Friday, July 19, 2024

No Turnaround Tuesday…

Wasn't we supposed too rally today?

Too bad... it's time for the bears to celebrate a little bit anyway.  The move down today confirms that the short term trend has changed, but how low will she go?  The 1080 area, which is the lower trendline in the rising channel, is key support and needs to hold, if the bulls want to go back up to finish the right shoulder.

It's too early to tell at this point what will happen, but I do believe the week will still end down.  Since the market sold off pretty hard today, a "pause" day is to be expected tomorrow.  And also since the FOMC meeting is tomorrow, which are generally bullish days, that leads me to believe tomorrow will close positive.

Flat to up would be forecast for tomorrow, but not a huge up move.  I expect that to happen in the morning session before the FOMC meeting at 2:15pm EST.  If good ol' Benny boy simply states the usually babble, and doesn't do anything to spook the markets (like raise the rates), then there could be some more light buying, or small selling into the close.

The big question is... when will the Fed's raise rates?  Bernanke has hinted at it the past meetings, that at some point they will raise the rates.  OK, I got it.  Now are you going to just surprise us with it on one particular meeting, or will you continue to pre-warn us, and set a date in the future for the likely time to raise them?  My guess is that they will simply have a meeting one day and say... "we're raising the rates today"!

And YES! The market will panic!  Will that day be tomorrow?  I don't know, but if it is, then you can say goodbye to a wave C back up to finish the right shoulder... as I think the current high on Monday would be the "right shoulder high" for this large "head and shoulder" pattern.

Next up... err, I should say down, would be 1080 in a big hurry, and then on through to re-test the 1040 low again... only this time I'd expect it to break.  But again, it would all depend on how much they raise the rates... and I'm not saying they will.

So, let's just assume that everything stays the same at the FOMC meeting tomorrow.  Then I would continue to believe we are going to go down to the 1080 area for the completion of wave B, and then back up to 1150 area for wave C.

After that, then we would have to study the charts more to see if the weekly charts and daily charts were matching up in overbought territory, and ready to roll over or not.  Again, we could continue on up past the right shoulder area and make a new high.

Remember, summer has light volume usually, and it's easy to control the market during those periods.  So what will they want to do with the market?  Did they buy a whole lot of shares around 1040 area, and need the market up a lot higher to unload them?  Or, did they already unload on Monday of this week?

I don't know the answer to that question, but should the market rally into the FOMC meeting, the high made just prior to it would be another chance to get short for a move down to at least the 1080 level... probably by this Friday.  So again, if nothing changes in the meeting, then one should look to exit all shorts by this Friday.

Of course that all changes if some "event" happens or the Fed's raise rates... then I'd say "hold on to your shorts, as this is going to be one helluva ride"...

Red

Red
Author: Red

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jimhobson
jimhobson
14 years ago

I think the markets are almost immune to the FOMC meetings. No one expects any move in interest rates until after the election or 2011.

maybe a short bump and then who knows. today was a surprise. 1080 is on the way. then what?

Red Dragon Leo
14 years ago
Reply to  jimhobson

We should bounce back up around 1080 Jim, and go back up and finish the “C” wave up, in an ABC to 1150 or so, for the right shoulder. But that seems too obvious to happen.

I think the right shoulder is already in (Monday's high), or we will go make a new high over the next few months, fooling everyone.

But first we have to get past this week, so let's just take it one day at a time.

jimhobson
jimhobson
14 years ago
Reply to  Red Dragon Leo

There certainly is no reason the 1031 high from monday cannot be the RS. The selling distribution in every rise seems more apparant.
My only hesitation has been the lack of conviction as indicated by the vixes. As I have said before I feel more confident about sentiment when i see daily vix changes above the 6% range.

Red Dragon Leo
14 years ago
Reply to  jimhobson

Yes Jim, I agree with you. The 1131 high on Monday could be the RS, which tells me we are likely to continue down in a wave 5 from the April high, and not simply go down in a B wave of an ABC up to 1150 or so.

If this is wave 5 down (or whatever count?), then wave 1 of the wave 5 was likely completed at yesterday's low, from Monday's high. Meaning today should go up in wave 2 of the wave 5 down, leaving Thursday and Friday to print a nice wave 3 of wave 5 down.

Not many people are considering that count, as everyone is looking at the ABC up. They all assume we are in wave B down right now. Well if wave B down breaks support around 1080, then it's not a B wave down, and there won't be a C wave up for the completion of the right shoulder.

Rip Van Trader
Rip Van Trader
14 years ago

No earthly reason for the Fed to raise rates except to throw the markets into chaos, so I think FOMC will be safe and cause for a reversal day.

I am looking for tomorrow to be bearish in the morning with a test of 1075-1080, and rally in the afternoon for a long green doji. After that, we will be under all important MAs and I expect us to stay there (welcome to bear country).

If tomorrow is green all day and reverses what was done today, then I would exit shorts and look for a major rally.

This whole right shoulder thing does not make sense to me. We have a RS already. If we go higher in a major way, I think we could even wind up testing 1220 again. I mean, the market would be wide open.

Red Dragon Leo
14 years ago
Reply to  Rip Van Trader

Yes Rip, the right shoulder is too obvious for me to believe that it will magically go there and reverse, allowing everyone to get short and make a bunch of money.

We have either already made the right shoulder, or we will likely go past it, and make a new high.

PeterK80
PeterK80
14 years ago

There are a few things I am looking at tomorrow. Daneric had a quote on his site that really stuck out to me “if everyone has that count (particularly EWI), it likely won't pan out” and I have found that to be correct from my experience as well. Everyone is looking for this to be the B wave of the correction and the C back up to complete the right shoulder. I have seen it in many peoples counts

FOMC days are usually bullish, especially in the morning leading up to 2:15. No one has entioned the smaller head and shoulders that was broken on the SPX and even more clearly formed on the XLF over the last 5 days or so.

First the SPX. We broke back under the 200 day MA after 4 days of barely satying above. This is bearish. We also broke below a H&S neckline. I expect the market to push back up to 1110-1113 where the backtest of the neckline and 200 day MA meet and then reverse.
http://screencast.com/t/NGQzYWY2
Also notice how many times the 200 day MA has recently been resistence or support.
http://screencast.com/t/MTk5MTVkZjgt

Lastly the XLF. This chart doesnt need much description. Its slightly more zoomed out http://screencast.com/t/ZmY5ZDFlMj

In all, I think the correction ended at 1131 and the next big wave down is coming. Also notice that the Nasdaq completed the bigger right shoulder almost perfectly. Good luck all!

anoopsan
14 years ago

U.S Markets view before opening bell
http://niftychartsandpatterns.blogspot.com/2010

Rip Van Trader
Rip Van Trader
14 years ago
Reply to  anoopsan

FTSE is forming the right shoulder on a H&S today (5 day intraday chart). If it does not break down, I may close out some shorts and wait until we are under all MAs.

Rip Van Trader
Rip Van Trader
14 years ago

TZA breaking out to the upside in pre-market trading. Looks like Britain's bull is crippled (have a 15 min delay there).

Things are looking very good for a bearish morning. I'll breathe much easier once we get under all the MAs.

jimhobson
jimhobson
14 years ago
Reply to  Rip Van Trader

I added a little to my TZA and TYP SPXU on Monday.

i may add a bit more on a bounce before FOMC meeting.

jimhobson
jimhobson
14 years ago

Weiss alert from yesterday FYI:

Dear Subscriber,

I’m not liking the looks of this market and I am waiting to see which move to make next, but for now I want you to exit all positions.

If you acted on my recommendations immediately after my email, you should be able to book gains in all three.

But to avoid these trades turning into losses, I want you to execute the following recommendations ….

Red Dragon Leo
14 years ago
Reply to  jimhobson

Nenner must not play short term instruments, like options or 3x eft's, as I still believe it's worth taking a short position for a move down to 1080 area. Of course you would need a bounce today to get in short, but most people are already short from Monday.

jimhobson
jimhobson
14 years ago

Nenner June 23:

S&P/Nasdaq
“And again the market came down”
In Feb 2009, when we got ready to go long, we did not mind being a bit early, since we were convinced of much higher prices to follow
Now, however, we feel that it will be difficult to see a test of the highs
We expect to see a more important high by mid Aug
Therefore, we do not want to take a lot of risk
Nevertheless, here is the situation:
Weekly cycles have bottomed
However, short term cycles – as shown in our last update – are close to a high again
On top of this, we still have to deal with the possible head and shoulders formation
Therefore, all of this results in us still NOT buying back the position we sold from longs around S&P 1200
Short term, the S&P and Nasdaq are on a sell signal
That does NOT mean that we are interested in going short, since, as we said above, weekly cycles have bottomed

Rip Van Trader
Rip Van Trader
14 years ago

'Soros says Germany could cause euro collapse'

Their industry, curbing of government spending, and more solid currency is undermining the EU's plan to screw everyone simultaneously. Just goes to show how frigging deranged these Fabian socialists are. I am personally betting that Germany and Russia will be among the first to go to gold.

Don't be fooled, however; all parties are in on the scam, I'm sure. Still, I wish we'd follow Germany and Russia in fiscal/monetary management.

http://finance.yahoo.com/news/Soros-says-German

jimhobson
jimhobson
14 years ago
Reply to  Rip Van Trader

And follow Russian tax policy 15% flat tax on all

they are more capitalist than we .

Red Dragon Leo
14 years ago

Well, I don't guess we are going to get a bounce today… from the looks of it. LOL

monicadern
monicadern
14 years ago
Reply to  Red Dragon Leo

we could get one later.

Red Dragon Leo
14 years ago

I bet Monica is happy today!

monicadern
monicadern
14 years ago
Reply to  Red Dragon Leo

I won't be happy until I can stop trading!

Red Dragon Leo
14 years ago
Reply to  monicadern

LOL… you'll be dead then Monica!

monicadern
monicadern
14 years ago
Reply to  Red Dragon Leo

Yes, because my husband will have killed me!

anoopsan
14 years ago

SP500 Hour chart price falling through the cloud
http://niftychartsandpatterns.blogspot.com/2010

Red Dragon Leo
14 years ago
Reply to  anoopsan

We are pretty oversold here, so we should get some kind of bounce.

anoopsan
14 years ago
Reply to  Red Dragon Leo

I am expecting the same

monicadern
monicadern
14 years ago
Reply to  anoopsan

Very cool san? How do you create the clouds?

anoopsan
14 years ago
Reply to  monicadern

monicadern

You must be having this indicator called ichimoku in your charting software. Ichimoku works well in larger time frame. For example try plotting ichimoku cloud for eur vs usd in daily chart.

monicadern
monicadern
14 years ago
Reply to  anoopsan

thank you!

jimhobson
jimhobson
14 years ago

If we hit 1080 today we bounce. If it breaks 1080 it collapses.

Question will be do we cover or hold???

As I type bounce seems to be in play.

monicadern
monicadern
14 years ago
Reply to  jimhobson

Disagree. I think we break 1080 to the slightest and then rally hard just to fool everyone.

jimhobson
jimhobson
14 years ago
Reply to  monicadern

That would be the RS call. So are you covering and going long at that point??

monicadern
monicadern
14 years ago
Reply to  jimhobson

possibly covering. Not going long though. i would reshort then at around 1097.

monicadern
monicadern
14 years ago
Reply to  monicadern

I think this is a head fake to the upside.

Red Dragon Leo
14 years ago
Reply to  monicadern

You busy now Monica? If not, give me a call.h

Rip Van Trader
Rip Van Trader
14 years ago
Reply to  monicadern

I covered about 25% when we hit 1085, later re-entered.

This is like shooting fish in a barrel now. We are under ALL important MAs all day.

Ben would have to crap a rainbow in order to turn this around, IMO.

Red Dragon Leo
14 years ago
Reply to  jimhobson

I think we will trade sideways to up until the FOMC meeting… then?

anoopsan
14 years ago

Dow jones trading close to an important support zone
http://niftychartsandpatterns.blogspot.com/2010

Rip Van Trader
Rip Van Trader
14 years ago
Reply to  anoopsan

I see how 10265 is acting as resistance now.

Great work as always, San! You are always on top of these things.

anoopsan
14 years ago
Reply to  Rip Van Trader

Thanks rip van

anoopsan
14 years ago

Apples bearish engulfing starts to take effect
http://niftychartsandpatterns.blogspot.com/2010

Red Dragon Leo
14 years ago

I was beginning to wonder if the market was ever going to rally up, but it looks like it's starting now. How high up is unknown though? Will they rally on the FOMC minute's or sell back off?

Anna
14 years ago
Reply to  Red Dragon Leo

REd flat into meeting knee jerk pop then sell into close

Red Dragon Leo
14 years ago
Reply to  Anna

Thanks, I wasn't sure what to expect into and after the meeting. Are you going to pick up more short positions on the “knee jerk pop”?

IlliniKap
IlliniKap
14 years ago

The BS begins. Rut already back to even for the day and DJI postive. What a bunch of horsesh*t

Red Dragon Leo
14 years ago

San, what levels are resistance now on this move back up in the spx?

anoopsan
14 years ago

Eur/Usd hour chart and daily chart analysis
http://niftychartsandpatterns.blogspot.com/2010

IlliniKap
IlliniKap
14 years ago

Been a great ramp job so far on literally no volume. Lowest mid-morning to afternoon in volume in days.

Red Dragon Leo
14 years ago
Reply to  IlliniKap

During the low volume periods, they have full control of the market. It's during these periods that most rallies occur. The fact that we haven't moved up very far today is very bearish for the market.

Anna thinks we might get a pop on the FOMC meeting at 2:15pm est, and then sell off. I also think we will do some more selling, although I don't know about the “pop” or not.

Either way, the selling is not over. The market is very weak now. It should have rallied a lot higher over the last few hours, especially with the very low volume.

IlliniKap
IlliniKap
14 years ago
Reply to  Red Dragon Leo

I don't know. We bounced right off the daily 20 SMA on most of the indices and to me that is bullish. I would have liked to see us hang around under them for a while, but we literally bounced right off.

Red Dragon Leo
14 years ago
Reply to  IlliniKap

We are moving sideways to up… forming a beautiful bear flag. After the “pop” at the FOMC meeting, the bear flag should play out, and we should see a sell off into the close. Have patience.

anoopsan
14 years ago

Russell 2000 hourly chart got support from a dragon fly doji
http://niftychartsandpatterns.blogspot.com/2010

IlliniKap
IlliniKap
14 years ago

Unrelenting. The won't even let it dip

IlliniKap
IlliniKap
14 years ago

Look at all the bids coming in. They are not letting it go down today. We will finish the day with a Doji most likely.

IlliniKap
IlliniKap
14 years ago

Unbelievable.

monicadern
monicadern
14 years ago
Reply to  IlliniKap

1105 here we come. Still staying short though.

Imaginasian23
Imaginasian23
14 years ago
Reply to  IlliniKap

This whole market is one big WTF!!!

IlliniKap
IlliniKap
14 years ago

Anyone want to explain what happen? Horrible housing data today and the FED said absolutely nothing good about the economy and we shoot up? WTF?

Red Dragon Leo
14 years ago
Reply to  IlliniKap

Just taking out overhead stops I believe.

Anna
14 years ago
Reply to  IlliniKap

low interest rates = weak dollar

IlliniKap
IlliniKap
14 years ago
Reply to  Anna

Interest rates have been low for the last 2 years

Anna
14 years ago
Reply to  IlliniKap

He said extended so that bearish for the dollar short term

jimhobson
jimhobson
14 years ago
Reply to  IlliniKap

It was a terrible fed statement. Weak economy fears. i think the market is not going to sustain.

IlliniKap
IlliniKap
14 years ago

Picked up some more SDS Jul 33 calls at ES 1088 and 1093

Red Dragon Leo
14 years ago
Reply to  IlliniKap

That was on big stop sweep we just seen. Now the real direction should be in play.

IlliniKap
IlliniKap
14 years ago
Reply to  Red Dragon Leo

the games continue. Look at the 1 minute chart. Much higher volume on the red candles down, but they are able to push it back up on much less volume.

IlliniKap
IlliniKap
14 years ago

Pumpers are def. jumping bids on futures to try to run this up and tank. It is so obvious it's not even funny and it seems to be working.

anoopsan
14 years ago

Dow Jones came down from a triangle
http://niftychartsandpatterns.blogspot.com/2010

IlliniKap
IlliniKap
14 years ago

SPX 1089 is key for today's close now. it was 1100 yesterday and 1089 today. We close below that and I fee pretty good being a bear. A close above, will give the bulls some hope to push it up.

IlliniKap
IlliniKap
14 years ago

It just won't quit like I said. This absolute BS

monicadern
monicadern
14 years ago
Reply to  IlliniKap

No matter where we close I am staying short.

IlliniKap
IlliniKap
14 years ago
Reply to  monicadern

They are running up the tape into the close just like I expected. Volume on the up bars has been pathetic, but it doesn't matter.

monicadern
monicadern
14 years ago
Reply to  IlliniKap

Doesn't matter. Staying short.

Red Dragon Leo
14 years ago

I think they we close it positive today.

monicadern
monicadern
14 years ago
Reply to  Red Dragon Leo

perhaps, but that's just to get the shorts out of their positions so they can tank it tomorrow.

IlliniKap
IlliniKap
14 years ago

Bears completely blew it in the last 30 minutes. Given everythign that came on today, today should not be an even or slight up/down day. That shows me that the conviction to the downside isn't as strong as we think. The tape and price action have shown us as such. I'm keeping my shorts, but have a very uneasy feeling.

monicadern
monicadern
14 years ago
Reply to  IlliniKap

Don't be uneasy. The bears are just waiting to attack.

I am the eggman
I am the eggman
14 years ago
Reply to  monicadern

Hi there!

I am a swing trader but for what its worth here is my work. I have solicited the help of RecnaduS and worked this by combining his cycle work (Ehlers) with what I can on my feed. We are also looking at the Summation Index and MO on stockcharts which seems to be flawed. http://www.screencast.com/users/has001u/folders

monicadern
monicadern
14 years ago

Thanks eggman but i am not sure I understand it?!

I am the eggman
I am the eggman
14 years ago
Reply to  monicadern

If you adjust the MA for cycle length and make it into an oscillator then watch for the zero cross. Very few whipsaws! Also, the McOsc is calculated incorrectly on Stockcharts. It is slightly off. I will publish periodic updates for you to see. This has implications for those that use the Summation index with a 20day MA cross. There was no cross!

Anyway, have a good night!

monicadern
monicadern
14 years ago

Does anyone else have whiplash?!

anoopsan
14 years ago

EUR/USD hour chart pair above 50 hour SMA.
http://niftychartsandpatterns.blogspot.com/2010

IlliniKap
IlliniKap
14 years ago

Like I thought, they did a great ramp job the last hour to ensure SPX closed above 1089, which also happens to be the Daily 20 SMA. Go back and look at the Rally off the Feb 2010 low. We rallied from 1044.5 to 1112.42 and then sold off to the 20 SMA, which at the time was at 1087.4. Same thing, we didn't close under it and rallied from their to the April Highs. While the news and general sentiment is worse this time, the 20 SMA backtest could serve as the launching pad again.

Rosabarba
14 years ago

Plenty of mixed signals. A good reason to be hedged and/or trade small, imo.

Red Dragon Leo
14 years ago
Reply to  Rosabarba

It's certainly in a tough spot right now Rosa… as it really needs to fall a little more 9about 1075-1080) to hit the lower trendline support on the rising channel, and then bounce back up into a “C” wave up.

Or, does it fall on through the trendline and go on down and retest the 1040 level again? It doesn't look ready to bounce back up from the current level it's at now, so that leads me to believe we will go lower before any multi-day rally starts back up.

How low is anyone's guess, but if that trendline support breaks (around 1075-1080), then I do believe we are going to 1040 again.

Rosabarba
14 years ago
Reply to  Red Dragon Leo

Very possible. Action of late has been quite weak, and the red volume bars on SPX have been rising ever so slightly three days in a row. Yesterday's selloff in $TRAN was quite something, $NYSI has stalled, and other bearish indicators and developments quite numerous and familiar.

There are factors advising bears to be cautious (as always, same goes for bulls), as you note.

A few of those items possibly worth bearing in mind as long as support holds: Both the $USD and the $TED spread appear to have at least short-term tops in place, and should be watched for any further moves lower (in the $USD, particularly below the 6/21 swing low).

Also, did you happen to catch the action in XHB on the heels of an ostensibly dreadful new-homes report? Quick selloff followed by a rally on double volume that heavily outperformed the $SPX. Still very much in tight downtrending channel, it should be added, but just something else to keep an eye on.

Red Dragon Leo
14 years ago
Reply to  Rosabarba

Very interesting about the XHB… I didn't catch it. Just wondering if it's the PPT trying to save it from collapsing, or if it was some big boys buying, anticipating a big move higher? Hard to say which…

Rosabarba
14 years ago
Reply to  Red Dragon Leo

As you might have gathered, I take a dim view of the PPT doctrine of market action (which isn't to say the big boys don't have built-in advantages and capital power us small-timers can never hope to match and should always keep in mind), so I don't think XHB was made some sort of window-dressing project. It's an interesting sector, but not one central to market strength like the banks or energy.

Looking at the dailies for the past three years, green-volume spikes sometimes come at bottoms, sometimes not. There's long-term support in the 15 area, so when the bad housing report failed to keep XHB below that level, it would seem to be an obvious place for shorts to cover.

As I see it, XHB doesn't signal a reversal until it can close above the descending trendline, now a hair below 16, also the neighborhood of several SMAs and EMAs. There's a double bottom in place for now, something it didn't make with broader market earlier this month.

For now, it's seems a one-day outlier. It was the volume and the positive divergence that seemed to make it notable, if not definitive of anything as yet.

midasportugal
midasportugal
14 years ago

I think short term bounce and then crash hard.

http://midasfinancialmarkets.blogspot.com/2010/

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