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Monday, January 2, 2012

Monday, 1/2/12 update

There are three alternates right now in the ES. The first two are identical in their very near term implications but very different in their medium term outcomes.

On the medium term, Alternate #1 outlines a 3-3-5 flat type bear market structure dating back to the top of last May, with the "A" wave complete at the early October low and the "B" wave in progress. The "B" wave should top at or near the May highs over the coming weeks and usher in some pretty serious "C" wave selling. A likely target for that "C" wave would be the .618 retracement level of the Mar '09 to May '11 bull market at ES 936.

Alternate #1

Alternate #2 also has a medium term 3-3-5 flat type bear market, but that flat is an irregular flat that is marked as starting at the highs of last February and concluding at the October low. In this count the ES has completed an Intermediate Wave 1 & 2 off that low and is in the early stages of Intermediate W3. The expectation in this alternate is for a strong and extended bull market from here forward.

Alternate #2

Alternate #3 is near term bearish and the most intriguing of the three. In this count the pattern from the May high into the October low is the 1st 5-3-5 zig-zag in what will eventually be a double (or triple) zig-zag type bear market. Since the October low the ES is labeled as having formed a triangle type "X" wave with the "E" wave of that structure complete in last week's trading. If correct, that would mark the conclusion of the "X" wave and the ES should immediately tip over into the 1st leg of the 2nd zig-zag of the bear market. A likely eventual target here is the same as in Alternate #1: ES 936.

Alternate #3

Alternate #3 has the edge as of this moment due to the situation at the end of trading last Friday. At that point there was a sell signal in effect on the ES/SPX under the Trendline/Oscillator system. Further, the Vindicator Buy/Sell has been oscillating, which it tends to do at market turns, with the Sell line close to crossing above the Buy line. A cross of the Sell above the Buy would be an initial confirmation of a turn down.


  1. Happy New Year, Al,

    You are one of the best traders on the net.

  2. Happy New Year to you as well, and thanks for the compliment.
    ES/SPX is little bit of a surprise this AM given the bearish look at end of day Friday, but that was in a Holiday market on thin volume, which is why I didn't act on sell signals.  BTW Alternate #3 above is now ruled out.

  3. The prudent traders were all flat into the holidays. Holiday trading data is distorted.  Hard to derive reliable analysis.   My charts were bearish but i didnt act on neither.  The old wisdom is never to overrule your charts. But I think holiday trading is the one exception with merit. 

    So now the possibilities left are  retest of 2011 top, or 'to the moon, alice'.  lol

  4. There is another short term bearish option which I didn't bother outlining above because it's a different version of Alternate #1, I'll see if I can find time later to post it.