IT update

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

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

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 !

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.

BSE Sensex (India) LT sell signal

BSE went into a LT sell on March 14, 2008 based on the weekly close, both from a momentum and e-wave perspective. The weekly MACD dipped below zero and now we have a pattern of lower lows on the weekly and a potentially completed e-wave pattern.

The day U.S markets went into a LT sell on my system was 1/16/2008 ( with the break of 1370, which i published on this blog), BSE was trading at 19,868 then. Today it's under 15000. The LT sell on the U.S markets was a great cue for those long the BSE to exit. March 14 weekly close broke the LT uptrend on BSE. I was out of town over the weekend and could not post the LT sell over the weekend.

This sell signal promises an IT objective of about 12500 (wave A decline) and then a bear market bounce in wave B and then a final flush in wave C below 10000. Once the wave B rally completes, i should be able arrive at more refined projections for wave C.

Now that we are in a bear market as opposed to a IT bear trend, this should lead to softening economic conditions going forward. Also, as long as the LT buy was alive, one could sit on drawdowns and hope for the LT trend to bail them out of the drawdown situations. One could also average down on IT term declines. Now that the LT is on a sell, drawdowns can lead to further drawdowns and averaging down can be a potentially losing strategy. Also now all signals will have to be intrepreted in the context of a bear market.

LT and IT update

My LT indicators remain in a bear zone and i eventually expect SPX to tag SPX 1170 +/- 20 points. No change there.

The IT picture here is very interesting to say the least. I have two counts here.

The first count says we have topped in wave X and about to commence the next big leg down. If this were true, then we should take out the MCO lows of 1/22/08, which is not very far below. My only concern with this count is that the upside wave X did not even tag the mid-line of the bollinger bands on the weekly charts. That's very unusual even for a bear market and is characteristic of an extremely weak market.



My second count says we are close to concluding wave b of X and then another run-up to SPX 1420-30 area (wave c of X) to tag the mid-line of the Bollinger bands on the weekly charts, before the big leg commences. Note that both the NYSE breadth and Vol MCOs took out the 2/22 lows. So it's very likely even with this count that we see further weakness down into SPX 1310-1316area, before the wave c of X begins.




Which count Jose ? I have no idea at this point unless we get more information. E-waves are roadmaps and not trading signals. Watch your hourly indicators for bottoming action before jumping long, even if you beleive in the bullish count. Hourly is decisively down at this point and no buy signals there. If you truly beleive that we are headed to SPX 1430 area, then why the hurry to catch a falling knife ? Wait for a hourly buy which could come 15-20 points above. Missing the bottom 15 points ain't shabby if you are looking for a 100 point trade. Good luck !

The big picture ! - LT sell

Prior e-wave projection

Back in Sep 2006, on this blog, i had posted the e-wave projection for the final bull market top as SPX 1620. But given the 3-legged structure from Aug 07 bottom, i was still giving the benefit of doubt for another run-up to SPX 1620 in 2008, to complete the pattern. I was wrong. My LT system issued a sell on Jan 16, which now precludes any run-up to new highs anytime soon. The e-wave failure or truncation resulted in a bull market top at 1576. I missed my projection by about 40 points, which is insignificant for a LT type of projection. It's not about being right or wrong here. Even if i were dead right on my target, i would still have got a LT sell only about 10-15% down from the top. You don't get LT bearish confirmation at the tops.

LT sell





As i posted here on Jan 16 08, my system went to a long term sell after breaking the Aug 07 lows. Some recent history on this LT system.

Nov 2000 - SPX 1365 - LT sell. SPX declined to 768 subsequently.
June 2003 - SPX 988 - LT buy. SPX ran up to 1576 after this LT buy. About 60% run-up.
Jan 16, 08 - SPX 1370 - LT sell.

Now since the last LT buy back in 2003, SPX has had one heck of a bull run of about 60%. Now the LT sell has been generated at about 12% from the top. So giving up 12% of the profits from a 60% run-up is not a bad deal, if one views it from a LT perspective. The LT sell during 2000 was also generated from about 11% from the top.

If one were a ST trader, my ST sell would have gotten one out of the market right near the top on Oct 11 - ST sell posted by me on TT.

http://www.traders-talk.com/mb2/index.php?showtopic=77295&hl=

If one were a IT term trader, my IT sell would have gotten one out of the market at 1480 on Nov 11 - IT sell posted on traders-talk

http://www.traders-talk.com/mb2/index.php?showtopic=78887&hl=

So bottomline, it depends on the timeframe one is trading and how much drawdown one is willing to take. LT signals is of no use to traders. It's mostly for LT investor types.

This LT signal is based on three factors. All three conditions need to be satisfied.

1) My bull-bear indicator moving above zero for LT buy or moving below zero for LT sell.
2) Lower lows on weekly for a LT sell and higher highs on weekly for a LT buy.
3) A potentially completed e-wave pattern.

Amazingly, all the three factors came into play right about at the same time. That's what makes TA fascinating !


E-wave details






I was working with an assumption that we were in a Primary degree wave B from March 03 bottom. Given that i now have a LT sell and a potentially completed wave pattern, i have to now radically alter my wavecount, in the light of newly presented information. Waves are dynamic structures, which evolve over time. Now there is no way, i can call this structure a A-B-C pattern from the Oct 02 lows, without violating all the channel rules and e-wave time rules and compromising on the structural integrity of the wave pattern. I am not going to do that to justify my bias or to stubbornly prove my original thesis. Instead, i am changing my wavecount, that the wave from oct 02 was a Primary degree wave 1 impulse, with a wave 5 extension. 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.

The first thrust (Wave 1) from the Oct 02 bottom generated a MACD reading of -14.3. The subsequent thrust (wave 3) generated a MACD reading of 39.58, which has never been exceed throughout the course of the bull market, even after the huge impulse from mid-2006. That pretty much confirms that 2004 peak was indeed the wave 3. Wave 5 generated a peak MACD reading of 37.27, which diverged negatively with the wave 3 peak, characteristic of wave 5. Now we have a situation where wave 1 < wave 3 < wave 5 which says wave 5 extended.

Price Projections Now typically, impulses once completed, retrace back to wave 4 of a lesser degree, which in this case comes around SPX 1170. The measured move objective for a potential double top at Oct 07 also generates an objective of 1170. So the preliminary price objective for the Primary degree wave 2 should be around SPX 1170 +/- 20 points. Whether further downside projections will be generated, will be determined if and when we get there.

Time Projections

Since there is no clear defined time relationship between wave 1 and wave 2, it's hard to come up with a time projection for wave 2. If it's a violent decline, we could see all this over in about 6-8 months. If it's a slow bleed with deep retracements, it could run all the way into 2010. I am not going to hazard a guess on that.


Signal Status

At this point all my systems from VST to LT remain on a sell. Remember in the context of this LT sell, we will have some large and vicious bear market rallies. But rallies should not make any new bull market highs, but a series of lower tops.

Implications of a LT sell

Now that we are in a bear market as opposed to a IT bear trend, this should lead to softening economic conditions going forward, and possibly a recession. Also, as long as the LT buy was alive, one could sit on drawdowns and hope for the LT trend to bail them out of the drawdown situations. One could also average down on IT term declines. Now that the LT is on a sell, drawdowns can lead to further drawdowns and averaging down can be a potentially losing strategy. Also now all signals will have to be intrepreted in the context of a bear market.

And again the "End of America" and the collapse of the Roman empire arguments will start to take centrestage as the bear market unfolds. The argument about emergence of China and India as the next economic superpowers will start to gain strength. The deflationary collapse and "Great depression" arguments will be accepted and dreaded. Those who hung out on the longwaves.net during the 2002 bottom know pretty well how convincing they look and how wrong they turn out to be. If anything this wave 2 will generate fear levels worse than the bottom of Oct 02. Those fear levels should present an opportunity of lifetime for the wholesalers to pick up the bargains once again, as has always happened in the history. But for the retailers with not that deep pockets, it's prudent to remain patient and let the bear play out and wait for the next LT buy confirmation.

Good luck.

LT sell

I will post a detailed update during the weekend. For now, it's suffice to say the break of the Aug lows and my bull-bear market indicator crossing below zero has signalled a LT sell.

Oh my... !

The decline from July 07 top concluded as 3 waves. The next upleg from Aug 07 to Oct 07 was another 3 wave structure. The subsequent decline from Oct 07 is also a 3 wave structure so far. So no impusive action so far from July 07, from either a bullish or bearish perspective. That's why i give the benefit of doubt to a high level consolidation here.

The most striking feature is the irregular top on Oct 11. Irregular tops are bullish e-wave structures and they resolve upwards after the correction is over. The only way a 3-legged wave can be called the ultimate bull market top is if one subscribes to the truncation theory. If one theorizes that Oct 11 ended in a failure, then we could say that it was a major bull market top. But the truncation theory ends up wrong more than 9 out of 10 times. So it's hard to go with the truncation theory. A failure or truncation means the bearish forces were so overwhelming that the market could not reach it's logical conclusion i.e could not complete it's wave pattern. Now if it were true, then the subsequent decline from Oct 07 top should have been more violent than the rally from Aug 07 bottom. This is not the case as seen from the angle of decline or the time taken to retrace the the rally from Aug bottom. So the truncation theory is pretty hollow!

Now here's the "Oh my...." part.




My momentum indicator which demarcates the bull-bear market stopped right near the zero line as of this week's close. Oh my...

That also coincided with a climactic reversal in the form of penentration of the weekly bollinger bands and a reversal out of it. The BB penetration and reversal have market all the IT bottoms since the bull market begun in 2003. Oh my...

The decline from July 07 top to Aug 07 bottom took 5 weeks. The rally from Aug 07 bottom to Oct 07 top took 9 weeks. That's a total of 14 weeks for A+B. The decline from Oct 07 to date has taken 14 weeks. A+B = C. Oh my....

Can you call the bull dead ? You be the judge ! I am just presenting the TA case for a incomplete bull market.

My ST to IT indicators remain on a sell signal. If we get a strong rally accompanied with strong volume and breadth, then we could generate an IT buy signal next week. If we crap out here yet again, then the bear market case will start strengthening again. The market is currently wearing out both the bulls and bears. The violent snapbacks have killed the stubborn bears. The spectacular rally failures have killed the stubborn bulls. If one thing everyone is sure of in this environment is failures - both rallies and declines. Strong trending moves come out of this kind of environment. Be prepared !

IT sell signal

What a difference a day makes!. The inability of the market to recover after filling the ES 1436 gap and a lack of strong reversal EOD, caused some massive technical failure on weekly charts. Now we have serious momentum failure on the weekly charts. If we break the Nov 26 lows, we would also have to deal with a pattern failure (triangle pattern). The ball is now clearly in the bears court and i am bearish here. No reason whatsoever to be bullish.

So, now are we in a bear market ? Not yet. Not according to my indicators. Not until this indicator crosses below zero.



Don't get me wrong. I am bearish here, but an IT downtrend does not make it a bear market. Aug 04, April 05, Oct 05, June 06 have all had the same kind of momentum breakdown/configuration on the weekly charts. But they all resolved to the upside. The arguments then, were same as now. Internals breaking down, fundamentals (like credit mess, impending derivative implosion, consumer tapped out etc...). The fundmental arguments have no credibility left in so far as calling the bear market, cuz the market has rallied for 4 years in the face the same fundamentals or the fundamental expectations. Now during all those IT bottoms, it was the same sentiment on the message boards and among the market advisors. That any recovery back to the bull side was improbable and the bear market was inevitable. Clearly it was a wrong assumption in all the 4 instances. My indicator and my methodology has kept me on the right side so far and it also takes away any emotional reponse to market action and popular herding behaviour out of the equation.

What will create a bear market here ? IMO, three things need to happen here. The massive larger degree consolidation pattern or the topping pattern, as the case maybe, is yet to be resolved. A break of Aug 07 lows will resolve it to the bear side. A break of Aug lows would mean that we finally have bottoms below bottoms on the weekly chart. That's an unequivocal bear trend. That would also put to rest any bullish e-wave pattern arguments. That would also pull my LT indicator into the bear territory. Right now the jury is still out, but time to be very cautious on long side as the market has a serious chance of a collapse....

Case for an IT bottom

On 11/7 after breaking below my SPX 1480 IT pivot, we had entered a IT downtrend. Now the SPX 1480 has been captured on a weekly closing basis. Coincident with the price close, all my daily and weekly indicators have turned up and based on my weekly indicators i have a IT buy signal at today's close. The daily and weekly are both turning up at the same time, which makes it a combo buy signal, which tend to be powerful signals. Since i cannot fully disclose my system and its rules, here are a few charts to make a case for an IT buy signal.

On the daily charts, this slow MACD has issued a buy signal at the close today.




On the Daily charts, we are coming out of an oversold area, based on this oversold/overbought indicator.





On the weekly charts, the CCI crossed over above -100. We had a nice outside reversal day on the weekly charts. XLF, the beaten down financial sector also had a outside reversal day on the weekly charts.





The NYSE MCO had a nice breadth thrust and the summation is now pointing up. Also note the positive MCO divergences with Aug 07 lows.




Lastly, the 10 day SMA of adv-decl made a nice divergent bottom relative to Aug 07 lows and has now moved above zero.




Now the perversity of the markets should show up it's face next week. I am sure a lot of newsletter writers will be issuing buy signals to their subscribers today. How do you unload all the newly minted bulls ? - Good old stlye shakeout. After a day or two of move to the upside next week, we should see a good sized shakeout after which the IT uptrend should continue. I would expect SPX 1460 to hold on any shakeout/pullback.

Bear market - Nah !

The message boards are raging with talk of bear market, recession, Super cycle top et al. Nothing new there. It's what that's been going on over the full length of this bull market.

Emotions aside, i am posting a chart here with an indicator that i use to objectively define a bull and a bear market. Until this indicator turns below zero, there's no bear market, the way i define it. Again, remember this is a long term indicator and should not be used for ST to IT term timing purposes, unless one is ready to take a 15-20% drawdown. Right now we are in a intermediate term correction and it should be respected, if one is trading that timeframe.





Based on this indicator, in the last two decades, there have been three minor bear trends 1987, 1990 and 2000. 1987 and 1990 conincided with minor bear trends and economic softness. 2000 was a major bear market in stocks which coincided with a full blown recession. This indicator signaled a bear market in Nov 2000 and turned back in June 2003, which signalled the end of bear market. It's always better to be late in calling a bear market than earlier. Public memory is short. Those who claim to have called the 2000 top were the same folks who have been calling it since 1995 and some from late 80s. There are a few exceptions who called it in 98 and 99 and were vindicated in 2000. My point is "Don't be eager in calling a bear market" as the bull market topping is multi-year process. It's better to be 6 months late rather a few years earlier as the opportunity cost of not riding the bull market is too much and the associated psychological stress of being early and wrong in calling a top is just not worth it.

Looking at my indicator, during the great bull market of 90s, the first set of divergences started appearing in Oct 1997. We got a decent correction and the Osc moved to new highs. The next set of divergences apeared in July of 1998. We got a big correction and moved to new highs on the Osc in 1999. From July 1999, there were a series of lower low on the Osc with higher highs on indices. The increase in volatility, accompanied by a series of divergences was indicative of a maturing bull cycle. My LT indicators are in a configuration similar to where we were in July-Aug 1999.

Looking at my long term indicators and some divergences on the long term charts, i have to say the BULL market is maturing and in it's final stages. Nothing has changed as far as my LT e-wave count is concerned and i still expect SPX 1800 by 2009, before it's all said and done. My indicators remain in a bull market zone and i have a incomplete wave count to contend with. So the implication is the bull market will continue. Currently we are in a intermediate correction which started on Oct 11. I expect new ATH on SPX once the IT correction is over.

As for the recession talk, it's something that's been going on for the last 4 years. 2004, we were supposed to enter a recession. Then it got moved to 2005. 2006 was supposed to be a no brainer recession. 2007, there was no escape. And here we are in 2007 and the U.S GDP is growing at 3.9%. The emerging markets continue to grow at 9-10%. I am no economic expert. So i will listen to the stock market to signal a recession, instead of listening to the economic professors who have predicted the last few recessions that never occurred!

As for the Super cycle top and Grand Super cycle top and "End of America" arguments, it may not happen in many of our lifetimes.

LT market thoughts - Update 2

Last i updated my LT thoughts here

http://nav-ta.blogspot.com/2007_07_15_archive.html


While the overall outlook and direction of the long term hasn't changed a bit, i will have to change the labelling a bit. LT remains very bullish at least until late 2008-2009 as i have been saying for the last couple of years.

Intially my guess was the large correction from the July 2007 top was a X-wave. If it was a X-wave, SPX should not have made new ATH after the Aug 07 bottom, rather should have made a lower high vis-a-vis the July 07 highs and made a trip down to about SPX 1320. That would have made it structurally look like a wave-X and also would have satisfied the price and time requirements. Now the entire correction from July 07 to Aug 07 looks so small in terms of both price and time (relative to the entire rally from March 2003 to July 2007), one can conclude that rally from June 2006 is extending. That means the intermedite wave C of Primary degree wave C is still extending. So to put it simply Aug 07 was a wave 2 bottom of the intermediate term wave C from June 2006. As simple as that. If it's not clear, take a look at the chart.

Now that brings us to the projections. If wave C = 1.618 * wave A, then we should achieve SPX 1830 by late 2008 to early 2009. SPX 1850 also happens to be the 1.38 times Fib extension target for the entire decline from 2000-2002. So we should top the bull market from 2003, somewhere in the vicinity of SPX 1830-1850. Now that's the minimum projection. It could be higher if the waves extend. I will update as time goes by. By 2009, most of the bearish caucus would have been worn out both psychologically and financially, paving the way for a huge bear market in Primary degree wave C.

Again, since we are now dealing with wave iii of an intermediate wave 3, it ain't gonna be a pony ride. It's gonna be a bucking bronco, with scary volatility. The ST volatility cannot be predicted with just e-waves alone, but by supplementing it with various ST technical tools. But overall the LT direction remains up and is very bullish at this point, based on the wave structure.


My last LT update can be found here.

E-wave count

On Sep 1, wrote...

Bullish argument is different and bullish cheerleading and talking positions that happen on message boards are different. Once a weekly buy gets generated, we don't go to the sky directly, like many to-da-moon theorists opine. There are many hiccups on the way and some very scary. Markets are perverse. The first buy on any timeframe generally resolves in the opposite direction. It's for a simple reason, cuz every amateur joe is aware of that and every guru and newsletter writers keep pounding on those facts. That's what causes the amateur traders to come and regurgitate some popular guru opinion on message boards. Now guess what the pros do. They fade that common perception, instill fear by scary selloff, get everyone lean on the wrong side, make them disbeleive their gurus, and then take off.

What's the trade for a ST swing trader (houry swing trader) here ? - IMO it's a unwavering short


Before i proceed, i just want to say that i will not be posting any of my VST stuff on this blog. It's hard for me to continually update this blog during the trading day. Those interested in my VST stuff or trades, i will be posting them on traders-talk.com. My orginal intention was to only post IT and LT thoughts on this blog, and i will stick with that.




So the selloff came like a clockwork. What's next ? I see two possible wave counts at this juncture. Those who make fun of alternate counts firstly don't understand the basic principle of TA, which is probabilistic prediction of future prices. The primary wavecount is that wave c of an irregular flat ended on friday and we take off on Monday without looking back. The only fly in the ointment is that we broke that channel on an hourly closing basis on Friday, which makes me wonder if the market wants to probe lower levels ( SPX 1420), which is my alternate count. Which one ? At this point, i have no idea. We'll know the answers on Monday.

If the primary count is true, we are headed to SPX 1560 for the wave C up. If the alternate count is true, the price projection for wave C would be around 1530. Timewise, i am looking for mid-october for this price projection.

Goog luck trading everyone !

Morning thoughts - 9/5/07

The large gap-down on ES, which is currently trading at 1479 will most certainly push my 120-min indicators to a sell at the open. So the trade is "Swing short". Since i would need a large stop of about 20 points to take this trade, i will wait for some sort of bounce to develop and incrementally start building a swing short position.


1:00 Est update

Something doesn't seem right here to short this market. The market was overbought yesterday on the hourly. It was all reset with just one gap-down. Now the hourly momentum is turning back up from oversold levels and the 60-min uptrend is still intact. That's generally a bear-trap. I went long some ETFs and options around SPX 1473 levels. If we break below intraday lows, then i am wrong and will flip short.

9/4/07 - Closing thoughts

As i posted in my morning thoughts, an hourly close above SPX 1484 would cause the market to challenge the next zone of resitance, which currently lies between SPX 1505 and 1512. The ideal target would be SPX 1512. But my experience has been, when the message boards are all abuzz with the same targets, it generally gets undershot or vastly overshot.

It was a good daytrading day on the long side. As for the short swing setup that i was expecting, it just did not materialize.

This market is very strong. The NYSE breadth MCO made another new highs today. This is telling us in no uncertain terms that any pullback that comes along should be bought. Remember for a swing long, we need a selloff, just like a swing short requires a rally. The selloff could be a shallow one in terms of price, but needs to be deep in terms of oscillators. Until that occurs, going swing long at these levels is a sure recipe for a whipsaw. Based on my indicators, we are somewhere around 80-90% done for this hourly swing. Tommorow 10:30 Est could generate some short setup. We'll see...

With all the hoopla out there, the daily trend on SPX still remains down. The hourly and 120-min trends are up, which is what is driving this swing. Blindly shorting a market whose 120-min trend is up, just because the daily trend is down, is plain dangerous. Patience is required here for shorts.

For now, i will daytrade the long side and will be on a lookout to short for a swing trade, when the setup arrives. I will post it real-time here, when that happens.

Good luck.

Morning thoughts...

We did not get a 120-min sell at 10:30 Est CIT. So i will have to wait, until a proper setup arrives to short this market. Will continue to remain flat until such setup arrives. An hourly close above SPX 1484, then the next resistance would be SPX 1500-1505.

A swing trader's case

I am expecting a selloff next week and it should start from the get-go on Tuesday. My expectation is for a test or a slight break of the 8/28 lows. 30-min, 60-min, 120-min momentum were all flashing warning signs on Friday, with 30-min already on a sell. Had it not been for the long weekend, i would shorted the close for a swing trade.

The bullish argument certainly has merit here. We have seen that massive breadth spike on the NYSE MCO. Now the NYSE 5% and 10% components are above zero. The weekly CCI is above -100. As of the close of this week, we got "All clear" signal for IT longs for the first time since 8/16 lows.

Bullish argument is different and bullish cheerleading and talking positions that happen on message boards are different. Once a weekly buy gets generated, we don't go to the sky directly, like many to-da-moon theorists opine. There are many hiccups on the way and some very scary. Markets are perverse. The first buy on any timeframe generally resolves in the opposite direction. It's for a simple reason, cuz every amateur joe is aware of that and every guru and newsletter writers keep pounding on those facts. That's what causes the amateur traders to come and regurgitate some popular guru opinion on message boards. Now guess what the pros do. They fade that common perception, instill fear by scary selloff, get everyone lean on the wrong side, make them disbeleive their gurus, and then take off.

Any professional swing trader worth his salt would not base his ST trades on IT indicators. One has to trade the timeframe of one's chosing. What's the trade for a ST swing trader (houry swing trader) here ? - IMO it's a unwavering short, unless there is a monster gap-up on Tuesday. So barring a big gap-up on Tuesday, i will be shorting this market for a swing trade.

Will try to update my blog on a regular basis going forward.

Good luck everyone.

Retest time ?

I will keep it simple. As i commented in my last post, we found support in the SPX 1360-90 area and bounced. Is the bounce for real ? Maybe !. But so far there's no evidence that the bottom is in. I need to see the weekly CCI move back above -100 and the NYSE MCO 5% and 10% components move above zero to assert a traedable bottom has been seen. We should know the answer to that in about a week.Right now it's retest time and i would expect at least a test of 1410-20 area sometime this week. The "Fed bottom" (8/16) should not be violated in any case here, which would be very bearish. Even if we violate the 8/16 bottom by a tick, the next target would be SPX 1320-30. So essentially we remain in a volatile environment, where one could be a genius one day and the monkey the next day. Will continue to play both sides, with a bearish slant this week.