Classic Dow Theory and Cycles News and Views by Tim Wood

The classic Dow theory and Cycles News and Views analysis by Tim Wood provides a very in-depth look at the cycles and movements in equities, gold, bonds and the U.S. dollar. Tim just released his March research letter, which he updates through each week and weekend via his Cycles News & Views services (which you can get more info on at his site, always included in the "other sites of interest" at the right side of this page). Dow Theory is sometimes called the predecessor to Elliott Wave theory. It's been around longer, and it is still well respected although there aren't many classic Dow Theorists left - so it's refreshing to get this input from Tim. In addition, he also conducts classic cycles analysis not only in the Dow Jones Industrial Average and S&P500, but also in bonds, the dollar and gold. Cycles analysis is different and separate from Dow Theory, but is a good complement and helps fill in to shape predictions about what's likely in the days and weeks ahead. It's on the cycles basis that Tim keeps subscribers updated about his short-term and long-term trading and investment signals in these markets.

Of course Tim's detailed work is reserved for subscribers, but I'd like to introduce the readers of this blogspot to Tim's work. His cycles work is different from ChartsEdge in the sense that he shares the detail on the short-term and long-term cycles. Also, ChartsEdge provides forecasts which are fascinating, whereas Tim provides commentary and shows how his indicators and levels signal either confirmation or non-confirmation of market movements within cycle trends. Now - I decided to share excerpts from one of his public articles that he posts each week at Financial Sense Online (his "corner" of that is at http://www.financialsense.com/Market/wood/main.html). Here's an excerpt of what he posted there on February 20 - it's about Dow Theory rather than cycles, but maybe that's just as well since Dow Theory isn't often addressed so it gives you a rare insight:

Is This March 2003? Dow Theory Says NO

Of late I have heard the argument made that the November 2008 to February 2009 period is like the October 2002 to March 2003 time period. Of course, the basis for drawing this alleged parallel is that the market has bottomed. Well, according to Dow theory, this is not like March 2003.

Ever since the short-term non-confirmation was first born on January 20, 2009, when the Transports closed below their November 20, 2008 closing low, there has been talk of the potential bullishness of that non-confirmation. As explained in my last posting here on February 6th, non-confirmations are mere warnings of a possible trend change and in accordance to traditional Dow theory the previously established trend must be considered to still be in force until it is authoritatively reversed. In the current case, the previously established primary trend change occurred on November 21, 2007 when both the Industrials and the Transports jointly closed below their previous secondary low point. In spite of many misrepresented or misunderstood views on Dow theory, nothing has occurred to invalidate the now 15-month old primary bear market. In fact, the price action on February 19, 2009 carried both the Industrials and the Transports down to new joint closing lows. In doing so, the Industrials closed below their November 20, 2008 secondary low point. As a result, the primary bear market has been reconfirmed once again.

Now I want to turn to the charts. In the first chart below I have included a chart of the 2002/2003 bottom. Note that the averages both made a joint low at the October 2002 secondary low point. From that low the averages rallied into their November/January secondary high points. From these high points the averages moved down into the joint March secondary low points. At that time the Industrials held above their November low as the March secondary lows were formed. As a result, a non-confirmation was born. Then, from that non-confirmation price moved up, and in June both averages bettered their previous secondary high points. In doing so, a new primary bullish trend was authoritatively established.

Now let’s turn to the current chart that I have included below. As you can see the non-confirmation that was born on January 20th was blown out of the water this past Thursday with the new joint closing low that carried the Industrials below their November secondary low point. Thus, the current Dow theory picture is not even remotely similar to that of the 2002/2003 bottom.

Now, this is not to say that short-term bounces aren’t possible, because they are - and I am watching my indicators very closely to tell me when such a bounce takes root. Once this occurs we will hear talk of a double bottom and that the Dow theory gave us a “false” signal. But once my short-term indicators turn back down triggering another sell signal, that is assuming we get a short-term bounce along in here, then the stage will be set to clobber the unsuspecting “double bottom we have a false Dow theory signal it’s all going to be okay” crowd.

It is important to understand that Wall Street and the politicians are the ones that created the economic mess we are in. The politicians did not see this coming, they do not understand this problem and they are not going to be able to fix it. From my seat, it is actually comical, but sad, to watch these guys in action. I honestly believe they are clueless. For the record, I warned about the extended 4-year cycle advance all throughout 2005, 2006 and 2007. It was then at the 2007 New Orleans Investor Conference that I first revealed the possibility of a 1930 to 1932 style setup occurring following that extended 4-year cycle advance. Don’t buy the current hype.

Tim W. Wood

Copyright © 2009 All rights reserved.
CONTACT INFORMATION: Tim W. Wood, CPA
Email l Bio Market WrapUp Archive

Folks, remember that this was posted February 20, but since it conveys big-picture information on the markets it's still very relevant. Now, I don't know that I'll always be able to post up current excerpts from Tim's weekly articles, so you can follow them as they are published publicly at FinancialSenseOnline.com. (Or consider a subscription for his detailed presentations about the equities, gold, bonds and U.S. dollar market movements.) Now - I'm off to read his March research letter!

Cycle forecasts for the upcoming week in equities and gold, from ChartsEdge

The weekly and daily cycle charts provided by ChartsEdge for equities do tie together, although produced with different methods, in the sense that the daily forecasts help to confirm the extent to which the weekly forecasts are working (or if there's a bias that's skewing the forecast, which way that bias is pointing). ChartsEdge provided some comments on that, so here are their comments - followed by their weekly forecasts for the coming week in equities, as well as in gold:

From Mike Korell: There is a change in the way that the Market Map charts will be posted.
These one-day charts are created using a non-cycle based technique and are aimed at intraday trading as well as confirmation of the weekly charts provided here.
For now I have removed these charts from the [ChartsEdge] blog ... and will include [the daily forecasts] to subscribers of the cycle charts[.]

Folks, for the time being, the daily Market Map forecasts will continue to be here, only posted after 8:00 am (to avoid the concern of ChartsEdge that they could be used for pushing around the thinly-traded overnight futures markets). Here are their weekly forecast charts:

Folks, my own comments - if these forecasts work out as shown, especially for Nasdaq and gold, it looks like a choppy ride in both. I'd love to help give a clear direction for options players and others who benefit from a trending market rather than a choppy market .... and I'm quite aware that Goldman Sachs has been quoted as pointing to Dow 6,000 (as others have been saying, and our own Elliott Wave ideas and Fibonacci retrace levels have been pointing) ... but as I said when looking at the sentiment indicators earlier today in my posts here and at the UBTNB3 blogspot, I don't feel real comfortable saying it's a straight shot down there.

While the SPX forecast from ChartsEdge looks more trending, the NDX forecast looks more choppy. So, best I can say right now using these forecasts is, choose your trading vehicles carefully, and keep in mind your trading capabilities and time frames. If you are daytrading, you may be best off (my guess). If swing trading, respect your margins (as always!), and we'll continue to keep a watch on day-by-day as we navigate the week.

Nasdaq being a drag; and other reasons to feel bearish about equities

I don't have time to post the McClellan oscillator and summation index as such, but you can find them via Stockcharts.com, and I have included the simplified versions of those for the NYSE in the charts overview below. We can certainly see that the ChartsEdge forecast for last week didn't quite work out in the SPX, but it did work well in the NDX. Normally it works rather well in both, so I rather expect that to be the case for the upcoming week. During this upcoming week, it shows that once again the NDX is likely to underperform. That fact alone - that NDX is acting weaker than SPX - tends to be bearish. Now you've got to remember that the NDX is relatively higher compared to its 2002/2003 lows and the November 2008 lows, yet here the point is that for the week, its movement tended to be a drag on the markets and that's bearish.

Other than oil ticking up, and the banks' drop on Friday being after a move up through the week, there's very little reward to the long side in most markets it seems. Here's a charts overview that also includes some of the technical indicators:

The TRIN looks like selling yesterday wasn't such a bad idea, particularly when looking at the 3-day moving average which does seem to be a good day-ahead sell when it digs particularly deep. I don't know that it predicts a downtrending week all week, but it was a good signal if you were watching it for downside movement Friday and probably Monday:

Overview of bonds, gold, and currences (dollar, yen, euro) - who's heading up, who's heading down

Here's an overview of bonds, gold and currencies. Let's start with TLT as a proxy for US Treasury bonds. We haven't looked at this in a while, but candidly, it's because the sideways movement was getting a bit boring! No doubt there are some looking for another wave down, but I agree with Tony Caldaro that these are due for another move up. The RSI is encouraging for that, and the 200 day moving average is still rising although weakly. TLT touched down to its lower Bollinger Band yesterday. Based on its position, it would be typical to expect some more consolidation before a strong move up. If trading bonds long, then it would be reasonable to put stop-loss protection at or just under yesterday's lows (if taken out, and it then looks like bonds are ready to move up again, then a long position can be re-entered with a view to more upside).


Gold's drop out of the 1,000 level was so sharp, it makes us wonder if the "B" wave might have completed there. It definitely didn't want to follow the ChartsEdge forecast for gold for this past week. Looking at chart position and the indicators, it can either reflex up, or even reach a new high. It remains within the uptrend channel lines and at moving averages for potential support. So depending on your trading time frame - and remember, I am a swing trader - it's not a bad idea to give gold a bit of room before throwing in the towel on its prospects for moving higher:




The dollar seems on path to get to 91 or above as I expected based on the Fibonacci setup pattern (which actually fit Hobbs' favorite, the "Triple Crown"). Only thing is, the move from that Fibonacci cluster looks rather choppy, so I'm really wondering if it will be able to get above the moving average and other resistance levels on the monthly chart, that we've looked at here before (look under the "dollar" label in the labels list at right). But for now, let's let it get to 91. At that point, a lot of folks especially the "gold bugs" will be asking whether it is a triple top?! But, what will be augering in the dollar's favor will be our view that gold will drop out of a "B" wave top. Then again - is it supposed to go along with another big leg down in equities - well, if the timing works, then that might really work out fine:

I updated my commentary on the daily, weekly and monthly views of the Yen during this past week (look under the "Yen" label). So you can refer to that for context, to understand what I mean when I say, I definitely agree with Tony Caldaro that the yen remains in an uptrend. Despite the steep drop, it fell right to a long-term trendline I showed, and the move up yesterday can be the initial move of a lot more to come. The still-rising 200-day moving average doesn't hurt either. Still - let's not be crazy - if trading this from the long side from here, let's use good stop-loss protection and look for a trading confirmation pattern to the upside. The indicators look favorable to the yen turning upward, so we'll want to see that improvement in the indicators continue:


I also share Tony's view that the euro is in a downtrend - and I know that there are other fundamental as well as technical analysts that see it that way. So the move down that we saw yesterday may be the beginning of a new move down in this chart:

Tracking the S&P 500, commodities and currencies markets with Tony Caldaro's recap and Elliott Wave indications for the upcoming week

Folks, Tony Caldaro has put out his weekend update (you can always find his site listed in the "other sites of interest" at the right side of this page, to follow his daily updates and see all his numerous charts of many markets, indices, etc.). Today I've included his chartlist link which you can always find at his site at the bottom of each of his daily and weekly updates:
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February 28
weekend update

REVIEW
The week ended with the SPX/DOW at levels not seen since early 1997. While the NDX/NAZ held above their 2002 lows, which were also at 1997 levels. Economic reports continued to worsen. Case-Shiller reported housing prices -18.5% for 2008, Consumer confidence is at record lows, Unemployment claims hit 667K, Homes sales are still declining, and Q4 GDP was revised to 1982 levels: -6.2%. Once (2005) worldwide market cap leader Citigroup moved closer to nationalization as the Gov't now owns 36% of the common stock. For the week the SPX/DOW lost 4.3% as the DOW flirted with 7,000, and the NDX/NAZ lost 4.6%. Europe fared better -2.9%, and Asia as well -1.2%. Bonds lost 1.3%, Crude soared 11.8%, Gold dropped 6.0%, and the Euro slid 1.2%. US Gov't paper, Gold, the USD and YEN remain in bull markets.

LONG TERM: bear market
With this weeks drop to new bear market lows the SPX/DOW have now completed the minimum required to complete: 5 waves down from the Jan 2009 high, 5 waves down from the May 2008 high, and 3 waves down from the Oct 2007 high. In OEW terms, Minor wave 5 of Intermediate wave 5 of Major wave C of Primary wave A is now in the process of completing. When Primary wave A does complete we're expecting a substantial bear market rally, possibly retracing 50% of the entire decline. This is exactly what occurred during the 1929-1932, 1937-1942 and 1973-1974 Cyclical bear markets: a 50% market decline followed by a 50% retracement of that decline. The other general indices, NYA and WLSH are also displaying the exact same pattern. While the specialty indices, like the NDX/NAZ, TRAN, R2K are displaying a similar ABC structure. While the general market indices has been making new lows, market breadth is displaying a positive divergence, see page 8 in the charts [link below]. This oftens occurs at significant turning points in a long term trend. What this illustrates is that less and less stocks are participating in the declines. When one also observes that banks stocks (KBE) were +12% this week, shipping rates (BDI) continue to climb, short term interest rates (USY1Y) are rising, numerous market internals are improving, and the market leaders: AAPL, GOOG, GS are still in uptrends. This indicates that the stock market should be reaching a significant turning point.

MEDIUM TERM: downtrend
From the beginning of this bear market we expected it to unfold in a series of ABC's. The first A would be a Primary wave, consisting of a smaller abc, and this would be followed by a Primary wave B rally, before the final Primary wave C ends the bear market. Thus far, we're still projecting a bear market low in 2010. The first significant decline of the bear market was Major wave A, a five wave structure, which ended in Mar 2008. Then a Major wave B rally followed ending in May 2008. Since then Major wave C has been underway. OEW waves subdivide as follows: Cycle, Primary, Major, Intermediate, Minor, etc. Since Major wave A was a five wave structure, Major wave C has also become a five wave structure: Int. 1 Jly 2008, Int. 2 Aug, Int. 3 Nov, Int. 4 Jan 2009 and Int. 5 underway. With new bear market lows achieved this week, Int. wave 5 has reached the minimum required to end this last wave before the Primary wave B rally. When examining the internal wave structure of Int. wave 5, we can count 5 waves down from the early Jan 2009 high. And the end of waves we often look at several technical indicators for guidance. First there is always an OEW pivot at the turning point. The market closed right at one on friday, SPX 734. This is the same pivot that provided support for the Nov 2008 low. Just below SPX 734 are 717 and 696. Second we look at Fibonacci relationships. As posted last weekend support appears between SPX 680 to 725. Next we observe momentum on all timeframes to look for divergences. In this case positive divergences since it is a downtrend. Currently positive divergences are appearing on all timeframes, and the monthly timeframe is the most oversold it has been for the entire bear market, extremely oversold. In summary, much of the technical evidence supports an upcoming significant turn in this bear market.

SHORT TERM
Support for the SPX remains at 734 and then 717, with resistance at 768 and then 789. Short term momentum is displaying a positive divergence at Friday's close. At the current lows this downtrend is exactly 209 SPX points, (944-735). This falls a bit short of equalling the first downtrend of Major wave c, Intermediate wave 1 and 240 points. Yet, it exceeds both Intermediate wave 1 and Intermediate wave 5 of Major wave A, which were 170 and 139 points respectively. When Major wave A bottomed in March 2008, Intermediate wave 5 exceeded Intermediate wave 3 by only 13 points. Should this Intermediate wave 5 of Major wave C be similar, it should exceed Intermediate wave 3 by only a few points. Intermediate wave 3 ended in November 2008 at 741, and Intermediate wave 5 is currently 6 points lower at 735. Again this market looks like it's getting close to a bottom.

FOREIGN MARKETS
The Asian markets are mixed, with China, Hong Kong and India in uptrends, and Australia basing.
The European markets did better than the US this week, but both England and Germany are in downtrends.
The Commodity Equity markets were mixed, and remain in mixed trends, Canada +2.2% and Brazil -1.2%.

COMMODITIES
Bond yields inched up a bit higher this week, and it appears that uptrend is continuing.
Crude rallied 11.8%, it remains a volatile market and is nearly confirming an uptrend.
Gold dropped 6.0% this week, it may have ended its uptrend at $1,007 or one more high is needed.
The currencies, especially the Yen were volatile as usual. USD remains in uptrend and Euro/Yen in downtrends.

NEXT WEEK
A busy week ahead. On Monday Consumer spending, core PCE, ISM manufacturing and Construction spending. On Tuesday we have Pending homes sales and Auto sales. Wednesday ADP employment and ISM services. Then Thursday, the weekly Unemployment claims, Productivity and Factory oders. Friday rounds out the week with Non-farm payrolls, the Unemployment rate and Consumer credit. The FED gets involved on Tuesday with testimony by FED chairman Bernanke before the Senate. Then Wednesday the Beige book is released. And finally on Thursday vice chair Kohn gives testimony to the Senate. Certainly looks like a volatile week ahead. Best to your week!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987

Chart of the Day's long-term Dow chart may converge with long-term Elliott Wave counts

The Chart of the Day at http://www.chartoftheday.com/20090227.htm?T updates their inflation-adjusted Dow Jones Industrial Average long-term chart. Kinda looks like either a C-wave or a third wave in Elliott Wave terms ... given that the Dow as well as the S&P 500 made higher highs in October 2007, maybe that gives support to a C-wave view ... or maybe that's too optimistic! Here's their commentary and chart:

Chart of the Day
For some long-term perspective, today's chart illustrates the Dow adjusted for inflation since 1925. There are several points of interest. For one, the inflation-adjusted Dow has gained a mere 55% since its 1929 peak and gained only 10% since its 1966 peak – not that impressive considering it took many decades to achieve those gains. It is also interesting to note that based on an inflation-adjusted Dow, the current bear market actually began in 1999 only to be interrupted briefly by a multi-trillion dollar credit bubble. That bubble has burst, of course, and the Dow now trades at a level not seen since 1995.

I'll be intrigued by the idea of a C-wave, since that points to the Fibonacci retrace levels I've shown for a C-wave flat in my long-term S&P 500 chart. I've annotated my long-term Dow chart similarly, although there I think that the count could be different in Elliott Wave terms - even if the levels we're pointing toward might be very similar. Whether or not we get to the "C-wave flat" levels I annotated onto these charts, the potential for Dow 6427 and SPX 664 look possible and significant on the Fibonacci retrace levels:

Very Special VIX charts agree that equities are poised to go lower but shy about exact timing

I've "brushed up" my VIX chart, on which I draw trendlines that the VIX appears to be "using" as well as mark a few Fibonacci levels that look significant. Back in January there was talk of the VIX doing a gap fill at 35, and there was a 33.81 retrace level (.786 retrace annotated on the chart). Interestingly, there was a spike tail on January 28 that poked under that 35 level to that .786 retrace, and VIX has continued up since. (Also the spike tail disappeared from the charts after a day or so.) After the apparent triangle which also ensnared equities - and got a lot of traders fooled into thinking the markets were heading higher - VIX leaped up and that looks like a very significant "air gap" where one of my new trendlines belongs. I now see that the action since then closed that gap vertically, meaning that VIX (after reflexing higher) came back down on Wednesday and Thursday to fill the gap that had occurred. And yesterday, VIX moved above yesterday's high, as well as above its 50 dsma and other MA's and the BB midline:


Looking at a more ordinary VIX chart that doesn't have my trendlines, it's easier to see that VIX did poke above these moving average levels. But the Bollinger Bands are still channeling sideways - that can change of course! Then there's another thing - the StochRSI is still under the 50 midline. Obviously that can change too. But somehow, the way things were feeling yesterday, it's surprising the StochRSI isn't higher. Now - I'm not going to argue with the idea that the markets move lower, it's certainly been one of my theses since late December. I just don't know if I can give you any guarantees that it's a straight shot down to Dow 6000 from here.


I should post the VXO more often, it's considered a bit more "pure." For a long time, the real reason why I didn't use it for my trendline analysis charts was that the candles had a bunch of weird long tail spikes. You can see that it's actually been weeks since that happened, those spikes aren't showing anymore. So maybe I'll switch over to VXO (but I'm lazy, just finished updating my VIX trendlines, so maybe a switch to VXO will take awhile!).


And let's take the updated look at the weekly chart going back as far as we can. I added notes on it to refer back to the reconstructed data for 1987 (if I had accurate data on that). You can see that it's possible to do a kiss-back to the broken shallow trendline, before going back up again - but it isn't a guarantee that we drop down that far, until after some kind of move higher first. At this point, my personal guess is that we see it move higher in something that looks like an Elliott Wave "B" perhaps to the 60's. (By the way, I don't try to actually apply Elliott Wave to the VXO, VIX or VXN, but I did start to apply structure (trendlines) and Fibonacci because that "works" for me.)


And finally, a light-hearted reminder that even VXO is not the same thing as either VS, VSOP, or XO !! From the Wikipedia article about Remy Martin [http://en.wikipedia.org/wiki/R%C3%A9my_Martin] cognac:

VS Very Special, or *** (three stars) where the youngest brandy is stored at least two years in cask.
VSOP Very Superior Old Pale, where the youngest brandy is stored at least four years in cask, but the average wood age is much older.
XO Extra Old, where the youngest brandy is stored at least six, but average upwards of 20 years.

Insights into equities markets, gold, oil, and other markets correlated with social and political mood - weekly update from Raymond Merriman

For those not as familiar with the history of this blogspot, let me explain why we include the public weekly comments of Raymond Merriman (and his MMA website is included in the "other sites of interest" listed at the right side of this page). The initiating reason is that these were included at the website of my late, best trading mentor, who referred to them from time to time. As I started to read them, I came to find them intriguing. For one thing, Merriman often predicts major highs or lows for certain asset classes that work out well - sometimes with a bit of slippage in timing, but that hasn't been a worry for me because it's been close enough to work for my swing trading. Also, he incorporates a certain amount of classic support/resistance and cycles analysis into these calls, so it's informed by his financial astrology rather than generated solely by that. Finally, his descriptions of the social mood are very interesting and do a good job of summarizing and tying political and sociological factors with market movements.

Later this weekend, we'll get into our usual round of posting the economic calendar at the related UBTNB3 site, along with review of charts on major markets, technical and sentiment indicators, Elliott Wave analysis especially with Tony Caldaro's Objective Elliott Wave and additional wave counts we can offer, and the Turning Points trend & reversal analysis from Andre Gratian. Along with the weekly cycle charts from ChartsEdge forecasting next week's equities and gold markets movements. So, these comments from Merriman "kick off" our weekend reviews - enjoy!

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

Review and Preview
It was a very good week for Financial Astrology, but it wasn’t a very good week for most equity markets around the world. Several stock indices – like the Dow Jones Industrial Average and the AEX of Amsterdam – fell to their lowest levels in over 10 years. Others – like Germany’s DAX and Switzerland’s SMI indices – fell to their lowest level since 2004. And yet others were down last week, but not below their lows of last October and November (London FTSE, Australia All Ordinaries, Hong Kong’s Hang Seng, India’s NIFTY, Brazil’s Bovespa, Argentina’s Merval, and the USA NASDAQ Composite). If they can all close in the upper third of their range this coming week, it would be a case of intermarket bullish divergence. But that might be wishful thinking, and would certainly be on the order of the geocosmic signatures now in force as discussed last week (i.e. Sun in Pisces, Jupiter approaching its 14-year conjunction to Neptune). This is a season of hopes and fears, dreams and nightmares. It will be a period in which defining reality will represent a greater challenge than usual.

In other markets, precious metals fell sharply last week, with Gold trading as low as 927 on Friday, after closing barely above 1000 the week before. Silver futures made a new multi-month high on Monday at 1463 (May contract). But by Friday, they were down to 1282, nearly 200 points lower. This is certainly consistent with heliocentric Mercury in Sagittarius, which starts out strong, but oftentimes ends up in a collapse. Crude Oil, on the other hand, rose to 45.30 last Thursday, a gain of 35% since the low of 33.55 on February 12, when the Sun was conjunct Neptune.

Short-Term Geocosmics
This week will begin the strongest cluster of geocosmic signatures to unfold yet in this new year. On Friday, March 6, Venus will turn retrograde until April 17. This is a Level One signature as reported in Volume 3 of our Stock Market Timing series (“Geocosmic Correlations to Trading Cycles”). In fact, it is one of the most powerful and consistent correlations to primary or greater cycles that we know of. In 78% of the instances studied, such a cycle has culminated within 12 trading days. Two days later, on March 8, another Level One signature appears. That is when the Sun will be in opposition to Saturn. This will also start the Sun’s translation to the developing Saturn-Uranus-Pluto T-square, which will last through March 23. In the past 15 months, this has had a strong correlation to sharp sell-offs in equity prices around the world.

One geocosmic signature that we will want to pay very close attention to is the full moon of March 10. This is a particularly powerful full moon, for the Sun will be in conjunction to Uranus and the moon in conjunction to Saturn. In other words, it will fall upon the Saturn-Uranus opposition, the most important of the long-term geocosmic signatures in effect November 2008 through July 2010. This is the long-term signature that most correlates with the kind of sudden and serious shock to the system that we have been entangled with over the past six months. In fact, a case can be made that state of crisis officially began six months ago when the opposite full moon occurred on September 15, 2008. That was the week when several banks and financial institutions collapsed. Just recently, Federal Reserve Board Chair Ben Bernanke acknowledged just how close the entire financial system came to a total collapse at that time. Well, here comes the second wave. Let’s pray (a good Jupiter-Neptune activity) we are better prepared this time, for if not, another full moon on the Saturn-Uranus opposition could coincide with another break of support, with the corresponding sense of panic and hysteria. In other words, the possibility of a sharp decline in stock indices is very high this week. Like the terrorist alert system, let’s say stock markets are now on “red alert.”

Longer-Term Thoughts
Attention all Financial Astrologers: do the major economic stories of last week seem like the principles of Jupiter and Neptune in conjunction starting up? Do they not seem like the Sun starting its transit through Pisces, which is the natural home to both Jupiter and Neptune? Are we being realistic or are we in a dream where it seems like that film “Groundhog Day,” in which every day seems to be a repeat of something experienced the day before (or was it that we dreamed it before), but its not quite exactly the same?

If memory serves me correctly (and there can be no guarantee of that under the influences of Pisces and Neptune), it was in 2005, shortly after being re-elected, that President George W. Bush proclaimed he would cut the budget deficit in half within 4 years, by 2009 (the year he is out of office – how convenient was that?). This was in response to the news that the budget deficit had increased to a record level then. Now flash forward to last week. The House of Representatives passed a new $410 billion spending bill, which contained twice as much “pork” (“earmarks” for special interests) as anyone expected. For instance, in this new spending bill, $200,000 is earmarked for “tattoo removal” in Los Angeles, sponsored by California’s representative Howard Berman. What is wrong with this? First of all, this new spending bill follows the passage of the $787 billion “stimulus package” that was approved the prior week. Second, didn’t President Obama just promise that he would not allow any more “earmarks” like this (and $7.7 billion more in this new spending bill)? But here is what is “déjà vu” all over again. Also last week a $643 billion health coverage plan was announced. That means that in the past 10 days, government spending programs have been announced of 787 billion, 410 billion, 643 billion… and within hours of the last announcement, the White House claims that in 4 years (2013, the year Obama’s first term ends) their programs will cut the budget deficit by – guess what - in half! How convenient! How believable once again! And how tragic the possibilities will be for the next generation if they – we - are wrong again.

But that is not the only area where Jupiter and Neptune are picking up bonus miles for flights of fantasy. Three years ago, as he was appointed the new Federal Reserve Board Chair, Ben Bernanke proudly announced to all those leaders who swore him in, that under his leadership, the USA would never again enter into a banking crisis like that of the Great Depression. Yes, I know that was before Hank Paulsen was appointed as the Treasury Secretary and the unstoppable multi-headed debt monster began to take its first incarnation of TARP (and soon there will be TARP 2). But then last week, the same Chairman Bernanke looks straight into the eyes of Congress, and announces that in his mind there is no doubt that inflation is not and will not be a problem (just as three years ago there was no doubt in his mind that the US economy and banking system would ever again experience a crisis like the Great Depression). You will note that in his natal chart (December 13, 1953, Augusta, GA, no time) he has the Sun in Sagittarius, in exact opposition to its ruler Jupiter in Gemini, and both are being squared by the current Saturn-Uranus opposition (making a Grand Square). This could imply a tendency towards over confidence and maybe even exageration or questionable judgment.

We are back in the land of Pisces, the times leading into the Jupiter-Neptune plane of reality, where hopes and dreams of a perfect world can be seen everywhere if you just…. believe. President Obama promised to end this practice of spending taxpayer monies on “pork,” and also to support beneficial programs (like education) that would create new jobs. Here comes his first test on fulfilling that promise. Let’s see if the “line item veto” has a brighter future than tattoo removal artists.

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We are going to have another webcast, a “Virtual On-line Discussion and Market Update with Raymond Merriman!” But we are changing the date, due to my participation in the OPA conference taking place April 15-19 in Big Sur, California. It will now take place two weeks later, on Saturday, May 2, 2009, just after Venus goes direct and just before the first of the three Jupiter-Neptune conjunction passages. Starting time is 12:00 PM EDT (that’s 5:00 PM, GMT, or 9:00 AM, in Los Angeles). Via the modern technology of Vivation, Inc, this “latest update” discussion on current markets (both long-term and short-term outlooks), can be heard and seen in the comfort of your home or office. All you need is a computer with speakers. You will be able to be part of the live broadcast, with a live audience, and with the latest charts visible on your computer screen that will be the focus of this presentation. You can ask questions directly to the speaker (Merriman) during this presentation. You can see and hear the other questions being asked by those in the audience too. You will be given long in instructions upon receipt of your reservation for this event. This webcast will analyze the stock market, Gold and Silver, currencies, grains, T-Notes, and Crude Oil. It is a webcast you won’t want to miss if you are a trader or investor in any of these markets. The cost for this private discussion is $45.00. If you are interested in being part of this on line event, go to http://www.mmacycles.com/virtual/ to register on-line. Or drop us an email (ordersmma@msn.com) or fax (248-538-5296), or call us at 1-248-626-3034, and we will email instructions and pin number on how to participate.

We have been asked if there are any Spanish-speaking “Market Timing” or Financial Astrology” chat rooms on the internet? If anyone knows, would you kindly let us know so that we can inform our clients who seek such a forum? Thank you!

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 form 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!

If you are an active short-term trader, you may be interested in our Weekly or even Daily Market reports with short-term trading recommendations. It is the only way I keep in touch with traders on a daily or even weekly basis. These reports give in-depth analysis of the DJIA, S&P and NASDAQ futures, Euro currency (cash and futures), Swiss Franc, Dollar/Yen cash and Yen futures, T-Notes, Corn, Soybeans, Wheat, Gold and Silver. The daily reports cover all stock indices listed above, as well as futures in Euro, T-Notes, Soybeans, Gold and Silver. Subscription to the daily report also includes the weekly report. For more information, go to http://www.mmacycles.com/services, or call our offices at 1-248-626-3034. In the words of one of our subscribers: “I recently subscribed to your weekly report and am finding it to be excellent and a very useful companion to the MMA Cycles Report. I can't imagine now managing my investments without them.”

You can now order the Forecast 2009 book in four languages! It is available in Japanese at http://www.toushinippou.co.jp/, in German at www.mma-europe.ch and www.mma-europe.de, and in Spanish via www.mmacycles-spanish.com. In Serbian, you can order a PDF file of the book at www.mma-balkan.com. In English, you can order directly from us, via our web site, or you can order from www.markettiming.nl in Netherlands, www.astrodata.com in Zurich, and Earlthorn Ltd in Hong Kong at www.earlthorn.com or by email at earlthorn2000@yahoo.com. In Melbourne, Australia, you may order the Forecast 2009 book at www.educatedinvestor.com.au, or by email at investorbooks@iprimus.com.

Our new 2009 MMA catalogue is now out! If you are interested in receiving this catalogue, you can download it directly from our website at http://www.mmacycles.com/freedownload/. A list of all our products and services and software programs is included therein.

The German version of “Merriman on Market Cycles: The Basics” is now in print. It is also a revision of the earlier work in English. For more information on this book, please go to our German web site at http://www.mma-europe.ch/.

We have added a valuable new feature to our web site. Now, on the very front page, you can get a daily update on the weighted values of the Solar-Lunar cycles for the Dow Jones Industrial Average and the Silver market, via the studies conducted in “The Ultimate Book on Sock Market Timing Vol 4: Solar-Lunar Correlations to Trading Cycles,” and “The Sun, Moon and Silver Market: Secrets of a Silver Trader.” These are the studies I use personally for short-term trading of stock index futures, ETFs (like DIA and Silver fund), and Silver futures. Anything over 100 means it has an above-average correlation to reversing from an isolated high or low if it forms that day. The higher the value, the more probable the reversal. To see these daily values, please go to http://www.mmacycles.com/, and just check it out on the top of the page.

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.

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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.

How to use this site, including ChartsEdge forecasts, etc.

Got this comment/question and it's great so let's address: "I'm new here can you please explain the chart ... is this a prediction and if so how does it account for overnight moves? sorry if this sounds silly". First, not silly and it's a great question.

The ChartsEdge forecasts come in 2 types: daily, and weekly. The daily ones are called "Market Maps" and show what the forecast tendency is for intraday action, NOT accounting for overnight moves. They are generated with a unique method, in my experience are often quite predictive, though not 100%. This is why I say, they're great but don't use them as a "set it and forget it" trading method. You can normally tell by about 10:30 am if they are working, and by about 11:30 am if they're working but with an upside or downside bias (meaning, the subsequent highs might be lower, OR the subsequent lows might be higher). Info on the daily maps is available at http://www.chartsedge.com/ and www.ChartsEdge.com/wp and that ChartsEdge.com site is always at the top of the "other sites of interest" I include at the right side of the page.

I've also placed info from ChartsEdge on how to use the daily map forecasts, at my "trading education" blogspot, http://www.nobullnobearnobias.blogspot.com/ (which link is also included in the welcome paragraph at right, and in the "other sites of interest" list (farther down the list) at the right side of the page.

Weekly cycle forecasts by ChartsEdge are generated with a different method (and I've also placed some of their basic info about that method, at the http://www.nobullnobearnobias.com/ site - and it's available of course at the ChartsEdge.com site too. The weekly cycle forecasts, like the daily ones, usually are quite predictive but not 100% which is why I always say, they're great but don't use them as a "set it and forget it" trading method.

There are a couple of other things I note, with the ChartsEdge weekly cycle forecasts:

1. They are part of a cycle forecasting method that looks ahead weeks and months.
2. The forecasts for the subsequent weeks and months can and do change from time to time - sometimes only gradually, other times significantly. (That's why I maintain a subscription so I can keep an eye on them, and gladly recommend my blogspot readers here do the same.) As Yoda said in "Star Wars" - "Always in motion, the future is!"
3. If they don't look like they are "working" then feel free to ignore them. Often they do, but not 100% - so don't get wedded to them (or anything else) and don't freeze up (but DO remember your trading time frame).
4. They are not the only method to use. I like to fold them in with all the other trading approaches and techniques - it gives me a better comfort level.

At these 3 related blogspots - UnbiasedTrading.blogspot.com, UBTNB3.blogspot.com, and nobullnobearnobias.com - I pull together my own insights, such as they are (the best I can do, for what it's worth), and those of others whom I've grown to appreciate. That's why you will find my comments and charts, along with ChartsEdge, quotes from Tony Caldaro's Objective Elliott Wave, the weekly updates from Andre Gratian, quotes from Todd Salamone and Rocky White of Schaeffers' Research, and other resources that help paint the picture for traders and investors of where the markets are and where they are most likely heading.

My personal focus is swing trading, although occasionally I will do shorter-term trades. This is why I normally don't comment on short-term (hourly chart) trading possibilities, unless I just happen to see something, or if I see a market reach a key level and I'm using the hourly short-term chart for a buy or sell. However - I am very aware that daytraders appreciate good information for intra-day trading, and the ChartsEdge daily maps are normally a great forecast for that. (Subject to my comments above, of course.)

When I say that ChartsEdge produces forecasts, think of it like the weather forecast. It will tell you what the "market weather" is looking like for the day. Some days, it's likely to just uptrend the whole day; or, to downtrend the whole day. More often, there are time periods during the day when there's forecast to be a high-spot turning point, a low-spot turning point, or combinations of those. It gives you a useful feel for likely strong and weak points during the market day.

I hope this information helps. Don't hesitate to comment and ask any additional questions, the whole point is to help rationalize and be successful in my own trading, and to do what I can to help others in the same way.

ChartsEdge map for 2/27

ChartsEdge Market Map for Feb27

Posted: Feb27
Author: Mike Korell

Relief rally, or stealth bull horns under the tent, in the banking index?

With the terrible day on Wall Street today, who's talking about the banking index being up 4.83% today, and up 21.98% for the week so far? (Even more than oil! which I'm happy to see rising out of what looks like a fifth-wave low from that triangle target I described last week). Here are my daily and weekly charts of the banking index (BKX):

As I marked on the daily chart, seeing the banking index as measured by the BKX clear 34 would clearly help establish a rally. Whether it's only a relief rally, or something more bullish, will be indicated depending on whether we can see a classic trend reversal pattern develop. In Elliott Wave, that means a five-wave movement up, followed by a three-wave pullback, and then a resumed movement in the direction of the presumptive new trend (in this case, upward of course). There are other trading patterns such as the 1-2-3 trend reversal or the trap door, which share the same basic characteristics - a strong movement upward on good volumes, followed by an orderly pullback on light volume, then a trigger movement upward again when an up day moves above the high of the preceding day.

None of those classic trading pattern setups has occurred yet - and I couldn't guarantee that there isn't one new low remaining ahead, because in my opinion the Elliott Wave pattern can be interpreted in more than one way. That's a great reason why it's best to look for a classic confirmation pattern buy setup before taking a long position in this sector. But the good news is that, looking at the KBE exchange-traded fund, there was decent (although not great) buying volume over the last several days, and positive RSI divergence (as you can also see in the BKX chart); and the other indicators are starting to turn less bearish or more positive. (Including the OBV - on-balance volume - which has moved above its 30-day moving average). So, let's see if we get an orderly pullback, and let's see if we get a classic trend reversal pattern setup, and many may also wait to see if the banking index can move above key downtrend-channel trendlines.

But at least the banking index is giving more positive signs than we have seen for a long time! Below is the KBE chart:

And here's a description of the most out-performing and under-performing sectors today - see that banking was right up there (measured by the Amex RKH holders ETF, up 5.79 percent!):

To close off - I cannot resist poking fun at the health care sector being down, because lately all I've been hearing everywhere is that health care should be the great sector to be invested in. Seemed a little too universal for my taste (although I confess I haven't attempted an Elliott Wave assessment for that sector).

And - as always - be careful out there, and happy trading!

Elliott Wave views for the S&P 500

Tony Caldaro has a different view of the Elliott Wave count for the S&P 500 here, than what I've been thinking. So let's take a look at it. By the way, from his narrative (his site is always in my "other sites of interest" listed at the right of this page), he indicates this marking of the past few days' rally as a wave 4, is "for now" - I think it means he reserves the possibility that the 4th isn't done, but just thinking it is likely done. So, we can see from his chart (below) and narrative, that he is thinking Minor wave 4 is done and next comes its wave 5 down:

Now for what it is worth, the move down from about 875/877 would be equal to the wave he marks as wave 1 down, at 736.62. Since wave 3 can never be the shortest wave, then if Tony's marking turns out to be the correct Elliott Wave count, the fifth wave cannot extend below 645.

My personal thought is that, if the move down from 875/877 is a third wave, then I would think it should look more like a five-wave movement, and I kinda think it currently looks like a three-wave movement. So, if I were marking this using a numeric count, I'd tend to think the wave 4 that's might be done, is a smaller-level fourth wave that would lead to a fifth wave that would complete the wave 3.

Similarly, if the move down from 875/877 might be a C-wave which is more like what I'd been thinking, I'd look for that to be either an impulse five-wave movement ... in which case, ditto my comments in the paragraph above. Or, I'm looking for such a C-wave to be a diagonal, in which case I'd expect the rally pullback to extend higher up. But ... I can also agree that the shape of the recent drop into 742 doesn't quite have the "look" of setting up for a diagonal. So I'm not wedded to the diagonal idea.

Just my best thoughts from the Elliott Wave perspective on how the SPX is looking. I'll be the first to point out, of course, that I've been looking for the S&P 500 and DJIA to move significantly lower, as indicated by my monthly charts! So I'm definitely not standing in the way of the next drop.

So is the S&P 500 down for the count, for now?

So is the S&P 500 finished with that meager rally and heading lower? Or does it have room to make more of a rally first? As I marked on the S&P 500 chart below, I could see 748.88 as possible and still allow SPX to rally into early next week. I recognize it's not popular, nor fitting well with the ChartsEdge forecast for the whole week - clearly the bias is to the downside this week. Will prefer remaining above the horizontal red lines for this scenario of course. Getting into early next week will allow the markets to absorb new money for the month at relatively higher prices - something that has been documented as a discernible (though not 100% foolproof) monthly tendency.

This scenario is based on marking off a flat correction following a leading diagonal that would be wave A, the flat completing B, and then looking for C up. (Interestingly and disturbingly like a fractal of the markets off the November 2008 lows!!)





As you can see in the weekly cycle from ChartsEdge had forecast that Nasdaq would weaken off this week sooner than SPX, and that looks consistent with the McClellan Oscillator. My VIX indicator has not - yet - given a classic sell signal on the daily charts. A trading buddy was emailing me today about whether today should be the "sell". I've got to say, on one hand it is possible to front run my VIX indicator and sell today rather than wait until tomorrow. On the other, in the past when I have done that, sometimes I was rewarded and sometimes not (meaning sometimes it was too soon). Sorry but I've got to be conservative on how I interpret it. This also goes with what else I see going on. I do see that the ChartsEdge forecast doesn't seem to be giving us the rise into this time frame but that's not the only factor I use and look at. To me, in my humble opinion and leaving the Nasdaq aside, I don't see that we can rule out the markets continuing upward into early next week in order to complete a wave 4 or B-wave correction.

Yes, CPCE is low, but like the VIX, it's better to wait for a trigger because this chart shows that the CPCE does have room to move yet lower if it wants to.



The VIX - didn't move all the way to bottom of BB, and today it moved back to or almost to BB midline and 50 dsma. Going higher tomorrow and crossing up above that BB midline and 50 dsma would be a classic sell sign, it just hasn't happened yet.



TRIN is saying that selling now or extremely soon is likely a good idea. Doesn't mean TRIN cannot move a bit lower though - I read it is a likely indicator but not a guarantee.

ChartsEdge map for 2/25

ChartsEdge Market Map for Feb26

Posted: Feb26, 209

Author: Mike Korell

Once again the yen is at a significant barometer level

Even if you are not trading currencies, there are reasons to watch the yen as a barometer of the Asian markets and really the effects on equities markets worldwide. This is partly due to the leftover carry trade issues too, of course. The yen on these charts measuring $XJY show it has reached a Fibonacci retrace level that's common for an Elliott Wave flat. It also results in overlap of the prior swing high, as mentioned in my recent discussion of the alternatives for the yen. When you look at the channel forked trendlines I've marked on the weekly chart, as well as my markings and annotations on the monthly chart, you will see additional reasons why this is a very significant level for the yen. For that matter, based on the potential Gartley pattern on the monthly chart, if the yen cannot hold in this area then a level about 93 is possible as I've noted on the monthly chart (lower levels such as the .786 retrace back to 80.55 would also be possible).

I sugges that for direct trading of currencies, it would be a good idea to "trade away from" the level it reached today. Its direction will likely correlate with the direction of equities markets too, although the correlated effects may not be immediate but over the course of a couple or few trading days.

Both gold and the dollar can still be on track

It's interesting that we are looking for both the dollar AND gold to edge up to somewhat higher levels. Obviously the big question will be what happens after that - we are looking for gold to weaken off, so will that mean that the dollar has more upside potential? One would think so - which may bode poorly for the yen, but then again the yen could also surprise by strengthing along with the dollar. Quite a confluence of factors in the markets. Check the post on the yen (posted slightly after the time of this post) for details on how that is looking.

ChartsEdge map for 2/25

Free Market Map for Feb25

Posted: February 25th, 2009
Author: Mike Korell Filed under: One-Day Market Map »

Alternate Elliott Wave views of the S&P 500 near-term

There are always a few alternative possibilities for the near-term Elliott Wave in a chart, so let's look at the most prominent that I know of. First, there's Tony Caldaro with his Objective Elliott Wave methods. He recently revised his S&P 500 count to correspond with his Dow Jones Industrial Average count, and here it is:

Clearly, the count points yet lower, because after a 4th wave there is a 5th wave projected, in this case pointing down. So this count tells us that, after a 4th wave pullback or consolidation finishes working out, we can expect the SPX to fall lower.

Here's another EW count, although this one from a chartist I know as "cleo" is a very closeup view so it's a bit more difficult to "see" the context just from this view. It was part of a projection intraday yesterday, that already played out into the end of day yesterday. But it's worth a look, because it gives clues for other ways to consider the EW count on the scale of days:


And here's my effort to show some Elliott Wave alternatives. I guess one thought I've got is that, if I were using Tony's count, I would think that the wave 3 isn't quite done yet, and needs to complete its own little fourth wave and fifth wave down to finish the wave 3. Just my thought, which is very similar to the idea I marked in red below (although those markings are to show a small fourth wave and then fifth wave to complete a wave C down rather than Tony's wave 3 down). Frankly, I don't really think that levels higher than 690 will finish the move down, and I really think that the market actually needs to get to 640 (or perhaps lower). So my chart annotations are in terms of alternative EW counts that are part of a larger wave down:

Ultimately I think that we need to see the shape of the movements occurring over the next week or so, and I'm glad to have corroboration from Tony's thoughts as well as the ChartsEdge, T Theory and other good analyses which are indicating lower - to help give me confidence in my swing trading as I wait to see how the chart pattern shapes up.

Finally, for now, here's another chart contributed by trading buddy "Joe" - it shows a "fork" with downtrend lines that look like they will fit well. Today's rise was from the midline of this fork and if this fork holds, it will point to the projected decline being rather steep. So we'll also want to see whether this fork's trendlines are predictive in shaping the EW count down:

The Dow Transports should be watched at these levels for important clues

The Dow Transports have now met both the triangle target on the daily chart, as well as a significant Fibonacci level on the monthly chart. That information alone doesn't tell us what level of a rally we can expect, but it does tell us to watch this index closely for clues to the health of the overall markets. Don't be under any illusions - the transports do not move in lockstep with the broader equities indices, and so there are times when a high or low in the transports comes before or after a high or low in the other indices. [Witness the fact that the transports remain above their 2002/2003 lows, unlike the industrials (shown in the last chart below). For that matter, the chart pattern on the transports' monthly chart prior to 2007 does not even look very much like that of the Dow Jones Industrial Average. So we cannot expect one index to dictate the movements in the other. Nevertheless, the transports do measure the pulse of the economy to some extent and should be watched for that reason alone. Also, Dow Theory still holds some sway among analysts, who will be looking to see over time how this level may correspond to similar moves in the industrials.




I'll be very curious to see whether the transports can mount a significant rally from these levels. If so, that may bode well for the other indices, although it certainly may be weeks or months before those other indices reach a significant low that can provide good support. So for now, it's just a matter of observing whether the transports are able to move above significant levels like their 200-month moving average at 2940. There are interesting possibilities raised by the monthly chart from an Elliott Wave perspective - possibilities along the lines of the transports being able to move significantly higher. So I'm cautiously optimistic on the transports for now.

Here's a chart of the IYT, an exchange-traded fund for the transports. Most swing traders will be looking for a confirmation pattern of a classic trend reversal before trying to swing trade the long side. Generally these involve a solid movement up, followed by an orderly pullback and then a continuation movement in the direction of the new expected trend. Naturally it will be several days before we can confirm such a pattern.