S&P 500, NDX – December 27, 2009

Hope you had a Merry Christmas, and are en route to a wonderful New Year.

In a post of December 11, I said:

In June, index looked heading for a good drop, or correction, but it turned around without giving much and rallied. In November, Index looked very weak internally and cyclically, it looked ready to break, but it recovered without giving much. It has been my proposition for months that the bears of the last drop (before March) have been little significance to the market action (other than providing timely squeezes for rallies), and I think they are totally out of the game at this point. Market needs new bears with capital and conviction.

And, more importantly:

So, the question is if those who can short with capital and conviction did not do so in July or November, why would they aggressively sell here in December with Santa and year-end-bonuses on the horizon?

And

My plans are just to focus on the ongoing range and ignore everything else.

Then I kept posting the range charts of NDX and SPX with my targets

Sometimes, the simplest of charts, and a trading plan may be all that one needs.

Here is the updated range chart of NDX


I realized that I had made a mistake calculating the first range target. Here, I have corrected it. So, the first target, 1860, has been achieved and surpassed – Congratulations to all who acted and benefited. I mean it, with all the noise coming out of bears saying GDP this, unemployment that, Greece-to-hell-in-a-hurry, Spain and Portugal to follow, and whatever the hell not, staying with a technical setup and pulling the trigger on a trade solely based on the charts may be hard.

Don’t get me wrong, I am not arguing against the fundamental arguments of any fundamentalist. I actually think they are right. But, as I have said, time and time again, market and fundamentals may, at times, dance to very different tunes.

It was in September that the weekly chart broke out. Since then, NDX has held very well. Some of you may remember this weekly chart that I have posted at times



There is some significant resistance around 1890 area, and after that we have the high of last year. As for support, we have a multitude of levels. What interest me in the above chart are the rising MAs and the appearance of hook on MACD. It is a very positive chart with a very positive technical profile.

Let’s zoom in


Index is overbought, but that does not mean much in an uptrend. The recent move did not have a lot of volume, and it would be interesting to see how the index behaves when volume comes back if it comes back.

I can count the entire thing as an impulse, but I’m gonna stay with abc’s for now

There is a tricky part with the placing of what I am counting as minor wave B (dark blue). I think I can place it at November 27 as well as at December 17 lows; each has a drastically different wave projection.

Let’s zoom in on the 60-min again


As you see, depending on where I place minor wave B, the wave projection changes significantly. But, that does not matter immediately. As long as NDX stays above 1814, it is just doing fine. If it breaks below that it may put the current uptrend in jeopardy.

Index can drop all the way to 1815 and still be OK. Below that, we have the range of 1760-1814 as a buffer zone. In other words, I cannot see a favorable risk/reward scenario on the long side right now.

The 60-min chart is way over bought. That’s OK, that’s what I’d like to see on a 3rd wave. But, that’s not my ideal setup for a new entry on the long side. It can ride the Santa Sled forever or can correct at any point.

There are four unfilled gaps on the chart above. The last one may very well be an exhaustion gap considering how overbought RSI is.

Getting back to the range, I think the first targets can be attacked aggressively. But the second target, IMO, should be played more conservatively. That’s because upon a breakout

1. Many are doubtful and wait for, well, whatever
2. Many are caught off guard holding shorts and, praying for a pullback and a break even

By the time the first target is achieved, everybody knows that the range was indeed a correct and fruitful setup; many shorts will have covered, and many doubters will have tip-toed in. So, chances of profit-taking/rotation/distribution increase.

We will see how it corrects when it corrects on the lower frames and we’ll decide what to do then.

It is good for the market to come out of a range being led by the tech sector. That shows a propensity towards risk.

This is a weekly chart of S&P that we have seen before



In the beginning of December, I pointed to RSI and wondered if its action was a harbinger of a pending breakout.

Well, we have our breakout now. There seems to be a lot of air above, and some solid earth below. There really is not much technical resistance before the 1175-1200 area. One could point to 1145-1150 as possible resistance, and that’s about all I see on the weekly frame.

We have quite a bit of support beneath, but the technical picture is not as well developed as NDX

Let’s zoom in


It is difficult to view the advance from July as an impulsive set of waves. I looks more like a series of abc’s. The overlapping waves, the continuously decreasing momentum, and low volume advances have been main contributors to the stealth nature of the recent moves. They get the bears all worked up that the top is finally in, only to be squeezed into another rally.

Let’s zoom in

This is the same 60-min chart that I have posted a number of times with my range targets



So far, S&P has been an underachiever compared to NDX. It may offer a better risk/reward entry when we finally get a correction. Regardless, as long as index is above 1110, it is in good shape, and the 1085-1110 range should act as a buffer zone.

For now, as long as index stays above 1080, I would ignore bears, and pay more attention to technicals, the weekly chart and its breakout, and the daily chart and it MA alignment, and the price action with respect to support levels and MAs.

You have done the hard job of pulling the trigger on a range breakout. Now is the time for position management and prudence. One shall not let a winner turn into a loser, and if the winner stays a winner, one may entertain a systemic increase in one’s position size

This coming week is a short week and volume may stay light.

Bond yields have been on the rise



This may make it more expensive for those who need to finance their ongoing operations. I am not sure what should happen to force, or lure big money into long-dated treasuries. Some may say a market crash or a sharp sudden correction may do just that. For whatever it’s worth, this is a US bond auction week.

Happy Holidays!

S&P 500, NDX - December 16, 2009

Before market open, I posted a quick post saying that If I were in control of the market, I would try to lure some sellers in, and then try to squeeze them.

Well, I am not in control of the market – Duh! But it seems like the market did that anyways

This is 5 minute chart of NDX minis


I posted at 07:50. Quite amazing, isn’t it?

So the shorts came is and went out dry. But the index could not capitalize on the squeeze run and started to sell off after the high of the day at 10:09


That further strengthens my thesis that bulls seem content to hit the shorts and stand aside (or sell) without committing new capital of their own to push the indexes above the top of their range(s), like this 60-min frame of MDX minis

Or this 60-min frame of S&P minis


As I have said, the way to play a range is to either stand aside, or bet the top end when one is at the bottom end and vice versa if one is a trader. Otherwise, one may get chopped.

If I can, I would like to play the ranges with options. If price moves for me, I may take profit and/or spread the options I have to reduce, or even eliminate cost.

The ranges on the indexes are a bit old now and everybody sees them, so they may soon break one way or the other.

Here are my targets either way



Targets are, needless to say, theoretical and not guaranteed.

Bulls cannot forever rely on short squeezes for higher prices. If they are serious, they will have to step in at some point and spend money.

There are negative divergences on the charts above. Oscillators are tricky beasts in trending markets, but they can be extremely useful in range-bound price action.

Once again, the ranges are very well known to everybody and their cousins, they may soon give way

Have a Nice Evening!

S&P 500 - December 16, 2009 - BMO

Not much has changed. Market tested the to of the range and sold off.

Volume expanded, and yesterday could be counted as a distribution day by technical measures.

It seems like both buyers and sellers are waiting for something to happen. In other words, seems like bulls, while not selling en mass, are not buying enough to cause the breakout. On the other hand, bears seem content to hit and run.

so while I am waiting, I can play with fictional scenarios, like this

If I could control the short term of the market and I did not want to commit extra capital to drive the market up, while still wanting the market to go up and help my existing longs, I would use this AM's econo-news to drive the futures down, hoping to lure the sellers in, especially since yesterday market sold into the close, and then I would try to squeeze them higher, especially since this is an OpEx week with a Fed show to boot.

Fictitious, fantasy scenarios aside, we are a the top of a range in a market that has been trading technically , and I should either entertain a short with a stop above the range, or stand aside.

For longer term positions, I should either hedge, or do nothing.

S&P 500 – December 11, 2009

Techies hold the market back.

Early Friday, futures seemed like all the rage in the low volume hours, pumping it ahead of retail numbers. After the numbers, techies took a good dump and that kept a damper on S&P for the day – Party Poopers!

This is a 20-min chart of March NDX minis


There is a potential Inv H&S on the chart. We’ll see.

Despite the early drop of the techies, S&P held its ground and didn’t budge. Nothing changed and the 1080-1110 range dragged yet another day


As long as index holds within this range, it has a chance of gathering energy to launch another attempt for a break to the upside.

The weekly picture has remained the same


Still knocking at the 2007 downtrend line and needing that extra bid required to push it through. If we break to the upside, pay attention to daily volume and breadth of the breakout, and how the whole thing (price, momentum, volume, breadth) behaves in the days after the breakout.

Friday’s volume was below average. Breadth was good


On Dec 5, I pointed to the number of new highs as a positive development. That gauge is still doing well. In addition, A/D line finally broke to the upside and recorded a new high.

Both McClellan Oscillator and the Summation Index recovered a bit on Friday


Overall, the breadth picture has shifted from neutral-to-negative to neutral-to-positive. That is nothing special in the upper half of a range that has been in effect for more than a month. It gives a launching pad to a break above the range and will be supportive if the breakout happens, but the breakout has to happen

Late October, we were studying the cyclical momentum of the index (CCurve) as it was showing signs of weakness.


Late November, CCurve started to turn up and I said that the peak after that turn would be important. That peak came higher than its predecessor. Now, CCurve is turning up again from a low that is higher than the prior low. This suggests that another momentum cycle may be forming to the upside. It is only a suggestion but, given the improving breadth, and the inability of the bears to cause damage, I’d rather give the bulls the benefit of the doubt – it is still their market.

Something very interesting is happening with the bond ETFs that I follow. Before looking at them, let me emphasize that, to me, at this point, all debt is junk regardless of who has issued the debt or what rating is plastered on its face.

Government bond ETF, TLT, has been very weak


The so-called high quality corporate bond ETF, QLD, has seen a few days of selling on high volume.


Notice that it ran into sellers at the same level as it did late September

The lower quality bond ETF, HYG, on the other hand has been doing well in terms of price, but not in terms of volume


There seems to have been a shift is resilience from the supposed quality of the treasury ETF to the lower end of corporate ETFs. If, and that’s a big if, this is a renewed appetite for risk, it is coming after 8 months of a market rally. Short term, it is in line with slightly improving breadth and the turning momentum cycle mentioned above. Longer term, it may, I, emphasize, may be setting the stage for a final run and a distribution top – definitely something to keep an eye on.

Let’s Wrap UP:

Index bounced from the lower edge of the 1080-1110 range and is poised to test the top of the range again.

We are entering a period of seasonal strength that has seen many Santa Clause rallies in the past

In June, index looked heading for a good drop, or correction, but it turned around without giving much and rallied. In November, Index looked very weak internally and cyclically, it looked ready to break, but it recovered without giving much. It has been my proposition for months that the bears of the last drop (before March) have been little significance to the market action (other than providing timely squeezes for rallies), and I think they are totally out of the game at this point. Market needs new bears with capital and conviction. So, the question is if those who can short with capital and conviction did not do so in July or November, why would they aggressively sell here in December with Santa and year-end-bonuses on the horizon?

This week is an Option expiration week. We will also be treated to another round of Fed meetings and announcements. So, I expect quite a bit of craziness, and bouts of price gymnastics. My plans are just to focus on the ongoing range and ignore everything else.

If I wanted to short, I could do so here that the risk is low (risk is a a break and close above the range), perhaps using options 2-3 months out.

Support is 1090, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133


There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Have a Nice Day!

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S&P 500 - December 10, 2009

The Ping-Pong continues

A rather boring day.

The short term oversold internal condition that we detected a couple of posts ago, and mentioned as a likely starter of a bounce in now resolved. The bounce came, and moved the index away from the bottom of the now month-old range of 1080-1110


Something I noticed on the chart above is that RSI has gone from oversold to overbought but index could not even rise to the top of the range. That is rather week, don’t you agree? I leave it up to you to study recent 60-min RSI cycles and see how price had fared.

Further proof of weakness may come if price cannot make headway before RSI becomes oversold again.

Regardless, we are still in range.

I added another upside target based on C= A based on minute wave B (green) being around 1085.

Volume was below average again. Daily breadth was positive


Daily momentum looks neutral.

McClellan Oscillator and the Summation Index look neutral as well.


We are just bidding time for the market to frustrate enough of the crowd so that they finally take some action. Right now, I would ignore both bulls and bears. Bears because they are yet to prove they can do something, anything, bearish. Bulls because they need to break this range to the upside with force. If they do that, if the index breaks out on good volume and breadth, I would not want to be short, period.

I continue to monitor the weekly picture


It looks like it may roll over. It needs the bulls to attack the tape and take the index up.

The bond dump, I mean, auction is over, so, if the conspiracy theorists were right, market should rise. And if not, you may not hear from them till the next dump by the Treasury.

Let's just pay attention to the price in this range, and plan our game(s) for the eventual break.

Support is 1090, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133

There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Have a Nice Evening!

S&P 500 - December 9, 2009

I am bit pressed for time, so, just a few points.

weekly picture stays the same, still looking like it needs the bulls to get some squeeze party going.

Volume came below average and less than yesterday. Breadth was positive.


Last post, we said we could expect a bounce, and S&P dutifully bounced off the lower edge of the 1080-1110 range.


Trading a range can be profitable if one just hits and run. I have, on occasions, mentioned that I, sometimes, target south of the range at the top using options, and do the reverse at the bottom if the range holds while getting out of the other play or roll it into a spread, and repeat.

the above targets are my range resolution target.

Support is 1090, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133

There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Have a Nice Evening!

NDX Futures, December 08, 2009 - Follow Up

The little mid-line study that I have been blogging for a few days has performed really well.

Notice how it broke the mid-line and rushed to the lower edge of the pink box that I had laid as a first range marker.

In a technically driven market, technicians do well :-)

This concludes my study for this particular setup.

Hope you had as much fun as I did, and hope you found it educational.

S&P 500 - December 8, 2009

A distribution day.

S&P is still in the same range it has been since November 15


It sold off to the bottom of the range and just stopped declining.

If the mid-term uptrend still has any punches left, short term momentum is oversold enough to generate a bounce soon.

Also, short term breadth looks oversold, and if the uptrend is still supported by the bulls, we may see a bounce soon.


Possible bounces aside, TRIN has been uptrending since September and that is not a very bull-friendly development.

Volume expanded and came above average. Breadth was very poor.


some slower breadth measures that I follow are fairly neutral.




Index looked weak today. It looks dangerously close to rolling over. So, bulls have to do something soon or the 1080 - 1110 range may break to the downside. Market is oversold enough for, at least, a squeeze party.

The latest I heard in terms of stories as to why the market is soft is that US treasury in is in the midst of a bond dump, ahem, auction, and they (whoever they might be) are artificially knocking the market down to get a bid for their freshly minted debt – just what I heard. If that’s true, then, sometime Thursday afternoon, at the latest, market should start rising again.

Hey, I am not predicting anything just blogging what I have heard and musing a logical consequence if the story is indeed true.

If I wanted to make a prediction, I would stick to my charts and examine both up and down like this


Before I leave you, I would like to remind you of a few things

The weekly picture is still sandwiched between the 2007 trend line and the uptrend since August


It, however, looks like it is about to roll over – urgent bull action required!

Quite amazingly, the love of garbage is still in the air

This is the high quality junk


And this is low quality junk


It’s kind of hard to think of the equity market being on the eternal verge of collapse when corporate debt holds well.

Let’s Wrap Up:

S&P near the bottom of the 1080-1110 range. Bulls need to start bidding. A squeeze party is urgently needed.

Index looks like it’s about to roll over on a weekly and daily frames. This is where bears have to show up and inflict damage. They need to take the index below 1090 pivot and towards 1061 pivot - and that is just a start to show us they are in the game.

Support is 1090, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133

There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Have a Nice Day!

NDX Futures, December 07, 2009 - Follow Up

Over the weekend, I wrote about the application of the mid-line technique to a chart of NDX futures

this is an updated chart



Two very nice bounces off the mid-line.

It reminds me of the old saying that says: Plan the trade, trade the plan

with the way this mid-line has behaved, I would not want to be long if it breaks in the coming hours (days). If it does not break, NDX stands a good chance of challenging north of 1800, and maybe the neighborhood of 1815

GLD, SLV – December 6, 2009

The last time I wrote about Precious Metals, November 21,

I said this about GLD

It may be a bit extended for new positions as it is quite a bit of distance from all of its MAs. If the current count is correct, GLD may be near the end of its Intermediate wave 3, or that wave may be extending

And

Weekly price has started a vertical ascent, which is supportive of the bullish count and the notion of an intermediate degree 3rd wave. But the vertical nature of the past few weeks, and the high volume bars, make me a bit nervous that we may have a buyer exhaustion setting in soon.

And this about both metals

I’d rather be cautious and try to protect what I might have built in for now.

That was two week ago. At the time SLV was at 18.22, and GLD was at 112.94. Since then, SLV rose to an intraday high of 19.11 and GLD to an intraday high of 119.54. This Friday, SLV closed at 18.15, and GLD at 113.75.

In the same post, I said that I had a target of 116.50 for GLD and 19.20 for SLV

So, it seems like it was not bad thing to avoid new positions, to take care of existing positions, and to have some well-calculated target areas in mind as our guides.

We did all that by just following our charts, applying finely tuned technical measures, and mainly ignoring expert opinions offered by main stream financial media.

The past is the past. We gladly take credit for a job well done. We move on, and ask the only relevant question:

What about now?

This is a daily chart of GLD


Look at the volume on Friday. You probably have heard many stories. Like dollar’s on the rise. FED is about to drain liquidity. Job numbers were good,. ETC, ETC. They all may be right or no, relevant or not. Still, not many told us that we had a wave structure that looked about complete. We had an issue that looked seriously extended on daily and weekly frames. We had everybody talking about precious metals and currency problems. Not many told us that we had a situation where PM miners were not doing all that much better than gold. I do believe that in a healthy commodity environment, the commodity producers should do better than the commodity itself. And by that I mean broadly across the group.

GLD may very well have entered a correction that might lead to a trend change. If the overall structure of the above count is correct, we may have seen the end of Intermediate wave 3. Only a new high would invalidate that possibility.

To the downside, only an overlap with the Intermediate wave 1 (purple) would put the current count under suspicion. Those are very poor trade parameters because they cover a wide range from 95 to 120. Not only that, shorting GLD now, exposes the shorter to some 8-10% risk before the tightest stop is hit.

Still, operating within the premises of the current count, and assuming that we have seen the end of Intermediate wave 3, if I wanted to narrow things a little, I could argue that due to the strength of the Minor wave 5 of Intermediate wave 3, we have a good probability for the correction to be at most limited to the area of Minor wave 4, that is, 101-104. That would be about 50-62% retracement of Intermediate wave 3.

GLD hit a high of 119+ which comes close to 2.62 * Intermediate wave 1.

Timewise, Intermediate 3 took 1.62 * the time taken for Intermediate 1 + Intermediate 2. If I project a 2.62 extension of the time of Intermediate 1 + Intermediate 2, it will give sometime in February 2010. That time frame corresponds with a seasonal period of strength that runs from March to July.

So, there it is, my first crack at projecting things assuming that

1. My overall count is correct
2. We have seen the end of Intermediate wave 3

I have seen bearish wave counts for gold that argue that the advance since the lows of 2008 is a wave B up – to be followed by a wave C down type of crash. I have had a count similar for a long time as well


That would make a hell of a wave B. Maybe they are right, but it just doesn’t cut it for me right now.

It doesn’t matter, really. They expect a crash, I expect a correction, so, if either party is right, we should see lower prices, we’ll then re-evaluate as waves unfold.

This is a weekly with both my counts and the bullish one being the preferred count


Some of you may remember when I was talking about the triangular range around 95, and the breakout to the upside. Then we started talking about a possible Inv H&S and we were saying that if gold wanted to go, it just had to go, no dilly-dally, if-but-maybe-this-maybe-that; just break out on good volume and go, and it did that.

And that, to me, is the essence of market participation. One sees a setup, defines one’s conditions and parameters, and acts.

Now the 100 level on GLD, or 1000 on gold is a must hold. But, before that, we have the top of Intermediate wave 1 (purple) that should ideally not be overlapped if my preferred count is correct
--------------------------------------------------------------

For SLV My target prices did very well. Because silver did not have the vertical ascent of gold, I lasted a bit longer before taking whatever defensive measures I deemed necessary.

This is a daily chart of SLV


Same story as gold. It looks done, or almost done, and if the count is correct, a correction to the area of minor wave 4 (16 - 17.5) is a likely target at this point.

I need to remind you that even if we have topped, we are so early that I am just doing ballparks.

Silver’s high point came at Intermediate 3 = 1.62 * intermediate 1.

It took intermediate 3 about 1.62 * time taken for (Intermediate 1 + Intermediate 2), and if I project an Intermediate 4 at 2.62 * (Intermediate 1 + Intermediate 2), It gives me end of February 2010, which is basically the same as what I projected for gold.

Once again, all targets and projections are theoretical. For price projections, it is an area that I seek not a pin point, and for time projections, it is a period that I seek and not the exact second of some big bang event.

So far, Gold has been a leader, and that, IMO, is not a very desirable situation to have for a long lasting PM bull environment. Maybe things have changed. But I still think that in a good PM environment those with more leverage to the price of the metal should lead. So if my count is correct and there is a major wave 3 and an Intermediate wave 3 to come, at so point miners, especially the juniors, should do very, very well. So, keep an eye on the performance of seniors versus gold, and juniors versus seniors.

Also, if this thing is for real, silver may do a lot better in terms of performance as the PM bull ages.

This is a weekly chart of SLV


What happened on Friday served as a reminder of what I always say to keep myself alert:

The doors of crowded places are narrow and few.

Have a Nice Day!

S&P 500 - December 4, 2009

On Thursday, we complained about the dull nature of the market action, and market responded like a mad man with an axe.

What did S&P do after all the angst and trepidations? Not much. 1.7% gain – flat for the week, and still in the same range. But just saying that the index did nothing is not fair to the market. It did chop around and retired some trader capital. That’s what markets are supposed to do, frustrate many with the goal of rewarding few.

This is the weekly chart that we have been following for quite some time


The only technical changes that I see from last week are a higher close, and a higher volume. That is positive, which is quite something given that we had the Dubai thing, and the bouts of selling that started Thursday afternoon.

Index is still sandwiched between the 2007 downtrend line, and a multitude of support from MAs, the half range marker, and uptrend line from August.

This is a Daily chart


A couple of routine bounces off of 21 EMA, and a flat price action since Nov 9. If we take a look back at 5 prior short term peaks, they were all flat, none this long, though. Volume expanded sharply, which may be indicating that players are becoming active again. Other than that, the daily picture is fairly neutral

Daily breadth was positive


One interesting thing that I notice is that number of new highs has been expanding these past few days. That, in itself, is positive. November 26 was a bad breadth day down on low volume. December 3 was distribution day. December 4 was a crazy day that came out, in numbers, as an accumulation day.

Daily momentum as read on RSI (or Stochastics) is neutral. Price has been flat, thereby neutral

Broader daily breadth as measured by McClellan Oscillator, and the Summation Index are neutral


Daily breadth as measured by percentage of stocks above their 50 MA has also been neutral


A/D line looks, well, neutral, but nicely holding up despite all the crazy gyrations.

So, I am not sure why I should buy perma stories bull or bear. Both sides have been incapable of driving the market their way for 3+ weeks now.

This is a 60-min chart


A few days ago, I referred to the range that I have been marking with purple arrows and said that to a bear, it was a top, to a bull, it was a base, and to a pig, it was a slaughter house.

Let’s remove some of the clutter on the chart and look closer


I think that the low of November 3 was a low of some significance because it happened at a time when some sectors (like finance) and indexes (like RUT) had a reversal of their mid-term trend to the downside. I have been counting it as minor wave B. After that, I think I can count 5 waves up. So we either have a minor wave C complete or have a minute wave a/1 of minor wave C.
After that, I think I can count an a-b-c down for a minute wave b/2.

Long time readers may remember that I collect 24-hour future market data and check price formation against cash market for confirmation or discrepancies. This is a 60-min chart of S&P December contracts


So, after the minute wave b/2 (green), I think I can count 5 small waves up. Notice that I have labeled the small waves in black which is not a color that I use for any wave degrees. On one hand, they may be micro degree waves completing minute wave C, and minor wave C and primary wave B like this


On the other hand, we may have the beginning of a much longer minute wave C like this


If someone puts a gun to my head and forces me to make a choice, I will probably say that market is going higher. That aside, I’d rather wait for the resolution of the 1080-1110 range.

Of course, my count can be totally wrong, and that’s another reason for me to take it easy and let the market tell me what it wants to do.

The Way I See it:

1100 area of S&P came under serious assault by sellers but it held firm.

Late Thursday afternoon, and Friday after open, there was a good number of shares that traded through violent bursts of selling. As we have been saying, players seem nervous. It can be due to any reason. Maybe it’s Dubai again. Or another overextended dreamland gone bust. Or something else. Reasons are usually known to many of us well after the fact, and as such, dwelling on them may not be a very useful occupation.

Technically, we have an index that has faced selling at every recent attempt at a new high, creating something that looks like a mini broadening top. A failed attempt for the upside out of a range is technically bearish. On the other hand, the low of Thursday stopped the selling on Friday. Yes, I know the bears say it was this or that entity buying the close and painting the tape. The fact of the matter is that if institutions want to sell en masse, this or that entity may either be buried, or become the only buyers in a market of sellers. Market manipulation works as long as there is another party to manipulate. If every other party sells, manipulators join the rank of sellers before you and me. Do a study of the selling of November 2008 to March 2009, or go through my posts of that period, and notice how orderly the selling was, which was what I was constantly pointing out in those days. That was a market of sellers.

This is a market still trying to establish the next course of action. Pay attention to price. Pay attention to breadth (it can’t stay neutral forever), Keep an eye on RUT (beautiful bounce off trend line), keep an eye on techies, watch USD, and ignore the permas.

You will hear all sorts of stories about the dollar, gold and the market. It happens when things get choppy. Choppiness may or may not bring a change in the order of things. Macro intermarket relationships may take some time to change the dominant course of the aggregate market action. Ignore the noise, and watch the price

If I wanted to gamble on the short side, I could do so with puts a few months out targeting 850-950 somewhere. If I wanted to gamble on the long side, I could do with calls targeting 1130-1150 somewhere.


Jumping up and down a narrow range happens out of nervousness and indecision. When big players finally make their minds, and feel OK with their positions, ranges break and trends follow, and it all becomes orderly

Staying with technicals, the lows of Friday and Thursday are important, and must hold or more bursts of selling may follow. Bulls need to breakout to the upside and stay there. Bears have a lot to prove, for starters, they need to take the Friday low of 1096. They then need to take 1080. After that, they must break below 1060 and stay below that. If they can make a couple of closes below 1060, index may finally succumb to widespread exit of the longs. Anything else, and this remains a market of bulls, by the bulls, for the bulls. It is their ball to drop.

The more the sideways consolidation drags, the more capital it retires, the more of its excesses it unwinds. That way, chances become higher for the continuation of the prevailing trend, which is up.

Support is 1090, 1061 (a tough pivot for the bears so far) and 1041. Resistance is 1107 (a tough pivot for the bulls so far), and 1133

There is no short term trend on S&P, just a choppy lateral move. Mid-term trend is up. Long term trend is down.

Enjoy the Rest of Your Weekend!