US bonds fell to potential support, just in time for S&P500 to look shaky

US bonds continued their fall through Friday afternoon, having gone past my queried C=A level along with the .50 retrace. As you can see on my daily TLT chart, as of the end of the afternoon TLT had poked the .618 retrace and closed just above it.

I'm including a weekly chart of TLT, with just my standard set of indicators. What stands out on this one is that TLT may also be receiving support at its Bollinger Band midline on this weekly chart.

And just in time! as the outlook grows more bearish for equities (see my monthly chart of the SPX, including the closing price Friday). Now, I've grown more pessimistic on the idea of bonds presenting a new surprise high, mainly because the drop did exceed the potential C=A level. And the indicators don't look great either. But I am optimistic that the level that TLT tested on Friday should provide a good tradable rally.

From a fundamental perspective this would also make sense if equities do make a new plunge downward. Although it will be interesting to see what will happen with the bonds charts just during this week, if we do see a sharp spike higher in gold to the ~1000 level as forecast in the ChartsEdge cycle chart and discussed in my post earlier today regarding gold. But if a rally like that in gold also turns out to be the larger "B" wave I described in that post, followed by a larger "C" wave down in gold, then it will also be fascinating to see what happens to the prices of these bonds.

Still - let's not get ahead of ourselves. Given the situation, with a potential spike in gold and the obvious volatility that bonds have just experienced, anyone playing a potential bounce by going long in TLT/bonds needs to use good stop loss protection (I'm thinking very close under Friday's lows), just in case bonds and TLT aren't quite ready to rally yet. One possibility is that bonds either finished or have yet to finish a third wave down, or even need to do a 4th wave consolidation briefly and then a fifth wave down, while gold finishes an upward move. And then, any rally in bonds may prove to be a bear market rally, whether a 4th or B wave, or even a nice high wave 2 pullback upward. (Meaning if bonds have indeed initiated the opening movement in a trend reversal off the highs, then a wave 2 pullback upward could retrace perhaps .618 of the ground lose during the move down.)

Here are the charts. First, the daily and weekly charts of TLT:



And next, my monthly chart of the SPX (no new markings needed (yet, anyway) on this one) - I already discussed in my previous posts here, yesterday and today, the potential for a down wave in equities:

Yen in consolidation mode - apparent breather before next move up

The yen has been in consolidation mode, and there's no indication that it's doing anything other than "taking a breather" before its next move up. The monthly chart shows that the steep move up can so far be counted out in two waves that are almost exactly equal in length - this is often an area where traders will take a look to see if that's it, or there's enough strength for the asset to continue the move. Looking at the daily chart, we can see that the consolidation since the recent highest point looks very much like a triangle of its own.

I've marked a red line at the 105.70 low that the yen should not fall under, if this is to remain a bullish triangle consolidation. Note also that this sideways consolidation is occurring around an apparent pivot level that also corresponds to the 111.49 Fibonacci number we identified recently as the .786 retrace of the yen back to its highest point as shown on the monthly chart (below).

There's also a point of view that the yen correlates with the movement of the VIX, which seems valid to the extent that both the yen and the VIX will tend to move inversely with equities. Similar to the ways in which gold, the dollar, and bonds will often (not always! but often) move inversely to equities. In the case of the yen in particular, it would seem reasonable to find it inversely correlated to the Nikkei stock index.

Here are the daily, weekly and monthly charts of the Nikkei. While some indicators have faint positive signs, clearly associated with this index' recent consolidation of its own, the majority of the indicators across these time frames look like it remains entrained in the downtrend:

Wolfes can run with gold bugs - for a little while anyway

Some (not all!) Elliott Wave analysts have had an upward B wave concept in the works for gold, a concept I've been referencing from time to time and it's been marked on my weekly gold chart (below). And of course I've also been showing my daily gold chart (below) as it's been updating, and warning again yesterday that gold was pushing up at key Fibonacci levels. Levels that could have been resistance, but upon nudging them, falling back, and then pushing up past them again, gave the warning that gold was on the move.
Egyptian scarab artifact; Guillaume Blanchard, July 2004

I've been advised that Wolfe wave analysts also have been projecting gold to higher levels, although I'm not an expert in that. Apparently the move down from the highs ~1033 with the three lower lows on the weekly charts since then qualifies as a Wolfe wave pattern that would complete a significant correction, pointing higher. And further, that the Wolfe wave projection would be in the range of 1200, and maybe higher. For that matter, I've also heard mention of "Lucas waves" and that some who practice that believe that gold has much, much farther to run. Hmm ... will see.

I can tell you that an Elliott Wave "B" wave could go to that area ~1200, and I even had a very long-term chart possible projection to 1192. Although my confidence in that level has been waning ... but of course we'll see. Such a "B" would have to be what's called an expanded flat. It's very possible to have a "B" wave that does not reach levels prior than the high (here, 1033) in which the B is only part of the correction. Now, I realize that all this talk of A, B, and C waves is confusing for non-Elliott Wave analysists. The point is, that viewing 1033 as "the high," and 681 as the bottom of a very much larger "A" wave, the big "B" wave upward (with its internal ABC counting up from 681) would be just part of the very big-picture correction - to be followed by a "C" wave to lower levels, well under 681.

I had marked a steeper channel within the bigger picture uptrend channels up from 681, and then gave the alert when a small H&S appeared ~899 and projected to a drop. That drop happened as expected, but what many may not have expected was that it made a neat test back to the larger uptrend channel line ... as I've been showing on my charts. Sure enough, that line acted as support, and I've been openly curious whether it would lead gold to higher levels. You can refer to my prior posts for more detail on all that.

The gold cycle charts from ChartsEdge that I just posted here for the upcoming week, shows a fast rise to ~1000. That's got me back to the concept of the very large "B" wave, counting out as a three-wave (ABC) movement up from 681. For that matter, Elliott Wave theory states that "C" waves tend to be strong trend movements (in the nature of impulse third waves). Here are my charts (below). The only new annotation or marking I've made, is a note at the top of the first chart about the C=A projection for a larger "B" wave. I marked the C=A measuring up from 681 and thus pointing to 1024. (If you count from ~700 on the idea there was a truncted low at that level (or depending on how you measure the "A" top given the apparent small expanded flat with that small H&S ~899), the C=A projection actually is right about at 1000.)

Gold bugs, be aware - the theory of a large "B" wave up - whether it finishes at the ~1000 level, or even whether it morphs into a big expanded flat that sees a "B" wave top higher than 1033 (such as 1192 or 1200) - leads to a very large "C" wave down. Yes, a C wave ... one of those strongly trending waves ... for which the likely target would be something like 486, and so the only logical Elliott Wave way to play gold would be from the short side.

Are there other potential ways to view Elliott Wave or other methods, as pointing to much higher levels in gold? Such as 1600 or higher (which I've seen projected by some forecasters)? Well as I've said before, anything's possible ... I'm just in in the skeptical camp on that by now. We'll have to play it as it comes. The big take-away here is: gold investors may be living in interesting times!

Gold cycle chart for 2/2 week from ChartsEdge

Gold has been heading higher, and has further to go according to the cycles work of ChartsEdge. They indicate a projection to 1,000, and very quickly.

This actually fits right in with the Elliott Wave analysis I've been primarily operating with for gold. I won't go into that in detail right here, as I've addressed it in other posts here recently. Check out the ChartsEdge cycles chart for the upcoming week:
=============

S&P500 & Nasdaq cycle charts for 2/2 week from ChartsEdge

Here are the cycle-based forecast charts from ChartsEdge, for the S&P500 and the Nasdaq, covering the week starting February 2 (their longer-term cycle charts by subscription, see link in sites listed at the right side of this page):
=============

Peeking below at support for S&P500 and DJIA under the November 2008 lows

While it might seem scary to look where the markets may go if they move under the November 2008 lows, it's worth taking a serious look for potential support at lower levels. The 640 level in the S&P500 is one of the potential projections of a bearish Elliott Wave triangle in the SPX, as I mentioned in yesterday's post here on that topic. Andre Gratian also mentioned that number in his prior weekend update, as a projection he's worked out.

Below, I'm borrowing Tony Caldaro's monthly SPX chart to illustrate another dimension of significance to the 640 level. But first, a quick peek at how the triangle would look in the Dow Jones Industrial Average. Using the main triangle count shown on this chart yields a conventional 5th-wave-down target at 6,743:


Notice that Tony in his monthly SPX chart (below) identifies 640 as the Fibonacci .618 retrace back to the lows of 1974. Purely on the basis of Fibonacci trading setups, this tells you that the potential for a tradable bounce is offered by this significant support level. Indeed, given that it's calculated on a monthly chart spanning a 30-year time period tells you that it's also an investable bounce for those who don't like to sell securities within weeks, days (or even hours) after the purchase.

Notice too that the October 2007 high in the SPX wasn't much higher than that of 2000, so just looking at the chart with the Fibonacci retrace levels gives you the feeling that simply dallying around the .50 retrace level - again, after having been already about that level in 2002/2003 - doesn't give a good sense that the SPX gets enough support from the .50 level and "needs" to dig lower to the .618 for potential support.


What implications might this have for Elliott Wave? It's interesting that the .618 retrace level is commonly the amount of pullback traced by a second wave. It implies that there is actually a possibility for a trend reversal to a third wave (in this case, upward). Yes - it really is the unthinkable, isn't it - going against the grain of what EVERYone is talking about - the idea that the markets could bottom a huge second wave and then enter a huge new bull market with a massive third wave?! Well, perhaps there are some talking about the idea of a huge new bull market ... not really what I'm seeking most talking about ... and my guess is that if the markets do plunge in a scary thrust down over the coming weeks, to the SPX 640 level, any voices crying "bull market" will either quaver into silence or be shouted down by "all reasonable people".

I made a post some time ago, under the "Equities" and "Elliott Wave" labels, that included a very long term chart of the DJIA going back to the 1930's, and showing that the market actually still remains within its uptrending channel lines. It is possible that the DJIA could still be contained within those channels, if a plunge there is a fast fifth-wave thrust down from a triangle that reverses rapidly upward.

Here's how my DJIA monthly chart looks now. My thought has been to use the Fibonacci levels that retrace back to 1982 as well as 1987. And I still think these are reasonable levels for potential support. Using these, you can see that that there are support levels not too far under the 2002/2003 lows that could contain another move down in this index (and even provide more potential for rallies after that). The .618 retrace to the 1982 lows is at 5900, and the .618 retrace to the 1987 lows is at 6,427 (not very far off from the 6,743 main triangle target I showed above):


Speaking to Elliott Waver analysts out there, I'll grant you that the markets don't "need" to plunge down under the November 2008 lows over the coming weeks. There remain Elliott Wave potential counts that have the markets going to new bear market rally highs first. In fact, this seems to be the consensus of many, or was until very recently. And Tony Caldaro has been showing alternate counts for a while now, with the bear market rally count shown in his SPX chart and the plunge downward count shown in his DJIA chart. There's even one that has the markets making new all-time highs first! Frankly I'm not going to revisit or show those, unless the markets first exceed Wednesday's high and then exceed the January 6 highs.

There are also different ways to count the Elliott Waves for a move down. Prime example, 640 is one of the main triangle target objectives that would make the move down a fifth wave (and the drop from the January highs look like the 1st wave within that fifth wave). If it counts out as its own ABC zigzag (with the drop from Jan. 6 either wave A, or the 1st wave within the A-wave) then it could reach lower, and I'd be looking at my larger "C" wave objective on my SPX monthly chart (which points to levels under 600 in the SPX). First, let's see if we get under 741 and then what the wave structure is looking like at that time.


By the way ... just to make sure no one is confused - since I do speak (as I should) in terms of probabilities and not guarantees ... the markets look unsafe to me, for any long positions (except occasional daytrades or perhaps swing over a 2-day time frame on rare occasions), unless they exceed the January 6 highs without making new lows. The high on Wednesday marked the .618 retrace back to the January 6 highs for the QQQQ and the .50 retrace for the SPX, and fit within the parameters of what I showed last weekend for a likely B-wave pullback upward. That was the likely trend reversal point. True - I'm considering the banking index and US Steel (X) as long candidates that might not join in a plunge downward - but if they violate the recent swing lows then I'm stopping out, to re-evaluate those. Also true - the markets could make rally efforts again toward the January 6 highs - but there is no substitute for actually going above them.

Therefore, either be short or be in cash unless you really know what you are doing in any fast (day) trading (normally I'm not this explicit but concerned if anyone doesn't understand this). Good luck out there all and happy trading!

Merriman's weekly commentary, week starting 2/2

Here is Raymond Merriman's public weekend update, or at least major quotes from it (read the entirety at his site included in the list at right side of this page) - whether or not you buy into the astrology (so to speak - though often uncanny calls), always a good grip on the tone of the times and fascinating read:

=============

MMA Comments for the Week Beginning February 2, 2009
Written by Raymond Merriman

Review and Preview
The January 23 geocosmic critical reversal date coincided with an expected trough (low) in most stock indices of the world last week. And those lows have so far held above the lows of November 21 and/or late October, which started the current primary cycle for most stock markets. But there is still danger.

In the Far East and Pacific Rim, the Australian All Ordinaries bottomed at 3300 right on January 23. That low was a re-test of the 3201 level of November 21, but the rally towards 3500 by the end of the week was not enough to confirm this as the start of new primary cycle. In Hong Kong, the Hang Seng was closed most of the week in observance of the Chinese New Year on last Monday’s Solar Eclipse. But following a low of 12,439 on January 21, it rallied smartly to 13,560 last Thursday. Japan’s Nikkei Index bottomed on Monday, January 26, at 7671, which was also a successful re-test of its October and November lows of 6995 and 7406. By Thursday it was up to 8305 before settling back to close just below 8000. India’s Nifty Index bottom at 2661 on January 23 and managed to climb back to 2881 by Friday. In all cases, the lows of the January 23 period held above the lows of last October-November. In all cases, the rallies lasted until the last two days of this past week, but those rallies were not enough to confirm that primary cycles were completed. With the Venus “translation” to the Cardinal Climax planets still in effect through the end of this coming week, danger is still present.

In Europe, the Netherlands AEX bottomed at 227.53 on our January 23 reversal date, which was a successful re-test of the 220.12 low of November 21. The German DAX index also bottomed on January 23, at 4067, which formed a successful re-test and triple bottom to the 4014 and 4034 lows of October 24 and November 21. The same pattern was evidenced in the London FTSE, which bottomed at 4046 on January 23, well above its lows of October and November. The Swiss SMI Index however was not so impressive. After putting in a low at 5194 on January 23, and rallying to 5457 the next day (Monday, January 26), it fell back again to 5241 intraday on Friday. In fact, all the other European indices topped out Thursday, only to start a retreat into Friday, thus calling into question just how stable the January 23 critical reversal date will be.

A similar pattern was present in the USA stock markets. After bottoming at 7909 last Friday, January 23, the Dow Jones Industrial Average soared to 8405 on Thursday, closing up over 200 points. However, in typical Mercury retrograde fashion, that bullish signal was negated the very next day as it sold off and closed down 226 points. By Friday, it was trading below 8000 again. That was true in the NASDAQ Composite, which made a low of 1434 last Friday, January 23. By Wednesday it was up to 1568. But by Friday, it was back down below 1475. Once again, we see the fickle nature of markets under Mercury retrograde, in which buy and sell signals do not last more than 1-4 days. In fact, it confirms our belief that during these times, we will see more than usual number of “fake outs” of various technical signals.

Gold and Silver formed an impressive top last Monday, and started a healthy sell off. But those sell-offs suddenly reversed on Thursday and by Friday, both were well above Monday’s highs. What is most interesting is that these sharp rallies in the metals occurred while currency prices were declining against the US Dollar. The story is that in times of uncertainty, Gold and the US Dollar are seen as safe havens. But we have been in a time of uncertainty for quite some time now, and the Dollar has gone opposite metals for most of this period, as would be “normally” expected – except under Mercury retrograde, when the “norm” is no longer is reliable.

Short-Term Geocosmics
The Mercury retrograde period ends this weekend, February 1. However, it may take all of this week before markets return to more normal technical conditions, especially given that the Employment and Payroll reports will come out Friday, February 5. If that is not enough to make the market on edge, consider also that Saturn will makes its second of five oppositions to Uranus that day, and Venus will complete its “translation” of the Saturn, Uranus, Pluto T-square then as well. As stated last week, “… but more relevant to market reversals is the translation of Venus to the developing Cardinal Climax planets of Saturn, Uranus, and Pluto. These three planets are moving towards an 80-90 year T-square configuration with one another. From January 22 through February 5, Venus will first conjunct Uranus (January 22), then form an opposition to Saturn (January 24), and finally a square to Pluto (February 5)…. Thus these markets either reverse in this time band (January 23-26), or else they break down and enter a “panic” phase, which has been the pattern with these translation periods in about 80% of cases in the past year.”

This week is important. Will the lows of January 23-26 hold? Or will they break and be followed by yet another panic? The answer will tell us something about the status of the longer-term trend. I have my bias which will be shared with subscribers in this week’s weekly report.

Longer-Term Thoughts
What ARE they thinking? The economy is headed into its deepest recession since the 1930’s, the stock market has suffered its greatest decline since the 1930’s, and the government has taken nearly $1 trillion of taxpayers’ monies to “rescue” the banking and financial services industry that is perceived to be at the root of this problem. And what do these Wall Street and banking firms do with that money? They give bonuses exceeding $4B to their executives and buy new corporate jets for travel convenience for these same executives. Are these businesses and banking leaders really so out of touch with Main Street that they cannot see why even President Barack Obama calls this behavior “irresponsible and shameful?” Apparently so, but this fits right in with the nature of the long-term planetary signatures in effect right now.

As discussed at length in both the 2008 and 2009 Forecast books, Saturn is now in Virgo, September 2, 2007 through October 29, 2009, with a brief return April 7-July 21, 2010. Saturn pertains to dissatisfaction, a feeling of frustration and lack of support. Virgo rules the work force. Typically when Saturn transits through Virgo and Libra – the middle of the zodiac - there is a heightened sense of social injustices to the “common man,” or “Main Street.” It is a time when workers can feel taken advantage of, treated unfairly. If this frustration reaches a certain level, workers become rebellious, and demand change, or else they strike. .....

But what is most astounding is that this same failure in sensitivity by banking and financial leaders is continuing even after the rout in the election, and even after the crisis in the banking system has occurred, and even after taxpayers’ monies have been tapped to come to the “rescue” of these banks. ... But then again maybe this should not be so surprising to Financial Astrologers. After all, Saturn is still in Virgo, and later this coming week, it will make its second of five opposition aspects to Uranus. Only three more to go. At this rate, one has to wonder what will be left of U.S. banks and financial institutions by July 2010 when the fifth and final passage takes place. What will be left of the “management class” when the “common man” (and Obama) gets done with them? Saturn opposite Uranus, to be followed by Saturn square Pluto, and then Uranus square Pluto. It sounds like a 5-year funeral procession for a class of people (“executives-on-greed” steroids) about to become extinct. We may see another giant fall in the next five weeks, and even days. I just don’t see Obama having much sympathy if one of these institutions teeters on the edge right now. And some are. They are going down, unless they wake up and act more responsible and socially sensitive in his eyes. This attitude that they are “too big to allow to fail,” isn’t going to cut it with the new sheriff in town.

Announcements
The “SOS Global Market Cycles Report” will come out this week, Tuesday, February 2. And it will be out one day later in German to our German SOS subscribers (please go to www.mma-europe.ch in to order the German version of SOS). This SOS monthly report addresses the long- and intermediate-term cycles that affect all world markets, but specifically through the history of the U.S. stock market, and the Dow Jones Industrial Average. It is the “big picture” ahead, like where we are now in terms of the 18- and 4-year cycles. It also discusses the shorter cycles (primary and its phases) of the German DAX, Netherlands AEX, the Australian All Ordinaries, Hang Seng of Hong Kong, the NASDAQ Composite Index, and the XAU Gold and Silver Mining index. The German edition also covers the Swiss Market Index (SMI). For information, go to http://www.mmacycles.com/catalogue/services/the-sos-stock-market-cycles/.

For those interested in learning or improving your understanding of astrology, please note that a fantastic conference in Astrology is going to take place August 19-24, 2009, at the luxurious Oakbrook Hills Marriot Resort, just outside of Chicago (not far from O’Hare Airport). This will be the ISAR (International Society for Astrological Research) 2009 conference, featuring over 80 professional astrologers from all over the world, including Jeff Jawer, Rick Levine, Michael Lutin, Claude Weiss, Nick Campion, Verena Bachmann, and several Financial Astrologers, including myself. There will be a whole track on Financial Astrology, and I will be giving a one-day workshop on Financial Astrology the day after the main conference. For more information, and registration, please go to www.isar2009.com. For those who golf, note that this resort has one of the most impressive golf courses on the PGA tour. Golf where the pros golf, and learn astrology from some of the best astrologers in the world, all at the same time!
......

Disclaimer and statement of purpose:
The purpose of this column is not to predict the future movement of various financial markets. However, that is the purpose of the MMA (Merriman Market Analyst) subscription services. This column is not a subscription service. It is a free service, except in those cases where a fee may be assessed to cover the cost of translating this column from English into a non-English language.
This weekly report is written with the intent to educate the reader on the relationship between astrological factors and collective human activities as they are happening. In this regard, this report will oftentimes report what happened in various stock and financial markets throughout the world in the past week, and discuss that movement in light of the geocosmic signatures that were in effect. It will then identify the geocosmic factors that will be in effect in the next week, or even month, or even years, and the author’s understanding of how these signatures will likely affect human activity in the times to come. The author (Merriman) will do this from a perspective of a cycle’s analyst looking at the military, political, economic, and even financial markets of the world.
It is possible that some forecasts will be made based on these factors. However, the primary goal is to both educate and alert the reader as to the psychological climate we are in, from an astrological perspective. The hope is that it will help the reader understand these psychological dynamics that underlie (or coincide with) the news events and hence financial markets of the day.
No guarantee as to the accuracy of this report is being made here. Any decisions in financial markets are solely the responsibility of the reader, and neither the author nor the publishers assume any responsibility at all for those individual decisions. Reader should understand that futures and options trading are considered high risk.
Copyright MMACycles 2007-9; you may link to this site or page, but you may not distribute these texts in any way (by email or otherwise).
Archives
Previous weeklies (2006) are archived at www.olmta.com
For other language editions of MMA´s weekly comments: Dutch : www.markettiming.nl (Nederlands); French : www.lecochonsideral.info (Francais); German : www.astrodata.ch (Deutch); Japanese : www.astrology.jp; Polish : www.astrobiznes.pl
Please note: This is not the same as our service titled "MMA Weekly Comments and Recommendations on Financial Markets" which is available by subscription only.

"Scariest Chart Ever", most emailed at Seeking Alpha

Here's today's "most emailed" post at Seeking Alpha, posted there by Todd Sullivan:

If this doesn't give you pause, nothing will. From East Coast Economics: Here is a chart of borrowing by U.S. banks from the Federal Reserve through Dec. 2007:


Now, same chart through December 2008:

Anyone still think there are not some rough patches down the road?

Editor's note, 1/29/09: The original version of this post indicated that the charts show 'federal borrowing', and not borrowing by banks from the Fed. That has been corrected here.

=============

Yes, I'm scared! And will look forward to more commentary and analysis here this weekend!

Tri and tri again - bearish Elliott Wave triangle in S&P500

Okay, I've been slow to embrace the Elliott Wave triangle idea for the equities indices because it didn't "look right" to me. But after yesterday when I counted out the triangle in the Dow Transports, and realized that its "D" wave looked like it had a triangle shape itself (which can happen with "D" and even other waves within a larger triangle), now I've got to cozy up to it for the S&P500 as well.

It does yield a couple of downside targets, depending on what you pick for the "A" wave, one of which is the 640 area that I've seen others reference and that may be right. My idea of a very large flat (shown in my monthly charts going back 9 years) would indicate a deeper downside (C) wave target (this (C) wave being of the monthly charts scale, not the smaller-level and smaller timeframe counts marked on this chart) .... But first things first, we need confirmation that the indices are going down in a 3rd or "C" wave down which obviously means under 804 and then under 741.

I don't see a need for deciding whether this would become my "primary count" rather than the ABC I was showing previously for a 4th or XX-wave consolidation. Either way the idea is pointing down from here.

I'm thinking this as the overall big picture looks consistent with what we're seeing in the yen, euro, and transports. What it means for the financials, and for US Steel (X) - both of which I've favored as a long position - will of course be seen. If these cannot remain above their recent swing lows then I'm stopping out of both, of course.

Meantime will look forward to another weekend of fun analysis, sifting through the data and reading tea leaves (and all the other "technical analysis voodoo" we like to do, LOL), spiced with some good economics and sentiment data as well of course. Happy Friday all!

US Steel looking poor today - investor alert

I don't like US Steel (X) under $28.36. That isn't happening yet, but the drop doesn't look good.

If X did a big triangle similar to the $TRAN we looked at yesterday, and is in some stage of a fifth wave thrust down out of it, then going under $28.36 will be part of that move and I'll stop out of my long position.

Then re-evaluate. Anyone trading on US Steel please note.

Okay, financials ...

Gotta keep playing it carefully! The hourly is on 50 MA support, with this plunge down along with the broader indices. It's at or very close to a gap fill on the big gap up, and then it's also Friday afternoon with a whole weekend to keep traders/investors guessing as always.

For me this is intended to be a big picture swing trade, though I know others (Jeff Macke at Minyanville apparently among them) have been working with this on a short-term trading basis. As always, keep in mind your time frame because that dictates how you manage your trades.

Financials showing relative strength...

Stock Market Update
12 minutes ago
[BRIEFING.COM]

Thanks to leadership from JPMorgan Chase (JPM 26.57, +1.14) and Wells Fargo (WFC 19.48, +0.70), financials (unch.) are threatening to move into the green and the broader market is paring its losses.

Still, all three major indices continue to trade with losses in excess of 1%.

=============

What a concept! You don't remember reading about this possibility beforehand anywhere ... do you ...?! LOL!
Okay, having said that - pride goes before a fall ... so, I'll keep it sober and unbiased and objective!

TLT today is testing a potential Fibonacci support level

Today, right now TLT looks like it is testing that .618 retrace level we've pointed out. So it worked that, having lost the C=A level discussed, it did indeed go this bit lower to this Fibonacci level which may act as a support line.

How it reacts here will do a lot to help clarify the larger Elliott Wave pattern.

I've posted this chart, as well as others of gold and Delta Air Lines (DAL), at my UBTNB3 site. I'll probably continue to post some over there from time to time during the day as things look interesting.

ChartsEdge map for 1/30; and comments on gold

Market Map for Jan30

Posted: January 30th, 2009
Author: Mike Korell Filed under: One-Day Market Map »


=============

Added note: I just posted a chart of gold with some comments about the move up which looks like a continuation move this morning, at my UBTNB3 site (see link to the right). So check that out if you're interested in the gold trade.

As always, careful out there and happy trading all!

Why technical analysis and what it says about S&P500 and Dow Transports right now

Why do we focus so much on technical analysis here? Well, there are two answers to that. Here's part one of the answer: Because I got tired of losing money "investing" with fundamentals and looked for something better!! You know what I mean, right? All those times that analysts recommend stocks, especially when the consensus is that some stock will do well ... then maybe it does, maybe it doesn't ... and even if it does well, they never tell you when to sell to lock in profits, and not see them waste away!

Here's part two of the answer, why technical analysis: Because it works. Because the price of any asset is set by supply and demand (something that economists and fundamental analysts are amazingly reluctant to admit when it comes to most tradable securities), and it turns out that technical analysis gives you a way to see where supply and demand are going and therefore where price is heading. When price is trending up, or down, or consolidating, or ripe for a nice trend reversal. Discussions about fundamentals don't make money. Being able to "have tomorrow's newspaper today" through the clues of technical analysis does make money ... so that's what Unbiased Trading is about.

Trading is not really different from investing, either. Show me someone who wants to invest and doesn't care about making money, and I'll show you the tooth fairy. There's no point in putting money into anything without some protection against losing it, and without some game plan for making, taking and keeping the profits. (This is why I crack up when I hear "investment advisors" talk about assessing a client's goals - what can the goals possibly be, other than to make money?!?)

Stock prices are set by the next bargains between buyers and sellers, not "set" by analysts who calculate discounted cash flows, expected future growth, the company's balance sheet, and all that. It's certainly valid and valuable for people to know and review all that information, and it certainly helps many with their motives for buying and selling. Then again, there are also other motives for buying or selling any asset, which may have little or nothing to do with the economic fundamentals. If you enjoy discussing why transports should be going up because the price of oil is way down, or why transports should be going down because business travel is down and commodity shipments have slowed - that's all fine, well and good.

But if you want to make money (or avoid losing it!) based on where the transports are headed next, then don't buy (or sell) based on some economic ideas and a bit of hope (or fear). Use any techniques you find reliable to clue you in. That's why I use a number of techniques, usually one or a few will give some insight when others are less scrutable. The other thing is keeping an open, objective mind. It is critical - the ability to acknowledge what charts are saying, without preconception or bias. Along with the ability to check one's ego and acknowledge what's working or what isn't.

The core of most technical indicators is price + volume, with many giving ways to "see" into whether it's the buying or selling that's taking the upper hand. That's why I like to use them with Elliott Wave. Elliott Wave offers a number of alternative counts at any given point in time, so picking the "right count" is greatly helped by the indicators. For examples of ways to blend Elliott Wave counts with indicators, here are some of my thoughts marked on the S&P500 charts (below). Now, do I look at other information on the markets? Sure! Much of that gets folded in here from time to time, such as the sentiment indicators, cycles and so on. I do also factor in fundamentals, although I don't often bring that discussion here. There are plenty of other great sources for fundamental analysis (including Minyanville, Seeking Alpha, and many others.) These charts (below) use many of the indicators I like, but as you know if you've been reading here, there's also great information we factor in here such as sentiment indicators.

First, a quick look at the transports. The potential Elliott Wave count with a triangle jumps off the page of this chart, although I haven't spent as much time looking at its big picture (as with the DJIA and S&P500) so right now it's a bit more hypothetical. What does make it look fitting, though, is the way the drop from what I marked as the "e" wave has been a nice smooth trend, just the type of quick thrust move out of a triangle that's textbook Elliott Wave. The standard triangle target would be ~2600 on the transport chart.

That bearish view of the transports tends to bolster the thoughts I've been working with on the broad equities indices. I posted some days ago my thoughts on the possibilities that the financials completed their low and may pull back while the broader markets push lower - and as the financials did pull back today, am keeping an eye on that of course (will continue posting on that as we move forward).

Here are the hourly and daily bars charts of the S&P500, with plenty of my technical analysis thoughts marked on them for all interested.



As you can see (and know if you've been reading here a while), I've been tilting for days and actually a few weeks to the idea that we'd see a drop down from early January. With a pullback rally up, to be followed by another, deeper move down testing the November 2008 lows. We're finally at a point where we may be starting that next move down.

And as part of my classic Elliott Wave training, I'll note that this construct will be wrong - and discarded - tentatively if price moves above Wednesday's high, and definitely if price moves above the January 6 high. It isn't that I lack confidence in what I see in the charts; it's just that I don't believe in trying to make market guarantees, and it's part of remaining unbiased. So as always, be careful out there, good luck and happy trading!

What's down: SPX, TLT, Euro

Interesting to see equities AND bonds down, along with the euro, today ... with TLT just pennies away from the .618 retrace back to the prior consolidation lows as marked on the chart (below):

Up today: Gold, dollar, yen, VIX, TRIN

And look what was up today ... interesting travel companions (although some more than others). Today makes a good example of a remark I've made a couple of times - don't expect certain asset classes always to move together (or inversely) all the time. Dollar weakness may mean gold strength at some times. But today, equities AND bond weakness apparently go hand in hand with investors and traders going into gold and (to a lesser extent) dollar and yen.
[*update note, 2/2/09: see article at Seeking Alpha, Why Are Gold and the Dollar Running Together? by Adrian Ash - on this topic]

The lesson for traders actually, in my opinion, is to be aware of what's going on but don't overthink the trade. The charts will speak to what's moving, where and when, how strongly. Don't let preconceived notions keep you stuck in a trade that isn't working, or keep you from entering into an investment that would work.

Here are the charts for these items I'm mentioning were up today (and by the way, I'm not going to talk about oil ... saw a headline last night asking whether oil is going up, down or sideways - I'd say isn't it obvious it's been going sideways?! and if I can stand looking at it tomorrow or over the weekend, will see what the charts say on that):

VIX -



TRIN - here's the 15-min chart and the daily chart -




The yen (although it closed just under the 111.49 pivot) -

The U.S. dollar -


And gold - up smartly enough that it suggest it may go higher (but let's take it one day at a time, because GLD closed just above the .786 retrace to the last swing high - can be a pivot to vault higher, but need to watch if it loses this level) -

Gold at important level in its rise today

I'm not always able to put out intraday alerts. However, GLD has just reached the .786 retrace back to its 90.19 prior swing high. So either a reversal zone, or becomes a pivot from which it could swing higher.

Anyone trading gold or using it as a benchmark, should keep an eye on it.

Is a bearish TRIN signal coming home to roost?

I just posted the hourly as well as this daily chart of the TRIN, at my UBT site - along with many other current hourly charts of the SPY, QQQQ, VIX, bonds ETF (TLT), dollar ETF (UUP), gold (GLD), oil (USO), euro (FXE), yen (FXY), US Steel (X), and the banking index ETF (KBE). So check that out for an overview of many markets we're keeping an eye on. I'm getting the impression that many of our theses may be playing out - equities weak, bonds searching for a tradable low, euro weak but yen strong, gold potentially weak ... and markets like the banks and steel could work out swing low pullbacks while the broader markets fall off lower. I'm talking about movements taking place over days and into weeks.

Therefore, I agree it's too early to make any great pronouncements. But so far I'm not seeing anything that surprises me. (And you know how I'm viewing each of these if you've been reading here, and/or you can check with the labels to the right both here and at my trading-chart UBTNB3 site.)

By the way, from a fundamental perspective, very good analysis in comments by Niall Ferguson this morning in Alexis Glick's (Fox Business News) interview. Check it out if you have the opportunity.

One of the things we discussed here recently was a way to use the TRIN with its 3-day moving average, and it was flashing a bearish signal that usually kicks in a couple of days later. Today's weakness in equities may be the effects showing up now. Whether it turns into something more, is something I'm evaluating with the Elliott Wave count hypothesis I also reviewed here yesterday, and mentioned with the charts this morning - the possibility that more turbulence lies ahead ... As always, be careful out there, and happy trading all!

Morning comments on equities, and a look at TLT and VIX

Here are my comments on the S&P500 chart - goes along with my point last night at the UBTNB3 site about the QQQQ. I wish time would permit me to place more of this into words, but I've made those notes on the chart also - bottom line, today could mark the start of a move to much lower levels, based on how the markets react at the Fibonacci levels reached yesterday:


And a quick look at TLT (and in a few minutes I'll add VIX to this post also):


Okay, here's the VIX just now (9:33 am) - not above yesterday's high of day, but elevated so that could happen - if it does, it plays into the thesis that the markets may roll over so it's one of my primary indicators today:

ChartsEdge map for 1/29

Market Map for Jan29

Posted: January 29th, 2009 Author: Mike Korell Filed under: One-Day Market Map »

=============

Thanks again Mike and ChartsEdge!

Quick comment to swing traders - the bear case here is that, once going under the .618 retrace back toward the January 6 highs, that the rise today turns out to be a small second wave after a first-wave dip this morning. Then giving way to a third wave down as part of the markets rolling over to lower levels.

*Update 11:36 am - it was the .618 retrace in QQQQ, and .50 retrace in SPX, as clarified in the later charts & posts this morning here and at UBTNB3.

How we're doing today

This afternoon we're seeing the equity indices start to weaken off a bit as traders TMAR (take money and run, meaning take profits). So this means we may be seeing the completion of the C-wave of a (B) wave bounce thesis for those of us swing trading, from here .... bit early to call it of course, but it's already possible.

The yen had fallen earlier but seems to be strengthing a bit this afternoon so we'll see if it regains that 111.49 pivot level. Last I looked, gold was off some, oil was up a bit, and X and KBE (the banking index ETF) were doing well, though some profit taking this afternoon in KBE. All in all, so far so good.

As for TLT, well sure enough that resistance area was right and we did see a neat drop this afternoon, and right into one of my potential support levels ~106. Will the 105 target be next? or will other factors come into play for another upside surprise in bonds? You already know I'm wary on this one. As for the VIX, I'll post it below after the TLT chart ... will be looking especially tomorrow to see the extent of any correlated movement between VIX, TLT and the dollar ...




-------------
Update at 4:28 pm - for those wanting a refresher on my C-wave up of a larger wave B up, here's how it's looking on my weekly SPX chart as of today's close:

Bonds and VIX morning update

TLT can be hitting resistance as discussed here recently, so if short-term trading check the indicators at these levels up to ~111. VIX candle body testing new hypothetical lower channel line (and interesting spike poking my .786 retrace number) - swing traders will need to see if this lower channel line will be support, in keeping with the possibility that we're only seeing a C-wave of a bounce as mentioned earlier this morning here: