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Sunday, November 24, 2013

Sunday, 11/24/13 update

"Overbought" and "oversold" are terms thrown around by market analysts.  But the truth is that markets often reach what look like extremes and keep right on trucking.  That certainly appears to be the case right now in the ES/SPX, which can certainly be classified as "overbought" by several types of momentum measurements.   However, whether it will turn here as a result is not a given.

There were three long term bull counts presented in last weekend's update.  All three show the ES in a 5th wave of one degree or another as of this juncture.  Also, prices are bumping right up against a trendline (blue channel in chart) that has turned the ES back twice in the last couple of years: March, 2012 and May of this year.  So the setup is there for a bear strike.   

In addition, the pattern since the 4th wave low of Nov 8 shows a pretty clear 5 wave structure up off that low, with the assumed 3rd wave longer than the 1st and alternating waves 2 and 4.  However, we are entering a period that has a seasonally upward bias, and the market closed Friday with a fair head of steam.  So it is quite possible that this 5th wave is going to extend, in which case the Minute W3 (in green) top on Nov 18 could actually be Micro W1 of an extended Minute W3 with a Micro W2 low on Nov 20.  That would allow more price and time space for a continued run.

Haven't discussed the long term bear alternate in quite a while.  The push through the ES 1586.75 high of 2007 this last spring put that count in serious question, and as equities have continued there relentless upward trend that "X" wave count has become less and less probable.  A fair elimination point would be at ES 1804.25 where the assumed "X" wave is a multiple of 1.236 times the 2007 - 2009 bear market.  Friday's high at ES 1803.25 puts the market right at that point.  Any significant push past this level pretty much rules out the "X" wave alternate.

Sunday, November 17, 2013

Sunday, 11/17/13 update

It ain't over until it's over.
And it ain't over yet.
And I suspect it won't be for a while - the seasonal tendency is bullish from here until the middle to end of January.  Of course there's always the possibility of a black swan event.

So pick your preference:

Bull pausing for a serious shake out very soon:

Bullish stampede continues interrupted by occasional cud chewing:

UBER bull:

Sunday, November 10, 2013

Sunday, 11/10/13 update

The ES has been fighting obvious headwinds the last couple of weeks.  As discussed last week, prices are right at a long term trendline.  Also, the underlying technicals are displaying divergences.  And finally, the alternate EW counts all show this to be an area of 4th and 5th wave unwinds.  But even with those considerations the ES/SPX staged a very impulsive looking rebound on Friday off an impressive looking downstroke on Thursday.  If we continue rallying the bears will once again have been denied their day of glory.  Paradoxically these short lived sell offs are setting up a very bearish situation.  One would have to assume that the number of market participants inclined to be bearish has been eroded considerably over the last couple of years, but the fact is that a bull market NEEDS  bears.  Bears provide support in bear trends when they buy to cover their short positions.  If there are a lack of short positions to be covered that leaves the market in the hands of bulls in panic - whoosh!! is the result.

So here are the two main alternates.  Target areas are noted on the charts.

Alternate #1


Alternate #2


There is a 3rd possibility that seems less likely, and that is that the Nov 7 top labeled as a "b" wave in both the above alternates is actually the top of a 5th wave ending diagonal, with the ensuing sell off and rebound being waves 1 & 2 of a new bear market.  However, the rebound off Friday's low has retraced over 80% of the Thursday sell off, so it's much more probable that it will keep on rallying to new highs.

Alternate #3

Sunday, November 3, 2013

Sunday, 11/3/13 update

I'd like to think that the print high at ES 1773.25 on Wednesday this past week marked a very significant top as per the above chart.  On Tuesday the ES motored a little above the upper trendline of a channel that has defined the market since the Mar '09 lows.  Then on Wednesday it dropped back below that trendline in the form of a key reversal where the market achieved a new all time high early in the day and then proceeded to drop to a lower low than the prior day followed by a down close.  In addition, the 1773.25 high is very close to a fibonnacci level of 1776.75 where Major W5 = .618 x Major W1. 

Also a number of technical indicators are showing divergences into Wednesday's high, such as a daily RSI and the McClellan Oscillator (1st chart below) and my proprietary daily indicator (2nd chart below).

BUT THEN...............
The pattern since Wednesday's high is beginning to feel like what happened in the mid September through early October correction - a nice downward impulse followed by a lot of waffling sideways crap culminating in a low that established a base for a ramp up into new all time highs.   Perhaps I'm being impatient and the waffling in Thursday and Friday's action is a series of nested 1st & 2nd waves building into a collapse.  If so that collapse needs to develop very soon.  If not then the below alternate count is quite possibly in play.