from a wave and internals perspective. If we rally straight up from here to about SPX 1300-1320, without doing a retest, then we are setting up for another failure and i would go with the count in pink. If we were to do a retest of the SPX 1200 area with positive divergences, then we would be making one heck of a bottom and should be good for a multi-month rally (the count in blue).

Blue or Pink Jose ? It's futile to guess. I will let the market speak. Bottomline the bear is far from over, but we are setting up for a major bear market rally here.

ST buy signal at the close

2008-07-01T20:33:00.000-07:00

It was wild volatile action in the markets today, typical of a bottoming market. The market apparently did not go into a selling climax, which many have been anticipating for weeks now. Maybe too many are looking for the climax. Maybe the system is clogged with shorts. Who knows ? What really matters is price, breadth and volume. Today we had a divergent bottom on both NYSE breadth and Vol MCOs. My price momentum system on the hourly also issued a buy signal. These signals are good for anywhere between 20-60 SPX points.

Is this an IT bottom ?. Too premature to even think in that direction. But if we start seeing big volume and breadth spikes, then maybe we are on to something big. One baby step at a time...

P.S - Remember, the mother of all interventions by the Fed in March 2008. That was an engineered bottom and today's retest of that bottom is sort of vindication for those who beleive that in the long run, the markets are on their own and too big to be manipulated by the central banks or any other financial powerhouses.

Weekly trends - 6/27/08

2008-06-27T22:19:00.000-07:00

SPX

As i noted last week, with the break of 1324, the IT trend turned down and i had weekly support target at 1280-90. We tagged that support this week, but there is neither a divergent setup on daily or even the hourly charts for that matter. I told one of the posters on traders-talk, that it's unlikely we get a complex bottom, cuz if we do, we can forget the bear market for a while. The market's on a mission here, a mission to make new bear market lows. That's the reason it's been so persistenty declining and not making any divergent bottoms. Everyday it's the same story. Some silly bounce, the breadth looks good in the morning and gradually deteriorates into 2000+ decliners by mid-to-late day. That's strong instituitional liquidation going on.

The break of 1324 was a disaster for the bulls. Once the market enters a IT downtrend, the reversal ain't gonna happen easily. We need to see complex bottoming action. We need see some 90:10 volume days with a big breadth spike. The only thing that would bring that kind of a buying interest would be either another huge Fed intervention or a market crash of about 100-150 points from here, which would undoubtedly bring an army of bargain hunters. Otherwise, 20-30 point bounces on SPX aside, the IT downtrend should continue.

As for the support, 1380 weekly support has held so far. I am not expecting any big bounces here other than the 20-30 point variety which is again a short in my book. If i get any ST buy signals on the daily charts, i will post an update on this blog.

The Asian markets got slaughtered week, particularly the BSE. BSE dipped below the 14000 mark, closing at 13800. The montetary authorities have started tightening the screws hard, with India in a runaway inflation mode. My LT forecast for BSE, which i posted on this blog a few months back, has it's first support around 12300. I doubt that support will hold either in the LT.

Gold, Silver and Euro

Gold, Silver and Euro continues to remain in a weekly uptrend. Both Gold and Euro issued a continuation buy this week. But it was not confirmed by Silver. Until both Gold and Silver confirms, i am staying out of these markets.

Weekly Trends - 6/20/08

2008-06-22T20:38:00.000-07:00

SPX

Boy, was i wrong !

I made a call just a day before the May top and projected a target of SPX 1350-60. My targets were met, but got undershot. But the IT trend was up in my book as long as SPX 1324 held. Given that we held SPX 1324 last week and got a divergent buy setup (a 70% odds signal), i thought we had begun the next upleg towards SPX 1500 +/- 20 points. The market action this week clearly proved me wrong. Now that cancels my SPX 1500 +/- 20 points projection.

Now the next support of importance on the weekly charts comes around the 1280-90 area. The 1404 double top has a measured move to SPX 1300 on the daily charts. So it's safe to say we should bottom somewhere in the 1280-1300 region. A bottom here could happen by a basing action, with multiple retests in the 1300 area or a climactic drop into the 1280 area. Which one ? I have no clue. Whenever the next buy signal on my daily charts show up on my trading system, i will post here (right or wrong !).

Gold, Silver and Dollar

As i said last week, there are no easy trades in these markets, as the weekly charts are pretty much neutral i.e sideways action, with the weekly 34 EMA flattening. A trending move is about begin in these markets pretty soon, looking at the basing action in the Gold/Silver on the weekly charts and the rejection of the 34 ema on the Dollar index weekly charts. Essentially the inflation theme continues in these markets.

Inflation is running out of control in the asian bloc. Many countries now have official inflation numbers in double digits. Some of the countries like vietnam have inflaton running above 25%. India's official inflation numbers which were barely 6% a few months back now stand at 11%. Wow, nearly 100% increase in a few months. Gotta beleive these govt numbers. Now how does this play out. Will this enter a runaway inflation mode, furthering the commodity rally or will the central banks tighten real hard and cause a commodity collapse ? Who knows ? That's why i hate fundamentals. Sorry for digressing, but the inflation situation looks alarming !

No positions in any market, but looking to enter soon, based on confirmation.

Good trading !

Weekly trends - 6/13/08

2008-06-14T22:36:00.000-07:00

Last week i showed a chart of the NYSE Vol MCO with a potential divergent setup. Now the divergences were blown away and we proceeded towards my longstanding target of 1350 for this correction. We'll the price undershot even more into SPX 1331.

What we had last week was a potential divergent setup. But what we have end of this week is a confirmed diveregent setup on both the NYSE Vol and NYSE breadth MCOs. So i will go out on the limb and call the 6/12 bottom as an important bottom for many months to come. We should begin a multimonth advance here which should take us into the SPX 1500 +/- 20 points area.

Again divergent bottoms can be simple or complex. What we saw in March 17 was a complex bottom. Those kind of bottoms are violent, emotional and glaring. While anyone can spot them, it's difficult to trade them as they tend to occur at major IT bottoms which tend to be hypervolatile affairs. We see retests on the Osc itself in the complex bottoming situations.

Simple bottoms are simple. Hell, how can i describe them ?. 1/23, 4/15 and 6/12 were all simple bottoms, which i have marked on my chart. They don't display the complex retests on the Osc. They tend to occur in the middle of IT trends, usually secondary bottoms. They are more subtle and tend to fool the most. A good example was 4/15 when most were bearish and got fooled. Same siutation here again.

Again, there are tons of fundamental reasons to be bearish here. But the technicals are saying a bottom here. And i will go with the technicals.

Gold, Silver and Euro - They all remain in weekly uptrends, but in a corrective configuration, which is very diffuclt to trade here. So nothing compelling there for me.

Weekly trends - 6/6/08

2008-06-06T22:17:00.000-07:00

SPX
Sideways to down it was, as i posted last week. I was expecting 1425 max on the upside, which got undershot. The downside today was pretty dramatic. We are now near my downside target of SPX 1350-60 area. I still beleive that this area will provide the support and we launch a multi-month rally from here. The key here is the NYSE Vol MCO which is putting in a divergent bottom relative to price.

The key is not the divergence itself, but the price reponding to this divergent setup. So we need to see the divergence hold and price confirming by giving a daily buy signal. If that happens then we are on track for a multi-month rally here. Now if the NYSE Vol Osc breaks that blue line in my chart, that's a warning sign that something big on downside is coming. Pricewise, if 1324 cracks then the IT uptrend is over and the next leg of the bear market has begun. That's not what i am expecting here, but something to be open minded about.

I have not seen the indices as broken as it is now, in a long time. NDX and RUT are not even in daily downtrends and yet to break the 5/30 weekly chart lows. But SPX chart looks completely broken from a daily chart perspective and holding on to dear life from a weekly perspective. Who's real...who's faking ? We should know soon.

Gold, Silver
As i noted last week Gold and Silver are in some sort of sideways congestion before we start a trending move up. Many are expecting a big downslide in Gold, which i am not. I will likely take a position in Gold sometime next week. I need to see some more strength before commiting, to avoid whipsaws.

Dollar
Yawn...The weekly downtrend continues.

OIL
The weekly uptrend continues. A very dangerous market here, which appears to be in a blow-off phase.

Weekly Trends

2008-06-02T00:36:00.000-07:00

SPX
The weekly on SPX remains in an uptrend with an eventual objective of SPX 1500 +/- 20 points. Only a break of SPX 1324 would invalidate the weekly uptrend, and would mean a multi-month decline has started.

The daily on the SPX is currently down and the market should remain rangebound for the next couple of weeks between SPX 1425 and 1350. My hourly model on SPX remains on a buy with a max upside target of 1425 this week, after which i expect a test of the SPX 1350-60 area.

GOLD and Silver
Gold and GDX remains in a weekly uptrend despite all the downside volatility this week. Silver which went to weekly buy last week entered a sell this week. The non-confirmation between the Silver and Gold continues. To me this appears to be a sideways congestion pattern, before the uptrend resumes on the weekly charts. However this is not a easy market to trade with confidence here. Closed my GLD position at breakeven this week and SLV for a 2% loss. Will reasess Gold based on this weeks action. Staying out for now.

Dollar
Dollar index remains in a weekly downtrend. So boring...

OIL
Oil remains in a weekly uptrend. Yawn...

Weekly trends

2008-05-25T20:35:00.000-07:00

Gold
Remains on a weekly continuation buy. Target still remains at 970-980. Still long GLD from 89. Took partial profits this week and bought some silver.

Silver
Issued a fresh weekly continuation buy this week and confirmed Gold's last weeks advance. Bought some Silver using SLV at 80. Will add more if we get to 75.

Dollar
Dollar index went to weekly continuation sell this week. Initial target is about 69-70. No positions here.

Stocks
I was expecting a ST top on Friday last week. But it came a day late on Monday. We are approaching the ST target on SPX around 1360-70 area, where a multi-week rally should begin which should not take out the 5/19 highs. SPX appears to be in a mulit-week sideways to down correction.

Financials
My call on SKF last week was spot on. I had a target of 109-110. But i took profits prematurely at 106. XLF has a downside target of about 24 based on the weekly charts and we are almost there. No positions here.

Not a bear market a la 2000-2002

2008-05-20T18:55:00.000-07:00

Back on Jan 19, i posted a LT chart of SPX showing the completion of a 5 wave impulse with a wave 5 extension. That completed the wave 1 of the impulse. That also said a wave 2 bear market was underway with a LT target of SPX 1160.

LT sell

The unfolding structure and the market dynamics at that time called for a quick drop to 1160. But the massive Fed intervention created a temporary bottom around 1250 and we rallied.

I said in that post

So we in a primary degree wave 2 bear trend at this stage, until proven otherwise. The implication is that the Oct 02 bottom was a cycle degree wave 4bottom, which should not be violated for decades to come.

Many bears are expecting a repeat of the 2000-2002 bear market and some expecting the Oct 2002 lows to be taken out. I have to respectfully disagree here on both the counts. 2000-2002 was a cycle degree collapse. Right now we are in a primary degree wave 2 bear trend. Big difference.

The last two of weeks of action has pretty much ruled out a 2000-2002 style collapse. Remember in bull markets the tops are complex and the bottoms are simple. It's the opposite in the bear market, when tops tend to be simple and bottoms are complex. Take a look at the weekly CCI during the entire 2000-2002 bear. As soon as the weekly CCI used to get overbought i.e move above 100, it used to result in a immediate collpase in prices. The weekly CCI never stayed above 100 for more than a week or two. That's a simple top and a classic weekly downtrend in progress from a momentum perspective. Right now we are dealing with a situation where the weekly CCI has been above 100 for the last 6 weeks. That's not a simple top, but a complex top on the CCI. In other words we have started uptrending from a momentum perspective. Although we have the 8 EMA still below the 34 EMA, momentum which leads price is saying we are uptrending on the weekly timeframe. That is not exactly what you would see in a full fledged bear market.

Now whether you call it a bull market correction or a bear market depends on one's definition. To me, it's not a bull market, until we have the weekly MACD above zero and bottoms above bottoms configuration on the weekly charts. So i continue to label it as a bear market.

Now the bull-bear dividing IT pivot comes around 1324. As long as SPX 1324 holds, the path of least resistance on the weekly chart will continue to be upward. For IT traders, long is the right trade. I was expecting a ST top on Friday, but it came on Monday. Now this ST decline will tell the story for the next 6-8 months. If we get a choppy sideways to down decline into SPX 1360-70 area and if daily gets oversold and turns back up around that area, then it's very bullish IT and we could move up to test the SPX 1500-20 area. For the bears to regain control, we need to break the IT pivot at 1324 - Period !. Now i keep asking myself, is there energy in the bear to do that ? Without putting my own bias in the front, i will let this ST decline give me clues.

Now does that mean the bear market ends if we hold the SPX 1360-70 area. A five year bull market is not going to end with a mere 6 month correction. Structurally, it does not make any sense from a e-wave perspective. That means SPX will not make new all time highs, but will do a deep retest of the 2007 highs. Bottomline, if 1360-70 area holds over the next few weeks, there's another 150+ points of potential SPX run to the upside. Bull or bear, i would not want to miss that.

Good luck.

Trade update

2008-05-20T11:13:00.000-07:00

Closed my SKF position between 106 and 106.30 for about 5% profits. Still holding GLD long.

Weekly trends

2008-05-16T20:42:00.000-07:00

I will try to post some weekly trends from my position trading system here going forward, once a week. These are multi-week position trades which require 5-8% stop aiming for 10-15% or higher profits.

Gold

Gold never entered a bear trend on the weekly charts, despite the big correction off of the March 08 highs. The weekly 8 EMA continues to reside above the 34 EMA. Now i have a fresh buy on GOLD as of this week's close. So essentially it's a trend continuation buy. The target for Gold is about 970-980 or higher. I took a position in GLD at 89.

Silver
Silver dissapointed from entering a weekly buy. Missed by a narrow margin. Not sure if that's a red flag for Gold or if it's just lagging behind gold. No positions here.

Euro

The Euro is on a counterend sell i.e a correction on the weekly charts. The 8 EMA continues to resides above the 34 EMA and the weekly trend reamins up. But we marginally failed to get a continuation buy on Euro, thus putting it still in the correction camp. Again whether this non-confirmation remains a red flag for Gold remains to be seen. Interestingly the ETF FXE issued a buy. Maybe the ETF folks are over enthusiastic here. We shall see..

No positions here.

Financials

XLF remains on a weekly continuation sell from last week. XLF needs to take out 28 to invalidate this signal. I remain long SKF from 101 last week.

S&P
The weekly trend continues to remain down on the S&P. 8 EMA below 34 EMA. We are in a large correction in a downtrend. But a couple of more weeks of upside action could turn the weekly trend up. ST continues to confound me. Everyday looks like a top, only to be taken out by a surreptitious slow rally. Typical of a trending market. My system says Friday was a ST top, but again the late day OPEX shenanigan put a damper on that signal. Next weeks things should get clearer.

No positions here. Only daytrading.

OIL

WOW. The strong uptrend on weekly charts continues. DUG seems to be the darling of the masses, just like QID was in 2006, making fresh lows day after day. But the enthusiasm of the OIL bears remains unfazed. It remains to be seen, if finally the OIL bears get the much needed correction or just get blown out by the charging bull. No easy trades in this market at all.

No positions here.

IT and ST update

2008-05-11T21:14:00.000-07:00

In my IT update on April 12, i was looking for an SPX target in the 1400-1420 range. On April 22, i thought we made a top at 1395. But i was wrong. The market inched higher into 1422 area. Now based on Friday's action, we have cracked the ST uptrend from the 4/15 lows. My ST system (daily) is now on a sell, which means i will be shorting rallies here.

Intermediate term has two scenarios here.

Scenario 1: Now the key IT pivot here is SPX 1324. If 1324 is taken out even on a intraday basis, the IT uptrend is over and we should head down and crack the 3/17/08 lows.

Scenario 2: If the daily charts gets oversold and turns back up without breaking 1324, then we should head higher in another upleg to about 1450-60 area.

LT we remain in a bear market, all this huge rallies not withstanding.

LT - Down
IT - Up
ST - Down

IT update

2008-04-22T20:24:00.000-07:00

The ST uptrend from March 08 lows likely ended today. Both the NYSE breadth and Vol MCOs have hooked down. The Nasdaq breadth MCO has crossed below the zero line and turned the summation down. The daily momentum on SPX has also turned down. The wave pattern looks complete.

The last rally from 4/15 lows has the signature of a sucker rally. Look at the 10 day SMA of the adv-decl on NYSE. It severely diverged as we made new highs.

Will we go for another high with triple divergence ? Always possible, but i am not betting my money on it. Triple divergences on daily charts happen when the markets are in a strong primary uptrend like last summer. Now we are in a bear market. Be prepared for out of the blue declines.

Good luck

IT update

2008-04-20T11:30:00.000-07:00

In my last update on April 12, i called for an upside target of SPX 1400-1420. I was expecting that target to be tagged in about 2 weeks. But it all happened bloody fast, if you were a bear !. Too far...too fast. Again, feels good to be a technical analyst.

So far there are no technical indications of a top yet. I did get a VST sell at the close on Friday. So expect some weakness come Monday. I don't have any projections for the selloff yet. All big selloffs start with a VST sell. But all VST sells do not necessarily lead to big selloffs.

To call 4/18 as a top, a couple of things need to happen. Firstly the rising NYSE MCOs should hook down and price needs to break below SPX 1357. That selloff should be of a high velocity type. That would be an early indication of the top. Barring that i would still expect the higher end of my projected range which is 1420 to get tagged in the coming days.

Bottomline, hourly is on a sell. Play for what it's worth. Daily uptrend remains intact for now. No need to overanalyze here.

IT update

2008-04-12T22:29:00.000-07:00

In my last IT update on March 24, i noted that the turn in the Weekly CCI above -100 would take us to SPX 1390, the mid-line of the weekly bollinger bands. We tagged the weekly BB which came in around SPX 1386 and got rejected. Feels good as a technical analyst. But the fly in the ointment is that the NYSE MCO spike has not yet displayed negative divergences to call that SPX 1386 as a good top. Also the daily trend as evidenced by the series of higher lows on the daily charts is up. So i would expect another rally here into the SPX 1400-1420 area to finally create the necessary divergences on the MCO and set the stage for the next big decline into the SPX 1160 area.

SPX remains in a very complex corrective wave B correction. This pattern can take myriad of ways to its completion. The wave pattern by itself is totally useless to determine its conclusion. One need to look at the daily price momentum and the internals like the MCOs to determine it's conclusion.

In the end, "Price is king". If we break the 3/31/08 lows, then you can kiss the uptrend a goodbye and start looking to short rallies. For now, the ST remains up and i will be looking to buy dips on oversold conditions. ES could fill the gap at 1321.50, before we begin the next upleg. Or we could also gap-up on Monday and never look back until SPX 1400-20. Either way, i am expecting another upleg.

Good luck all !

IT update - The mother of all interventions !

2008-03-24T00:34:00.000-07:00

I am not a fundamental analyst, nor do i beleive fundamental analysis has any value in market timing. But some interesting fundamental events have transpired over the last couple of months - 75 bps emergency but, 50 bps regular meeting cut, 200 billion TSLF facility, another 75 bps regular meeting cut, Bear stern bailout....

And the grand effect - we are still below the Short term DTL (downtrend line). That's some potent intervention, eh ? How many cuts did we require to launch the 1998rally ? Something to ponder.

Ok, now back to TA. The most important technical event as of last weeks close was the Weekly CCI moved back above -100. Usually that's a good indicator of a multi-week rally to occur. The last time it occurred was on 11/30/07, which resulted in a 1.5 weeks of rally before failure. Let's see how long this one lasts.

From a daily chart perspective, we still remain under the ST DTL, which means the daily trend is still down. If we get back above SPX 1345, this week we would end the ST downtrend and the weekly momentum displayed by the CCI should assert itself, meaning a move to about SPX 1390 area (midline of the weekly bollinger bands) should begin. If we fail to take out the SPX 1345 area and encounter a failure, then the downtrend will continue.

If one is stubbornly bearish, the weekly CCI is flashing a big warning to remain flexible.