OIH - rolling over on all timeframes !

On the OIH, weekly momentum is overbought and rolling over. There's major horizontal trendline resistance and also resistance from the broken trendline. In the second charts the daily momentum is showing severe divergence and the daily Stoch is overbought and trying to rollover. On the 120-min, again, it's overbought and trying to rollover. One can only conclude that we are at a IT turning point on the OIH. I am expecting OIH to severly selloff starting Monday, which should be a good indication that the trend has turned down. Otherwise we might fool around the resistance area for some more time. Either way, a major correction is not that far away.

Some Intermediate term thoughts

Been busy with other things and could not update my blog since Decmeber. Going forward, i will try to update my blog on a regular basis.


The popular consesus among the wave analysts seem to be that the decline from 2/22 to 3/14 was the wave A and currently we are in wave B. So most are expecting some sort of a selloff to retest the recent bottom, which would qualify as wave C.


























One of the most interesting technical aspect here to me is the NYSE MCO. MCO broke below the 2006 May lows. Normally this should result in some kind of a retest of the recent lows to produce some bullish divergence between the price and the MCO, in order to begin a new sustained uptrend. But a closer look at the 5% and the 10% trend shows that the 10% trend of the MCO never broke below the 2006 May lows. The slower 5% could not catch up with the faster 10% creating a wide difference betwen the same, which smacks of panic selling, which is what created that panic low on the MCO. Panic lows sometimes never gets tested, which is the risk of being bearish here. So maybe the low is already in. Even if the retest were to happen, the time consumed by the wave B has been too small to consider it complete.

In the ST though, the risk is to the upside for a retest of SPX 1460. Whether the wave C begins after that or not needs to be seen, based on the quality of advance and the technicals at that juncture. Right now the 120-min price trend is still up and my goal is to ride that until it turns down. The last few days of market action can only be qualified as a choppy sideways correction. Only a strong impulse down here and the break of the important pivot at SPX 1400 would mean that wave C has started. I highy doubt that scenario at this point. I am looking for a move towards SPX 1460 in the next 1-2 weeks.

LT and IT update

I wrote about my long term thoughts in this post a few months back.

http://nav-ta.blogspot.com/2006_09_01_archive.html


I thought i would update my IT and LT thoughts here.

As for the LT, 2003 marked the primary degree wave A bottom and currently based on all the evidence i have, we in a primary degree wave B, which has ways to go before we can call any long term top, which should probably occur between 2009-2010 depending on how the wave progresses.

Within the Primary degree wave B, we are currently in wave 1 of C, which is topping and should lead to at least a 100 point decline on the SPX, by about June 2007. I have shown my primary count in green and there's no reason to change the forecast unless something dramatic happens or the economy weakens significantly beyond what is being discounted by the market. Some fundamental factors are screaming that we are headed, at a minimum for a major slowdown in the U.S economy or worse a recession.

1) 10 year Yields breaking down
2) Inverted yield curve
3) ISM below 50
4) Crude in a confirmed weekly downtrend
5) CRB in a confirmed weekly downtrend

All these significantly increase the chances of a major slowdown in the U.S over the next few quarters. Now what is unknown is the extent or the degree of the slowdown. Based on the larger degree wave pattern in the stock market, this may end up as nothing more than a slowdown rather than a full blown recession. I have an intermediate term target of about $38-40 on the crude oil, again based on the wave pattern, by mid 2007. That also coincides well with a stock market bottom around that time.

The Fed has found the panacea for all ills (or so it thinks), which is the rate cuts. So any slowdown into mid 2007, will be met with aggressive Fed rate cuts. This will not only create a melt-up in the stock market, but also in the whole commodity complex into 2009-2010. OIL could goto $100+ dollars by then, again based on the e-wave pattern. SPX should head to 1640-1800 by 2009-2010. I think this is where the overwhelming inflationary forces will cause the FED to lose control and kick off the deflationary primary degree wave C, which the bears have been prematurely betting on for many years now.

Now if the current slowdown morphs into a full blown recession, the longer term outcome of the stock market would not change, but the IT term would have to be changed drastically i.e a decline into SPX 1020 is possible and that's what i have shown in my alternate count in pink. While i am not expecting that scenario at this point, it's something to keep in the back of the mind. Some major monthly pivots have to be broken before we get there and the monthly MAs have to curl down, before that happens. It's too early to get that beared up IMHO. Again this is all a roadmap just for some perspective not a trading plan.

Feel free to disagree with my outlook. But it is what i am seeing at this juncture.

Big whipsaw days

Today caught me by surprise. I was expecting that ES 1391-1394 would offer serious resistance, to be followed another leg down. Instead the market displayed some unusual strength and as soon as 1395 was taken out, i knew that the gap at 1403 would be the magnet. Got stopped out for 5 points loss. These kind of multi swing action is typical at the tops/bottoms and is a harbinger of trend change to come. I think it was George Soros who said the market becomes choppier at the turning points. These kind of moves are bull-bear tug of wars at turning points, which eventually results in range expansion and a change in trend. I am still of the opinion that the top has been seen. There's a remote chance that we could do a marginal spike to 1415-20 and then breakdown. That is low odds at this point.

As for the larger picture, take a look at the chart.

Look at the MACD indicator (my custom MACD), which did not produce one single sell all the way from the bottom to 1388. That is why i was bullish all the way up to 1388!

I hope you remember my call on 10/26, where i called for a decline to ES 1367, which was precisely hit. That was the primary sell. Then we made a secondary top on 11/22, which produced that selloff off of that terminal, which i again called last Sunday. Note the huge divergences betwen 10/26 and 11/22. It's not just the divergences i am trading on, but i do have a momentum break on the daily as well. And then the internals - Nasdaq MCO took out the Nov low and the nasdaq summation is now pointed down. NYSE summation was also pointed down yesterday, which recovered today as the MCO made it's trip to the zero line. Last but not the least, if we close below 1377 SPX, i will also have a weekly sell signal. When the daily and weekly combo goes on a sell, then you can be assured that the IT top has been seen.

Oversold bounce

Nothing to add here and my ST target remains at SPX 1360. Reshorted ES at 1389.50. Will add to shorts, if we gap-up tommorow morning

Very Nasty internals

From Nov 24

We should see a fast selloff to SPX cash 1360, virtually giving no opportunity for anyone to position short. This is a unique point in the price structure where the pattern, price-action and the momentum are all converging to a sell !

The selloff came right on schedule and as i said the nastiness gave very few people a chance to position themselves for the decline. The only folks who probably profited from today's decline were those who were already short. Many would have thought i was nuts when i made that call on Nov 24. I don't make these calls until everything in my work lines up.

Now what was noteworthy today was the nasty breadth and the heavy volume on the selloff. In the first hour of trading 400,000 ES contracts changed hands. I think for anyone who watches the tape, it was a no brainer that the day was going to end badly, closing at the low tick of the day.

The NYSE A/D line was 12% : 78% and so was the Nasdaq A/D. The Nasdaq volume A/D was 7% : 92%. That pretty nasty internals folks !. Also noteworthy was the fact that the Nasdaq breadth MCO broke below the November lows, which means this is not going to be a one day affair. So we are in a ST downtrend. The VST selloff should end in the next 1-2 days after making a complex bottom on the hourly momentum, before we see any sustainable bounce. My ST target remains at SPX cash 1360.

I actually covered my shorts today, half at 1390 and the other half at 1383.25. All posted in real-time on traders-talk.com

So far, no IT pivots are broken. So Bottomline ST bearish, IT/LT bullish.

We are likely headed into a recession !

The fake poke !

When the 10-year yields made a monthly close above the long term channel from 1982 (back in June 06), i was convinced that we were entering into an inflationary environment. Boy, was i wrong ! That was a massive headfake. Now that we have reverted back into the channel, it's sending a powerful message that we are likely headed into a recession. Nothing is gauranteed in the markets. But when the markets send out powerful signals, we just gotta listen or endure financial ruin. If T-Notes breakout above 108.75, then the yield curve inversion would steepen beyond any economy bulls' threshold level. Is the economy strong now ? You bet !. Was the economy strong in the spring of 2000 ? You bet !

What does this mean to the equities ? Well, i don't like mixing market analysis. Right now it's ST bearish and IT bullish for equities. That could all change. I will update if and when any major IT pivots get broken. Stay tuned....

Terminals are tricky

Terminals are tricky, which is why even when most e-wavers detect them, they fail to trade them. The problem with terminals is that they don't unfold in a text book fashion. Either they end in a throwover, giving the illusion of breakout and scaring the heck out of the short sellers or they truncate, keeping folks waiting for that another not-to-come leg up. In this case, it looks like a classic case of truncation to me. Wave b unfolded as a irregular flat and wave d as a triangle (alternation) and then there's waning momentum from wave a to wave c to wave e. We failed sharply after wave e. Then we went and backkissed the broken wedge and failed sharply again today morning.

Both my terminals calls i.e ending diagonal pattern calls in 2004 and 2005 were right on the money. One can go back and search my posts on traders-talk.com. I have reasonable confidence that this one is a terminal too. If so, we should see a fast selloff to SPX cash 1360, virtually giving no opportunity for anyone to position short.

This is a unique point in the price structure where the pattern, price-action and the momentum are all converging to a sell !

Short from ES 1407.

Enjoy your holidays !

GROSS !

In my last post i said, my hourly went to neutral and closed all my shorts and went flat. In hindsight, it was a good decision. Now we have a better price to short and all my ST indicators are lined up.

My best guess at this point is a rally in the morning to around SPX cash 1412-1416 area and then a strong selloff. If we do get the rally, i will be shorting the strength. Instead if we breakdown below the channel shown on the 120-min chart, i will start shorting the bounces. Either way, a ST top is forming right here. If i have to describe the 120-min chart in one word - GROSS !

I do not have enough indications to call it a IT top yet. But the ST selloff could blossom into a IT selloff. Stay tuned....

Bottomline -> ST - bearish, IT - bullish, LT - bullish

Hourly signal in neutral territory

Break above ES 1395, i will go long on pullback. Break below 1377, i will short any bounces. The hell-in-between, i will scalp. Went flat today. Not a time to be opinionated when the hourly bands are getting squeezed and the hourly EMAs are flat, which means indecision - a big one at that.

Hourly sell still in effect

Hourly sell from Tuesday is still in effect. We had a post election gap-down, which pushed some VST indicators to extremes, causing that recovery on Wednesday. Today we gave up all that gains. Now the hourly is nowhere near oversold conditions, to worry about any major rally here. Based on 30-min and 60-min indicators, we could bottom tommmorow morning somewhere around the 1376-78 area, which should lead to a small bounce before another leg of selloff starts....

Bottomline: ST bearish, IT neutral, LT bullish.

No blowoff !

I was wrong yesterday expecting a blowoff to SPX 1398. SPX went to 1388, double topped and sold off. As we approached the double top area, i posted this heads up on traders-talk.com

http://www.traders-talk.com/mb2/index.php?showtopic=62140

One chart says it all for today ! 60-min is now back on a sell. This signal has a pretty good track record catching the hourly swing turns. Fade it at your own risk.

Terminal blowoff !

The bounce that i described yesterday came right on schedule. Now i am pretty sure, based on the e-wave pattern that we are in a terminal blowoff, which should take SPX cash to 1398-1400 region and conclude the intermediate term advance from July lows. Once this IT advance concludes, we should see a multi-month selloff in SPX to about 1300-1320 region.

Approaching a traedable bottom

Remember the first chart that i posted on this blog on 10/27, warning a potential ST top. The call was right on the money and we satisfied out ST objective of ES 1367. Now the second chart is showing the MACD right at the zero line support. Howvever the CCI has a teeny bit of work to do on the downside. What is more important is that the hourly chart is showing positive divergences and the 120-min is putting a complex bottom on the Full Stoch. All of these are warning signs that a traedable bottom is approaching. I am seeing the ES 1358-1364 zone as a potential bottoming zone. We might mess around this zone for the next day or two. But the risk of rally increases here. I will be playing the long side this week.

What next ?

1370.75 it was ! Remember my call from yesterday was for a move to ES 1367-1370 - we acheived that technical objective today. Technically it was a nasty move - a 3 sigma move. On the 120-min chart i have shown 3 instances from 9/11/06 when we hit the 3 standard deviation band (on 20 EMA). Two of the prior instances on 10/3 and 10/11 resulted in barn burner rallies. Will it be a replay of the same this time ? I don't think so. Notice the bands were compressed in the prior two moves, while it's expanding and turning down now i.e a potential change in trend. The daily context was on a solid buy then, and back then i was a frothing bull. Right now the daily is on a momentum sell. Well, anything can happen in markets, but we have to play the odds. Given the 3 sigma touch today at 1370.75, a reflex bounce is a given, which is why i covered all my shorts at 1372, which i posted in real-time on traders-talk. Now how big is the bounce gonna be is anyone's guess. Given the technical condition, any bounce tommorow morning will be likely sold. So will reshort on any bounce and see how it goes. If the selloff results in a positive divergences on the hourly charts, i will consider going long for a counter-trend trade. If we break 1367 and accelerate to the downside, it can get nasty in a hurry. It's all speculation at this point. Gotta watch the tape tommorow to see what happens. For now, i am neutral, but looking to short tommorow morning.

I don't have the time today. But i will definetely post the updated daily charts tommorow, which warned us last Friday.

Bottomline - Bearish ST, Bullish IT/LT

Land of the quick or dead !

All my indicators, measured move projections, dyanmic support on 120-min, dynamic support on daily, e-wave projections are all pointing to ES 1367-1370 area (SPX 1360-62 cash) for tommorow. BTW, someone dumped nearly 65000 contracts in the last 5 minutes of the trading. That's huge and means something. I guess we will know tommorow. They have been jerking the price all around, the last two days, confusing the heck out of the bull and bears alike. But the hourly trend indicators have been essentially saying the same thing, despite all those gyrations - DOWN !

Another small change day on both the NYSE and Nasdaq MCOs. Two back to back small change days on the MCOs, which are not very common. Nasdaq MCO flipped below zero pointing the summation index down. NYSE MCO ready to plunge below the zero.

Tommorow will a strong day either up or down - no ifs and buts. The odds of a strong move down is about 80%. It's about as good as it gets in TA. If such strong odds do not transpire and the market decides to move above 1392 ES, i will throw aside all my opinions and join the long side. Right now, all my work points down and i remain short from last Friday. I don't have to sweat sitting on the house money. So will give it some time.

Bottom line - ST bearish, IT/LT bullish.

ES 30-min trend

Keeping it simple for now. The 30-min trend is clearly down for now. We need to just let the trend play out. The slow Osc is clearly down, with no positive divergences yet. The fast one is turning down. The key for tommorow is whether we can break the horizontal support at 1378. If we can't break 1378, then the downtrend could be in trouble and we could see a larger sideways consolidation i.e no money for bears unless you flip in and out based on the Fast Oscillators. If 1392 is taken out, then then the correction is over.

Small point change on both the NYSE and Nasdaq MCOs. So it will be an exciting session tommorow.


Bottomline : ST bearish, IT/LT bullish

Rejection at channel resistance

The indicator i talked about yesterday which was warning about a potential top did produce a reaction which occurs near ST/IT tops. The MACD crossed over and the Full Stoch broke below 80, as i suspected. Look how nicely the price was rejected at the channel top (SPX 1389), which i have been talking about for the last 15 days. 1365-1388 SPX cash was my projected topping zone. We have likely topped for the ST and headed towards the first potential support at 1362 and then eventually towards the 1350-1355 area. According to my work, a weekly close below 1356 is required to confirm that a IT top has occured. Otherwise this would end up as another ST top and a retest of the current highs cannot be ruled out.

Bottomline : ST bearish, IT/LT bullish.

Warning signs for longs

Per my Oct 13 comments, we were in a topping zone from 1365-1388. Yesterday SPX cash hit 1389, satisfying that objective. We are now right at the top of the channel. While the first 120 point rally off of the June lows barely had any believers, the last 30 point rally has generated enough cocky bulls and the parabola dreamers. Now a reaction off of this zone has to be expected any day. There will come a out of the blue decline, for which there will be no reason or no news behind it.


















One of my indicators has flashed a warning sign for the first time since this rally leg begun on 9/11/06. Look at the fast MACD, which had a series of higher highs from 9/11/06. For the first time since 9/11/06 , this indicator generated a momentum divergence yesterday. Also we have the Full Stoch crossed over and ready to plunge below 80. Again this is just a divergence at this point. If we get a strong rally today, the divergence can get erased. On the other hand, if we close in red today, not only will the MACD crossover, but the Full Stoch will also drop below 80. This would then be the first traedable decline since 9/11. At this point, it's only a warning to longs, but not a short signal yet. Will know by the end of the day. Stay tuned...

Three strikes and....

My system missed a daily sell signal by a hair's breadth today. As i said in my weekly comments, we are in the intermediate term topping zone and we could fall off the bed anytime here. One chart says it all !