In intraday commentary today, Surage asked:
Will today be a repeat of 11/7? A strong green day to be followed by a few more days of selling? Or is everyone and their mother calling for this “new” bottom to hold?
Great question! That got me digging in to some numbers on some “reversal” days and 11/7 as a control. I used SPY as a surrogate to the market. Here is how it traded on 3 key reversal days in the last 6 weeks.
Date Up/dn intraday Volume Comment
swing
10/10, dn ~02; ~10 pts; 871 mil; most number of 52 week lows;
10/28, up ~10; ~09 pts; 640 mil; reversal after first retest;
11/07, up ~03; ~03 pts; 380 mil; a low volume up day last week (use as a comparison for vol);
11/13, up ~06; ~09 pts; 753 mil; most of the volume occurred after 1:30 PM;
- Reversal #1: 10/10 low (83.6) to 10/14 peak (105.5) is 26% too quick (less than 1 1/2 trading day length)
- Reversal #2: 10/27 low (83.7) to 11/4 peak (100.8) is 20.5% in 6 trading days
- Reversal #3: 11/13 low (82.09) to mm/dd peak (X) is P% in Y trading days?
Today’s reversal is on much stronger volume than the reversal on 10/28. This is why I think this rally may last a little longer than the rally after reversal #2, (expect Y to be more than 6 days). I also expect the percent gain for this rally, P to be higher than the last two reversals, say between 26 to 30% as people will be more skeptical this time. (BTW, Art Cashin said that if there is a reversal today, it could rally 30 to 35% from the lows). I pick 27% or 105 on SPY as potential high (may be too high). This will work well with Tony C’s and Craig’s scenario of pennant breach to 1010 to suck more longs. I think that’s when the REAL selling begins. May be it will it be just in time for Thanksgiving or the next jobs report.
3 drives to the bottom!
don’t see $spx going to 1010
http://stockcharts.com/h-sc/ui?s=$SPX&p=10&yr=0&mn=0&dy=28&id=p60438326065&a=154857661
Thanks for the analysis it does look like most of the indicators are pointing to a strong rally.
Tony C’s new video is out: out of control and highly emotional. pennant is violated and now it is an expanding triangle – a wild ride.
If this pattern plays out and goes a little past the triangle like Tony says, then we could go all the way up to 1050 during this move.
You go gr! I love finding these links in the erly AM (my time).. Goes good with the first cuppa.
If I may comment and ask a question of those with more knowledge. If you bring the VIX into the mix, there isn’t much room for the VIX to go down to stay within its pattern, therefore this leg up could be short before the big break down. I appreciate any thoughts.
Look at each of these last pops. The one on Oct 10th was erased in 2 days. The one on Oct 28th was a short covering rally on the first test of the lows and it was ultimately erased. This is the 3rd test and likely will be erased within a week or sooner with the 4th test being the one that ultimately fails. It usually takes 4 tests to break a trendline in either direction.
The S&P lost 48 points on Wednes and Thursday added 59, for a net gain of 11 points over 2 days, and premarket today it looks like those 11 are likely gone.
This time people won’t believe this rally. Which makes it more sustainable. I mean it will last a few days longer and a few points higher. That is how the sentiment works? No?
I do believe in the sentiment logic behind Elliot Wave theory. But I think it becomes obvious only in retrospect. Most forward looking projections on counts/scenarios always have either multiple alternative scenarios or immediate retractions.
However, this latest revision by Mish seems plausible to me (gut feel only).
http://4.bp.blogspot.com/_nSTO-vZpSgc/SR1kIkXy1AI/AAAAAAAADws/u2frHWUlGGs/s1600-h/%24SPX-Monthly.png
The near term EW predictions are all over the place and make them rather useless imo, and you can get in trouble if you get hooked on any one count. It is interesting that few people who use EW also use MAs, trendlines, or S/R lines in their predictions. These lines are essential to have on any chart.
Traditonally is market down during Thanksgiving? I don’t think they will want a doom & gloom scenario around Thanksgivng & especially the day after when people go shopping for Christmas. Just my opinion.
Regardless of all forecasts, one thing that remain constant, and always be, is the degree of assertiveness that caracterize most of the forecats posted on this blog (and elsewhere). I would like to point out to the very large number of TA indicators, suport/trend lines that can be drawn, and all of the different trading theories that exists out there. Since every single of them can be used to support one’s opinion over upcoming market moves, please everyone acknowledge that we are all human and that our personal opinion are based on imprecise science, which is equity trading. That being said, I wish everyone good luck !