Weekly Trends - Aug 20, 08

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

SPX

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







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

Good luck.

Weekly trends

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

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

LT Update

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

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

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

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



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

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

ST buy signal at the close

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

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

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

Weekly trends - 6/27/08

SPX

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

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

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

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

Gold, Silver and Euro

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

Weekly Trends - 6/20/08

SPX

Boy, was i wrong !

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

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

Gold, Silver and Dollar

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

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

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


Good trading !

Weekly trends - 6/13/08

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

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

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

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

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


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

Weekly trends - 6/6/08

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
















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

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


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


Dollar
Yawn...The weekly downtrend continues.


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

Weekly Trends

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

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

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

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

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

Weekly trends

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

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

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

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

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

Not a bear market a la 2000-2002

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

LT sell

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

I said in that post

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

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

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

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

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

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

Good luck.

Trade update

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

Weekly trends

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

Gold

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

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


Euro

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

No positions here.

Financials

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

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

No positions here. Only daytrading.

OIL

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

No positions here.

IT and ST update

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

Intermediate term has two scenarios here.

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

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

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

LT - Down
IT - Up
ST - Down

IT update

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.