Tuesday, April 30, 2013

Charts 04-30: extended 5th E-D

Here's a count that explains how we can stay up here in the aether until the May New Moon next Friday.  The opening waves of the larger 5th looked normal enough, they fit a nice channel, and put in an apparent top ... but ... we're not declining.  So I'm looking for one of those extra-innings extended 5th waves, where we try the patience of any final remaining bearish holdouts.  Actually, a crawl like this will probably piss everyone off, bull and bear alike.

Tomorrow has the ISM number at 10:00 EDT during RTH.  That is where we finish (i) of v of 5 and pull back to the bottom of the E-D wedge.  But it should hold up there.

SPX 04-30

The Value Village thrift store around the corner from me had a shrink-wrapped copy of one of my favorite movies, "What's Eating Gilbert Grape", for a mere 99 cents.  This is a charming film about a good-hearted young man stuck in the rural doldrums out in darkest Iowa, a film about duty and family and young love, well-written and well-acted.

At the end of the film, the protagonist and his girlfriend take cyanide capsules, shoot themselves with a PPK, and have the Waffen-SS guards burn their corpses with gasoline in a shallow ditch outside their bunker.

Oh wait, sorry, that was "Downfall".  They also had that at Value Village.  Good movie.

Monday, April 29, 2013

Charts 04-29: Wait, scratch that

Since we're still headed up, an ending-diagonal is ruled out if we're still interested in the May New Moon as a candidate top for it all.

We Elliott wave bloggers are like the gibbons at the Lincoln Park Zoo.  We're always trying to pee on the tourists, and sometimes we even get them.  But it's important that we keep trying, that we may get them tomorrow.

It struck me today how similar the current tape is to the initial candles we put in from 1343, back in November.  Tonight's chart carries the comparison a little further, a wave 5 here that is similar in shape and time to wave 1, but not as strong.

Counting the wave 1 as 95 points from 1343 on November 16, this would take us through very nicely to next Friday.  

I'll look for a spinning-top doji tomorrow, followed by a little rally into the May FOMC announcement Wednesday.  If we get that, I may even pick up some UVXY for a play into Friday.

Lots of notes on the chart.  Hang in there, bears. 

SPX 04-29

Saturday, April 27, 2013

Charts 04-26: Two more weeks

Nope, sorry, but it looks like the bears will have to wait just a bit longer on this one -- two more weeks.  I know ... I know ... but this cycle will run its course and let us know when it is finished.

We just did not get the sort of sharp reaction expected from a final top of this magnitude.  We threatened to, briefly, but the sell-off was muted.  A big GDP miss would be the sort of thing to get things moving to the downside, and we got it, just without any follow-thru.

In 2007, we hit 1576 on the SPX and retreated 30 handles intraday.  That's the kind of signal we need to see here.

Elliotticians would then look for a terminal pattern up here, such as an ending-diagonal triangle.  Expect to see new lows in all of the leveraged bear ETFs.  It's a fair question whether UVXY (which I scalped this week) will even hold $5.

Short-term, I'm looking for weakness early next week as we retrace in (ii) of 5.

SPX 04-26

Thursday, April 25, 2013

And ... it's ... gone

We have a completed wave count touching the "Jaws of Death" mega-megaphone at SPX 1592.64, followed by a sharp reversal.

My first target on the downside here is 1560, likely on tomorrow's GDP number.

Welcome to the Great Bear Market cycle of 2013-2014!  GLTA!

Tuesday, April 23, 2013

Charts 04-23: If the top is in ...

Two things caught my eye late today, prompting a quick bear count for the blog:

1. AAPL's delicious $22+ pop and fade to red after its earnings
2. The fact that we have retraced 72% off the 1536 bottom.  The first bounce in the 2007 cycle retraced 72%.

We have three big days of data ahead: Durables, UE claims, and GDP.  Big misses on the numbers, plus a 400K+ claims figure, could roach the indexes and take us to SPX 1500 by EOW.  After a bottom next week, we would be set for a sharp W2 into the May New Moon.

After that, we test the larger rally channel, the trendline up from 666.

Since we already wrangled with the top of the Jaws of Death megaphone, I'd be happy if we continued down.  The move off the top can count as a legit 5-wave impulse, if that's what we've got here.

SPX 04-23

Monday, April 22, 2013

Charts 04-22 a.m.

I drew up this chart last night, but didn't post it because the seemingly strong pump in the /ES futures was making me wonder about it.  But it turned out OK actually, we popped right to the top of the little pink channel and 1560 at the open this morning.

The .618 retrace of the move up from the (wave 4) bottom is 1545.  A close there today and maybe a McClellan Oscillator reading of -150 or so would set us up for the final rally.  There's kind of an inverse head-and-shoulders pattern sorta-kinda there with the 4/17 low, but the pop at the open today tilted the neckline out of whack.

If we keep sliding and close closer to 1540, then that could be the last downdraft in the wave 4, the [v] of c of 4 move.  Either way we should then start heading up for another test of the 2000-2007 highs trendline around May FOMC.

Edit: there is a nasty downward channel on the chart that could take us as low as SPX 1526 today.  That would leave the bulls with a do-or-die close.

Friday, April 19, 2013

Charts 04-18: Finishing up wave 4

Oh I really really wanted us to rollover into a iii of 3 waterfall yesterday, but when I could see that it wasn't going to happen, I exited positions to wait and see.

It looks like the larger wave 4 in the move up from 1343 is about in.  I first mentioned it a couple of weeks ago, but the excitement of visiting the top of the Jaws of Death trendline on the SPX, and the delicious drop from those highs, makes us watch for impulsive moves down.

The midline of the channel intersects the 2000-2007 highs trendline again just after the May 1 FOMC.  Is a policy change coming?  A declaration of victory and a timeline for winding down QE?  Or a delayed reaction to this?  The JOD trendline remains at ~1592, so a move up there and failure would be a nice way to end the reflation-attempt rally since 666.

Wave count, the channel, McClellan, VIX, etc all suggesting a bounce soon. 

Wave 4 count

SPX 04-18 6 month

Wednesday, April 17, 2013

Intraday 04-17: LOL

If we can make it to the 1500 area this week, then we can find an IT bottom at 1480 by EOM April and the next batch of Great News on the Recovery from the May 1 FOMC.

The 2nd half of May would be a fantastic panic bloodbath sell-off atrocity exhibition, with us completing "A" down in early July.

"B" would be the summer rally ... take a breather ... everything is going to be OK ...

"C" down, which corresponds to everything from 1440 south on the 2008 tape, could then kick off in earnest with the German elections in September.

2008 was faster than 2000.  We may be on an even faster pace down for this cycle.

SPX 04-17 a.m.
"A" down?

Monday, April 15, 2013

Charts 04-15: A good start

What a sneaky wave 3 we had today!  In the 2007 top, we had a move like this intraday off a spike high, but in this cycle we got the first big move off the top as a nasty nasty slide.  Looks great.

I'd like to see this first leg end early Wednesday on a spike low, one of those mid-channel power-reversal things.  Then we can bounce nicely into April op-ex.

SPX 04-15

Intraday 04-15: A bearish count

Still looking at 1596.75 as a possible technical top for this whole mess.  Would love to see us pull up to end the day nearly even.

Gold now trading under $1400, what a great way to start the week.

SPX 04-15 a.m.

Sunday, April 14, 2013

Alt. count for Permabear Doomster

The 5th wave was powered by the mess that was the FOMC minutes this past week (which was itself a way to eke past a non-POMO day at a sensitive time).

Here's a count that says the top is very much IN.

The moves in the commodities tonight are severe and very real.

SPX 04-12 alt top count!

Charts 04-12: False break?

The decline Friday stopped at about a .36 retrace of the larger move -- wave 4 country.  So we have a setup once again for a minor 5th wave into a top.  The confirmation would be a strong reversal and selloff into the close late tomorrow (Monday).

We have been busy lately arranging my 2nd daughter's 5th year birthday party, which we did as a "tidepool party" at the north end of Golden Gardens city park here in lovely Seattle.  We had a decent low tide here yesterday afternoon, so, despite the risks of Spring weather here in the PNW, we decided to go for it.  WA kids hit the beach:

Happy birthday, my Claudia!
We had a grim forecast of rain and cold, and actually managed some sun during the first half of the party as the prevailing winds angled just right to put us (Seattle) in the rain shadow of the Olympic Mountains across Puget Sound.  Eventually the rain made landfall, and the kids fled the beach.


Someone hit Denninger with a DDOS attack Friday, and I was mentioned in a thread as a possible suspect.  My old friend "Truthseeker" put in a good word for me -- appreciated.  Not only do I not have the time or inclination to fuck around with Karl's site, but I still do visit regularly to see what's up.  Karl's a mess, of course, but he's still the first place to go to deconstruct quickly an employment report or the Durables sausage, even ahead of ZeroHedge.

I will issue this challenge to TickerForum folks, though.  If Karl truly caught some sorry mook -- BitCoin zealots!  too funny! -- red-handed DDOS'ing his site, then please, please follow-up on this case to ensure that Karl follows through on this one, all the way to a conviction.  He is so strident that everyone else follow his various crusades -- boycotting airlines, cities such as Chicago, states such as Connecticut --  and so silly in his continual rants, that you should keep a close watch on whether he can seek his own justice here.  This will take time and effort!  So don't let Karl wuss out and seek less than full retribution for the damages done to him.

Someone over at Economic Undertow suggested this book, which sent me scurrying off to abebooks to secure a copy:

Farmers of 40 Centuries

I located a nice, tight copy in Pittsburgh.  Now this book in interesting on two accounts.  In the first part, we have F. H. King making a tour of China, Korea, and Japan 100 years ago, surveying the intensive organic farming techniques practiced there.  Filled with photographs and detailed descriptions, he explains things like how the Chinese learned how to build large structures with a combination of fired and unfired adobe brick, because they simply did not have enough energy on hand to fire all of their building bricks.  So they had to make do with what they had, and they did so in ingenious ways, again and again.

On the other hand this book is a fresh portrait of Southeast Asia a century ago, before Mao, before the Greater East Asia Co-Prosperity Sphere, before the 20th Century really got underway, before the Chinese poisoned their land and water.  It is doubly fascinating and tragic, and very well-written.  The author King is like me after my first visit to the state of Washington -- overwhelmed by what he has seen, and exuberant to tell others about it all.

The question remains for the Chinese people, was it really worth it, trading this in for an extreme of waste-based modernity?  What will they say, five or ten years from now?

I've been re-reading José Ortega y Gasset on the bus lately.  I read The Revolt of the Masses years ago, but I stumbled across a thin, trim copy from George Allen & Unwin at a bookshop on Mercer Street a few weeks ago, and I had to pick it up.

The Revolt of the Masses, George Allen & Unwin ed 1951

I'm a cult believer in this publisher.  Heck, I would even buy Denninger's screed if he could manage to get it published on this great press.

José Ortega y Gasset takes on a very special importance today.  Before, he read like any other European anti-socialist liberal, with an aristocratic bent that is largely alien to us, but still someone I would read sympathetically.  Re-reading chapters such as "The Self-Satisfied Age" or "The Barbarism of 'Specialization'", today, however, I remember that he is writing in 1932, at a time of great crisis,
"A hurricane of farcicality, everywhere and in every form, is presently raging over the lands of Europe. Almost all the positions taken up and proclaimed are false ones. The only efforts that are being made are to escape from our real destiny, to blind ourselves to the evidence, to be deaf to its deep appeal, to avoid facing up to what has to be. We are living in comic fashion, all the more comic the more apparently tragic is the mask adopted put on. The comic exists wherever life has no basis of inevitableness on which a stand is taken without reserves. The mass-man will not plant his foot on the immovably firm ground of his destiny, he prefers a fictitious existence suspended in air. Hence, never as now have we these lives without substance or root — déracinés from their own destiny — which let themselves float on the lightest current."
"The new man wants his motor-car, and enjoys it, but he believes that it is the spontaneous fruit of an Edenic tree. In the depths of his soul he is unaware of the artificial, almost incredible, character of civilisation, and does not extend his enthusiasm for the instruments to the principles which make them possible."

I think I have much more to learn from Ortega y Gasset, and will read him much more closely and carefully.  Oswald Spengler, too.

Oh, here's my chart from Friday's tape.  We closed back under the Jaws of Death, which is at about 1593 SPX.  It looked like a 4th and start of a 5th.

SPX 04-12

One more thing.  As a deflationist, I see the moves in metals on Friday as totally awesome.  More, please!  I can't wait to see gold under a kilobuck.

Thursday, April 11, 2013

Charts 04-10: Jaws of Death

If wave 1 of the rally since SPX 1343 ran 105 pts up to 1448, then a corresponding 105 pt move from 1485 would target 1590 here.

That and the Jaws of Death are right above us.  An intraday reversal per 2007 would then take us down to the 1560 area.

SPX 04-10

Jaws of Death megaphone

Wednesday, April 10, 2013

Intraday 04-10: New Moon tonight

Up in the ether here, very close to both the "Jaws of Death" upper trendline from the 2000 and 2007 tops, as well as this nifty Andrews Fork.

New Moon tonight.  For the comparison to the 2007 top, the New Moon was on October 11, 2007.

To continue the comparison, the "M"-top false break south would have been the drop to 1538 last week on the nasty employment report.

Also like 2007, we need to see some sort of intraday reversal on volume.  Is everything OK over in Euro bankland?

SPX 04-10

Saturday, April 6, 2013

Books: Library essentials

I will never own a Kindle or purchase e-books.  While the herd is distracted with that nonsense, now is the time to accumulate all of the analog books you can get your hands on, before the lights go out.

Books, real, physical books are the very best thing in the world.  They are a pure expression of modernity, the printing press, the written world, mass-produced, and yet they have a seemingly infinite variability and nuance.  To visit a great used book store is to experience the breadth and depth of our great civilization, and yet, it's all just so anachronistic, isn't it?

When the time comes, a good read will be as unobtainium as something svelte in 5.56mm.  So get yours now.

Here are the sort of books that are essential in building a great library.  They're not rare or especially valuable, but good solid material for the foundation.  They are like the brick 3-flats in Chicago (I was born in one), a broad, supporting base, of enduring value.

Let's start with Alan Moorehead.  Here a fine writer meets up with subject matter to match, the history of the West apprehending and staking out the undeveloped world.  Outside of a study of Burton, Moorehead remains a great entryway to the dark continent and points beyond.

Alan Moorehead
Anthropological study takes on a renewed interest in a post-peak-oil world.  Now reading about the Mesopotamians or the Hittites doesn't seem all that far removed from us, does it?  We may have to solve some of the same problems.  Here are a couple of good books published by Knopf.

Early human history
As long as we're going to use the Wayback Machine, we may as well go all the way and have James Henry Breasted in the larder.  The great Egyptologist was born in Rockford, Illinois, and went on to become a giant, because giants still walked the earth in his days.  Get his master text.

James Henry Breasted, 1938 ed
Sticking with history, take time to stock up on your French annales texts while you still can.  Here is a funny boxed "collector's" edition of Marc Bloch's classic Feudal Society, pubished by U of Chicago Press.

Marc Bloch, Feudal Society, 1968 printing
I saw copies of both of the following books linger at Value Village for almost two weeks.  I already had mine, of course, but I was tempted to grab the additional books and just give them, to someone, anyone, to have.  Rodale Press gardening books will serve you well.  Always.

Gardening super-duper-classics by Rodale Press
Closer to home, here are two classics from the Mountaineers Press before they became popular and everything morphed into a glossy softcover consumer trail guide for the masses.  These are first editions from 1968 and 1967, respectively.  When I still lived in Chicago, I would read Bob Wood's books on the Olympic Mountains like they were the finest travel literature.  The descriptions of the wild country were so captivating and engaging that I would read them again and again, imagining that I might one day move to this perfect place.

Mountaineers Press
Fiction is important to have as well.  In addition to the deep sets of children's classics I have been hoarding like mad, I have also been snagging other essentials of science fiction and literature.  Here are a couple of examples, Fritz Lieber and Theodore Dreiser.  Of course, both also have a Chicago connection.

It shocks me that Fritz Leiber is seldom on the shelves in the Sci Fi section of the corporate bookstores these days.  The youth of today would be well-served by reading him.

Leiber and Dreiser
And some criticism, classics, Paul Fussell and Allan Bloom.  First editions from 1983 and 1990, respectively.  I love these guys.

Fussell and Bloom
And, lastly, what doomstead bunker would be complete without a little Oswald Spengler?  The Man and Technics essay is a first edition and is actually obscure.  "Man  is a beast of prey," he reminds us.  This edition of Decline is an edited version, again, by Knopf.  What a great American publisher!

Spengler, Man and Technics and DOTW
Sock them away, keep them dry, protect their dust jackets with a Brodart.  Get more books than you have time for now.  You will have plenty of time to read them later.

Books.  Get physical.  Take delivery.  Get stackin'.

Friday, April 5, 2013

Charts 04-05: Back to the zig-zag

The lack of follow-through today after the opening gap down suggested that we were completing a five-wave move on one of those opening dumps that marks the end of a move.  Forget the irregular flat, that was an interesting idea, but I think the zig-zag 4th wave here is the right call after all.

That would put us in b of 4, pulling back early Monday, and then rallying again into the release of the FOMC notes late Tuesday.  I propose that those FOMC minutes, plus the lack of POMO on Wednesday, will send us lower late in the week to SPX 1527 and the bottom edge of the channel.

I had a bid yesterday in the AH for some 1-day mayfly SPY puts.  It missed by .01 and I just ran out of time in the 15-minute AH options session.  If I had nabbed those, however, I hope I would have had the sense to cover them at the open this morning.  The melt-up on days like this is just so evil.  Never mind anyone who tried to short the hole on that opening.  UVXY seemed like the tell on this today, up by only a moderate amount, and then withering on the vine.

SPX 04-05

Thursday, April 4, 2013

Charts 04--04

It didn't look like the wave ii retrace completed into the close today, which was disappointing because I really wanted to pick up some mayfly (overnight) SPY puts.  Lately, the tape has been all about reversals, so one tomorrow, continuing into Monday's session, would make sense.

SPX 04-04

Wednesday, April 3, 2013

Charts 04-03: Irregular flat

The steep drop today suggests that that wave 3 to a new higher (than 1576) high is very much over, and that we have actually been in the 4th wave since the news first broke on Cyprus.

The pattern for this would be an irregular flat 4th wave, where the B subwave actually makes a new high.  A and B of 4 are in, and we began C of 4 down yesterday.  I am looking for a bounce tomorrow and a move up to around 1564.

Friday, with a slew of data and no POMO scheduled, could be a real doozy.  If 1 of C of 4 was 23 pts, then 1.618x that would suggest a 37 pt drop.  Yes, probably all of it on Friday.  Wave 4 would then finish up mid-next-week when we reach the lower boundary of the channel.

What makes this pattern particularly perverse is that someone looking for a top at 1573 will indeed see a five-wave impulsive move down, without realizing that it is actually the C wave of a correction.  Ouch.

But we wil still have the "Jaws of Death" trendline just above us, so we can race up to tag it into the May 1 FOMC or so.  The midline of the channel actually looks to be just after May 1st, so maybe the FOMC is the "good news" that ends the rally a day or two later.  Or what the Fed has to say, takes a day or two to sink in and draw a broader reaction from the markets.

Something like that.

SPX 04-03

Tuesday, April 2, 2013

Charts 04-02: W3 almost in

We're in a small E-D wedge that looks like it can touch 1576 tomorrow, a logical spot for profit-taking and an end to what I am labeling W3 of a final 5-wave impulse up to finish the Jaws of Death.

Wave 2 was 50 handles (1448 -> 1398).  50 handles down from here is the 1525 area, which gets us across the channel, gives us a clean 2-4 trendline, and lets us rally into EOM April and the May FOMC for a touch of the giant megaphone that started with the 2000 top.

Proposing a zig-zag for a W4 here, because it would look impulsive enough to bring in enough shorts to power the final leg up.

SPX 04-02 6M daily

Stay frosty!