Sunday, 4/28/13 update

This has been a pretty typical bull run since the lows last November in equities.  It's like the energizer bunny - just keeps on shrugging off hits and marching up.  If you look at the charts, corrections have been pretty short lived and of shallow proportion.  My trading has been actually quite boring - I position trade rather than day trade due to demands on my time and attention- I went long ES in mid-November, liquidated that in mid-December due to the holidays, then long Jun ES on Jan 9 and have been holding since. 
However, seasonally there tends to be a spring top followed by some bear action ("Sell in May and go away"), and the market does appear to be in the process of forming a double top over the last couple of weeks or so.  The EW count has needed modification several times in recent weeks as the bull move has kept extending, but the current count (if correct) has the ES in the 5th wave of the move up from the mid-November low.

It should be noted that the prior short term count had 5 waves complete at the Apr 11 ES high at 1593 - and that may turn out to have been correct in the end IF the current rally that started Thur Apr 18 fails to put in at least one more push up that gets it at or very near to the Apr 11 high.  The other thing to note is that there is the possibility that this current move up from Apr 18 will also extend - meaning it could push well beyond that 1593 mark.


This site is currently tracking 3 possible long term EW counts.  Of the three, the 1st alternate below is becoming less and less likely as time and price go by - in fact, it's probably only a 1 in 4 shot.  The 2nd alternate also will recede in likelihood if the ES/SPX continues it's upward march.  Which leaves the very bullish 3rd alternate, unpalatable as that may be for long term bears such as myself.  But it is what it is.  One thing to point out in the context of that 3rd alternate is that it takes the view that the market is in a Cycle Wave 1 off the Mar '09 lows.  In EW, 2nd waves can retrace almost all of 1st waves and still be valid as long as they don't run past the point where that 1st wave started.  Which means that Cycle Wave 2 in the bullish alternate is allowed to drop all the way back down to the high 600's in the ES/SPX and still fit EW rules.  So maybe the things that give rise to current bearish sentiment may eventually cause the bear downdraft that those sentiments anticipate and still support the bullish alternate.

Alternate #1

Alternate #2

Alternate #3

Sunday, 4/14/13 update

Markets are places where lessons in humility are taught on a regular basis.  The last couple of weeks are a case in point.
The ending diagonal formation in the ES of late March - early April seemed to be signalling the end of the bull sequence that started last November.  Instead, it was merely signalling the end of the rally that started right after Christmas.
In EW terms, it now appears that we've seen a 1st wave off the November low into a mid-December high followed by a 2nd wave flat into the Dec 28 low.  Thereafter there is a 3rd wave into a high at ES 1568.00 on April 2 followed by a zig-zag wave 4 into the 1533.25 low of April 5.  The ES thus currently appears to be working out the 5th and final wave of the rally off the November low.

To this point Minute W5 has shown distinct sub waves and appears to have passed the 3rd wave midpoint of maximum acceleration.  If the above count is correct the ES has yet to trace out a rally-correction-rally sequence before finding the final top to Minute W5.  Note: the dashed red lines in the chart are intended to show the form of the possible rest of the move and not necessarily to pinpoint price targets or time frame. 

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It has been the preferred view on this site that the bull market since the Mar '09 lows is a corrective "X" wave sequence that will eventually roll over into another severe bear market.  In that context it was always anticipated that equities would match their 2007 highs in the process of working out that "X" wave.  However, now that we're at those highs serious consideration has to be given to the idea that the 2009 lows marked the onset of a very long term bull market.  The alternate EW count in that eventuality looks like this:

  

Why does this deserve serious consideration?  Simply because all the reasons to be long term bearish don't seem to be causing any significant economic pain at the moment.  If the top of that assumed X wave is near at hand one would expect to see some serious cracks in the foundation begin to appear - but they really haven't as of yet.  That's not to deny the possibility that any number of possible black swan events may slam this thing into a reverse gear.   So from a trading perspective the best idea IMHO is to recognize that the market is currently uptrending and act accordingly, and to switch to bearish only when market action makes that the obvious trend.

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I will be traveling on business starting early Wednesday through late Friday, so updates to my indicators and trend charts will be spotty if at all.  Also, may not be able to manage an update next weekend.

Friday, 4/12/13 2nd update

Guess that answers that question.

Friday, 4/12/13 update

Gold has dropped to a level that has provided long term support over the last few years:

Likewise with silver:

Could be a nice buy opportunity.  However, be aware that the PM's could significantly break below these levels, in which case there would probably be a rapid collapse in prices.  So a good idea would be to wait for some sort of confirmation of a bounce off these levels before taking a long position.

Saturday, 4/6/13 update

The ending diagonal that was in progress since mid-March finally appears to have topped at ES 1568.00 last Tuesday.  Ending diagonals often appear at the end of sustained trends and are indicative of exhaustion of those trends.  In this case the ED marks the end of a rally that started last November and traveled 228 points (17%) in the ES, so the down trend should have some significance.

The pattern in the ES since the Tuesday high shows 5 waves down into a low of 1533.25 on Friday.  The fact that it was 5 waves helps confirm the possible change in trend.  The ES then rebounded into the Friday close.  If this analysis is correct then that rebound should not exceed Tuesday's 1568.00 high.  A possible target for the corrective bounce is at the .618 retrace of the sell off.  That level is at ES 1554.75 and is also right in the wheelhouse of the 4th wave of the sell off.  Corrections often are limited to the area of the 4th wave of the move that they are correcting.

Tuesday, 4/2/13 update

Couple of things showing up on this rally today which could be significant.

1st is the Vindicator Buy/Sell index which measures buying and selling pressure.  The chart of that below uses 26 half hour periods as a base, which equates to two days of activity.  Over the last two days selling pressure has exceeded buying pressure.  That will probably swing the other way if the current rally is sustained for the rest of today, but it should be noted that this did not occur as a result of sell offs since Mar 21 when the recent roller coaster commenced. 

2nd is the performance of the broader market as compared to the S&P.  The RUT is not participating in today's rally, at least not to the same extent as the S&P.  The chart below has the RUT in black bars and the S&P in purple, the indicator below the chart is a simple ratio of RUT divided by S&P.  I checked the NYSE and that index shows a similar situation.

Both these indicators may mean absolutely nothing in the end, but they are showing up at just about the right point.  However keep in mind that trending markets can be freight trains that crush everything standing in there way.  So a good idea would be to wait for a turn to be confirmed in some fashion before jumping on the bear wagon.