Monday, July 22, 2013

Charts 07-22: Alt count for a 7/31 top

My friend Permabear Doomster signaled a note of caution today, just the sort of remarks to make one nervous, so I quickly reviewed my chart, looked at the anemic tape, and pulled the ripcord on some weekly SPY 170 calls I was holding.

It is very possible that wave iii of this final (??) move here is in, despite the /ES futures being up 4.5 pts in the overnight session.  The 3rd wave looked balanced and arguably complete, so I did not want to gamble on the overnight session with the calls.

What Doomie made me consider is the possibility that this runs all the way to next week's FOMC and the POMO schedule that will be announced after RTH next Wednesday, giving us a 7/31 top.

If we get a 4th wave here, for a couple of days, and a final rally into FOMC, then we can end up in the neighborhood of 1730.  But first we need to burn off the /ES green overnight.  Maybe Los Angeles can default tonight -- that should be worth 6 or 7 handles.

Here's the proposed alt count.  Wave 3 actually extends when you compare it to the 5th wave, not the 1st.

SPX 07-22

A 7/31 top actually has some really neat aspects to it, when you apply the 2008 crash tape and timeline from there.  I'll explain it all if we ever get our top and a fresh new bear market to enjoy.

Hey, just to make it clear where I stand, I updated the tagline of this blog.  Deflation really is the cure for all that ails us.


Permabear Doomster said...

'Deflation really is the cure for all that ails us.'

I..err.. don't think the Bernanke would agree.

*Futures higher, but Oil sure is weak again. Maybe a jump at the fail..and then a small sell down?

Yet..its that SAME old problem again of QE, and the algo-bot melt.

I see NO catalyst to knock this market lower today.

Its why I'm already looking to next week, when we actually do have something to get things moving. The FOMC..and GDP data.

ps. why not get Disque installed on this page? When you reply to people, they don't know, unlike disque, which fires off an email each time a reply is made.

Bryan Franco said...

Taking into account the possibility that sometimes they don't make it so pretty, is there anything you'd look for prior to confirmation to suggest either extreme 1) wave 5 truncates or 2) that this latest leg up from the june lows is merely wave 1 of a larger wave 5 that finishes in late September?

Bryan Franco said...

uggh.. could have brilliantly used a line from a Green Day song in that prior post. Can you guess which one?

Christian Gustafson said...

IIRC the "late September" idea would be for us to form some sort of ending-diagonal structure here for a 5th wave, which terminates with the German election on September 22.

That's certainly possible, and I'll poke around with it. Keep in mind, though, that the big channel since the 2009 lows is rising, and that every day pushes a touch of its upper bound even higher.

McHugh suggested recently that the current wave up could be a W1, and the E-D is one good scenario for this to work out. Each leg of an E-D is a triplet, so W1 would be complete -- and really rape anyone betting on a W5 arriving here.

The .618 retrace of the rally move since 1560 is SPX 1613. Wave 2?

I'm not too familiar with their oeuvre, Bryan. Big Black or Gang of Four is more up my alley.

Christian Gustafson said...

Bryan, the upper trendline for the 2009 rally channel -- the Big Enchilada -- is right about at 1770 SPX on Friday, September 20.

That would give us W1 ~ W5 similarity, where wave 1 is the move from 1266 to 1474, 208 pts.

From the 1560 low, 208 pts targets 1768, ding ding ding.

So the wags on ZeroHedge may be right after all. The rally does not end until the Germans turn out the lights on Europe.

Bryan Franco said...

That guy Luna on Tickerforum used to love the expanding wedges to finish things off. Where is he? You and he were among the more thoughtful ones on that dreadful site.