FocalEquity » Craig

Sentiment Too Bearish… probably

Craig — Sun, 13 Mar 2011 19:48:27 +0000

I’ve been waiting and waiting for the the bear market rally to fizzle out. And I don’t think we’re there yet. At the peak of a 2-year rally, I’m looking for some irrational exuberance. Consider these:

Yahoo Finance Homepage

And check out this sentiment data reported by Bespoke:

Craig’s Count ~ Bearish Setup

Craig — Fri, 03 Sep 2010 20:40:19 +0000

Yes, the market feels very bullish at the moment. Price action is strong. M&A activity is picking up. Data was better than expected the past couple weeks: GDP, unemployment, manufacturing activity, consumer confidence. A few minutes ago, the Hindenburg Omen guy just told CNBC he would not be short now until the McClellan Oscillator goes negative (I think he is still bearish though).

But beware. The volume has been lackluster during this recent rally. The market internals were extreme during selloffs and less impressive during rallies. And the wave counts just don’t support the bulls. Even the most bullish count has the market in a triangle, suggesting a C-wave flush lower (see DanEric’s chart). I’ll try to find another bullish count that supports upside from here but I don’t see it yet. Some bulls are heralding Primary [3] up but the shallow retracement (<32.8%) and time aspect makes me skeptical (Primary [1] = 59 weeks, Primary [2] = 10 weeks).

And look at today’s perfect trendline hit in the S&P. Doesn’t everyone feel good about the economy heading into the holiday weekend? This price run up is typical ahead of holiday weekends so consumers spend more money. But do you really want to be buying this market right here? Even if you’re a permabull, why not wait for a break and back-test of this trendline?

S&P Daily

S&P Futures 4-hour Chart (notice the overbought RSI reading)

I’ll have more charts throughout the weekend. Enjoy the holiday!

Please note: This is a rough road map for the market movement I expect based on the rules of Elliot Wave Theory (EWT). There may be several valid counts at any given time, but I am only presenting what I consider the most likely count based on my own objective analysis.

Craig’s Count ~ Let’s Get Nuts

Craig — Thu, 02 Sep 2010 04:42:44 +0000

Today was one of those days where you just stare at the chart and wonder what the heck went wrong. It’s the type of day where you think of all the time and effort that went into your counts only to have them rendered useless in one swift updraft of buying. One commenter called EWT useless after today’s move. How tempting it is to throw in the towel and agree that EWT is just too darn fallible.

Regardless of your opinion on this, admit it was interesting that exactly when the S&P violated the Minuette (iv) CANNOT CROSS line, the market exploded higher on strong volume. Looks like too many people were on one side of the trade and there was a mass exodus out of the short camp. I repositioned my trading account to a neutral state until I figured out what the heck was going on. When the market does something you don’t expect, you must get smaller and reevaluate the situation.

After some reflection, here are my thoughts. This is the type of post that gets readers annoyed and even angry. I cringe just hitting the Publish button because I know most people will say I’m ignoring the price action and simply using creativity to find a count that fits my stubborn outlook. If there was one day in the past 3 years that I have been tempted to turn bullish, it was today. And that is why I know it’s time to be more bearish than ever.

This count is borrowed from DanEric who is a stubborn Bear just like me. It shows Minute [i] finishing shy of its 1010 target, sporting an extended fifth wave. Sure, it’s not ideal, but it’s a valid wave count with no rule violations. According to Prechter, corrections after extended fifth waves usually complete near wave two of lesser degree. Well, that’s pretty much where we are now indicating Minute [ii] is just about done. This target lines up pretty well with the 50% retracement too.

Craig’s Count ~ Minuette (iv) Triangle Still Works

Craig — Tue, 31 Aug 2010 20:36:28 +0000

My primary count of a Minuette (iv) triangle still looks fine. However, I am prepared for a move lower in case (iv) has already topped out. It’s important to keep an eye on the bigger picture and not get too caught up in the squiggle counts.

S&P 10-Minute

S&P Daily

According to EWT, Minuette [i] should advance prices beyond the Minor 1 low, just as Intermediate (1) should advance prices past the Primary [1] low under 666. Notice the large head and shoulders pattern on this chart. The negative sloping neckline is very bearish.

Craig’s Count ~ Minuette (iv) Triangle

Craig — Mon, 30 Aug 2010 21:09:20 +0000

This count was proposed on Friday and looks good so far. Subminuette b has retraced just over 61.8% of Subminuette a. The b-wave may have a little more downside to go, or it may not.

Counting corrective moves is challenging, and counting triangles is especially difficult, so I don’t really care exactly where we are. It will become clear soon enough. I am having trouble finding a count that supports a Minuette (iv) flat or zig-zag, but that possibility does exist. The alternate count is that Minuette (iv) already topped out - see DanEric’s expanding triangle count.

As a trader, I want to be prepared for (v) down, which should be a decent size move. Given that (i) = (iii), both about 60 S&P points, it suggests that (v) will be an extended wave, moving greater than 60 S&P points.

Craig’s Count ~ Strong Internals got a Bear Thinking

Craig — Fri, 27 Aug 2010 21:45:49 +0000

I admit that today’s strong market internals put the Bearish Count into question. On the NYSE,
Advancers/Decliners = 6.59 / 1 and UpVolume/DownVolume = 12.75 / 1

Who said this market would be easy? It felt like there was lots of short covering today, which might have been needed to alleviate some of the bearish sentiment. Here is what Bears are looking for on this 10-minute chart of the SPX. There are few catalysts next week until the Friday employment report, so a choppy triangle next week does make sense. Today’s rally makes a nice 3-wave pattern, which suits the a-wave of a triangle.

EWT Lesson: Today’s rally looks like a bearish wedge but those can only be found in fifth or C waves. It is not the c-wave of a flat because subminuette ii is already a flat, and you cannot have two flats in the same 5-wave pattern. Subminuette ii must be a flat for this bear count to work. Otherwise, subminuette iv would violate the price territory of subminuette i.

Notes
This is a rough road map for the market movement I expect based on the rules of Elliot Wave Theory (EWT). There may be several valid counts at any given time, but I am only presenting what I consider the most likely count based on my own objective analysis.

Craig’s Count | More Downside in Days Ahead

Craig — Wed, 25 Aug 2010 04:00:22 +0000

SPX Preferred Count
My preferred count continues to play out. I wouldn’t expect any meaningful bounce until we pass the Minor 1 low around 1010, but the large Head & Shoulders Neckline is a more likely target around 995. There are alternates, of course, but today’s gap lower looks like the 3rd of a 3rd. If the gap fills, it would put the preferred count in question. 3rd of 3rd waves generally create a price window that is not retraced until the next wave of higher degree, which would be Minute [ii] in this case.

Author Notes
- This is a rough road map for the market movement I expect based on the rules of Elliot Wave Theory (EWT).
- There may be several valid counts at any given time, but I am only presenting what I consider the most likely count based on my own objective analysis.

Craig’s Count | Bearish Count vs August Doldrums

Craig — Sun, 22 Aug 2010 20:14:57 +0000

SPX Hourly Count
The last trading week in August typically is a light volume week, which favors sideways to upward price action. For that reason, I’m less inclined to shout from the rooftops, “LOOK OUT BELOW!”

However, the counts are looking very bearish for the short term. Since the Minor 2 (blue) top, the market is impulsing down in 5-wave patterns and correcting up in 3-wave patterns. All signs point to a third of a third of a third wave lower coming shortly. Note that I have labeled Minor 2 as a double zig-zag rather than an ending diagonal.

Notes
This is a rough road map for the market movement I expect based on the rules of Elliot Wave Theory. There may be several valid counts at any given time, but I am only presenting what I consider the most likely count based on my own objective analysis.

Craig’s Count | Keepin’ it Bearish

Craig — Sat, 12 Jun 2010 00:56:03 +0000

Here are several charts: The truncated leading diagonal just doesn’t sit well with me, even if it’s only truncated on the S&P and Wilshire indexes. The entire move down from 1220 certainly looks impulsive, and this is supported by the internals. The question is how to count it. The (iii) of [iii] of 3 count still is valid, even though its not pretty. This recent rally is really pushing deep for a wave (ii) retrace, but has not yet violated any rules. The move off the recent low can be counted as a zig-zag. If the market opens strong, I’ll know I’m wrong and accept the alternate count. I should have more charts this weekend.

How many bearish traders do you know that have covered shorts in the past two days? I’m thinking a lot, which makes it a perfect time for a gap down. We shall see…

Here is the alternate count that has the market in Minor 2 - with a truncated Minute [v] of Minor 1.

This 30-minute XLF chart is showing some negative divergences.

Here’s a look at the TED spread, which is the rate banks are willing to lend to each other. The risk of a credit market freeze up is increasing. How banks are behaving is a great indicator for the health of an economy. One of the worst measures is consumer confidence, unless you’re using it as a contrarian indicator. Looks like its in a 3rd of a 3rd wave, doesn’t it?

Gold looks Bearish on the Monthly, Weekly, and now Daily timeframes. Check out all the negative divergences on this daily chart. I can see Gold falling down towards 1080 very quickly.

Craig’s Count | On the brink of (iii) of [iii] of 3 ?

Craig — Thu, 10 Jun 2010 23:41:46 +0000

I’m upgrading the bearish (iii) of [iii] of 3 count to my Primary Count. The Leading Diagonal count is still possible but the (b) wave retrace looks too deep. The move off the 1042 low looks corrective with its overlapping waves (could be a series of 1s and 2s but unlikely). The market looks setup for a nasty fall over the next several days.

DanEric and Kenny don’t like the 3rd of a 3rd of a 3rd count tonight… Dan thinks the Leading Diagonal count may have ended truncated for S&P and Wilshire. This week has produced two extreme volume ratio days that are just strange. We had a 119:1 down day and a 44:1 up day today, both the highest recorded figures I can find