Red Dragon Leo

What a wonderful time it is to be a bear!  The market just keep on selling into Friday, closing around 1071, surprising even me.  I said in last weeks post that I believed we would pierce the 1080 level intraday to trick the bears into believing the level has broken, and pierce did we ever!  We went straight through it, and continued on down to a low of 1071.59, which probably had the bears jumping up and down thinking the next level is 1030-1040 area.

Not so fast Mr. Bear (I am one… by the way).  Every down move will have a bounce back up from time to time… and that’s exactly what I’m looking for next week.  A rally back up to at least 1100, or maybe as high as 1120 is overdue, and should occur next week.

Looking back at the chart I posted on last weeks “Weekend Update“, I see that it played out fairly well.  I was off on the 1080 level holding, but other then that… it’s pretty accurate.  I believe the breaking of 1080 is a bear trap, as it requires 2 days below the level to confirm the break, which would allow the market to fall to the next level around 1030-1040 (I don’t see that happening).

Last Weeks’ Chart….

So, looking ahead to Monday, I believe we might have a gap down in the morning, followed by a rally up to close the day positive.  If the gap down doesn’t occur, then it might just rally up and sell off a little in the evening… but I still expect a positive (or flat) close on Monday.  I don’t think it will close down big again, like Friday.  It should be a flat to up day, for the market to consolidate before a move higher to 1100-1120 by Friday the 5th, (or Monday the 8th at the latest), as the finally high before wave 3 down starts.

To be on the safe side, I will most likely be going short on Friday the 5th, not Monday, as I don’t want to miss out if it crashes Monday instead of Tuesday.  Since the first larger wave 1 down from 1150 to 1071 is 79 points, wave 3 down should be well over a 100 points before it’s finished.  Whatever you do… don’t go long on anything!  No dip buying, only ”sell the rips”!  You will get killed if you go long in this market once larger wave 3 starts!

This Weeks’ Updated Chart…

Once the larger wave 2 up is finished by next Friday (or Monday), you should get short and stay short until options expiration on Friday the 19th.  This larger wave 3 is probably going to last until then (or longer).  This second cut through of 1080, on the down move from whatever high we reach this Friday, should pierce it quickly and not look back.  The first decent bounce level is at 1030, and should cause a pause day to occur, before the selling continues.

Once it breaks… hold on to your hat Nellie, as this is going to be one hell’uva ride down!  The 1000 level should also be heavily protected by the bulls, but when it breaks… look out!  We’re going to 910-920!  This is a rare opportunity to make a ton of cash as this thing falls.  I will be holding on for dear life, as it’s going to be scary as hell!

Best of luck to all of you…

Red

Is the selling every going to stop?  Yes… at least for a short while I believe.  I’ll make this brief, as I’ll do more research and post it on my weekend update.  I believe that we may gap down on Monday and rally back to close positive, or simply open up positive, sell off a little and rally back to close positive.

Either way, I think Monday will close positive or flat.  I think this move below the major support level at 1080 is to trap shorts.  I still see next week as a positive week, most likely creating our larger wave 2 as I posted on last weeks’ Weekend Post.

I’ve said throughout the week on different blogs with my comments that it should go back up to 112.00 area.  Since the sell off went so low, I’m not sure if it will make it that high?  Maybe, but 110 is more likely now.  We’ll see.  But for now, I’m still long on the USO, and don’t have any shorts right now.  I’ll reload next Friday most likely in anticipation of wave 3 down coming the following week.

Red

Gap UP, then Sell off hard… back up, down, up, and down!  Whew… what a day!  We did go lower intra-day to tag the 107.91 spy level, which should complete the 5 wave move down, of the larger wave 1 down.  It was possible that yesterday’s 1083 was the end, but it turned out to go lower today to 1079… which hit the lower channel perfectly.

Are we finished with the larger wave 1 now?  I’m not sure yet… but we’re close.  I could see another little push down tomorrow morning, and then a move back up to close around flat.  Then a move up all next week, just as forecasted on my weekend update.  I think that the support will hold this week around 1080, and the traders will calm down over the weekend and start buying again next week.

How high we go is unknown, but the ideal place would be 112.00 spy by the end of next week.  I did not go long on the SPY as I don’t trust the up move next week.  We could just go sideways next week, and either end the week flat or only up a couple of points.  It not worth the risk for only 1-2 points on the SPY.  So, I decided to go long on the USO, buying the 35 call for $1.60 today.  I’m looking for a move to around 38 by the end of next week.

So, for tomorrow… I don’t expect much more selling.  A flat day is my forecast.  Then a small retracement rally all next week.  It’s risky right now to go long on anything… but I think I’ll be fine with the oil trade.  I just wouldn’t touch the spy right now, as it’s in good support now which could break or bounce?  It’s safer to sit and wait for now.

Red

The market looks like it completed 5 waves down in this larger wave 1 from 1150.45 to 1083.11 today.  I was looking for a wave 4 up and 5 down, as I posted on my weekend post, and I think we may have gotten it?  If Obama doesn’t mention anything about Wall Street (as I suspect he doesn’t have George W. telling him what to say… if so, look out! A crash is coming!  LOL!)… then the market will probably start a “week long”… larger wave 2 move that I’m expecting.

I think that elliottwave, fib’s, ta’s, and support and resistance levels… work really well when the market is in a trend.  I think we are now in a new trend… down of course!  That’s why I think the forecast I put up last Sunday is tracking as well as it is.

During the last several months, when the market wasn’t trending, but instead… stuck in a channel, forecasting was very tough.  I don’t think I got half of the moves right back then?  Maybe it’s just blind luck this time?  Either way, I’m happy that it’s working this time.

So, if all continues as planned, then a slow grind back up to about 112.00 is expected over the next week or so.  Of course it will be choppy and great for day traders.  But, I like to trade trends, and I think the next one is up for a little while.

If you’re playing options, then I wouldn’t go straight long as the IV will kill your option price because the VIX is going to drop while the market goes up.  The only way to win is to do a spread or buy deep in the money calls.  It’s still risky of course, but that’s what trading is all about.

Red

The market is looking pretty scared right now.  It rallied a little, and then sold back off into the close.  Tomorrow night is what the market is waiting on.  Although I think we will go up into the events, it is possible that we sell off tomorrow in anticipation of bad news from Obama… (which never happens as he’s a great liar) and then start the 2-5 day rally from the low tomorrow.

It’s hard to guess at this point?  I’d only recommend that if you are already short… stay short.  We are either going down into the events (FOMC meeting at 2:15 and State of the Union after-hours) or down after them.  Either way, I expect 108.00 to be hit.  I will look to close my shorts there… assuming that it doesn’t pierce the level with huge volume!

That’s one of those “iffy’s” as I’m only assuming that it will hold on the first hit.  Now that’s on a “closing bias”, not intra-day.  I do believe we could pierce it intra-day to suck in more bears, and then close right at the support level… which could setup a good place for a bounce… with “could” emphasized!

This is a tough place to be if you aren’t already short.  You Damn sure don’t want to go long when it hits 1080, as it’s way too risky!  So, you hope for a rally into the FOMC meeting, or a rally on Thursday (after Obama yaps his jaws late Wednesday night).

I’m sure our smart President will save us from this mess we’re in… right?  After all, I know how Patriotic he and his wife are… just look closely at how well they honor the Pledge of Allegiance by holding their right hand over their heart (ops… that’s their left hand!  Must be a new trend to use your hand with your wedding ring on it?)

Red

Looks like the market rallied a little today as expected.  I don’t have anything to add today, as I explained it all in my weekend post.  I’m looking for another flat to slightly up day tomorrow, and Wednesday.  I’m still looking for a fall to 108.00 SPY by Friday (or Monday).

I expect the market to sell off either Wednesday afternoon, or Thursday.  It should hit the 108.00 level by Friday or Monday, and then I expect a 2-5 day rally.  Nothing much has changed from my weekend post.  So far everything is following the plan.  Of course life is never that easy, and it wouldn’t surprise me if something happened too throw the plan off.

Hmmm… what could it be?  At break of the 108.00 SPY level would cause a huge sell off to occur!  Let’s hope it holds on the first hit, and rallys back up.  I’d like another opportunity to get short again from a higher level.  So for now, I expect the level to hold and produce a bounce.

Red

It looks like the tide has finally changed!  There is no doubt now that this market has officially rolled over, and is heading down!  I have to say that this took me by surprise.  I really expected them to pull it back to 1115 spx and then rally one more time into 1160-1180 area. But,  I don’t see that as possible now.

Why?  Because the tables turned on them when Scott Brown won the Senate race in Massachusetts.  That state has been a Democratic state since 1972, withTed Kennedy leading it.  He has been a very powerful voice in the Senate all those years for the Democrats, and now he’s replaced by a Republican.

I now see how important that is, as I didn’t put the pieces together last weekend when I charted out my forecast.  I never realised how critial that seat was.  Obama’s Democrats aren’t in control of the Senate anymore, and this puts his health bill at risk, as well as any other agenda that he wants passed.

This has changed the “Grand Plan” that the “power’s that be” wanted.  They… I believe at least, wanted to take this market higher into the February 9th-10th time frame.  Why?  Well, not too sound like anymore of a conspiracy theorist then I already am, but I’ll go ahead and spill the beans now.

Ok…

What happens with these crooks is that they decide well in advance… which direction to take the market, and for how long (you should already know that… if you’ve been reading this blog for awhile).  They can do this because they manage to get key positions filled in politics, with one of their buddies (aka Ben Bernanke and Tim Geithner… both former Goldman Sachs boys).  This allows them to get free money (aka the TARP funds), and to get policies and laws changed to allow them to profit more.

This isn’t only about “buying up their own stock” with the TARP funds, and then issuing new shares to the retail public at the high in the market, and then taking the money and paying back the TARP (aka… our taxpayer money).  Oh NO, that’s not good enough for them.  They profit from it in both directions!  Yes, the decide when to “Tank” the market too, and steal the money from the average retail investor’s 401k or pension fund money too.  Lot’s of “Insider Trading” and secret payoff bonus checks for “service’s rendered”… whatever that is?

They are well organized and plan everything in detail.  They set up these Annual Summits where they all meet and “cash their checks”… so to speak.  Basically, they funnel all the profits they’ve stole from the un-suspecting public through the Vatican and into “out the country” bank accounts.  The next annual summit is being held on February 4th-6th, 2010.  In the past, after every summit (within a few days), the market has started a huge sell off.  I know this all sounds kind of “Cloak and Dagger” stuff, but the fact it continues to happen should tell you that it’s real.

Essentially, the checks all clear on the following couple of days, and then the market tanks.  They release some kind of news event to cause it to sell off.  It could be anything?  I think that they had planned for Obama to release his “We’re going to get tough on the banks” speech on either the 9th, or 10th?  But, losing the senate seat to a Republican forced him to move up the time line.

The one thing I didn’t see when I made my forecast last week was how serious it was when Scott Brown won.  I’m sure the death of Ted Kennedy wasn’t planned, but it did happen… and that changed the plan.  So, does that mean that I don’t see the market crashing on February 9th-10th?  Not at all!  In fact, it sets up the perfect “Wave 3″ down after a nice corrective wave 2 back up to occur over the next 2 weeks.

Looking at this 60 minute chart of the SPY, I think we just finished a wave 3 down inside a larger wave 1.  That means that Monday and maybe Tuesday should produce a wave 4 up, and then one final wave 5 push down into the end of next week.  The target is 1080 SPX.  After that, we should have a larger wave 2 up… hopefully into the time frame window of February 9th-10th.  That allows the crooks to get their checks cleared on Monday the 8th.

I expect some bad news to be released or some bad event to occur that will trigger the larger wave 3 down.  This is the one that could go down 97 points on SPX, as I talked about a week or so back.  I don’t know if that is going to be accurate, but it wouldn’t surprise me if it was.

That larger wave 3 down should take us into the options expiration date for February.  At that point, I’ll have to look at where we finally stop at and see if that whole move down from 1150 spx is more likely a ABC, which would end it there, or a 5 wave move, which would mean that it will fall further.

If it’s a 5 wave move, then we should go up into a larger wave 4 starting the week after opx.  That might take until the end of February or so, and then finally a larger wave 5 down into early March.  But that is all just guessing at this time.  We’ll have to cross that road once we get there.  For now, let’s focus only on the 2-5 day corrective larger wave 2 from the expected 1080 low coming.

I do think that it will be higher then we might expect, as the bulls aren’t quite dead yet.  Some news event to spark a rally is all that it will take.  Maybe they will re-elect Ben Bernanke, and the market will use that excuse to start the rally.  Of course it will also start big bear squeeze on all those caught short at 1080, which could push it higher then I expected?

Again… I will still be looking for the major turn date about February 9th-10th.  That’s one of the best opportunities of a lifetime… the absolute best one will come in about a year or so.  But for now, catching a larger wave 3 inside of a Primary wave 3 inside of a Major wave 1 (the entire 5 larger wave move from 1150… to maybe 920 area?)  is still extremely powerful, and profitable… if you’re on the right side?

Of course after this big move is over in late February or early March, you should expect a long drawn out choppy Major Wave 2 to take us though the summer months.  Look out for September though… (keep all windows in high story buildings locked, or you might have someone jumping out one?)

Red

Another huge sell off… unbelievable!  I was wrong again, as support at 1115 broke and down we went!  I hope all of you that were short… stayed short, and didn’t get out as I posted yesterday.  I guess I’ve been so conditioned to expect a rally to occur after any big down, that I simply couldn’t believe that it would continue selling again today.

It’s taken the PPT almost a year now to condition all the bears to close out their short positions after only one day of selling, as we have always had them come back in and squeeze the bears… killing any serious sell off from starting.  I have to change my thinking now, and expect any rally to be short lived, and the selling to continue down.

OK, of course this changes my forecast, and I’ll go into detail on the weekend post.  But for now, I’d expect an 60-70% chance of a bounce on Monday and maybe Tuesday, and then more selling until we hit the master level at 1080 spx.  At that point, I’d say will have a 90% chance of a 2-5 day bounce.  It could just go down Monday and tag the level, and then reverse to start the 2-5 day bounce?  But, I think it will wait until Tuesday or Wednesday… then dump to 1080.

I just think that people will calm down over the weekend and allow the market to float higher on Monday, and maybe Tuesday.  Then more selling to 1080, at which point I will probably go long for the bounce.  I expect that it might pierce the 1080 level intraday and trap a lot of bears short… thinking that it broke the major support level, only for it to be rallied back up the next day (or later that day) in a big short squeeze.

But, after the rally is over… more selling is coming!  It will be a Wave 3 Down… and you know what that means!  Panic Selling!  I held my short over the weekend and will wait for the 1080 level to be hit before I get out.  I’ll probably go long, but I’m not sure?  Yes, there is a 90% chance of a 2-5 day bounce… but too be quite frank with you, I might be too scared to chance it?  We’ll see…

Red

Wow!  What a Bloody day on Wall Street for the Bulls!  I was wrong yesterday in thinking that Goldman would hold up the market today, and that we would sell off to 1115 on Friday.  I hope that many of you were already short and profited from it even though it came a day early.  I know I’m a happy camper, as I was already short!

Today’s volume was one of the largest I’ve seen in many months, with 338 Million Shares Traded on the SPY.  Big Volume = Big Down Day!  This is going to be an exciting year… if you’re a Bear that is?

Looking at tomorrow, we have some good support a 111.40, and 111.20 SPY.  If we gap down, I’d expect those levels to hold, and the rest of the day should float higher… although not a whole lot higher.  No major news or earnings are being reported tomorrow, so that sets up a “Pause” day… (flat to slightly up).

Moving on…

Isn’t it interesting how Scott Brown, a Republican, wins the Senate seat, and suddenly Obama decides to come out on TV and state how he’s now going to be tough on the Banks?  Coincidence?  I think not… He did it because he’s now worried about his popularity… which is now shrinking!  He has too act tough on the banks so people won’t switch over to the Republic side when more elections come up.

He already lost a key Democratic seat when Ted Kennedy died, and was replaced with a Republican.  Now his health care bill (which is garbage by the way) is in jeopardy of not going through.  Then there is the economy, and this fake wall street rally… which isn’t working or creating any new jobs!  Duh Obama!  I could have told you that!

Let’s not forget about Ben Bernanke, as the Senate has yet to re-appoint him.  I think they won’t, and that will be another “lack of confidence” of a recovering economy.  Which will probably start another sell off in the market?  So, looking forward (and I’ll do more a in-depth post this weekend), I’m expecting a few days of a flat to slightly up market until Obama has his “State of the Union” speech next Wednesday.

If you are still short, and didn’t close out today, I’d close them out tomorrow on any gap down and stay in cash over the weekend.  That’s what I’m doing, as any move up next week will be limited and not worth risking… in my humble opinion at least.

Red

Unbelievable!  The PPT (Government) managed to rally the market back up to close just inside the rising wedge once again.  But, time is running out quickly and tomorrow should be the last day in the wedge.  I think that Goldman will release good earnings and that will keep the market from falling outside the wedge.  A flat to slightly up day is what I expect.

However, I expect selling on Friday and a possible drop to 1115 spx?  Now it’s possible that tomorrow Goldman might not be able to hold the market inside the wedge all day, and we could sell off into the close?  Regardless… the market is going down!  It’s taking a little more time to fall then I expected when I wrote my weekend post, but we are basically still on track.

My biggest concern now is that the time line for the final top (not for the year, as I expect a summer rally) may come early?  I had it projected out at February the 9th-10th, but because Obama is going to give the “State of the Union” address next Wednesday, on January 27th, I think we might not make it until February?

The loss of the Democratic seat in the senate to the Republican Scott Brown in Massachusetts could throw a monkey wrench in Obama’s Health Care Plan.  Plus, the Senate only has until January 31st (a Sunday, so really only the 29th) to decide if they are going to reappoint Ben Bernanke.  Make NO mistake about it… this market is controlled, and this news events are going to affect the market tremendously!

Since Obama originally stated that he would support another term for Bernanke, it’s not going to look good if the Senate doesn’t agree.  I believe the main reason the market is still afloat right now is because of Obama’s Health Care Bill.  If he gets that passed then he’ll let the market fall.  He’s trying to fool the American public with this fake rally, so he can get what he wants.

But, I don’t think the death of Senator Ted Kennedy was something they were prepared for… and then losing the empty seat to a Republican!  This changes the game plan for them seriously.  We’ll just have too take it one day at a time for now, but keep in mind that the huge sell off I’m looking for… could start next week!  Sorry for the change of plans, but I wasn’t sure how this election issue would affect the market… and I’m still not 100% sure?  Only that things could be speeding up…

One more thing… if we do fall to 1115 by Friday, don’t short the market!  I’m certain that the PPT will be buying early Monday morning to prevent any serious support levels from being broken.  They are going to keep this market up until after Obama speaks (at least that long).

Red