December 04, 2013
Today’s ES intraday action seems to be an exact reflection of what we saw yesterday (with the overnight Globex history also shown). I can only take this to mean the wave action is increasing in intensity. Furthermore, the ES (S&P futures) – EC (Euro Currency) seems to be broken following yesterday’s news. No longer can you use them as coincident indicators for day trading.
December 03, 2013
Wolfewave setups are always amazing – going into wave 5 it feels like there is a thundering herd of bulls or pack of hungry bears ready to gorge and devour anything in their path. It always feels a bit wrong to trade, just like any reversal setup. Today we have a pre-market getting very worried about the possibility that Bernanke will stop his magic hat trick sometime in the future. This is most likely the spark of uncertainty that will cause the markets to pause and consolidate. Do I hear a howl in the distance?
Below you see the results of intraday action (did somebody get headwind of this policy/rumor perhaps) and the opening bell news.
TSLA became a mo-mo stock earlier this year, sparking the imagination of many an investor, only to be disappointed by a “fire” incident and commiserate sharp pullback in the stock price. Similarly, we should carefully watch the market leaders, AAPL and GOOG as they have to work off a rising wedge pattern and monster gap. They are the true tell of the tape as money managers rotate among bets ahead of the new year.
Apple has been rumored to have changed hands from momentum players on the ascent to $700, to value investors who piled in on the pullback to $400. Pattern players on the other hand see that AAPL responds very nicely to Fibonacci extensions and pullbacks. Right now, it is completing a Gartley AB-CD pattern with a measured move target (wave CD) right around $572 on the weekly chart. This also represents a 62% pullback from the highs.
Google is a real mess and will probably consolidate from these levels. There is a “3 waves and a dome” pattern see on the daily chart, but more interesting is the overlap in the price structure over the past month.
December 02, 2013
Market correlations are an amazing science and trader’s tool to ensure success. We often look for “confirmations” of new highs between the indexes to ensure that the uptrend is intact. This is the underlying basis for the Dow Theory – any new high in the Dow Jones Industrials must be confirmed by a new high in the Dow Jones Transportation index. The best source for modern-day correlation analysis is the MRCI.com page. This well-established website has been cited many times by Linda Raschke for their in-depth analysis. Below is an example showing just how closely all of our US markets are linked:
This is a nice snapshot in time as all markets are walking in lock-step. What we will want to watch in the future is any breakdown in this relationship as volatility picks up (an imminent event based on VIX signal).
December 01, 2013
Sheesh, another 1929 setup, just like the playbook that was used into the 2008 abyss. This one comes courtesy of Tom DeMark who is also fascinated by market correlations. Interesting reading at McClellan Financial – Chart in Focus.
All the major indexes have experienced a huge lift on the wings of helicopter Bernanke’s easy money policy (aka quantitative easing). I haven’t felt compelled to comment much on the markets, since they have been for the most part uni-directional (up) until an interesting signal flashed on my pattern recognition scanner. A wolfewave pattern is visible on S&P 500 bigcaps, Russel smallcaps, and Wilshire charts.
To make things more interesting, the time span from June-September lows matches the length from September-present highs. Weekly patterns are showing a ‘doji’ = indecision Japanese Candlestick, and the VIX (volatility index) is beginning a solid turn on the daily chart. Monday will make for some solid fireworks following the Thanksgiving low volume week, so watch for a confirmation of this pattern setup.
After all, isn’t this the season for window dressing?
January 25, 2010
Why is this pullback in the markets more significant than any other in the past nine months? There is a negative divergence which set up the turn in the McClellan oscillator – higher prices, but lower market breadth. This is exactly the reverse of the positive divergence which preceded the market bottom in March 2009.
January 21, 2010
It’s been quite a time since my last post. The real reason is that I was out of the rhythm and beat of the markets since covering a multi-year short bet in March. I didn’t have the force of character at the time to flip long, at an incredible opportunity cost to my trading account. The lack of clean pullback from the March 2009 lows has provided very few good entry points.
I have also come to realize the futility in relying on other trader’s calls – most notably Doug Kass’. I am relying much more on my own insights going forward, with links noted wherever possible to relevant market insights.
The markets are experiencing the second day of pullbacks from multi-month highs. In particular, the structure of the S&P 500 suggest the possibility of a completed 5-wave series given the near-perfect Fibonacci ratios between successive waves.
September 01, 2009
Doug Kass made news last week with his “market has topped“ declaration. Kass said that the market has more than likely peaked for 2009. He believes the consumer is dry and can’t afford to spend money on anything but necessities. The retail consumer is the primary driver of the economy and responsible for some 72% of the GDP. With summer over and the home buying season over that will mean the consumer is going into hibernation for the winter. He also worries that taxes are going sharply higher despite campaign promises simply because of the rapidly rising Federal deficit.
Doug was one of the few analysts bold enough to call for a market bottom in early March during an appearance on CNBC. Once again, keep an eye on the dollar as it has how traded into pocket support. There are rising wedges visible on almost all indicies which suggest a profit-taking wave is inevitable.
August 19, 2009
As expected, the Shanghai Composite index encountered pocket resistance on the weekly chart. Despite major news outlets decrying the 20% drop as the beginning of a bear market for China, it is actually a healthy pullback after a total gain of 109% from the November lows. This pullback can be considered the handle of larger cup & handle formation – this setup was also encountered in the March 2009 lows.
Examining the daily chart, it appears that 2,750 will be a very crucial technical level to establish itself as a short-term floor. This is where pocket support should come into play on the weekly time frame, and it a test of the rising trend line from the 2009 January – March spike lows. It is also a 50% Fibonacci retrace of the advance from the March low.
August 08, 2009
Much thanks goes to Steve Garner – Gatetrader – for his ongoing insights found in the commentary section about the S&P, crude oil, volatility, and interest rates. He taught me almost everything I know about bonds and interest rates. Along with Ox, another great trader, he opened my eyes to inter market dynamics and paved the way to foreign exchange trading.
The dollar has been slapped around for quite a while now. There are signals which suggests a trend change is in the making which will have a profound effect on commodity prices and markets.
In early March a wolfewave pattern gave rise to a topping pattern in the dollar index. Now there is a clear positive divergence (lower prices, higher momentum) which was confirmed in Friday’s trading session. The larger structure suggests that an Elliott 5-wave pattern has completed, and in the weekly timeframe there is pocket support and the presence of a large A-B-C structure.
Crude oil drives both political and psychological markets. It is now against pocket resistance on the daily charts at 72. This swing trade will be very profitable on a move back to the lower 60′s to form some type of channel or symmetrical triangle pattern. Pocket support will be around 62-63.