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.
Thursday, November 26, 2009
Sunday, November 15, 2009
Who are these happy-go-lucky buyers ?
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....
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....
Friday, October 30, 2009
SPX and Dollar
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.
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.
Thursday, October 15, 2009
9 month cycle thoughts
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.
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.
Monday, September 07, 2009
LT update
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.
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.
Saturday, August 15, 2009
LT Time-Momentum confluence
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 !
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 !
Sunday, August 09, 2009
Still a bear market
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....
Sunday, August 02, 2009
Primary degree wave A bottom confirmed
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 !
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 !
Monday, June 22, 2009
An important event last week...
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 !
Stay safe...play safe...Good luck !
Monday, June 15, 2009
Done fooling around ?
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
LT - Far below the zero line for a bull market to begin
IT - H&S on MACD
VST - False breakout and backkiss on MACD
Sunday, May 17, 2009
Weekly momentum hooks down
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.
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.
Monday, March 30, 2009
9 month cycle cresting !
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 !
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 !
Friday, March 20, 2009
IT thoughts - SPX 780 taken out
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.
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.
Monday, March 16, 2009
VST, ST and IT thoughts
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.
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.
Monday, March 09, 2009
Elevation of degree of bear market
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....
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....
Tuesday, March 03, 2009
Update
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.
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.
Monday, February 23, 2009
Setup invalidated
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.
Friday, February 20, 2009
ST Bottom ?
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 !
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 !
Tuesday, February 17, 2009
Heading into the 9 month crest
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 !
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 !
Saturday, February 07, 2009
IT Update and the upcoming 9 month cycle top
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 !
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 !
Subscribe to:
Posts (Atom)
