Use your Oscillators....

Use your Oscillators in a sideways market and the moving averages in a trending market. Anything else, you become the victim of whipsaws. How do you know you are in a sideways market ? I showed this chart to my 6-year old and he says it looks sideways On a serious note though, we aren't trending up until we see bottoms above bottoms on this chart. Right now all we have seen is bottoms below bottoms a.k.a SIDEWAYS-TO-DOWN market.




The last warning on complex bottom was here.

http://nav-ta.blogspot.com/2007/06/going-into-fed-meeting.html

The 120-min buy signal from that day is still intact. But as you see on the charts, we are overbought and rolling over. Once that happens, we need a momentum break to go short. That's what i will be looking for next week.


Consider this a topping area, unless not leaving the last .25 percent is your forte Just kidding. I will start my shorting campaign next week.

A break above 6/20 swing high will start sowing the seeds of doubt in my heart

Bearish shooting star

You gotta love markets. Everyday is different and brings new information and new challenges and excitement. What looked like a bullish certainity going into the Fed meeting, changed completely after 2 hours.

Firstly, the 120-min on NQ and ES is still on a buy, but is in a position to get rejected at the zero line, if we selloff tommorow.




The bearish shooting star pattern appeared on the NQ at two different timeframes (120-min and the daily charts), which is pretty ominous. For this bearish pattern to confirm, we need to open Friday around the Thursday's closing levels (or even better gap-down) and selloff the rest of the day ending in a red candle. That would confirm that it the rally from ES 1492 was a 2 day wonder and the next downleg has begun. Anyway, i preferred to jump the gun and took a stab at a short here around NQ 1958, since the risk/reward is so good. Not to mention that i closed all my longs at the close. A hourly close above NQ 1968 will stop me out and also keep the bullish structure intact. Call me a bear for today !

We'll see what Friday brings.....

Going into the Fed meeting....

The crescent shaped selloff did mark a bottom of some sort after all. Now the question is "Is the rally sustainable ? ". Before the Fed meeting the technicals have decided what they want to do going into the Fed meeting. Now the real question is "Are those positioned based on these technicals right or wrong ?"

Two charts which are self explanatory.

We are coming out of a very complex bottom on the ES (the complexity which i had not seen in a while). The level of complexity suggests a near vertical rally without any meaningful pullback IMO.




120-min buy signal

That crescent shaped selloff

That crescent shaped selloff on the NDX is a classic climactic selloff signature. In percentage terms that was no climax, but nevertheless the signature has the characteristics of a climax.

As i noted yesterday, my ES target of 1492 was hit today morning. What is more significant here is that, while ES took out the 6/8 lows, NQ is still holding above it. If i were a bear here and if i see a doji on the hourly candle, without NQ taking out 6/8 lows, then i would be scared - very scared !.

If NQ takes out the 6/8 lows and ES breaks below the 1490-92 support, then a much deeper selloff should be expected. Otherwise, we should make an important low today !

Heading into a climax

As i said yesterday, based on the Nasdaq fishhook, we were probably headed into some sort of a selling climax. Seems like they sucked in a lot of bulls yesterday. As i mentioned yesterday, ES 1490-92 was my VST target. We should hit that target tommorow morning. Now how deep the climax is going to be is the multi-million dollar question. If 1490-92 gets taken out, then a deeper selloff somewhere into the ES 1470 area is the next expectation.

Trade safe.

I am torn...

I am torn between the bullish and bearish view here. I was of the expectation that we are headed to new highs in the ST term. I can no longer envision such a scenario with confidence, given what the internals are saying at this point.

The NSYE summation index is now making a trip towards the zero line. The Nasdaq summation index has formed a fishhook and was rejected from the zero line, which means we are probably headed for some sort of climactic selling. I don't have any downside targets yet. The break of ES 1510 pivot means we retest the ES 1490-92 area in the VST term. Also the 5% and 10% components of the NYSE and Nasdaq MCOs are now below the zero line, confirming the IT downtrend.

The lack of selling pressure in the Nasdaq is quite disturbing here. Given that it's internals are worse than NYSE, it still holding better than the SPX. I don't know whether to intrepret this is bullish or bearish. Internals are clearly bearish, but the price action is bullish.

As i said i am torn between the bull and bear camp. I will try a short trade on NQ today (went short NQ at 1945). Even if we trade above 1958.25 for a tick, i will be out and will switch back to the bull camp. I have been a good fade the last one week. Trade at your own risk.

Volatile session

We got the bounce yesterday and a pretty strong one at that. Now the big question is "Are we headed to new highs ?". The Nasdaq MCO had a small change day yesterday and the NYSE MCO was close to a small change (not strictly speaking) day. Whatever direction the indexes breaks today, needs to be respected. Today will more likely be a volatile whipsaw session and the range expansion will most likely occur on Monday.

I am betting on new highs for all the major indices. The ES futures dropped to 1527.25 overnight and are bouncing back now. Critical intraday pivots are NQ 1950.50 and ES 1523.25. If we break below that today, bears will have won the battle. Above those pivots, the BULL rules.

I don't quite trust this decline !

Last time i commented, i expected a deeper correction and a trip to zero line on the NYSE MCO. Although i expected this decline, the decline on SPX in particular went faster and deeper than i expected. My 120-min did went into a sell this morning and is in a oversold condition right now.

Take a look at the NDX and SPX charts above.

The daily range on the SPX today was nearly 25 points and the daily range on NDX was a mere 26 points. In percentage terms, SPX had nearly twice the range as NDX. What the heck is going on ?

Look at the MACD on SPX and NDX - SPX had a backkiss, while the NDX still remains on a buy. Again what the heck is going on ?

Also remember the CCI on SPX never reached a overbought condition before turning down and is now right near the zero line support. I don't trust at this point that this is the beginning of the next leg down. This should end up as a short term pullback. The next expectation should be new recovery highs on the SPX.

Corrective action

There's not enough clues at this point to determine whether today's action was distributive or not. But as the correction takes longer time here, there's the risk of 120-min rolling over. So far the 120-min is still on a buy signal and i will post an update if that changes. We had very narrow range movements on the NYSE and Nasdaq MCO, but not close enough to call it small change days. Nevertheless that narrow range and the fact that the MCOs have hooked down means a trip to zero line on the MCO is likely. So my guess is that the correction has a little bit deeper to go before the assault to new highs is made.

That pesky "W" bottom

I was of the impression the last couple of weeks that SPX was headed to 1450-60, which was a logical IT price target based on the fact that the IT pivot was broken and the NYSE MCO made a new flag. I even posted on traders-talk, the exact day the countertrend rally begun and was expecting a rough target of Sep ES 1536-38 . Once it broke above that level, i was questioning myself.

Now in hindsight, it's clear that SPX put in a "W" bottom. The "W" bottom was tricky to spot, because of the fact that the price did not make lower lows, but ended up as higher lows. We have seen many such lows in this bull market from 2003, which has shown this phenomenon of higher lows. This typically is a product of "Extreme bearishness" at bottom and the system getting clogged so severly with shorts that any countertrend rally ends up in a epic squueze which creates a new leg up. I was one of the first to publish a IT target of 1450-60 when the declione begun. When every newsletter and blogs on the web were abuzz with that number, that was a kiss of death for that target. As i said, i was expecting a restest of the recent lows on SPX till yesterday. But i abandon that view at this point.

One chart says it all. The NYSE MCO made a higher low and price did a retest although that retest ended up as a higher low, which is what threw a curve ball !. The summation has turned up. More important the 5% and 10% components of the MCO are now above the zero line, which keeps the IT uptrend intact again.




As for the VST term, 120-min trend has turned up. Once it turns up, it's very difficult to turn it back down immediately. I say this from my experience and also from examining a large historical data series. So the path of least resistance is now up and will continue so for the next 1-2 weeks at least. The only way the 120-min can be turned down at this point is to have a high velocity selloff of about 25 points on Monday, which i think is very low odds. The market does everyting for a reason. The breakout above Sep ES 1536-38 resistance made it clear that the market was headed much higher. The next logical target is all time highs on the SPX or a double top just below it i.e SPX 1550-55.

Now here's the fun part, which i am sure the Perma bulls will ignore yet again and call for a wave 3 of 3 again. The weekly momentum has turned down, while the daily is up now. Once the daily gets fully overbought here and turns down, it would produce a "Combo Weekly and Daily sell signal". The decline from that signal will be far more powerful and larger than what we witnessed last week.

Bottomline VST, ST, IT bullish. I will post on this blog when the 120-min approaches the sell signal again.

VST, ST and IT pivots - all broken in 3 days.

Daily chart







The same signal which gave a daily buy back in March is now on a triple divergence sell. Some rough IT targets for this decline at this point is around SPX 1450-1460. Will refine it, as we move forward. The NYSE MCO has created a new flag, which means the internal low is probably in and the price low in the form of a lower low is pending. If that lower low on price creates a positive divergence with the MCO, then we should expect another leg-up towards new recovery highs. But it's too early to speculate on that. As for a "V" bottom here, i am not a beleiver. In any case, "V" bottoms have 20% odds as opposed to 80% odds for a retest. So i am positioning myself for a retest.


VST chart








The Full Stochastic on the 60-min chart is fully overbought and is turning down. The EMAs are on the verge of a backkiss. The 60-min CCI diverged and has turned down. So the odds that the bounce from Friday is over, looks very high.

Inflection point...

If we get a gap-down tommorow again, it could be a VST buy, but it would clearly break that controlling channel on the 120-min charts. So those betting on a irregular flat correction will have to give up. The controlling trendline from the 3/16 lows is already taken out. If you are a blind bull, then that downthrust in the NYSE and Nasdaq MCO may not mean anything.

Let me tell you something. If the uptrend is alive, the market will start going up from the get-go tommorow without breaking below that cahnnel, as though no technical damage has happened and will never look back. A close on 120-min basis below that channel tommorow will be a high odds signal that we are looking at more than a VST correction with much more downside to come. The summation on both the NYSE and Nasdaq has turned down. The breakdown in the MCOs do not look like a hesitation pattern, but looks something decisive.

To me any daily close on the ES below 1512.50 would mean that the back of the bull is broken and a multi-week correction is underway. What shape the correction would take is anybody's guess at this point. Clearly we are at a inflection point.

Analysis only provides the framework for my trades. Those who are interested in my trades , i post them on traders-talk.com.

Before i leave for the vacation....

I am going on vacation and will be back on June 1. Before i leave, i thought i would post a chart of the daily charts rolling over. The picture says it all !

Daily momentum sell at the close

My system generated a momentum sell on the daily charts today.

Last time i commented, i had a VST bias into SPX cash 1493, which got tagged today. If the uptrend on the hourly charts were intact, then we would have seen a powerful rally out of that pivot. The fact that the pivot did not hold and the daily momentum kicked into a "Sell", means, this is more than a VST correction. So i would not be a buyer here. Not yet !

Now the million dollar question is whether this is a ST correction or an IT correction. The ST pivot on the SPX cash comes around 1474-1478 area, which should be the focal point for the daily trend traders to go long. Again, we'll evaluate if and when we get there. If the 1474-78 area cracks on a daily closing basis, then it would blossom into a full blown IT sell, which would target the SPX 1420-30 area. Again, i don't pretend to have a crystal ball that far. So taking one baby step at a time.....

Also of interest is that the Nasdaq MCO broke below the late April lows. Both the 5% and the 10% trends on the Nasdaq MCO are now below zero, which is also suggesting that this is more than a VST drop. The NYSE MCO is barely holding above the late april lows and if it follows the Nasdaq, the next day or two should see the NYSE MCO taking out those lows.

No top of importance in sight

Sorry i coudn't update my blog since April 23, since i had some personal preoccupations.

My April 23 forecast for a drop to 1452 was invalidated by the market action. I was wrong !. Every day the market throws new information. Only a stubborn ego-maniac analyst can afford to ignore such information. Right now the market says that we have not seen any top of importance. So as a trend trader, the next area of importance seems to SPX 1493, which should be the area where a hourly swing/trend trader need to focus on going long. For VST traders, today has a downward bias for a drop into SPX 1493.

ST Top ?

Based on the pattern, momentum on daily charts and dynamic supports on daily, i have some targets which should be acheived within a week.

ES 1452-1454, NQ 1800-1805.

Violation of Friday's highs on a hourly closing basis will invalidate these projections. I remain short NQ from 1854 with a stop above today's highs. Based on my 30-min charts, it appears that we will start with a gap-down on Monday. FWIW.

Friday was a Euphoric close with a closing tick of +1250. Those who were buying the close went home with the expectation of a probable gap-up. Talk about "To da moon anxiety" !. Top tick closes, especially on OPEX fridays is a bearish sign. Monday could end up as a big red candle day !

8 hours of bearish excitement

May last another couple of hours tommorow morning

As i commented in my blog last, the market looked tired as we approached 1448 and a reaction looked inevitable. My downside targets for the move was SPX 1428-30 (ES 1438-40). I will refine it to SPX 1430-32, which should be tagged tommorow morning.

ES 1440-42 is a key area, which should provide support. If this area is breached, then lower targets like ES 1428-30 will come into play. Need more clues in the form of price action tommorow to determine if that's the case.

In any case, the next move of consequence should be a move to a new recovery highs on the SPX.

VST top

If i wanted fame, i would have made a dramatic call that the next 100 points on SPX will be down or this top will not be seen in my lifetime. But i am a trader and i want money :-)

I do not see anything that suggests a major top is in place. But that does not preclude any non-linear drops, which i can't predict with any TA methods. Last time i made a projection was when SPX was trading near 1416. I had a preliminary projection to around SPX 1455-1460. I have to refine those targets now to yesterday's high at 1448.10. Good enough for government work.

The smart money OEX folks were loading up on puts with OEX P/C ratio hitting intraday highs of 3.81. The not-so-smart equity folks were loading up on calls like there's no tommorow. So i am expecting sometime of reaction to the downside over the next couple of days.

At a minimum we have a swing top in place on the hourly charts based on my work. The next move should take us to ES 1438-40 (SPX 1428-30). After this breif reaction, the uptrend should continue.....

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.