UPDATE 9:30PM Friday: Forgot my 15 minute chart which shows a potential scary H&S forming.
Primary Wave Count: Markets have “setup” for a major plunge lower beginning Monday to futher extend wave 3 of (5).
Alternate Wave Count: Wave 3 of (5) is over or will shortly be after a minor washout come Monday.
Commentary: I am trying to approach this analysis with an open mind and see what the charts, waves and indicators are telling me.
1. Waves are pointed downward for Monday after the late Friday plunge. SPX closed under 741 support. Very bearish price action. Mondays are often continuation of Fridays. Could not close its breakway gap on Friday although it tried all day. More bearish action. 750 is a resistance area. Dropping lower, market would be seeking long term support from mid-1990′s. 741 was a good support area, the next REAL good one is…685ish… 700 should produce a bounce also I suspect.
2. VIX is way low compared to the wave 1 of (5) low. I can only take this to mean it is ready to spike. The 10,20,50 and 200 DMA are all finally bullishly aligned. All except the 5 DMA which should align very shortly Monday.
3. The CPC put/call ratio 5 day EMA has started to curl back upwards toward put heavy. Like the VIX, it is nowhere near where one would expect it to be if this was the bottom of wave 3 of (5).
4. Wave 3 is *officially* now longer than wave 1 by a few points, however this is not the “norm” and one would expect it to expand toward at least a Fibonacci target of 1.382 (685) 1.5 (668) or 1.618 (652).
5. The NASDAQ is way above its low in relation to the other indexes. I take this as obvious window dressing for end of month and I assume it will selloff hard come Monday. Dow and S$P dropped 12 and 11% and NASDAQ only 6.8% for Feb. That is probably why the VIX has not moved much. Just a guess. Just a guess that it will move severely on Monday. (yes I know this is a market factor not a chart item but still I think its important to point out.)
The bottom line is this: The waves have officially made new lows for the SPX and DOW but the NASDAQ is WAY too high at this stage. The VIX and CPC indicate still not much “fear” and uncertainty and are not even close to where one would expect them to be for the bottom of a wave 3 of this size. If this wave 3 ended in this state, it would be surprising. It all adds up to some more downside coming Monday and maybe Tuesday with a chance that it will be be more severe than all the “pundits” expect.
I do realize that indicators can “fail” and must be taken in consideration with all other factors. However, until proven guilty, I am in no rush to move my cumbersome 401K (with 30 day wait rules before fund switching) into full equity mode. I think the market may have 2 more weeks or so. The 1937/1938 pattern played out until the end of March. This market just might too and end with a daily sentiment reading of virtual zero. But realistically I am looking at the bottom within 10-12 trading days or so.
EWI posits the possibility that we may already by in wave 3 circle. I can’t make that count very well, can others see that possibility and how it would get to that count?
EWI and Mc Hugh’s counts have turned bullish too early.. they had called major wave b bottom in november
McHugh’s phi date turn point of 2/18 worked perfectly, but not in the way that he wanted in to. A major trend change from sideways to down clearly took place on 2/17, but he was looking for a bottom instead.
Truth be told Mchugh’s and others way of counting a wrong. I knew they would be proved wrong once intermediate wave 5 revealed itself to new market lows.
Their counting methods cannot account for this new market low hence their whole system is just plain wrong, what else can I say?
I have to agree. I rarely even bother to read McHugh’s newsletters any more, even though I’m a subscriber. His short term trading predictions have proved to be just about worthless. Makes me angry really since I’m paying him good money to get fed a load of crap in return. His Phi-Mate and Fibonacci Cluster dates are good though, as his his PPT and Secondary Trend indicator. Other than that, his newsletter is fish wrap IMO.
Also, I don’t know why he doesn’t just ADMIT he was wrong about the last Phi-Mate turn date instead of making convoluted excuses. He’s a damn stuborn for a Scots. What a surprise.
Its possible, but not likely. If we crash, and certain market internals such as UVOL-DVOL and Advancing-Declining issues pass our September/October highs, we will adjust the count that we are already in Primary 3 (circle) but I highly highly doubt that will happen.
Daniel do you work for EWI?
Daneric, great charts!
have posted a chart of TWM in photos showing a potential double top in the RSI of 70 on this bear etf. believe futures closed at 729… wow! we are really chugging along. however, be wary of a corrective rally coming soon….im thinking it starts next Monday… 5 more trading days and 10 days before OPEX week….
im going to keep a close eye on TWM for signs of a reversal in the Russels. this pattern of selling month end began last month. it then resulted in a pre-opex rally and hold.
keep an eye on the max pain SPY chart. it is VERY CALL heavy. they will now send this market lower and hold it there to sell more PUT OPTIONS and balance the curve. Once this is accomplished the market should reverse and hold a level for a while to convince PUT CHASERS to sell those options on the cheap as they suffer from time decay. once this is accomplished the market can begin selling off into OPEX week again.
don’t think options play an important role in the market? study carefully what happened last month. if you were a large hedge fund with redemptions on your desk and didnt care about your clients and only cared about profits for yourself. how would you play this?
push the market down…..redeem your clients portfolios near the lows….buy call options on the cheap….cover your short positions… squeeze out the retail shorts… sell call options as rally loses steam and buy put options…. sell into the waning strength. process more redemptions…pushing the market down into opex and cash in your puts…..buy calls..manipulate the market up to close off opex.
right now we are at the first step: balance the call heavy curve.
hope everyone made out great in February. made over 30% return in past 13 trading days but i hope to do better March through May… the Volatility continues. more grey hairs.
The VIX has broken through the monstrous bull flag formation… giddy up.
Dan I want to piggyback off what richard is saying. Normally I agree pretty effortlessly with your EW count, but something has me nonplussed with this one. Namely, where’s the time allotment for 4,(5)? You say we have 10-12 days to wrap up Bear Phase 1–I mostly agree–I think we have 13-15 days, but let’s not quibble over a couple of days. The point is, regardless, you need some time for wave 4 to peak before we can mop up the floor of this bear party with wave 5,(5). Right? So where is that time in your analyis.
I think Richard is right, we need to start wave 4,(5) immediately on Monday. That gives it a week or so to do it’s thing. Ny calculation is a standard 38.2% fib retracement (standard and typical for wave 4) back to 792, then 5,(5) kicks in and we drop to mid-March.
Nothing else makes any sense to me from a timing, cycles, astro, or EWP POV. We have a megaconfluence of turn dates in Mid March, i.e., PHI-MATE, OPEX, and last but not least the all-powerful Vernal Equinox. The VW has historically been a very powerful turning point in the markets. Of course THE MARKET IS ALWAYS RIGHT, I’ll go with you there, but it just doesn’t make any sense that this is going to drag out into April.
My 2 cents.
You might be right. I am not good with times. It might take a full 15-20 trading days to end this thing….
You say we should start 4 of 5 on Monday? It looks like we might be finishing 2 of 3 of 3 of 5. So, we may still have much of 3 of 3 of 5 left to go. Doesn’t seem like 3 of 3 will resolve in one day.
I meant it doesn’t seem like 3 of 5 will resolve in one day.
Could be some pretty good pain Monday morning, but don’t expect a big swan dive. Per many charts, a rally up to maybe 800-810 is upon us. THEN the wave completion. My target is 650 but kinda like 666 as ideal irony.
I’m playing 10% up and down until that happens. I’m telling anyone that cares to have CASH ready for the wave up. Have a great weekend.
One tell to eyeball is SOX. A kiss off Nov’s lows (172ish) will work for me.
I completely agree. We have to finish up this bear party on or before the Vernal Equinox IMHO. That means wave 4,(5) has to get going ASAP. That max height for wave 4,(5) is 805 so that fits with your range. However the most likely retrace for a wave for is the standard fib retrace of 38.2%, which is 792 by my calcs (If we go lower on Mon obviously that could change).
Whats the equinox matter?
Historically it is a major inflection point for the market. As it was in 2008.
Elliot wave talking on friday before close http://www.cnbc.com/id/15840232?video=1047685901&play=1
You can brag that you are better than Elliot wave if what you predicted comes true.
First, his name is Bob Prechter, not Elliott Wave. Second watch the video and take notes. At 3:07: Bob says “the Elliott Wave pattern is not complete,” meaning we have more downside to go.
He also said that he closed out his shorts.
A strong retractment next week would also support a good expected decline in gold. I like how that fits in with low evaluations and oil. A strong retracement starting Monday would fit nicely with all these aspects.
The bottom is in!!…for a couple days…
I think we need to see a continuation of Friday’s consolidation before we see a retracement. If I see a side-ways market on Monday. I would be inclined to agree.
I thought the best part of the video was when Prechter told Maria that news is a lagging indicator. In other words “inadequate” and worthless.
Maybe headline news… But the devil is always in the details and not so lagging at all.
Al, yes I loved that comment! And I completely agree. This is a subject I’ve brought up on StockTock before but the response has always been overwhelmingly negative. Today one member even told me to go F myself after I suggested that we not clog up the main page with news stories and stay focused instead on charts. So that’s it. I’m done carrying that torch. There’s so many people that believe news drives the markets that I’m done trying to argue with them.
What?
Use $VXN.X for Nasdaq
$VIX.X is only for SP500
i’m looking for a hammer bar on monday that kicks off 4 of 5, finishing mid-late in the week
I agree. We will wait and see.
I think you are barking up the right tree.
Let’s add some context to what Prechter said Friday. Ironically, I didn’t see Prechter’s appearence on Friday, but he issued the EW Theorist on Monday and EWI/Hochberg issued the EW Forecast on Friday. I’ve read each several times and it requires a careful read. EWI’s official stance as of Friday is that the market is DJIA is in (5) of 1 (circle) down with and alternate (4) of 1 down. Prechter, in the Monday EW Theorist, did not call the bottom but said the “minimum requirements of (5) had been completed. From his language it was obvious he was not saying that it was his preferred resolution. However, he mentioned recently measured historic analyst extremes in US Treasuries (99% bullish) and gold (96% bullish) that had NEVER occurred in ANY MARKET in recorded history. When those bubbles pop or even vibrate, the cash runoff will create a huge wave up in equities. Those extremes and the nearness of the EW count to the beginning of a major wave up caused him to believe the prudent market decision would be to close shorts. He wasn’t calling a bottom, just managing his and his clients’ risk. He said quite plainly the market could drop again from here but the risk/reward had clearly changed. He also mentioned the potential that even if the wave (5) in DJIA is not complete, it could begin and truncate or not extend to an expected Fibonacci preference and V bottom into a violent thrust up that would severly harm anyone caught short.
Exactly. Which is why even if you are short, you should have long calls on various banks, indices, etc, as protection.
Think about what VJ wrote. The bubble is not in both treasuries and gold….it is in one or the other! That means that one is telling us the future and one is a lie. Do think Treasuries are telling us the future?
After spending the Sunday with one of the best technical analyst on the planet, I now believe the S&P will bottom around 585.