Black Monday Delayed…

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It seems that the only Black Monday to happen was for the Bears... for they just got ran up a tree today fast!

This huge move up, is actually great news for the bears, as it means that there is a higher chance of another sell off coming within the next few days.  So, I was wrong on today being Black Monday, but I still see more selling coming.  Possibly another up day tomorrow, but I don't see very much of a move up possible.  It could just be a flat or pause day?

Looking at the past occurrences of large sell offs, and then a big rebound, in almost every case there was another leg down, putting in a lower low.  Cobra did an excellent weekend update, with a lot of charts that shows all the previous sell offs... which had another leg down almost every time.

I don't think this time will be different.  The next couple of days could be held up, but I really doubt that it will last too long.  We had 4 more fake prints at 111.30 spy, in the afterhours session.  Those could be late fills from yesterday's close of 111.47, or they could be fake prints?  It's hard too tell at this point.

There was also a fake print of 113.42 at about 12:10 pm (est), which was printed again in the afterhours session.  I think that if we open flat, and go down to 113.42, and then bounce back up and go higher... then the final high is already in from April (maybe?).

I say that because I don't think the bulls will have enough power too rally up to a new high, without first making a lower low first.  The bears are looking for a short entry, as many missed the first leg down.  With the bears overhead lurking, there should be too much resistance for the bulls to fight through, if they try to rally higher from the 113.42 level.

If the market goes down and retests the low of 105.00, and makes a lower low, then the bulls will have enough shorts in the market to squeeze them up and put in a new high in late June as I explained in the video I did.  The bulls need to get more fuel to rally up to new highs in this market, and they can't do that without more bears in short positions.  Most bears missed that big move down on Thursday.

That's why there is almost always 2 moves down.  The first one the bears miss out on, and get short too late.  That would be your wave one down in Elliottwave terms.  Then they get squeezed out like today, in wave 2 up.  But, there isn't enough of them short to squeeze them higher, and put in a new high.

You need to bait them again.  So, you have too have another leg down, taking out the current low.  Every bear will go short and continue shorting on every move higher.  They will be the fuel needed to make a new high in the market.  Remember, everyone will see the massive Head and Shoulders, so the bears will continue to go short at every level higher that the market makes.

Eventually, there won't be an more bears to squeeze, and the market will run out of fuel to go higher.  I still believe that will happen in late June or early July.  Whether or not it happens exactly on June 25th, is anyone's guess?  I thought would we sell off hard today, and then start the rally back tomorrow.

But, I was wrong, and the market decided to rally hard today... leaving me to guess at the rest of the week, as to which day the "Big Sell Off" will happen on.  Could it be Black Tuesday, or Black Wednesday?  I don't know yet, but I'm still very confident that another leg down is going to occur... and I expect it too happen this week.

Next week should start the huge rally up, and squeeze all the shorts in the May OPX.  Then, as I said in the video, a possible couple of days of selling... to work off the over bought conditions that will occur.  Then, instead of a continued fall from the huge right shoulder that will have been made, a rally up too the DIA 118.16 mark should occur.

You should all know by now that everything can change, and these are just forecasts that I'm making, by trying to put the pieces together, to give you a clearer picture of the possible future.  The game can change at any time.  But, if the past history shows any indication of the future... then this is the most likely outcome.

One more thing, as you may already know, I didn't go short into the weekend.  I stayed in cash, because I was unsure of what the weekend could bring.  I did go short today, and will stay short unless the market doesn't make the next leg down this week.  That means that the past history isn't valid this time.  But, next week will still most likely be a huge week up.  We all know that opx is usually a bullish week.

This time around shouldn't be any different, and in fact, it should have higher odds of being bullish, as there is now a huge amount of open interest put contracts for May.  They do not want to pay out on all those contracts.  That's why I think we will rally into opx.

The question still remains... is whether we have another leg down first, or this is it?

Red

P.S.  After I wrote this post, Alphahorn posted another chart that has me concerned.  In it, he has a screen shot of the spx on the 1 minute chart, showing a low of 1056 in the pre-market session before Thursday May the 5th.  I'm a little concerned as to whether or not that qualifies as a double bottom... meaning that we might only go down to 113.52 spy tomorrow, and then rally on up from there on out.

Or, was this a fake print telling everyone that the market was going down to 1056 soon (actual low was 1065 on Thursday)?  I'm going to be very cautious here, because that could mean the bottom is in for now?  I don't think it is, but I have too be open to the possibility that the current sell off is over for now.

That doesn't mean I don't expect the fake print of 113.52 spy to be hit, as I still see that happening.  But, I want everyone to be aware of it (thanks for sharing it Alphahorn).  And you might want to lighten up on your shorts at that level... unless you see the market just blow pasted it like it wasn't there of course.

Close up of the print above.  Notice the StochasticFull at the bottom of the chart says 66.6667... tell me these guys don't like their rituals.  LOL

Edit.......

Actually gang, credit for the wonderful catch of the fake print, goes to  http://disqus.com/grednfer   Many thanks from myself and others who find benefit from it... go you Grednfer.  Alphahorn did mention it in his post, but I overlooked it.

1612 COMMENTS

    • Yeah… definitely. We all need to help each other out and share charts. Alphahorn posted, and did mention grednfer. I'll edit the post, to give proper credit.

      • Gred's a great guy- good trader and chartist for sure. I'm sure he'll be honored. Good work over here today- I was able to pop in a read quite a bit, and learning a lot from y'all.

        • Thanks girl…

          We have a good group here. Join in anytime. I edited the post and include credit to Gred. I overlook the part where Alpha said he copied the chart from Gred… DUH

  1. I'm about 85% positive that there will be a second, lower bottom. Cobra had a lot of material on his site yesterday that supported a second bottom, and also pointed out that the duration of this valley could go on another nine days. So, this thing could have a lot of twists and turns. Or not. One possibility is that we could have a very rapid bullet down and immediately go into a rally, a strong possibility because of market breadth that is almost scary.

    Or, we could meander around testing containment points before going to a second bottom, or even have two more steps, which would surprise everybody.

    Sundancer posted a chart this morning that shows the containment areas, very interesting:

    http://www.flickr.com/photos/47091634@N04/45955

    We are on our fourth attempt at the green line, and I do not believe that the market has enough oomph to do it, having come so far in three days if you include Thursday's rebound. I'm not a wave theory guy, but do see rallies as usually consisting of three steps, and we are on step three now, according to my reckoning.

    All day long, it looked to me like the bigger trades were downticks, even if the money flow was positive. Got to watch it, though, because I've seen some of my buys come in as downticks. Some bears ran a little at the end of the day, but hardly panic covering, I thought. I was mostly watching SDS and AAPL.

    Sold my AAPL calls too soon. 🙁 More than doubled my money, though. 🙂

    • Yeah, I agree with you. I posted a link in the post above to Cobra's weekend update. It shows lots of evidence of another leg down. Tomorrow could still go up to that 116.80 spy level in the morning, and then stale out, and either sell off or trade sideways?

      Either way, I went short around 116.00 area, and I'll wait it out for a few days if necessary? I really believe another sell off is coming asap.

      • I went short about the same level, about an hour in, because the rally looked like it was petering out. So we're sharing the boat.

        One scenario that I'm entertaining is that the market could drift up slowly the next three day, just a few Dow points per day, and turn around on Friday (new moon). That would be maddening.

        If we dip tomorrow morning, I may pick up some June calls as a hedge. If I blow the direction, at least I will have some insurance and, if I don't, they should be good into the next rally even if they get pasted in the meantime. I will avoid AAPL because it's been getting too much play. Maybe F? This market will probably scare the UAW into settling up on their warrants.

        • We certainly could just drift up or slightly sideways for a few days, but that would be too easy I believe. Looking at any chart, and everyone is waiting for a backtest of the broken support line at 1180 spx.

          If you were a market maker, would you let the bears get on board short from that level, or stay just shy of it, and tank it without letting them on get short? They would chase the tape down, just like they want them too do.

      • I have been posting the DWC/DIA ratio chart for quite some time, however, I never plotted it against the SPX.

        Seriously, take a look at this. And the PRS 133 on the ES and the EUR/USD, and the Fear Factor, and Chart of Charts, all say the same thing….

        Don't be deceived, it's easy to be a bull and predict up, but this puppy is going down and pretty darn soon!

  2. FTSE is down sharply this morning, which gave me an idea how a fake bottom and rally might play out:

    They are at about a 1/3 correction on their rally, so we open down (about 1120) and rally with them, taking us to 1186 after their market closes, or maybe tomorrow.

    After that, the pipe continues.

    I'm planning on buying some calls at the fake bottom if it happens.

  3. Red, your going to get whipsawed out of your positions listening to 10,000 different people

    What is important is understanding the dance of the market.
    I posted this chart back on 4.11.2010 showing you the daily containment pt. that was going to get backtested
    http://www.flickr.com/photos/47091634@N04/45102
    Then look where the precise bottom was last Thursday, that pesky light blue containment
    http://www.flickr.com/photos/47091634@N04/45850

    Downward pressure will be on the market until gold weekly containment is hit, no new highs are coming until weekly containment is hit.
    http://www.flickr.com/photos/47091634@N04/45890

    • Thank you for the update.

      I plan on staying in my position now. I do strongly believe we will hit that gold containment line around 1050, and I agree with you that I need to stay focused.

      I'll probably have to set some trade triggers for tomorrow, as I have an appointment in the morning to do, and won't be able to get to a computer. The last time that I was gone, the market tanked (Monica is rough on them Bulls… LOL). I'll be here today of course.

      Anyway, thanks for the reassurance, I'm sticky with it, and will stay short until the gold containment point is hit.

    • Hi Sundancer, it is hard to stick with a position when I am not the one coming up with the analysis but you have been nothing but right and I appreciate the reminder. I am still short. Both you and the some of the economists that Red posted quotes suggesting that leveraged instruments were dangerous – one of the economists suggested that they would become worthless. I think I will stay in puts until the move down to 105. For the next round down, I will just short the SPY outright even though it won't be nearly as lucrative.

      • Hi Mon,

        If options were to become worthless you might as well give up the ghost. The Commercials actually use leverage in a native sense.

        Plot your own containment lines. Google “George Renya The Midas Touch”

        These will be close enough to do your own analysis. I believe in teaching the folks to fish.

        There is very little that is new under the sun. The most successful investors have mastered position size which is the toughest act of them all.

        • Hey there. Sundancer is trying to teach us how to fish. I'm just not that great and hooking the bait, nor do I have the time with two little ones but I will get there. I believe something new us under the sun and that is sundancer! If technical analysis really worked (and I do believe it does to some extent) then many people would have mastered it and would be rich. Instead, most of us are spinning our wheels. Dread is probably the best technical analyst I have seen. Options may become worthless (if no one is there to pay them out) but by that point money probably won't be worth much anyway 🙁 Not sure what the answer is unfortunately.

          • If by really works you mean its the Holy Grail, you are correct.

            It is an art, not a science.

    • Thanks Sun for your posts. Are you talking about gold to reach down to 1050 or going to touch higher contain point?

  4. Friday, September 19, 2008. This was the night of TARP.

    September 19, 2008’s gains lasted all but one session with the entire gain evaporating the next trading day. The S&P 500 had an historical opening that day, closed at 1255.08 on 2008-09-19 up 48.57 points for a gain of 4.03% (a Friday). The S&P 500 closed at 1207.09 on September 22, 2009 down 47.99 points for a loss of 3.82% the subsequent Monday.

    We all know what happened next between September 19, 2008 and March of 2009 as the market started it’s decline to what we now refer to as the March 2009 lows.

    There is another interesting comparison drawn to the September 19, 2008 record breaker. The advance decline ratio closed at 18:1, meaning for every stock that was down, 18 were up for the day. Today’s advance/decline ratio also ended at 18:1.

  5. very strange that gold is trading higher this morning. Guess that just means more downside in equities.

  6. Carl’s morning call:

    June S&P E-mini Futures: I think that last week's low at 1056 ended the correction from 1216. Today's range estimate is 1135-60.

    1140.50-1158.25 range last night (17.75 points)
    1135-1160 estimate for today (25 points – ~1.5 times the usual range)

    1142 currently, so estimate is -7 to +18 from here (bullish)

    • Probably going to close the gap, and end up being a flat to slightly down day. Looks boring too me already. It should crash tomorrow, as I have to work again.

      So you're in charge, try not to kill all the bulls this time Monica. Remember, we do want some left alive to rally back to the DIA 118.16 print by mid-summer. Be easy on them. LOL

  7. The instantaneous recovery on Thur and the spike up on Monday reinforced one mindset : BUY THE F@*&^% DIP.

    The PPT pulled a marvellous job on Thur. Who do you think were scooping up the futures when the bottom fell off and all the retails were shut out?

    So, now, every pro in every equity shop is banging his/her head on the $2000 desk. BUY BUY BUY. Stupid! When there is a crash, BUY, stupid!

    That is the prevailing psychology in the pro investment community now.

  8. While the market continues to climb, a perfect end to this rally is to put in an intraday high of 116.66 spy… which by the way, we are almost there now.

    • Pretty half-assed rally so far: low volume, mediocre money flow, fourth trip to the containment bar.

      Got my fingers crossed,

      • Yeah, I suspect the day will be flat to slightly down. I just seen a fake print to 115.50 on the 10 minute chart, so maybe that's where we close the day at?

  9. I think we're close. SDS augured in like a panic sell, 600m shares.

    I'm out $0.45. 🙂 We'll see if I'm smiling later.

    • 1:15pm – I guess they stopped for lunch. Still happy to see them, though.

      TL down for the first time all day.

  10. Well gang,

    We knew from last Thursday, that there were multiple fake prints at 116.80, which have now been filled. From yesterday, we had 4 fake prints at 111.30, which leads me to believe they should also be filled… probably within the same time frame, about 2-3 days.

    That means by Thursday or Friday, it should drop to 111.30 area and fill those prints too. Since we didn't hit the 116.80 target yesterday, I should have waited until today, but I'm still learning this ritual game they play, so mistakes are going to be made.

    • Red – doesn't count if we go past it! Because either market direction you go, you can say the fake prints have been hit! Still I think we go down.

      • I don't think “past it” by only a few cents counts. But yes, if we go above too far above 117.00 tomorrow, then the prints probably won't work this time. I'm staying short for now, as this really hasn't changed anything from what I can see.

    • Let's hope it plays out that way, it seems now that this is the way they are screwing the bears again. I'm still short minus apple and have my spy calls as hedge.

      Good Luck to All.

  11. Red can you confirm alphahorn print on 1056 tic before the big plunge? It looks like it was ameritrade trading platform. Can you check to see if it was on yours as well? Thanks

    • I didn't see it on mine, but I use the 10 minute chart. It only appeared on the 1 minute chart. And, it came a 11:45 pm (almost midnight). My system only shows afterhours until about 6:30 pm or so.

      So, I can't confirm it. But, I see no reason for him to make it up. I know all the other fake prints came true… why should that one have been different? They seem to warn everyone of the major moves, before they happen.

      I'm sure it's real, and we just didn't catch it…

  12. Well my plans sure seem to be going to hell. got stopped out of most short positions.

    Picked up a little tna for a quicky.

    I believing the market is going to try the old grind up on low volume like before last week

  13. Looks like things are breaking down at 1170, thank goodness. Once the selling starts, I think it will go fast.

    What kind of nut buys into a thousand point rally without a correction anyway?

    I went short at 116, but it's amazing how decimated my account is already.

    • mine too. Red, I don't know how to provide a link to the SPY at my Ameritrade account but just look at the 6 month chart of SPY on Ameritrade and put in the 10 and 50 day moving average. If this is the ritual day (like Jan 19th), then we have to go down hard tomorrow.

    • Join the crowd. Options are high risks. I can be down 50% one down (like today) and up 100% the next day. Wild swings, and wild profits… and losses.

      The charts still tell me we are heading back down. The dollar hasn't moved hardly any from yesterday's closing price. Oil has been falling since it put in it's high around 11 am.

      This rally won't last. All the signs show it falling back down within a few days. I'm staying short.

      • The serious money is in SDS, which held up very well, and I have a bunch of puts. They were pretty cheap, hard to resist. I got some at 1170.

        The market is a fickle mistress. I'll be glad when it really breaks down and I only have to decide on my cover point.

        • I think I will be looking at the 111.30 fake print first, and might take some profits, then let the rest ride the wave down to 105.00 or so. We'll see? It might fall too fast, and blow right through 111.30?

  14. This ain't looking good for the Bulls now. They lost all of the move up today, and are just even with yesterdays' close. Plus, Oil is still going down, Gold is rallying, and the dollar is holding pointing up.

    • I was able to get back in some of my stopped out positions as the market started turning down but this sis just unbelievable. I guess i am wrong again.

      S&P seems to want to drop below 50 to close

      • I can't believe how it's playing out.

        Now if we can get past this blue chip rally, we're home free.

  15. During ritual days there isn't anything to do or see, so I've been out enjoying the Sun.

    We're going to back test max contain (teal line) on the 60 in the not too distant future
    We can either go sideways for another day & test it or dump 30 pts. & back test it in the 1150 area.
    http://www.flickr.com/photos/47091634@N04/45995

    • sun, if this is a ritual day like jan 19th, wouldnt that mean we put in the high today? not only was the market rejected at your 3 containment points, it also was rejected at the 50 day ma.

      • Yeah it's highly probable the terminal value was put in today, but that doesn't mean the market falls out of bed tomorrow

        May is the most active month of 2010 with my ritual sequences so the rest of the month should be volatile.

        I have 2 minor sequences next week on the 18th & 19th.

  16. Carl at day’s end:

    1135-1160 estimate for today (25 points – ~1.5 times the usual range)
    1144.25–1169 actual range today (14.75 points )
    Market was ~9 points higher than what Carl expected.

    Trades: No trades
    Grade: C (lost no money)

  17. Today's action on spy closing below yesterday close but the high was above yesterday's high seems to follow many of the bearish signals on the various oscillators but the vix never turned.

    Tomorrow would normally be a tell day but moving towards opex i am not sure what it will tell.

  18. I have been looking for some directional signals and I just realized that from the April23 high in S&P to the infamousMay6 tail bottom the S&P close today is just below the fib 61.8% retrace. the high tail exceeded that.

    GS has only retraced about 8% from the same drop while xlf upper shadow hit the 61.8% Fib.

    Certainly GS is very sick

  19. TZA opened up 3.6%, and the opening gap was filled. TZA was up 4.5% at it’s high, and closed down 2.21%.

    An earlier, lower gap from $5.53 to $5.77 remains unfilled.
    An earlier, higher gap from $6.72 to $7.61 remains unfilled.

    We are now in a Full Moon Trade, which tends to favor TNA.
    AmericanBulls had TNA with a possible buy today, and TNA was up a bit, so TNA might be a BUY right now.
    AmericanBulls had TZA with a possible sell today, and TZA was down a bit, so TZA might be a SELL right now. TZA bought at $5.54. TZA closed today at $6.20, so this trade is now up 11.9%.

    Volume for TZA today was a bit more than usual.

    $RVX (VIX for $RUT) closed down 1.54% with TZA down 2.21%. A mild divergence, Good for TZA.

    TZA had been up 4 days in a row, but now down 2 days. Bad for TZA.

    The low for TZA was from eight days ago at $5.30. Today’s low was $5.93, 11.9% higher. Still ok for TZA.

    Today, Ultimate Oscillator for TZA dropped from 44 to 41 while TZA dropped 2.2%. No divergence.

    MACD is below zero, but has been moving up steadily lately, but the fast line is now flat to falling. Bad for TZA.

    Bollinger Bands for $RVX (VIX for $RUT): Two days ago, the monster white candle closed far and away above the spot that I would normally consider to far and above the upper Bollinger Band. MACD was wildly & vertically rising. Yesterday, the small white candle closed well below the upper Bollinger Band – completing step #2 of a 3 step $RUT buy signal. Today, a red candle closed below the close of yesterday, completing a $RUT Buy Signal. MACD fast line was flat today. Bad for TZA.

    Bollinger Bands for $RUT: Today’s white candle closed at the 50day moving average and has, at times, bounced from this line. A bounce from here would be down. MACD has rolled over (down) and is still falling, but the fast line was flat today. Might be good for TZA.

    Bollinger Bands for $RUT:$RVX ($RUT vs VIX for $RUT): The white candle today was up a bit from yesterday, consistent with TZA falling. Bad for TZA.

    The McClellan Oscillator for today looked very much like that of Feb 2nd, which was followed by $RUT downside. Good for TZA.

    TZA had a lower high, lower low and lower close – Bad for TZA.

    Money flow for the Total Stock Market:
    $ 198 million flowing out of the market 2 days ago.
    $ 2,881 million flowing into the market yesterday.
    $ 693 million flowing out the market today.
    Good for TZA.

    I will post the AmericanBulls candlestick interpretation a bit later.

    Overall, Good for TZA. (relying somewhat on what appeared to be a reversal today favoring TZA)

  20. The Daily view from Americanbulls

    TNA had been a possible buy for today, was up a bit, and now is a Confirmed Buy. The buy price is the previous close — $55.69

    TZA had been a possible sell for today, was down a bit, and now is a confirmed Sell. The sell price is the previous close — $6.34.
    This trade ends today — TZA buy price was $5.54. TZA sell price was $6.34, up 14.4% since the buy.

    Of the stocks & ETFs I follow, these are to hold on to:
    IWM (1x $RUT)
    UWM (2x $RUT)
    TNA (3x $RUT)
    IYR(1x RE)
    URE(2x RE)
    DRN(3x RE)
    UUP(US Dollar)
    GLD (gold)
    UGL (2x Gold)
    SLV(silver)
    AAPL
    DRI
    SCO (-2x Oil)
    DTO (-3x oil)
    EPV (-2x Europe)
    DZZ (-2x Gold)

    The list to avoid:
    USO(oil)
    UCO(2x Oil)
    GS
    EWG(Germany)
    EWQ(France)
    EWU(England)
    EWX(emerging mkts)
    RWM (-1x $RUT)
    TWM (-2x $RUT)
    TZA (-3x $RUT)
    SRS (-2x RE)
    DRV (-3x RE)

    The following are possible buys tomorrow:
    ERX(3x energy)
    AMZN
    GOOG
    DIA
    SPY
    QQQQ
    QLD (2x QQQQ)

    The following are possible sells tomorrow.
    ERY (-3x energy)
    SKF (-2x Financials)
    FAZ (-3x Financials)
    SPXU (-3x $SPX)
    QID (-2x QQQQ)
    DXD (-2x DOW30)

    Action for TNA or TZA for tomorrow: none

    • I do not know where they get their opinions but i was real sorry I got stopped out of TZA FAZ TYP vxx today and was able to salvage by getting back in close to the stop after the market turned..

      And now look at the futures.

      It looks like Red called it if it all follows through just Wednesday instead of Tuesday.

      • AmericanBulls derives their opinions from Japanese Candlestick theory. They are awesome during trends when a stock or ETF is headed up, but can eat you alive when prices go up and down days on end.

  21. As with any chartists I guess. Tops and bottoms are difficult. I rode april09 -Nov 09 and did not have to do anything. Since then whether its fib or Elliot or other we are wrong a high % of the time.

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