Wednesday, October 31, 2012

Charts 10-31: Turn tomorrow?

A bottom tomorrow, and a similar wave 5 to the first move off 1266 in June, sets us up to top right into November opex, at SPX 1493 if we have enough gas for it.

FWIW, tomorrow is a minor Bradley turn date, if you believe in that sort of hocus-pocus.

Trick-or-treating was good tonight, especially once the rain stopped.  The neighborhoods north of Ballard in Seattle are tight grids of middle-class single-family houses, which makes for a very efficient and effective time for the girls.

SPX 10-31

Sunday, October 28, 2012

SPX thought experiment

Good luck to all [you evil market speculators] this week.

BTW, topping into a New Moon after the U.S. election ... hmm ...  pretty much the perfect time for Israeli F-16s to take wing.

June w1 transposed into this week

Thursday, October 25, 2012

Charts 10-25 a.m.: Monday bottom?

Monday is the Full Moon (bottom).

On the principle that w1 ~ w5, we can project a final top at SPX 1493, right into the November New Moon (before November opex).

By the way, if you are waiting for the bottom to sort itself out here, do yourself a favor and read the estimable Reverse Engineer's detailed typology of the Doomer community.

This is a must-read!  What kind of Doomer are you?

Here in Deflation Land, we endorse a Full Doom scenario of the Mad Max variety.

Expanding ascending wedge top

Tuesday, October 23, 2012

Charts 10-23

I still see the possibility for a sharp blow-off rally top here, this week, modelled on the proportions of W1 up from 1266 back in June.

1486 no longer fits this revised channel, though.  I'd be happy with a slightly "failed" spike 5th wave ending at 1470 Friday.

1444 or so is needed tomorrow for this strange scenario to play out.  The alt would be that we keep descending to about 1396 on Thursday, giving us a clean, unbroken 2-4 trendline.  The current channel I have drawn has a slight violation of the 2-4 on a couple of pins.

IIRC, the unbroken 2-4 trendline rule comes from Neely's system, one that I like quite a bit and that usually clears up a lot of confused counts.  A decline that deep gives us a wave 4 of about 47% retrace, pretty deep for a 4.  Maybe that would indicate that the rally has lost its force, and is setting up to roll over with a 5th wave failure midway in the channel in the next week or two.

Bernanke will really have to trash the dollar extra-hard tomorrow for this to play out.

an electric wave 5?

Monday, October 22, 2012

Charts 10-22: New highs ahead

A small change on the McClellan oscillator today foreshadows a big move (up) on the indexes, a spike high that may finish off the entire rally since March 2009.

Ideally, we can rally to 1486 this week.  A reversal candle on Thursday would be real nice.

I'm long the weekly SPY 145 call from fifteen cents.

Hmm, just wondering here, but what if we get more Fed Magic on Wednesday, sending us skyward, only to have a failed auction for the 7-year note on Thursday?  That could do it.

SPX daily with the noise turned off
VIX breakdown

Sunday, October 21, 2012

Charts 10-19: the case for 1486

Nice to see that the market is keeping us guessing here.  So we're still in wave 4?  Or, have we topped, and we'll look at this in a week and say we "failed" a wave up here somehow?

At least it was satisfying to see those SPY calls I had sold early last Monday, leaving money on the table, it was good to see them go to zero.  Any time you can trade in and out of a short-term option, make some money, and watch it wither and die, well, that always feels good.

So I'll make the case here for 1486.

Take a look back at the first week of June, 2012.  There, from the low @1266, we put in a spike low, held, and rallied very strongly, within a few days of the bottom.  The same candle pattern here could take us 60 points north from 1426 tomorrow by mid-session Thursday.  Wednesday would be the key, a mix of real-estate data and FOMC fuck-all, who-knows, for a gap-and-go monster rally day.  It would be a repeat of W1 up to a point, where we would hit resistance mid-channel and finally top.

That could be Thursday, with Durables and some other data, where the market rallies early and then rethinks the numbers, reversing hard and nasty, heading down to 1400 by the first days of November.  Stopping at 1486 SPX would make wave 5 here about .618 the length of the 97 pt wave 1 from earliest June.  Tomorrow would dip early and reverse.

The VIX breakout is concerning and needs to be watched carefully.

10-19 SPX, drop to 1426 Monday?
Repeat of early June gives us the spike high top
VIX breaking out?  or just a tease?

Thursday, October 18, 2012

Charts 10-18

Making our way sideways and up to 1486 a week from now.  Waiting for the target, especially if it has the shape of a terminal pattern or bearish wedge, and if VIX drops below 13.

I count the 2007-2008 cycle as A down in 3 waves; here are the A and B waves leading into the crash:

A and B of A, 2007-2008
I'm using these early waves as a benchmark for the upcoming cycle.

1 and 2 of C, 2012-2013
Lots of spare notes and ideas on the charts.

The final target of C down is SPX 160, sometime in 2014, based on a 1.618 fibonacci extension of the rally up from 666.  When it completes, the petrodollar standard will come unglued and the U.S. dollar will collapse.  Good time to have an orchard and some geese, a flock of pilgrims or some embdens.

Wednesday, October 17, 2012

Charts 10-17

We continue to ratchet up in a wave 3, only 25 pts now away from the proposed 1486 top next week.  This is a wave 3 so far without any huge days, no 30-handle gap and go action here, just a non-stop day to day grind up.

The SPY calls I dumped on Monday, looking for a pullback, are now at least a triple for the buyer, possibly a 5-bagger later this week.  Just being careful with the short-term options.  Flat and patient to wait for the technical setup next week.

In the 1500+ blow-out scenario, the current waves are only forming a wave 1 for a much larger sequence ... still very possible ... although it would be very tasty to dump from 1486 straight to 1400, and to leave the bull market crowd in the lurch.

I'd very much like to see the VIX drop below 13 next week as well, to give us a new low and a possible buy signal on the daily Bollinger.  It would also gut UVXY and create a good entry for swing longs.

Tuesday, October 16, 2012

Charts 10-16: Let's try this

The impulse up from 1425 is stronger than expected -- I had hoped for a little pullback today instead of the continued rally.  I sold some SPY calls Monday that were green, but could have been quite a bit more green.

If the bounce at 1425 terminated a wave 4 in the blue channel (see chart), then we're looking for a 5th wave, so why not propose here a terminal pattern, either an ending-diagonal or an expanding wedge?

I'll sketch the ending-diagonal for now, looking for a pullback to support at 1440 tomorrow.  I'll buy that dip.

SPX 10-16

Saturday, October 13, 2012

Charts 10-12: Last leg of a broadening top

Friday should have completed the W4 correction off the post-QE3 rally.

Looking for a gap up Monday, followed by a pullback Tuesday, and a strong rally into October opex.  Then we can top at the midpoint of the larger (dark blue) channel in the week following opex.  The larger structure here is a broadening top.

Picked up a couple swell books yesterday at Seattle's finest storefront bookshop, Wessel & Lieberman:

1. a 1932 1st English edition of Oswald Spengler's Man and Technics: A Contribution to a Philosophy of Life.  After only a few pages, I am already seeing that this may be very relevant to our time.  I may blog on this in the near future.

2. A Journal of the Terror, an account of the last days of Louis XVI, by Jean-Baptiste ClĂ©ry, his valet.  This is a very clean Folio Society edition from London, 1955.  Good fun!

SPX 10-12

Wednesday, October 10, 2012

Charts 10-10: Simplify

Too much cruft, old trendlines, cautious early counts, broken channels, bad ideas, and miscellaneous crap left on my charts.

Today was one of those days where I select delete all on the SPX chart, clear the slate, draw the essentials and see things clearly.

Tomorrow, looking for a small drop -- to 1428? -- early, which is bought.  Still looking for 1480-1485, the week after October opex.

SPX 10-10

Tuesday, October 9, 2012

Charts 10-09: 3 options

It looks like we are in some sort of wave 4, that has now broken out of the old blue channel.  

Let's posit two options for the wave 4:

1. It will count A-B-C, putting in a new low below 1430.  Wave 1 was 55 points, so this could target the 1480-1485 area.  This would complete fairly soon.

2. It will keep heading sideways in a textbook wave 4 triangle, counting A-B-C-D-E.  This could finish soon, or drag out until October FOMC, resulting in a final rally into the election as high as the 1500 area.  So there are two variants of option 2, one that finishes sooner (FOMC) and later (November election).

Since we have lost the dark blue channel, I want to guess^H^H^H^H^Hsuggest that the wave 5 final move up will end with a failure to regain or hold this channel.  That would be a nice way to end it all.

And I guess the 4th option is that we already topped with a failed 5th.  But that's the least-probable scenario, IMO, and not shown on the chart.

At least, with these several scenarios, we have decently clear criteria to eliminate the losers over the next week or so.

Green, Blue, or Pink?  or something else ...

Stupid market update

I have a time-tested, almost sacred rule re Elliott-wave counts:

Whenever the market is acting stupid, you're in a wave 4.

So I'll suggest a wave 4 triangle here, still correcting from the QE3 excitement top at 1474.5.

It should finish up next week, and have us rally into October opex and in anticipation of the October FOMC, which could mark the final market top. 

That sets us up nicely for the long-awaited drop back to SPX 1400, where we can bounce off horizontal support as well as the lower channel trendline.  We can still make it to the 1266 area by December FOMC, once we learn how to sell-off again.

Or ... the triangle finishes up into FOMC, which sends us up in W5, rallying into the election.  I'll look more closely at both scenarios tonight.

W4 triangle and proposed W5

Monday, October 8, 2012

Charts 10-08 and 3PDH update

Today looked good, we did not complete a 5-wave impulse from the top.  Can we wrap this up in just two more days? 

5th wave ending diagonal

Three Peaks and a Domed House would complete nicely back @1266 right into December FOMC.  The Fed will cook up something fresh and fun for us after the election.

Like the subwaves of (a) of A back in 2007, I am proposing that it will have deep retraces, taking us all the way back to SPX 1400 just in time for a February 2013 debt crisis.  If the waves line up, March SPY puts will be legendary.  So will Q3 calls.

Sunday, October 7, 2012

Goodwill smells like ... victory

Sunday morning and I'm granted a run out to the Value Village over on Lake City Way.  I hit the Goodwill in Shoreline on the return trip.

I had been on double-secret probation from the thrift stores after blowing out my monthly $20 budget over the summer at the Value Village near us on Crown Hill.  I picked up a cool 1950s set of the Collier Junior Classics, which I found in excellent condition and just couldn't pass up.  The time away allowed both Value Village and Goodwill to churn their books and look fresh again.

Today was a real score.

Grosset & Dunlap "How And Why" series
two KICK ASS Golden Press hardcovers

I have a Wes Anderson-like reverence for Jacques Cousteau, and I have nearly completed this set of his old books from Doubleday Press:

Fans of the movie "Rushmore" will remember the book Diving for Sunken Treasure in this series, a copy of which I have here.

And some general read-on-the-bus history stuff. 

And one more staple.  I have a good set of John Stuart Mill books from the 19th century, including his Political Economy, but only have "On Liberty" etc in shitty Penguin paperback.

This can go on my shelf between its sibling Oxford Press editions of Burke's Reflections and Maine's classic Ancient Law.

It was a good day.  Altogether, spent $15 for these castaway books.

Friday, October 5, 2012

Charts 10-05: Not over yet

Looks like an ending-diagonal triangle to finish this up.  A 5th wave to the midpoint of the larger channel at 1485 will work here.

1485 also gives us a wave 5 of 55 points, which is similar to its corresponding wave 1 which ran from 1325 to 1380.  The first wave (i) off the 1485 top will bounce off the lower channel line, which is 1460 next Friday.

ending-diagonal triangle 5th wave

Listening to the classic 24-minute "Tube Bar" prank call recording tonight.  I once played the entire thing on the public airwaves on a radio show I had on WHPK FM, at about 2:00 in the morning.  Not a peep from the FCC.

Next week we'll check in on the weekly SPX Bollingers, watch for an extreme low candle on the VIX, and look for other interesting divergences.

Thursday, October 4, 2012

Charts 10-04: Capitulation day?

So, can we actually make it up to 1480 tomorrow?

We completed wave (iii) right out of the gate this morning, and spent the rest of the time sideways in (iv), which we completed into the close.  Wave (iii) is longer than (i) (the move from 1439.03), but not by a ratio of 1.618x or more.  So we look for wave (v) to extend, possibly taking the entire day to complete.  Those SPY 147 calls were already a triple or better today (up from 7 cents), and could do well again.

That would be one of those crazy capitulation days, where we drift upwards.  VIX might fall below 13,  and we could see a shocking new lows on leveraged ETFs like UVXY.  There are people still trapped in this pig at a pre-split $21, a seemingly cheap level at one time, and they may see it again (ouch).

A close tomorrow at 1480 would be truly beautiful, especially if it's followed by a 30-handle drop to support on Monday.

Good luck out there!

SPX 10-04
25-day, with proposed path to 1400 support

Wednesday, October 3, 2012

Charts 10-03: Gap up

McClellan oscillator for the last 3 days: -52.26, -45.81, -50.06.  A big move is coming.

Today sorted everything out for me.  The brief, rushed penetration of the lower channel bottom marked the end of wave iv.  Today was a very obvious (i) and (ii) of v, with (iii) starting tomorrow morning with a big gap over resistance.  I have a target of 1472 for the move.

Should this play out, then Friday presents an interesting opportunity for riskloves.  If we dip to 1465 early and then rally, reaching our target top at 1480 into the close, and wave (i) ~ (v), then a daytrade of the weekly SPY 147 calls may be a home run.  We will watch for it.

SPX 10-03

Someone bought the Great Books set at Value Village.  I felt good about it because I had found a stray volume -- Karl Marx -- over in the politics / current affairs section, separate from the rest of the set, and I moved it to be with the others.  It would have been a shame if the buyer had missed a volume.

As for great books, I prefer the real, raw thing ...

John Locke 5th edition, 3 vols, 1751 ZOMFG WTF LOLZ

Tuesday, October 2, 2012

Charts 10-02

I saw a full set of Britannica's Great Books of the Western World at the Value Village around the corner from me, but I'll pass.  I have the contents of most of this spread across my shelves already, and I really don't need this.  Allan Bloom used to make fun of the translations used in the series -- the Straussians take that very seriously and insist on as literal a translation of the text as possible.  Value Village prices the books out separately, so it probably can be had for about $80.  Not a huge bargain.

I took the girls out for a museum day on Saturday, starting with a bus ride to the Burke Museum of Natural History at UW here, a couple of bowls of pho for lunch, and then a visit to a good used bookstore.  Perfect day.  I snagged a Grosset & Dunlap edition of Tom Sawyer for them and Alan Moorehead's classic White Nile for me.  And some Peanuts paperbacks -- the girls really enjoy old, old "Peanuts" and "Nancy" comics, pretty far-out for the youth of today.

Small change in the McClellan oscillator today, suggesting a big move ahead, which I think will be up.  I spent about an hour staring at the chart tonight, trying to pick out waves.  Either we're moving in little triplets right now, or we have to wait for it to emerge and make more sense.  The tidy channels I drew last night were bent and broken today, but trendline support held.  1440 is an important level on the chart.

1480 still sounds good, possibly by the end of this week.  I'd short that.

Crappy finger-paint sketch tonight, I want to suggest the possibility of a diamond-top pattern if we pop up hard the next couple of days.  Need more data!

Diamond-top forming on the SPX?

Monday, October 1, 2012

Charts 10-01

Well that was a dopey thing I did on Friday with the "Bearish Option".  I should have stuck with my original count, and kept in mind that we were finishing up a wave 4 candidate move right into a full moon.  Dumb dumb dumb ... plus I dumped some perfectly good SPY calls.

Back on track, the channels are starting to make sense again here, so I can see us rallying to a 1480 finish EOD Monday.

October 1
Hmm, actually I think the blue line we "reject" off in the 20-day chart here may actually be an odd artifact in OX charts.  That happens sometimes when you view charts at different zoom levels.  It's still an important 50% retrace level from an 80pt drop from the presumed top.

It doesn't show up in the 60-day chart.

Yeah, zooming out a bit further, I don't know what that line is supposed to be on the 20-day chart.  A ghost trendline for October, I guess.

This sets us up for a summer 2013 rally and a hellish crash in the fall.

1 year

OK, then, W4 in ... 1480 on deck ...

Covered shorts this morning before ISM. 

The full moon at the channel boundary, EUR bounces off its 200DMA, and Charles Evans is right there to stick a fork in the dollar.  OK.

So we're set up for SPX 1480 in a week.  Let's see how it looks if /when we get there.

Blue channel for the win