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12
Feb
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Primary Count: Market indexes bottomed on a “D” wave today and reversed to begin its “E” wave back toward the 900 area.
Alternate Count: SPX continues to produce complex correctives prior to the plunge under 800 SPX.
Commentary:Â
Intraday Waves:
The waves down since the recent 875 peak have not been true 5 wave structures down. They look like “threes” (ABC patterns) mostly 5-3-5 zig zags down and some complex flat patterns.   Based on this evidence and the hard reversal today which was accomplished on good volume, my primary count is back toward the huge triangle and today marked the end of the “D” wave. The “control” is today’s 808 low on the SPX. If that is taken out, then the D wave theory is weak. Â
Triangle commentary:
I have recently posted a blog post on my social page the 1937/1938 triangle and even the 1987 triangle and the fact that they both had “E” waves back to the upper trendline.  The 1937/1938 pattern is very interesting. It follows the current market very well.Â
Today had a very pronounced “hammer” candlestick on all the indexes. Both the 1987 and 1938 triangle also appear to be pronounced hammers marking their “D” legs, however I cannot confirm this due to I don’t think the chart I provided shows proper opening prices, but it would make sense anyways. The next days also were not terribly bullish as far as shooting straight upwards and holding gains. That could happen tomorrow also. Could be some down draft along with bullish updraft.  So don’t expect an elevator ride to 900 if this is the case that this is an E wave. There is many resistance layers to travel through.
The VIX got hammered at the end of day. I suspect the long-standing gap of the VIX will be filled prior to wave 5 starting (if my triangle play is correct). That would fulfill a “falling wedge” pattern nicely.
There is certainly a perverse bullishness and lack of true fear in the markets. I suspect a true wave 5 down to new lows will not happen until this bullishness and complacency completely exhausts itself. E waves are built on “hope”. Right now the government is what the news media has focused on as this source of hope. However government cannot change the underlying sentiment, they merely reflect the current moods. They react.  So if the underlying sentiment WANTS an E wave, then it will happen and the media will invent a reason for its happening and the government, being part of the social fabric and mood, will probably do its part in helping the market achieve its E wave .  It will, of course, all make sense. Â
Wave patterns repeat for a reason. And triangles of this size wouldn’t makes sense unless it had its E wave. Regardless, the markets are still clearly missing its 5th wave to new lows. It needs time as the 1937/1938 pattern clearly shows as that market didn’t bottom until almost April 1st.
On you’re third chart, you have (4) labeled far out. Does that mean you think it hasn’t ended yet? Sorry, but I’m really new to Elliot Wave.
And thanks for posting these.
February 13th, 2009 at 7:23 pm
if you take a look at my chart in Social posted FEB 13 it will explain the action is more about OPEX than it is about the PPT.
im naked short and i will sleep well this weekend. its a simple downward channel that i discovered a few days ago. everything else i read and digest is as clear as mud compared to this chart dissection. keep it simple.
http://social.stocktock.com/photo/spx-feb-13?context=latest
Dan, a couple observations about the triangles for various indices:
1) The $NDX is further evolved and is sporting a classic, textbook throwover. Meaning its E leg is done. And the next move is down…hard and fast. Since the $NDX is a leading index it could drag everything down with it.
2) All the other major indices, e.g., $DJI, $SPX, $RUT, $TRAN have already broken through their lower trandlines. Now, I grant you could lessen the angle of the lower TLs somewhat and make today’s lows the touchpoint, like you did above. OK. That’s as much (black) art as science. But I don’t think you can do that for the $NDX. The $NDX is clearly a mature pattern that is locked and loaded.
Care to comment?
February 12th, 2009 at 9:57 pm
The one thing I don’t understand with triangles is why they continue to be redrawn each time the bottom or the top of the triangle is pierced. Maybe I’m missing something but wouldn’t the D wave have completed with the January 20-21 low.
February 12th, 2009 at 10:02 pm
I think one has to admit it’s a subjective call. There’s lots of guideline, e.g., don’t make the slope of the TLs too steep, but in the end I think beauty is in the eye of the beholder/creator.
February 12th, 2009 at 10:21 pm
Certainly. The NDX is not in a triangle pattern perhaps. It made new lows continuously back in October when the other indexes didn’t. Didn’t bother anyone then huh?
So NDX may run a bit….Its perfect. It won’t be in a triangle so everyone will be confused…hehe
February 12th, 2009 at 10:27 pm
Actually the QQQQ’s already broke its C wave high so its not in a triangle.
And thats perfectly ok.
February 12th, 2009 at 10:36 pm
Yes, but breaking it’s C wave high could also be what’s known as a “throwover.” It’s a common termination pattern for triangles.
February 12th, 2009 at 10:42 pm
Throwover is when the A-C trendline is broken over, not the actual C wave price high.
technically the QQQQ’s are not in a triangle.
There is too much resistance, esp. upper BB, for $SPX to find 900. I still think (4) topped at 944 and we are in 3 of (5).
I agree about the bullishness and can provide evidence. This chart combines combines two market statistics in a way that peaks with bullishness, which has been near bear-market highs :
http://stockcharts.com/h-sc/ui?c=$BPSPX:$CPC,uug,adeolnnaypb20!b50!f][d20070901][iub14!ua12,26,9!lp14,3,3]
HOWEVER — the charted bullish tendency is TOO great, and is thus bearish for want of buyers. Most prospective buyers have likely already bought. With mostly sellers remaining, the chart has begun to roll over into what has typically been its most ominous phase, with negative divergence in both indicators, and the 20dMA just making a bear cross downward thru the 50dMA. Every time this occurred in the bear market, a decline in the S&P was under way, and the 20dMA downcross of the 50dMA was at the beginning of the steepest part of the plunge, which reached a new bear-market low each time. The capitulation you mention occurred DURING the plunges, not before, with the bottoms in statistical measures of bullish sentiment occurring at the same times as the S&P bottoms.
While no great proponent of conspiracy theories, I believe there is a bit too much conicidence in the timing of today’s news about mortgages and the surge in stock prices that painted the candles that you and Kenny’s List noted. The episode lasted almost precisely from 3pm to 4pm EST, raising $SPX from the brink of a technical abyss to the 38.2% Fib between today’s low and the recent double 875ish tops. A bit too convenient for me to accept, but the rise could not even reach the 20dMA. After market close stopped the straight-line surge, e-mini almost immediately rolled over at 837ish and has since drifted down to 832.5. SPY, XLF, and IYR drifted flat to downward (IYR closed at 30.22 and fell to 29.75 AH), while SRS and FAZ rose. Strong bullish forces (not sentiment but forces) are needed to break serious resistance and soar near 900. Could these after-hours moves have happened if such forces were in play? While we can’t give much emphasis to after-hours action, this does seem to be quite the opposite of what one would expect.
February 12th, 2009 at 9:39 pm
Sorry, this ^%&*%^$^%##$#%@@!!!!!!!!!!! software has messed up another link. Go with
http://stockcharts.com/h-sc/ui?s=$BPSPX:$CPC
for now, and I’ll post an unbreakable link to an image of a better chart in a few minutes.
February 12th, 2009 at 10:23 pm
unbreakable link to a static image of a better chart:
http://i43.tinypic.com/j7e2qh.gif
February 12th, 2009 at 10:24 pm
Uner all they have to do is change “mark to market” rules and the indexes will slice through a lot of resistance.
Its almost as if the waves are foreshadowing an event.
And let me tell you, look at my intraday chart….I knew it was gonna turn…waves were compressed ready to explode.
I bought FAS at $7.51 and I’m a permabear….
February 12th, 2009 at 11:43 pm
Dan, if you hold FAS over the weekend, it will cost you a lot. Mark to market just became less important. Think EU.
February 13th, 2009 at 12:52 am
The threat of changing the mark to market rules is possibly the only risk to being short. It’s likely that that change will happen, just when it’s needed more. In the meantime they can leak rumors about an impending change to scare shorts and get a little rally going and buy a few more days. Probably if the spx goes sub 740 they make that change.
I’m starting to get paranoid but I think with good cause that Obama purposely pumped up the treasury secretarys speech and that they knew a huge selloff would result when the secretary basically said nothing – that or Obama and his staff are not even close to being on the same page. Which is more likely?
This would be because the solution, if presented in a final version, wouldn’t be enough and the next time the banks needed help they would have nothing. It’s looking like a bluff and a controlled decent (for now). I don’t discount the possibility that this rally isn’t over (it’s clearly not and the only question is how high) but the logical timing for anything useful coming out of Washington is when the market is in freefall, when it’s needed, and when it doesn’t look like it is the final bullet. I’m going with this because this sort of manipulation seems about right and I doubt they would waste any positive developments when the rally is already going… about the story that sparked this rally, I think this is one of the more evil things I have ever heard – explicitly punishing the responsible and rewarding the irresponsible (using the people who didn’t make shitty decisions money) and I am very doubtful this goes through, it would be awful if it did.
February 13th, 2009 at 10:04 am
“Its almost as if the waves are foreshadowing an event.
And let me tell you, look at my intraday chart….I knew it was gonna turn…waves were compressed ready to explode.”
I really want to understand how you saw it coming, but I don’t. First, which of your charts is the “intraday chart”. To me that is a chart showing the details of A DAY. I don’t see such a chart. Second, what waves are you looking at. I don’t see any compression on any of them. I’m really not a dummy, I have a few engineering degrees myself, but I sure feel like one. Any help would be appreciated. Thanks.
Dan, could u please add MACD(5,34) to your 1930s charts
Thanks
Awsome post Unersaettlich! That’s a great combinations of indicators to get a clear read on sentiment that I haven’t seen before. I am glad to add it to my arsenal. Thanks for sharing.
The cumulative tick and NYSI also indicate we may just now be rolling over finally and there is a lot of room to fall before the hope is rung out of this market. I have no preconceived notions and will change course if the indicators tell me so but that late day move today did not prove anything accept that a little empty news dumped at a point of previous support can start a pretty impressive short squeeze.
(If the link gets split up just copy and pate the whole thing to the address bar)
http://stockcharts.com/h-sc/ui?c=$BPSPX:$CPC,uug,adeolnnaypb20!b50!f][d20070901][iub14!ua12,26,9!lp14,3,3]
http://stockcharts.com/h-sc/ui?c=$BPSPX:$CPC,uug,adeolnnaypb20!b50!f][d20070901][iub14!ua12,26,9!lp14,3,3]
can this rally not be counted as an ABC wave 2 irregular flat with wave c ending today or early tomorrow morning?
February 12th, 2009 at 11:47 pm
I thought so too but truthfully it was too bullish to say that at this point.
Looked like a true reversal to me and we have seen a few of them in this bear…
Doesn’t mean market is heading to 1000…..or even 920
But it is my alternate (complex correctives).
February 12th, 2009 at 11:57 pm
thats cool…thx for the follow up …really enjoy the work…
IM NOT A FAN OF 900 – unless it’s a $1.99 / minute
Daneric. thanks for your great post and ive reviewed the analysis. however, this market is so weak and the action today smelt of manipulation. we know how far manipulative action has got us before.
the money used to prop this up will probably removed slowly and surely after Options EX. FEB 25 i have written on my Calender “WOW DAY”. PPT or whomever. It’s so suspicious the kind of action we are seeing before Options Ex and ive explained the psychology behind the moves with the chart posted on Social Photos.
here is the chart ive prepared that explains WHY 900 is not an option for me:
http://social.stocktock.com/photo/photo/show?id=2348194%3APhoto%3A16217
GOOD LUCK TRADING!
February 13th, 2009 at 2:38 am
SORRY… UP LATE
changed the chart… by george i think i’ve NAILED IT
http://social.stocktock.com/photo/photo/show?id=2348194%3APhoto%3A16221
this fits with S135s view of the markets. with this chart .. no chance for 900
February 13th, 2009 at 3:53 am
feb 18??? is that 860 or 750 on the 18th
February 13th, 2009 at 7:18 pm
750 on the 18th.. back up to 830ish by the 20th and then leg down to 650ish starting after OPEX… my WOW DAY
The PPT knows how sacred that trendline is, and with one click of the mouse they can put in an unlimited size market buy order just above it, and sucked up the ask on every share in the way in order to get there. Brokers love it as they skim on every trade.
Your tax money at work, and it should be illegal.
I cashed out FAZ for 45.65091 in AH and PM for a 16.1% gain (bought at 39.30ish). I felt silly doing it, but I am enough on the fence here to be worried about holding an all-FAZ portfolio. The price of being wrong about being so bearish could be quite high on paper. Sure, the trend would still be my friend, and FAZ would eventually come back big and deliver a double or probably quite a bit more vs current prices. However, smart guys like S135, Dan/Eric, Richard (permabear), 3min, b, Kenny/David and others are no more sure than I what to make of the fundamentals, especially given our lack of experience with this administration’s PPT. Oscar is also screaming to be all in cash over a 3-day holiday. That seems to be one of his basic rules, and he will gleefully bellow his intelligent, if frenetic, reasons at you in the video S135 posted on Social. I don’t know exactly what to do with shares right now, but I do know what to do with cash: snarf up buying opportunities that inevitably materialize sooner or later.
Getting guys like me into cash and Dan/Eric into FAS is certainly also just what the government wants. Let’s face it — the new PPT is Tweedledee and the old PPT was Tweedledum. Besides, no Prez, regardless of how much he wants to fix, needs the word “change” and his name to forever be associated with an ugly market crash. Those guys own the printing presses. Thus it is no surprise that a high-velocity plunge thru support toward a new huge H&S neckline gets converted into a classic white hammer recapture of the uptrend.
It’s time to be philosophical and take stock (pun intended; in reverse). I harvested 16%+ in three days, combined with a double Jan 6-15 and whatever I got from late Jan thru early Feb, maybe 20% (not calculated; it involved moves between ETFs and bouncing around with a bunch of beer-money biotech). That is plenty good for bragging rights among fellow geezers whose “investment” activities consist mainly of watching IRA balances rot away. Tournament card players like me quickly learn not to go all in against somebody who could have a lock; just take what you can get and be happy watching your stack grow. I have won lots of bridge tournaments by cashing winners that would have turned to losers if I got greedy and tried for more (along with getting greedy people to think they could always cash winners later). But I might be wrong – it’s just that leaving a little money on the table is better than leaving a lot of blood. Besides, I can always say Oscar made me do it.
February 13th, 2009 at 10:29 am
I have the hardest time taking a profit…the better it gets the more i want it… lust of the flesh, lust of the eye, and the pride of life…
it sounds so easy to do…just take your small profits and let it grow….but even knowing its me being greedy…i stand frozen…finger hovering over the mouse button…and cursing as it escapes me….
February 13th, 2009 at 11:04 am
Whew!! At last! I was indeed getting worried! I am convinced of nothing but in and out,,,again and again. Take whatever you can, before they KILL it.
I am not at all convinced of investing ‘long term’ in this market, this gov’t, or this banking system at this time. The downfall last Fall was a ’sign’ of the corruption and incompetance. Nothing has changed. There is a reason for it, and it is due to the goals of the NWO/Central Banking system. Learn more about THEM and you can put it all together their cause of wealth, and the destruction of it too, and WHY.
But we are playing on their court, and the ref’s are a bit blind to some calls.
I think it best to keep in mind exactly WHAT can be changed; there are MANY things. And all of them will make the market zoom, one way or another.
-restoration of the uptick rule on short-selling (I don’t want that!) lol
–restoration of Glass-Steagal Act (I WANT that) and better believe market will ZOOM…up, up if/when that happens. Don’t think it isn’t part of their arsenal. I will go FAS/QLD/double up QQQQ, etc, etc…when/if they do this. It MIGHT be the ‘big one’ they are holding now.
–uhhh,,,impeach most of Congress, and 5 of 9 of the Supreme Court. (I am in favor of this; probably won’t happen)
–legalize smokin’ pot. lol. That will put Mexican gangs outta business,,for a litlle while. Tax it/regulate it. Just decriminalize it.
–teach me enough to be able to make a lot of money in the limited time we might have, in order to buy that land, build my mudhit, and have enough money to trade and make a living, and just live in peace. HooYaaaa!!! (lol)
Oh I went to my bookmarks to get Denniger’s site; looks like he is talking Glass-Steagal too,,,3 articles down. In the article ‘to the republicans”
–By being able to ’short’ IRA/Pension accounts w/QID, etc, is an advantage that we didn’t have in 2000, to 2003,,,(at least I was unaware of it, if so) Oh good lord, the things they CAN change. In the past, all you could do w/an IRA was go long.
http://market-ticker.denninger.net/
This guy is GOOD; we might need him on the Cabinet. He has 18 things listed. Here is a partial;
“Here’s the prescription to fix it now and forward – your platform on economics:
1. Reinstate Glass-Steagall. No more “Chinese Wall” nonsense. If you’re a commercial, government-backed bank that accepts customer funds (e.g. anything with an FDIC guarantee) you may not offer investment products of any sort (including insurance-style products such as annuities) nor may you have cross-ownership or control with a firm that does. Period. Banking – the fractional reserving of depositor funds and issued debt for the purpose of issuing loans – is a utility function and its plenty profitable (if a bit stodgy) when operated as one.
2. Drop the 10% deposit concentration cap to 5%, and give existing banks that are over the 5% limit three years to get under it by splitting off or selling off assets. This applies to fewer than 25 institutions, and it needs to happen right now to control systemic risk. Bluntly, if you’re too big to fail you’re too dangerous to the banking system as a whole. See #1 above – commercial/retail banking is a utility function and should be regulated as same.
3. Repeal the “Bankruptcy Reform” law. Consumers must have the same right to go bankrupt and discharge debts that corporations have. Banks and others who grant loans must have this Sword of Damocles over their head – you make a bad loan and the borrower can file Chapter 7 and stick you with it, without exception. This will immediately collapse the outrageously overpriced bubbles that remain and are credit-driven, including post-secondary education.
4. Remove the obscure little change made in the EESA/TARP legislation that allows Bernanke to set the reserve ratio to ZERO for banks, and set it statutorily to 8%. Enhance the law by declaring that ALL funds taken in by a bank irrespective of their source are subject to the 8% reserve requirement (thereby removing the “sweeps” exemption that started this mess.) This will force leverage in the regulated banking system to no more than approximately 12:1.
5. Set the lawful leverage limit to 12:1 for all investment banks and other entities including hedge funds. Any firm that wishes to be domiciled or operate in the United States must comply. Period. I know what the counter-argument is – “they’ll go somewhere else.” Fine! Go blow up some other nation’s economy. We’ve had enough of it.
6. Said 12:1 leverage limits must apply to all assets. Yes, even US Treasuries. If you hold it at most (for the safest assets) you can gear it at 12:1. Period.
7. Ban all off-balance-sheet vehicles; no exceptions of any sort. If you have control of it or are responsible for it in any form or fashion you must consolidate it on your balance sheet. “Shell corporations” set up to evade this requirement that have no capital or assets of their own are deemed a fraudulent shell company. Close the SIV loopholes.
8. No more Level 3 anything may count as “assets” and all model-marked assets in Level 2 must be disclosed specifically along with their pricing models and the inputs for same in quarterly and annual reports. The proper disinfectant for chicanery and fraud is sunlight. If a regulated or public company wishes to hold an “asset” without marking it to a market price they’re free to do so – what
if you take a look at my chart in Social posted FEB 13 it will explain the action is more about OPEX than it is about the PPT.
im naked short and i will sleep well this weekend.
http://social.stocktock.com/photo/spx-feb-13?context=latest