Oil may be attractive again for hardy traders with stop-loss rules

The oil ETF that I track, USO, tested down to the bottom of a small uptrend channel that I showed recently in connection with a potential "kissback" target that's higher, on the monthly long-term chart. This also places USO at potential support from its 50-day moving average, which can be in position to start inclining once again. A move up would also be consistent with the RSI indicators that show a test back to the midline, and the OBV remaining above its 30-day moving average. Now remember, we're just thinking in terms of Fibonacci retrace targets as indicated on my chart (below), also consistent with potential goals involving that long-term channel kissback and perhaps the 200-day moving average. But if oil needs a deeper correction instead, then it will move under today's low as well as the support levels. So these considerations are for those who don't mind considering it a swing trade rather than a long-term investment, and who also will use stop-loss protection to avoid being stuck in case USO moves to lower levels.
Here's my daily USO chart:

Optimistic on the financials? You may have too much company

Feeling optimistic about the financials? You've got lots of company, it appears! Perhaps too much, at least for market contrarians. The ISE's gadget that shows the "most bullish" and "most bearish" (which you can see on the ISE webpage, site in the "other sites" listed at the right side of the page here) is showing that options bought to open are running 14-1 positive, with 13,870 calls versus just 1,018 puts. This hot sentiment is enough to place it into ISE's "Top Bullish" list this afternoon.

Should we be contrarians? Perhaps. Or at least, not rush in to follow the crowd without being very careful about it. I've posted here recently some reservations about the banking index (BKX). If it turns positive, we'll know because it will do so by breaking above trendline and price resistance levels along with the indicators confirming it's ready to change from downtrend to uptrend.

The XLF chart (below) shows that this financials sector ETF isn't trending either way right now, which is evident of course from the sideways action that set in since price moved up sharply in the first weeks of this month. Either "the crowd" knows something special, or it might be time to turn cautious on this sector again.

Yen for sale? and if so, will it work to bring the yen down?

Japan is hoping that its third stimulus package will work, possibly putting the yen "on sale." And the yen chart as shown by FXY seems to be reacting. I had been thinking the chart showed upside potential to new highs, as I've posted several times here. But that may not happen, or even if it does, FXY could go substantially lower first. I'd calculated one target at $83 on the $XJY chart which would be about where FXY would also go, if it loses this trading range and the 200-day moving average. I don't want to pre-judge whether or not it loses the trading range, or goes higher instead. The indicators seem ready to go either way. The standard RSI shows bullish divergence, the MACD might be doing a bull kiss, and the StochRSI may be doing a nice midline test that will push it up again. But the OBV confirms the weakness we're seeing as it tests the 200-day moving average, with the Slow Stochastics under 20; and its price level is almost poking under the most recent prior swing low. While I would not hold it short if it wants to push upward from this trading range, I would not hold it long if it breaks to the downside. Here's the chart:

I don't know that I can advocate shorting FXY before it proves that it's breaking chart support. From an Elliott Wave perspective, it might be finishing a pullback (although it's an extremely and unusually deep one, but that can happen off a leading diagonal which might have been playing out the past month). Or if it pokes a bit lower, theoretically it need only a very small poke lower to complete a small fifth wave. But it might be more bearish and wanting a deep third wave down if it already completed a bit leading diagonal down off the top. Maybe the best advice for now is to paraphrase something that Raymond Merriman once said, "if wrong - don't be wrong for long!"


Footnote: The CBOE-based "max pain" data showing currently may indicate that many other traders are thinking the same, to follow out of the trading range, which could indicate a straddle approach for those interested in those types of strategies. (Not a recommendation, just an observation.)

Possible path of the S&P 500 over the next week or two pointing to re-testing 760

Taking a step back from the short-term action and looking at where the S&P 500 may go over the next week or so, here's one way (among others) that we could see a pullback that would still have the potential to resume another leg of the rally upward. I do recognize there are other possibilities, including that the rally could move up into the mid-April time period. And my label for this post refers to Tony Caldaro's Objective Elliott Wave, but these are just some EW comments of my own. I just want to post this to keep an eye on what may happen if we fall under the 50-day moving average soon (even though a trading buddy has passed on some talk that certain fund traders won't get bonuses unless the index closes today above that average! so let's forget about today and think, what if it loses that 50-day moving average later in the week):

ChartsEdge (S&P 500) map for 3/31

Market Map for Mar31

Posted: March 31st, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Submit Comments [to ChartsEdge on this post] »



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

Thanks once again, Mike and ChartsEdge!
I know that it's one thing for the cycles to indicate a high or low, and another to determine which it is (high or low) - Mike's system was certainly right about existence of a gap Monday morning! So he certainly deserves a nod for that, and we cannot be upset that the direction of it was different than forecast. For that matter, we don't know if that amazing news about GM yesterday didn't throw a wrench into all kinds of systems yesterday! And with all that went on yesterday - and even remembering that the ChartsEdge forecasts are to be used for timing of highs and lows, not absolute levels, I've got to say that yesterday's intraday map did another phenomenal job of forecasting the intraday action.

From the original chart for the entire week, I would have thought that the market might close that gap from yesterday morning, and then we'd see if it trended downward again after this week. Of course that still may happen, either this morning or in the next day or so - cannot guarantee anything or rule anything out. But it is possible that the problematic factors seen in the charts going into and during last week, may be borne out with the fundamental factors being reviewed once again in the "news".

Apparently some talking head or analyst on tv said that when the market goes up, it will go up faster than anyone can imagine. Well, I see that possibility too, but it's only a possibility, again no guarantees! It is likely that whenever we see a bottom to this entire big wave down from October 2007, we'll see a recognizable wave 1 up and then wave 2 down, and then it will be the resumption upward from that which we'll want to hop aboard. We'll know it from a number of factors, including technical indicators and trendlines. Thinking about the entire possibility may just get us off-track for the current market, so let's focus on what's at hand nowadays. And we've got our 833/838 level as a nearby "line in the sand," along with the other good pivots and levels from Andre, Tony, and others. And the possibilities also include the market seeing new lows first, as well as pushing up in a rally for some weeks and then rolling over to new lows. All reasons to take it one day, and one week, at a time here.

Well, we'll see of course - so as always, be careful out there, and happy trading!

Market technicals and sentiment; and options spread suggestion

I posted not only technical analysis info but also sentiment indicators charts today, including at my UBTNB3 site under the "Charts roundup" label. The technicals confirm what we already know, that support for the rally has been weakening into the key Fibonacci levels we presented regarding the 833 level (with 838 as a backup but not needed for the setup). Sentiment is measured different ways, and the charts I posted there seems to have some conflicting aspects. But in general, it looks to me like sentiment is still relatively bullish (which is bearish). Check out the Monday Morning Outlook at Schaeffers which readers know I recommend - you can check it out each Monday morning, using the link at the right side of this page. To make it easier for you, here's a link to that article this morning: http://www.schaeffersresearch.com/commentary/observations.aspx?ID=92098&obspage=1

And here is a "credit spread" or options spread discussion including a specific setup involving options on PG, that does look pretty good as far as I can tell: http://www.schaeffersresearch.com/commentary/content/credit+spread+corner/observations.aspx?id=92116. Apparently this is going to be a new column at Schaeffers so you might want to keep up with it from time to time if options spreads are your thing.

Tony Caldaro has revised his short-term Elliott Wave count, recognizing that diagonal wedge that looked like it formed last week in the SPX. Based on his view, we're now seeing part of a pullback wave B. From my corner, I'm going to remain skeptical (pessimistic) backstopped against 833 and will see. I also posted the max pain info from that "max pain" website I recently added to the other sites of interest listed at the right side of the page here (I posted it at the UBTNB3 site, you can also find that link at right). For SPY, it calculated 70 as the new "max pain" level. Remember, this calculated max pain level can change relatively rapidly. and so I do not know that I can recommend it this far in advance of the April opex. For that matter, I wouldn't rely upon this signal alone - but it is noteworthy, IMO, that it has dropped to 70.

That Fibonacci cluster I've mentioned with a probable reversal zone from 806-833 is called the "triple crown" in that book by Hobbs, Fibonacci for the Active Trader. On the one hand, no setup is ever a guarantee so I won't pretend that it is. On the other, it's one of the more robust setups in the sense that its first objective goes relatively far; in this case, it would point toward a new low at a minimum price that's 1.272 of the range from 667 to 833 - in this case, to 621.85. (At that point, one would take partial profits, tighten the stop on the rest, and expect yet lower prices after that.) This setup is, therefore, squarely in conflict with at least two prevailing Elliott Wave views of the market (maybe three), which call for the market to rally higher in the days to weeks ahead.

So as always, be careful out there, and happy trading!

T Theory update for S&P 500

Terry Laundry's T Theory update for S&P 500 is now available at his T Theory website. Below is his chart updated through Friday last week. You'll need to visit his website where he posts it and also gives a link to his audio comments about it.

Comments from ChartsEdge, and from me - on the gap this morning, and the markets

First, the comments from ChartsEdge which relate back to their daily (and weekly) cycle forecast charts:

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

The Gap this morning [indicated on the ChartsEdge daily map for today, a gap up] is obviously not correct. This represents a shift in not only today’s chart, but also in all of the Market maps for the rest of the week if there is not a substantial rally today to offset the correction lower.

Since the regular cycle charts show a rally today, it is likely that the top of this move is now in place.

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Folks, now my own comments. We all knew already (or should have known!) that the markets are rather treacherous nowadays. We can all debate whether or not "news" plays a role in affecting the Elliott Waves, etc. News such as the U.S. President removing the head of GM, for example.

I'd like to refer back to posts I've made about the Fibonacci clusters in this area, which give probabilities for this being a reversal zone area. Never a certainty, but a probability, which coupled with the supply overhang in this area and signs of the markets being overbought, raised a cautionary flag into last which I and others pointed out. Also my posts about the banking sector (you can find under the "Banking label") which raised concerns about that index running into resistance levels.

How do we now use the ChartsEdge maps for the day and week? Remember that they tend to depict cycle timing, not necessarily the absolute (or even relative) price levels. When there isn't an undercurrent of market bias, the price levels they show tend to work well, but we must always remember to focus on them in terms of pointing to relative high and low/weak spots as time goes by in the day and week. So if you are daytrading, or very short-term (1-4 days) swing trading, you can still use them for reference.

How to interpret the Elliott Wave count here is something else. I had posted a rather ugly alternative view, that suggested the move up might be done or almost done, but I admitted that the count had some problems. I still think that way of viewing the count had problems. Maybe a kinder way of viewing it would be to say that the wave 1 or A was done, and it wanted to start an expanded flat. Or maybe it is just something else. Meantime, we've got our Fibonacci levels to watch and the technical indicators. Later today, we'll also have Terry Laundry's T Theory update relating to market breadth (which we already knew from the McClellan oscillator was getting tired out).

Be careful out there, good luck and happy trading!
(Or if you aren't trading but just watching, it should be another interesting show!)

ChartsEdge FTSE map for 3/30

Market Map for FTSE Mar30

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


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

Folks, if you're looking for the S&P 500 map for Monday (3/30), then look just a bit down the page, it's the next preceding post (just below). Also see Mike's comment about experimenting with showing if there's an opening gap in the S&P 500 in U.S. cash market trading.

Note too, I've set it up so if you want to submit a comment to ChartsEdge you can use their link (provided above).

Good luck all - be careful out there - and happy trading!

ChartsEdge S&P 500 map for 3/30

Market Map for Mar30

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

Something New
Posted: March 29th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Submit Comment »

I created this blog as a way to introduce some new charts which use a unique bit of technology to forecast the world’s stock markets. The first charts appeared in November and there have been hundreds of changes and improvements in the way that the charts are calculated and how they are presented. This week represents yet another introduction of something new.
The S&P chart now has a scale and also shows the potential for a gap at the open. This is experimental and Mondays are the most difficult to forecast a gap, so I’m hoping for the best on this.

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Folks, the above is as Mike Korell posted it at his daily-map forecast site Chartsedge Daily Market Maps (always included in the list of "other sites of interest" at right side of the page here).

S&P 500 market analysis for the week of March 30 with Turning Points by Andre Gratian

March 29, 2009 Weekend Report
Turning Points
By Andre Gratian

A 3-dimensional approach to technical analysis
Cycles - Breadth - Price projections
“By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint." -- Mark Twain

Current position of the market Long-term trend - Down! The very-long-term cycles have taken over and if they make their lows when expected, the bear market which started in October 2007 should continue until 2012-2014. This would imply that much lower prices lie ahead.

SPX: Intermediate trend - The index started a counter-trend rally which has the potential of extending itself in a bumpy ride if it can overcome the resistance which lies directly overhead.

Analysis of the short-term trend is done on a daily basis with the help of hourly charts. It is an important adjunct to the analysis of daily and weekly charts which discusses the course of longer market trends. Daily market analysis of the short term trend is reserved for subscribers. If you would like to sign up for a FREE 4-week trial period of daily comments, please let me know at ajg@cybertrails.com

Overview:

We'll start by re-assessing the EW count. The low of March 6 was either intermediate (3) or (5). It is possible that there is one more alternate count whereby 11/21/07 started a corrective A-B-C wave (4) pattern and that we are now in C. We don't have to decide which it is because it will soon clarify itself, and we have several ways to determine short-term tops and bottoms until we get to the completion of (4), or whatever! Cycles suggest that this corrective uptrend could continue until July.


Both the daily and hourly indicators (which we will see a little later) suggest that we have arrived at a short-term top. I keep re-adjusting my parallel lines to the main channel until I have them exactly right. These define the trend channel and the inner parallels provide support and/or resistance to the SPX. I think that I now have the final version in place, so please disregard all previous prototypes. The solid red line on the weekly chart, which is also the dashed red line on the daily chart, should provide the most resistance.

We have negative divergence in the two lower indicators and it is more pronounced in the A/D (lower) oscillator.

There is also a minor cycle due to bottom on Monday, and a small cycle on Tuesday or Wednesday. This should cause a retracement to at least 806, with a probable move to 786, and possibly 770-775, depending on the weakness that sets in. Window dressing is still a factor. We'll evaluate this in the days ahead.


The hourly chart (below) also shows negative divergence everywhere, a sure indication of a short-term top. Two channels are drawn on the chart. The SPX is having more and more trouble reaching the top of both channels, and is already drifting outside the dotted line channel. It is about to reach the dashed line, which represents a support line. When it trades below that line. It will quickly reach the solid blue line which is the bottom trend line of the channel (about 790) where it could find temporary support.


I have labeled what I think is the most likely short-term count, with 5 waves complete, and the beginning of an a-b-c corrective pattern which will end at the low of the short-term cycle. We can always change it later if it needs correcting.

After a short decline into the bottom of the cycle, we should have a rally to a new high until we arrive at and create the next short-term top, for which we will get a target after the correction is over. This should complete the rally phase from 667 and be followed by a much more substantial decline into a cluster of more important cycles making their lows in early May.

Summary:
Directly ahead, we should have a correction of 2 or 3 days to a minimum of 806, and maximum 770-775. This should be followed to a new high with a target to be given after the correction.
And then, a much more severe decline into early May. Projection to be given after we've made our second top. We'll re-examine where we are after that.

Andre

The above comments about the financial markets are based purely on what I consider to be sound technical analysis principles. They represent my own opinion and are not meant to be construed as trading or investment advice, but are offered as an analytical point of view which might be of interest to those who
follow stock market cycles and technical analysis.

What would R.N. Elliott do with these market numbers?

What would R.N. Elliott do - the founder of Elliott Wave analysis - if he saw this market and these numbers? First, an odd note - I learned recently that he projected that the end of Supercycle Wave (V) would probably fall on or somewhat before 2012. Nice number there! Looking at the long-term charts, some numbers finally jumped out at me in conjunction with some of the numbers I've already been looking at for several months now. First, some information - in Elliott Wave, once 5 waves up have finished, then it can either be counted as a completed larger wave One (unless the 5-wave structure occupies some other position within a larger wave.) And a common Fibonacci retracement level for the second-wave correction from a first wave, is .618. Now, if the S&P 500 index were to lose 61.8% of its total dollar price from the October 2007 peak of 1576, that would send it to 602.03. Also, the .707 retrace is another important number since market price will often actually overshoot the target level, so it could overshoot the .618 retrace to land at .707. Retracing the SPX from its all-time high to .707 of the way to absolute zero would be 461.77. The comparable numbers in the Dow Jones Industrial Average would be 5423.64 and 4160, respectively.

Hmmmmm, makes me think that if we ever see those numbers, maybe it's a buy??? For that matter, if you've seen my monthly long-term charts of the SPX and DJIA, you know that the projections for a C wave of an expanded flat - you know, the idea that other EW'ers don't seem to have so maybe it's "wrong" - also point to numbers very close to those levels (my charts are below). Is this eerie or what??! Almost makes me wish the market would just get it over with, get to that number, and then let us pile on with the idea that there's some kind of third wave around the corner. Or maybe I just need to wake up and smell the coffee! Would R.N. Elliott consider such levels to be a terrific buy, on the theory that a great new wave up must be around the corner? Perhaps. The pessimistic way of looking at it would be to say that the entire party is over and will never recover. That the only way the market ever recovers anything that looks like value will be fake, a charade of hyperinflated dollars. (Somehow that reminds me, while so many are talking down the dollar, it might be like what Churchill is reputed to have said about democracy: yes it's terrible, except when you compare it to the alternatives!)

Here are my charts, with the annotations about C-wave price levels that I had placed on there months ago (at the time I'd been thinking of what my late trading mentor would have done, but I do think it's what good ol' R.N. would have considered too):


Ooops, this post has that default label I set up for Elliott Wave, that refers to Tony's OEW. Well maybe Tony's chart markings for the peak are consistent with these ideas anyway, being wave V and all that (I just don't know about the part for what happens next - I know Tony is looking for an intermediate B wave bear market rally, I'm not certain that's the same as my idea for a C-wave in an expanded flat however - doesn't matter for trading purposes as we'll trade it as we see it no matter what).

Elliott Wave analysis focused on the week ahead for the S&P 500, commodities and currencies markets by Tony Caldaro

the ELLIOTT WAVE lives on
Tony Caldaro's Market analysis using proprietary Objective Elliott Wave techniques
March 28
weekend update

REVIEW
US markets surged on Monday in anticipation of Treasury secretary Geithner's new bank bailout plan. After the legacy debt plan was announced, and investors had a chance to digest the news, the US market was basically flat for the rest of the week. Economic reports for the week were generally positive, with Existing/New home sales rising, Durable goods orders turning positive, and Consumer sentiment rising. Yet, Unemployment claims remained high, and Q4 GDP remained at -6.3%. For the week the SPX/DOW gained 6.5%, and the NDX/NAZ were +5.7%. The Asian markets surged 8.2%, led by India's 12.0% rise. European markets lagged +2.4%, and Brazil/Canada were +4.2%. Bonds dropped 2.0%, Crude gained 0.6%, Gold was off 3.0%, and the Euro was -2.2%.

LONG TERM: bear market
After the SPX hit 667 in early March and started to rally we anticipated that the first phase of the bear market had ended. We are expecting the bear market to take the form of a large ABC consisting of three Primary waves. At the Mar 09 low we could count five waves down into the Mar 08 low, a rally into May 08, and then another five waves down into the recent low. In basic EW terms this is a simple zigzag: 5-3-5. We have labeled each of these major moves as Major waves ABC. Each of the waves within the Major waves have been labeled as Intermediate waves. See SPX weekly chart in link below.

At the lows there were positive divergences on all timeframes, except the monthly charts which were the most oversold they had been in decades. When reviewing the three previous Cyclical bear markets (1929-1932, 1937-1942 and 1973-1974), we observed that after all three dropped about 50%, they bottomed and then retraced about 50% of the decline in a bear market rally. Our current bear market had dropped 58% (SPX) and 54% (DOW) at the recent lows. Anticipating that this bear market will follow the same pattern, this would project a bear market rally (Primary wave B) to around SPX 1100. When applying the long term OEW pivots we find one right at SPX 1107. These pivots have worked very well during this bear market.

MEDIUM TERM: strong rally, awaiting uptrend confirmation
While all of the Asian markets we follow (ASX, BSE, HSI, NIK and SEC) have confirmed uptrends. Plus some sectors within the SPX, such as the XLB, XLK and XLY, have confirmed uptrends. It appears to be only a matter of time before the SPX/DOW, NDX/NAZ and the FTSE/DAX confirm uptrends as well. In the meantime the SPX has rallied from 667 to 833 on thursday, a 25% rally off the lows in just three weeks. In percentage terms, this represents the second strongest rally of the entire bear market. The best uptrend was from Nov 08 - Jan 09, which rallied 27% and took six weeks to unfold. From the Mar 6th low until Monday March 23rd the rally looked very impulsive. Since the Monday close at SPX 823, however, even the rallies up to the Thursday high at SPX 833 have looked choppy. Either the market is consolidating recent gains or running out of short term upside momentum. Let's not forget that this is still a bear market and subject to volatile swings at a moments notice. Nevertheless, even if we get a sharp pullback from current levels there should be much more upside potential before this rally concludes.

SHORT TERM
Support for the SPX has remained at 789 and then 768, with resistance at 848 and then 912 for most of the week. Short term momentum was rising all week until Wednesday's highs and has declined to just below neutral into the close on Friday. We continue to maintain the current short term count, as long as Wednesday's low at SPX 791 holds. As mentioned earlier the recent action has been choppy, and this has opened the possibility to other potential counts. Also, there are negative RSI divergences on both the hourly and daily charts at the recent highs. Therefore some short term caution is advised until this situation is resolved. A 25% rally in just three weeks is quite an upside move. Thus far the biggest pullback has only been 33 SPX points, and that occurred between Tuesday/Wednesday of this week.

FOREIGN MARKETS
The Asian markets are all in confirmed uptrends, and all are at short term overbought levels going into next week.
The European markets have not confirmed uptrends yet, but are overbought as well.
The Commodity equity markets are close to confirming uptrends and display some negative divergences short term.

COMMODITIES
Bonds dropped 2.0% this week but are still in an uptrend. With short term rates declining it looks like a retest of the lows in rates are next.
Crude was relatively flat +0.6% this week, but is still uptrending.
Gold dropped 3.0% on the week and appears to be holding up fairly well during this correction.
Currencies reversed last weeks sharp moves, but the USD/YEN are still downtrending and the EUR uptrending.

NEXT WEEK
Big week ahead and possibly an historic one as well. This weekend a pre G-20 meeting is underway. On Monday FED governor Duke gives a speech at UNC. Tuesday Case-Shiller home prices will be reported, along with Chicago PMI and a Consumer confidence reading. On Wednesday the ADP employment report, ISM manufacturing, Construction spending, Pending homes sales and Auto sales. Thursday the G-20 meeting officially gets underway in the UK. In the US the weekly Jobless claims and Factory orders will be announced. Then on Friday Non-farm payrolls, the monthly Unemployment rate and ISM services. Also, FED vice chairman Kohn gives a speech in OH, and FED chairman Bernanke gives a speech about the FED's balance sheet in NC. If the G-20 meeting lives up to expectations all markets should get quite volatile around the time it begins. Best to your week and be careful!

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

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Folks, of course the standard disclaimers apply; and, you can always find Tony's site listed in the "other sites of interest" at right side of this page, where you can locate his comments daily after the close and his charts link.

Good reading

Plenty of good articles around, here are some of them - these are at SeekingAlpha unless otherwise indicated:

The Week That Actually Was (Not as the Market and Media Would Have You Believe) by Tyler Durden (nice article, but remember to trade the market, not the "data" or the "news")(also if someone gets a chance to buy Tyler lunch, please do it - his pic there looks like he needs a nice bowl of soup! LOL)

Surge in Short Interest Early in March, Mainly in Financials and Tech by Tyler Durden

Confidence Measures: Nascent Signs of Recovering Sentiment by Prieur du Plessis (might want to consider this in connection with the Armstrong business confidence cycle - just a thought)

One Month Treasury Yield Goes Negative Again by Bespoke Investment Group

This one might also be worth a read if you have an extra couple of minutes - Market Long Waves: Why Bernanke and Geithner Are Flying the Plane into the Ground by Andrew Butter

Now, is it just me or does it seem like there's a lot of negative sentiment in the articles floating about these days? I don't know if that's a contrarian indicator though. I did see that TickerSense came out with a bit about the market being overbought - we already know that so I didn't bother to post that one also (besides their site is in the list at right side of the page here). Since they put out a blogger sentiment poll, their comment on this point is worth noting.

S&P 500 and Nasdaq cycle forecasts from ChartsEdge suggest continued level-testing for the week of March 30

Here are the cycle forecast charts for the week ahead from ChartsEdge (site included in "other sites of interest" at right side of the page), for the S&P 500 and Nasdaq. These suggest that the "buy on Monday" crowd may have another good week, perhaps more subdued than in recent weeks. The generals' (institutional traders) end-of-quarter window dressing for March 31 certainly has been helped by the improved market internals and wave/cycle timing! There are some who also believe in the new-money phenomenon, with many funds receiving investor's contributions at the beginning of each month; and this is documented, although the effects aren't as strong every single month. (Actually it's nice to see that these ordinary investors were rewarded better from early March, than from early January and early February!) Then there are some other factors to consider into April - cycle and Elliott Wave suggestions for a bear market rally, plus the Armstrong date coming up, perhaps the effects of Fibonacci time cycles, Merriman's financial astrology, and others .... including a reminder (thanks Denny!) about IRA and 401k investors pushing money into retirement accounts in time for April 15. It's a wonderful thing.

Well - I'm getting WAY ahead of myself. You can see the longer-term forecasts if you're a ChartsEdge subscriber, and besides as Yoda said (or will say?), "Always in motion, the future is!" For myself, I'm keeping an eye on the top of that Fibonacci zone I mentioned, at 833 (although there are other Fibonacci levels and pivots from Andre Gratian and Tony Caldaro to consider too). All of the above comments are just my own (not speaking for ChartsEdge). For the week ahead - here are the weekly equities cycle forecasts from Mike Korell at ChartsEdge:

Gold's 28-year cup and handle; and the week-ahead gold forecast from ChartsEdge

I've got some comments of my own about gold, while I'll provide below, relating to a 28-year cup-and-handle formation as well as the daily and weekly outlook. First, here's the week-ahead cycle forecast for gold, from ChartsEdge (listed in the "other sites of interest" to the right):

And now my own comments - Looks like this forecast is consistent with the idea that gold's price may continue to keep us guessing whether it's just going into more of the second-wave pullback according to Tony Caldaro's Objective Elliott Wave count; or going for a "deeper dive" into the second part (large wave (C)) of a larger fourth-wave correction. I've added my own daily and weekly charts below, as well as a monthly chart on which I've made some more markings. I know there are some Elliott Wave analysts out there, including some prominent names, that are looking for gold to go much lower. Maybe. I think it's premature to say that gold doesn't have more upside, after a pullback of some amount. For those wanting to gauge what pullback level to look for, there are the levels I've mentioned recently (850, with perhaps a poke lower about 843/846), and there are somewhat deeper levels (such as 809 and 750) also possible. And we'll also be looking for channel trendline support on the weekly chart. As for the monthly chart showing 28 years of data - it certainly raises some interesting possibilities. It's difficult to believe that gold broke above the level of what looks like a long-term cup-and-handle formation, with the kiss-back to that breakout level having already occurred, without having higher levels ahead. So it's reasonable to think that gold will find support at one of these levels. Then once it's found support at a trading cycle low, we may see another good move up.


The possibility of a continued pullback in gold would also be consistent with my thoughts about the rally potential for the dollar. But of course, the possibility of gold reaching significantly higher after a pullback, is very consistent with the economic discussions about more inflation ahead, maybe even hyperinflation. For now, the indicators on the daily, weekly and monthly charts confirm the cycle and Elliott Wave suggestion that gold extends its pullback. for a bit

Crude oil price's risky rally, and the anatomy of a kiss

We don't post so much about oil anymore, because the daily chart has been - well, boring - with the anemic rally off the lows. Sure, it's been a decent long trade, no complaints there, and the percentage increase has been great. It's just looking tired. On the daily chart, I had identified a probable triangle in the chart of one of the ETFs - USO - after which it put in a low. Conversely, the futures contract measured by $WTIC put in either a truncated diagonal low or a B-wave. The movement up looks like it's observing a good parallel channel. I believe it can get to $55 but I also took almost all my position off the table thinking it may have a small 4th wave before it can get there. Cautionary signs include the faster-moving indicators slacking off, overhang price resistance signaling turbulence, price has been pushing the Bollinger Bands perhaps enough for now, and that 200-day moving average is still declining. But there are some signs to consider also on the monthly chart, which I'll comment on (below the charts). Here are the daily and monthly charts of $WTIC:

You can see that price dropped under the long-term parallel channel (that looks like it has 1x1 Gann angle trendlines), got support at the 200-month moving average (which we did point out here, at the time), and looks like it's reaching for a "kissback" toward that broken channel. The faster-moving indicators have starting curling up simultaneously. It often happens that price will jump back toward a moving average when a shorter-term moving average crosses it, and you can see that the 20-month exponential moving average (EMA) is in process of crossing under the 50-month simple moving average (SMA). There may be many looking for price to get back up to the 50-month SMA, but a more realistic target would be the kissback level for now.

You can also see that price pushed hard on the lower Bollinger Band (BB) as it tested the 200-month SMA. It signals there's also a possibility that price moves to the midline of that BB. But it doesn't have to go there in a straight line. The BB which moves about the 20-month MA as its midline, is also in process of descending which will provide a lower target for that method as well.

The ADX-DMI on the daily chart shows that the modest trending level is weakening, and that indicator on the monthly chart hasn't even finished coming out of downtrending mode. Long-term swing traders and position investors will want to see the MACD and other indicators turn around and improve on the monthly chart before investing in long positions - that will take some time of course.

From an Elliott Wave perspective, I can see the rally as either the C-wave of a diagonal that can have another big rally ahead, or as a fifth-wave thrust out of a triangle. Lacking more historical data makes it difficult to select which has the greater probability. Frankly, I don't feel I can discount the diagonal idea right now. Sometimes a channel trendline break can signal that a diagonal will set in - just not always. But the charts indicate there will be sufficient time ahead within which to make that decision. I'm not moving into a short position, just going mostly flat for now to watch it. For now, I want to watch what happens if we do see $55 in $WTIC and whether any pullback from there would get support at the new uptrend channel on the daily chart. Also, if it does plant a big kiss onto that broken channel trendline, that might be a good shorting opportunity.

(The Elliott Wave ideas I'm discussing in this post are my own - the label refers to Tony Caldaro's OEW, by default - and I'll try to circle back to pick up his OEW counts as well; for now, you can find his charts via his site in the list at right.)

Dust beginning to settle on the residential real estate market

The power of fifth-wave thrusts following an Elliott Wave triangle has proven itself in many markets, including the parabolic rise - and consequential drop - of home prices in the U.S. Actually I don't think this was limited to homes only in the U.S., as the effects were felt also in the United Kingdom, parts of Europe and other areas of the world. A range-bound market often (although not always) encompasses an Elliott Wave triangle which tends to compress prices into lower highs and higher lows. Eventually price seems to explode out of the triangle - creating what looks like a "J-curve" parabola or bubble peak. When this happens in tradable markets it creates a "buy the dip" mentality that works until the bubble breaks. That even happened in real estate when speculators of all sorts crowded in - from condo flippers, to the more common renovators, to folks buying second and third homes; and let's not forget the new home builders who piled on too. Below is a chart illustrating the triangle and 5th-wave thrust that bubbled up and broke, courtesy of ChartoftheDay.com:

Chart of the Day
For some perspective into the all-important US real estate market, today's chart illustrates the US median price of a single-family home over the past 39 years. Not only did housing prices increase at a rapid rate from 1991 to 2005, the rate at which housing prices increased – increased. That brings us to today's chart which illustrates how housing prices have dropped 33% from the 2005 peak. In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (1.6% loss). Not an impressive performance considering that nearly three decades have passed. It is worth noting that the median priced home has moved back to the top of a trading range that existed from the late 1970s into the mid-1990s.


"Webmasters, journalists, and bloggers may post an occasional free Chart of the Day on their website as long as the chart is unedited and full credit is given with a live link to Chart of the Day at http://www.chartoftheday.com."

First, a quick reminder - they state that: "In fact, a home buyer who bought the median priced single-family home at the 1979 peak has actually seen that home lose value (1.6% loss)." But don't forget that they charted this in inflation-adjusted prices. The dollar's value has depreciated greatly since the 1970's, as we know from looking at references like gold. So existing homeowners can have some comfort that their home price since the 1970's did provide some inflation hedge. In other words, a home bought in 1979 has held its value relatively better than cash.

What's next? Price has already corrected back to the area of the triangle - the range shown on the chart. Will home prices find support, and start moving up smartly again? It very much depends on whether the decline finished measuring out five waves of its own. The chart above suggests that it may have a fourth-wave consolidation or correction/pullback upward that needs to complete before it drops into its own final low, which may be only slightly lower than the current level. Given the pace at which the real estate market moves, that may take a number of months. After prices complete their own 5th-wave low, there can be another rally. But it very much depends on just where this entire pattern fits into the much, much larger picture. For example, the stock market drop of 1987 from a small fifth-wave peak ended up looking like simply a wave 2 in a much bigger uptrend. These days, however, it's difficult to predict that a much bigger uptrend awaits anytime in the near future. The dangers are that home prices may be range-bound for many years ahead; or worse, that any further rally may be followed by a drop lower still, such as toward the bottom of that chart.

Remember, once again, this is based on an inflation-adjusted charting of home prices. If the dollar goes into hyper-inflation, then the apparent price of homes and a lot of other investments, including gold and other commodities, will seem to rise nicely again. But it's difficult to recommend buying a home for its investment value. For most people, it will just be comforting that the rate of decrease slows down and home prices seem to stabilize for a while.

The Good, the Bad, and the Ugly in an Elliott Wave count in this S&P 500 rally

First I'll describe the good, and tonight it's a photo from Life magazine (copyright Time, Inc. but found on Google images, available for personal noncommercial use only) of "Tiros spun in magnetic field/RCA" - at the bottom of this post. Makes me think of how ChartsEdge does amazing things with their market forecasts derived from the earth's "standing waves," VLF, Schumann resonance and all that. Next, the bad - which for my purposes right now, is that the Elliott Wave count for the rally might be certain but then again might be subject to differing interpretations (unless one or another alternative gets confirmed by subsequent action). And now, the ugly - I've placed some markings on top of one of Tony Caldaro's Objective Elliott Wave charts (sorry Tony! - and folks, you can see the original and all Tony's charts, at his website included in the "other sites of interest" at the right side of this page. Tony's count had marked, consistent with Elliott Wave as well as his own "special sauce" (my term) Objective Elliott Wave, that an A-wave probably completed its five waves up mid-week last week, shortly before last Friday's opex. My "ugly count" marking is a different way of looking at it. I'll admit, I think my alternative here (marked in red on top of Tony's chart, below), has some flaws from an EW perspective. If it were valid, it would suggest a C=A level (oh, I'm always looking for valid C=A levels!) was reached on this past Thursday as the market pushed into 833. It would also have the C-wave in a diagonal triangle wedge that implies the market has a deep drop ahead. Another way of looking at the rally is that some or all of it forms a leading diagonal that actually has bullish implications for much more to come in the rally - I haven't marked that, but I think Tony refers to it in his comments this evening (and it's something I've wondered about too). Here's the chart:

And here's the pretty picture I mentioned:

Just looking at this photograph makes me want to pontificate about Elliot Waves, cycles, trendlines, and even Gann angles and similar methods. But it's very late for me this evening, so I won't do that - I'll just leave it to be appreciated pretty much on its own. (Remember folks, this is (c) Time, Inc. and for personal noncommercial usee only.)

Merriman's Comments for the Week beginning March 30 in the S&P 500, crude oil, commodities, and market psychology

Comments for the Week Beginning March 30, 2009
Written by Raymond Merriman

Review and Preview
The countertrend Venus retrograde rally in stocks in stocks continued through most of last week. In fact, the lead article of Friday’s Wall Street Journal declared this a new bull market, as the “Dow (is) Up 21% in 13 Days in Quickest Rally Since 1938…” On Thursday's high of 7931, the Dow Jones Industrial Average was up 22.5% from its 12-year low of 6470 on March 6, the day Venus began its retrograde motion. Other world indices made their multi-year lows the following Monday-Tuesday, March 9-10. And all continued higher last week. As stated in last week’s column, “It is not unusual to see a market making a multi-month high or low nearby to Venus turning retrograde, and then reverse in the opposite direction until the time its motion returns direct. If the Venus retrograde is more powerful than the Sun’s translation to the Saturn-Uranus-Pluto T-square, then the market should continue its rally for a few more weeks before taking out the low of March 6-10.”

For some strange reason, the investment community has accepted the rule of 20% up or down as the definition of a bull and bear market respectively. As a Cycles Analyst, that is not our definition of a bull or bear market. It is not measured in terms of percent gain or loss, but rather according to length of time and pattern. For instance, it is “bullish” if the high of a new cycle is occurring after the 8th week. It is bullish if both the trough and crest of the 13-21 week primary cycle are higher than the trough and crest of the prior primary cycle. This new cycle is only three weeks old. The crest of the previous primary cycle was 9088 (January 5-6). We won’t know if this primary cycle’s trough is higher than the prior one until it ends in about 10-18 more weeks. The last primary cycle (March 6) certainly was lower than the prior one (7449 on November 21). As you can see, this market has a long way to go before it can be defined as a new bull market.

You might also find interesting the last three major DJIA rallies since the economic crisis hit in September. The first lasted four weeks, from October 10 to November 4. The DJIA rallied 1772 points, from 7882 to 9654. The second rally lasted almost 7 weeks (Nov 21-Jan 6), from 7449 to 9088, and covered 1639 points. This one has now lasted 3 weeks, and in this time the DJIA has risen 1461 points so far. It is not that this isn’t a bull market. However, except for that arbitrarily accepted “20% rule,” there is nothing to confirm it as such as of this time. Of the three post-crash rallies, this one has so far gained the least amount of points. And now we are right in the middle of the Venus retrograde zone (March 6-April 17). This is a point where a sharp but short reversal can occur (see “Short-Term Geocosmics”). In fact, most stock indices did start to pull back on Friday, right on time, according to this rule of “retrograde motions” in Financial Astrology. This rule states that if a market is making a significant high or low when Mercury or Venus (and probably Mars) turn retrograde, then that “trend” may be briefly (but sharply) interrupted at the halfway point of that planet’s retrograde motion.

The mid-point of the Venus retrograde period had a similar impact on Crude Oil, Grains, and Currency prices last week. All had been up sharply since the week Venus turned retrograde. All made new highs for their cycles into last week. But then each of these markets ended the week with significant pullbacks.

Short-Term Geocosmics
We are right in the middle of the Venus retrograde period now (March 6-April 17) as of March 27. As discussed above, it is not unusual to see a sharp but short reversal around this time in any market that started a new trend at the time of the retrograde. Since the U.S. stock market made its primary cycle low right on March 6, as Venus turned retrograde, and it has been up ever since, this market is a good candidate for such a short-term decline right about now.

There is another concern looming on the horizon. Transiting Mars is about to begin its “translation” to the Saturn-Uranus opposition, April 4-15. In 2008, such “translations” were accompanied by sharp declines in stock indices throughout the world. It hasn’t been that way in 2009. In fact, it has coincided instead with sharp rallies. Note that the last “translation” occurred with the Sun making the same aspects to Saturn and Uranus (opposition and conjunction respectively), March 8-13. That coincided with the low in most world stock indices, from which started this current bull run. We wait to see if a similar decline will happen this time into April 4-15), with another strong advance to follow. Or, if instead, new cycles highs in stock indices form then, and it is just the opposite.

The one thing that does seem almost certain, however, is that with Mars in opposition to Saturn, followed by its conjunction to Mars (and all of this occurring in mutable signs), the markets will be volatile. These are signatures that oftentimes coincide with the threat of military conflicts or terrorist activity, and a tendency towards aggression on the world political stage. In terms of nature, it can coincide with fires, explosives, as well as tornadoes, earthquakes, or volcano eruptions.

Longer-Term Thoughts
Here it comes.
Last week’s report stated, “… the first non-lunar aspect made as we begin spring will be the Sun square Pluto on Monday, March 23. With Pluto in the picture as the spring equinox begins, the focus is once again on debt, for Pluto rules debt, death, and taxes.” So what were the themes of all last week? Wednesday’s Wall Street Journal started off with “White House to Hunt for New Tax Revenues.” The front page snippet said, “The White House plans to seek new tax revenues, as lawmakers move to pare proposed spending increases and tax cuts.” Well, we welcome the consideration to pare back on the proposed $3.6 trillion spending plan. But we worry about paring back on the tax cuts promised to 95% of the population after only 1-2 years. I am not sure the American voter understood the tax break would be so… temporary.

But it does fit in with the waning phase of the Saturn-Pluto cycle (2001-2020), described so often in past columns. This is when federal deficits increase, and are soon followed by increases in taxes and interest rates. So far we haven’t had the increases in taxes or interest rates. But now as we approach the middle of the Saturn-Pluto cycle (i.e. the waning square of November 2009-August 2010), we see the winds of change coming.

Yet this doesn’t have to be a negative, and the very next day the Wall Street Journal printed a story titled “White House Leans Towards Tighter Enforcement of Taxes.” The title sounds ominous and certainly consistent with one’s worst nightmare about Saturn square Pluto (i.e. getting that dreaded notice from the IRS that you will be audited). But within that article comes a glimmer of hope, fairness, and entirely consistent with suggestions on how to handle the deficit problem positively in light of the Saturn-Pluto history. Midway through the article, John D. McKinnon writers, “A growing number of experts… say the U.S. should consider switching to more efficient means of raising revenues – for example, taxes on consumption.” This is how it is done in many countries today – countries where the population has a much higher savings rate than the USA. Instead of taxing on one’s net income, which will always be unpopular and in dispute, a shift towards a tax on consumption might be more popular. A balance between these two may be more favorable. Obama can then keep his campaign promise, increase his popularity, while at the same time raising more revenues that escapes the U.S. Treasury through tax evasion or avoidance. In other words, lowering the inflammatory income tax, and by the same percentage (not a higher percentage) adopting a new consumption tax – or “VAT” (Value Added Tax). This would be a tax reform (in the USA) consistent with the Saturn-Pluto waning phase, while at the same time it would encourage a transformation of our addiction to debt and spending. Taxing on purchases – instead of on one’s working wages – will help individuals develop the habit of savings. One will think twice before spending carelessly.

In the waxing phase of Saturn-Pluto, the tendency was to spend and invest (i.e. “Appreciate your capital’). In the downside of the Saturn-Pluto cycle, the mantra is “Protect your capital.” This may be one way to transform this difficult phase of the Saturn-Pluto cycle into something more fair and constructive, and in line with the principles upon which this country was founded (a tax on income was not part of this country’s founding). It is far more constructive to raise monies this way than to send the tax collectors out to audit more and more people. Of course, reducing the government’s parabolic spending spree could do the trick too.

Announcements
I will be giving a special one day intensive for subscribers to any of the MMA reports on Saturday, April 18, 11:00 AM – 4:00 PM, the day after Venus turns direct. Venus turning retrograde or direct has a very high correlation to the end and beginning of powerful cycles in many financial, markets. We want to be aware of which markets may be making cyclical tops or bottoms at this time, for they will be the most likely candidates for exceptional trading opportunities. Attendees can spend an afternoon and ask all the questions they wish about how I analyze a market, and why I forecast what I forecast in the various reports. If you have never been to one of these intensives with other MMA subscribers, you are in for a treat. This one-day intensive is free to any daily or weekly subscriber of MMA Reports, or to any yearly subscriber of the SOS or MMA Cycles report. For all others, the cost is $300.00 (but it is best if you become a subscriber at less than this amount, get to know the language of the reports, and then get in for free). The location will be the beautiful Asilomar Retreat Center on California’s Monterey Peninsula. For more information, contact our office at 1-248-626-3034, or by email at ordersmma@msn.com, and we will give you details as to the location and accommodations. Or http://www.mmacycles.com/articles/articles/special-one%11day-discussion-for-subscribers/.

We are also going to have another webcast for the world, a “Virtual On-line Discussion and Market Update with Raymond Merriman!” This “Webcast for the World” will take place on Saturday, May 2, 2009, just before the first of the three Jupiter-Neptune conjunction passages. Starting time will be 12:00 PM EDT (that’s 5:00 PM, GMT, or 9:00 AM, in Los Angeles). Via the modern technology of Vibation, 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 log-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/weekly-preview/mma-comments-for-the-week/comments-for-the-week-beginning-march-30,-2009/virtual/ to register. Or drop us an email at 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. If you wish to be in the audience of this live presentation, taking place in Troy, Michigan, let us know and we will send you directions to the location.

(Please see the remainder of the announcements in the Merriman weekly comments listed at Merriman Market Analyst Weekly Comments - and remember, this is always included in the "other sites of interest" listed at the right side of this 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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Commitments of Traders charts support the case for becoming more cautious in equities markets

Interpreting the Commitments of Traders (COT) data that come out each Friday afternoon (with data as of the preceding Tuesday) is an art of contrarian trading. The point being, of course, to use the data to figure out where sentiment lies among wrong-way traders and then take the other side of the bet. Often people will think it's best to side with the commercial traders - at least, that's what I normally have heard. I've also heard some counterpoint to that, on the basis that it takes a while for the commercial traders to size up the trend, so they can be slow to get on the right side and therefore also slow to change when trend changes. Well - I don't personally know - I don't find it the best tool for spotting trend changes, but helpful sometimes especially for confirmation of general outlook. For me, it seems more an art than a science. However, I have been interested to keep up with the COTS Timer blogspot which is working with some trading setups based on the COTs data. Alex Roslin there is taking a scientific, formulaic approach - and it's interesting to read his discussions of how he's dealing with the market action. He had been short but stopped out mid-week, and apparently re-evaluating with a comment about going short if under, I think he said 758 - interesting, that's so close to the 760 number which I think will continue to be an interesting level to watch.

Below are COT charts this afternoon for the Nasdaq, the ES (SPX futures) and S&P mini traders. I'm personally not sure what to say about them looking at them all together, other than the obvious which is that the Nasdaq commercial traders have been more bullish (makes sense given the NDX:SPX ratio), and all three sets of commercial traders grew either less bullish or more short as of Tuesday, compared with the week before.

This does remind me of an interview I saw a couple of evenings ago, of one of the largest Asian hedge fund managers, who said the easy money has been made on this bear market rally and from here it's likely to be more of a zigzag suitable only for nimble (professional) traders. That makes sense based on a lot of factors we've been seeing too.

Quick look at bonds and the dollar

Bonds as indcated by TLT and the dollar both had a good day today. The dollar touched just above and then closed at its 13-day exponential moving average, which interestingly is also a retest of the .382 retrace level that it had dropped under in the plunge last week. It's also just slightly under its 20-day exponential moving average. If the Elliott Wave alternative idea of a diagonal wedge plays out - recognizing there are other ways to read the chart - that could have the dollar at higher levels about the middle or end of May. Here's the chart:

TLT made a modest rise back to its 50-day moving average. The indicators are in position to confirm, if it ticks higher on decent volume in the coming days. Buying volume was certainly evidence on the two days where you can see that volume bar spike up recently. Not many people seem to be expecting bonds to rally seriously. That doesn't mean it's a contrarian indicator that guarantees bonds do in fact rally higher, let alone get to new highs. But we'll continue to watch this because it will be an interesting development if bonds do indeed move up in the C-wave we've discussed before - it would look even more like a US Treasury bubble if that happens! Since the A-wave that goes along with this idea took about two months, a C-wave high would probably take about two months also. Some of its movement could be counted since mid-March, so we might think about mid-May or late May as a potential time frame.


The time convergence of middle to late May is interesting for some other reasons, such as the Fibonacci time extension that I commented on some days ago with respect to the equities markets. (That time frame would be approximately 1.618 years from the October 2007 highs in the stock market.)

We'll do more charts review this weekend, along with the usual roundup of discussion and analysis. Meantime enjoy your Friday evening!

ChartsEdge (U.S. equities) map for 3/27; and my additional comments

Market Map for Mar27

Posted: March 27th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Submit Comments to ChartsEdge »

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

Thanks again, Mike and ChartsEdge! Another awesome week. While we know we should be using these forecasts more for cycle timing rather than absolute price levels, the maps have done a neat job of pointing the way in price as well, again this week.

Those readers who may have been wondering about the comments I posted yesterday about a zone from 806-833, that was a reference to one of the Fibonacci pattern setups called Triple Crown Zone in a book authored by Hobbs, called Fibonacci for the Active Trader. Well, those setups are among those I like to reference in conjunction with looking at other things too, but they often work well. Nice thing is that they give clearly defined setups with entry and exit (including stop loss) information. I cannot always be certain that a reversal will happen within a zone like this - it's a matter of probabilities. If and when price goes decisively above this zone, it's informational and therefore not only a stop loss point but calls for re-evaluating the trend. It's a trend continuation pattern (in this case, the downtrend from above), so breaking decisively above this zone would be information that the downtrend is broken through, at least for the current time frame. We can also cross-reference to the work of others such as Tony Caldaro with his OEW, Terry Laundry with his T Theory, and Andre Gratian (those of you who got Andre's update very late last night or very early this morning, you know what I mean).

We'll have the usual round of charts review and analysis this weekend. Meantime, be careful out there, and happy trading!

ChartsEdge FTSE map for 3/27

ChartsEdge FTSE Market Map for Mar27

Author: Mike Korell

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

Folks, my apologies for not posting this one earlier this morning (though it's available if you are a subscriber to the ChartsEdge services, see their site listed at right side of the page). Careful out there and happy trading!

Fibonacci levels for swing traders to keep an eye on in the S&P 500

The S&P 500 is getting close to the .786 retrace to the February highs, which (depending on just which numbers you use for the calculation) is about 830.50-833. That's also the top of a Fibonacci probability zone (in this case, from 806-833) within which a significant reversal can occur - or not. Somewhat above is the .618 retrace to the January highs at just under 838. A quick "poke" above 833 would be permitted for this particular Fibonacci reversal setup, but that's about it. If price moves much above 833, or 838, then it's a signal of strength (even though it may not dictate exactly what we see on a short-term trading basis).

Here's the VIX - not really as low as you might think, but I don't know just how much we can read into that right now:

ChartsEdge (U.S. equities) map for 3/26

Market Map for Mar26

Posted: March 26th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Submit Comments to ChartsEdge »

ChartsEdge FTSE map for 3/26

FTSE Market Map for Mar26

Posted: March 26th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
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Feeling ebullient? Measuring gold bullion's potential, with chart reviews for bonds, dollar and yen

Lots of people are talking about the yen today, in addition to bonds, the dollar and gold. For that matter, many are feeling ebullient about bullion.* So let's take a look at all four of these. First, as to gold, it still retains the bullish option as Tony Caldaro has marked in his Objective Elliott Wave - in fact, I've measured out that it could get to 850 (that pivot as marked on the weekly chart and no too far from its 200-day moving average) or even a quick poke down to about 846; and still be in a corrective pullback wave 2 in Tony's count - prior to a sizable wave 3 up. Or the view can be my more bearish one, that gold completed a large (B) or (X) wave up and starting on wave (C) or (Y) down. Perhaps there are other alternatives but these are the main two of which I'm aware. So, if gold does weaken further, then we can look to the levels on the weekly chart where the 50-month moving average, the Bollinger Band 20-month MA midline, and my uptrend channel trendline may give support. If those don't do the job and it falls under 850 and then 846, we can look to see whether the wave 2 idea could still have some room to go or otherwise that the bearish view is in force.

Of course we must look at the dollar chart. Yes, it's a bit busy (not as much as my VIX chart, which I think I've marked a few too many lines on!), but it's interesting that it hugged up to that one trendline it recently moved under. If you look back at my recent post here about the dollar, you know that I'm trying to remain open to different alternatives. Naturally, the idea of another wave up in the dollar - perhaps a delightful diagonal fifth wave - would fit nicely with the idea of a (C) or (Y) wave down in gold. If it works out that neatly I'll be delighted, but maybe it just seems too easy ... alternatively, if gold pushes above 1007 and the dollar drops more, then we'll need to work with patterns that are more bullish gold and bearish the dollar. But I'm not going to count on that for now, since the indicators can be interpreted in favor of my primary view, and there are cycle reasons to think that gold's put in some level of a high with the converse true in the dollar.


Bonds can have put in the opening rally of the C-wave up that Tony Caldaro expects and that I've had in mind as well. Actually I'm not 100% certain of how he derives his C-wave count; mine is based primarily on a huge Elliott Wave diagonal that, as best I can determine, "needs" one final C-wave up to be complete. We'll see, of course. Yes, the indicators do look weak - but that can be the case with a final rise up, it would be just the negative divergence that would help confirm the outlook. If that diagonal idea is true, then once bonds top out "again," look out! (Probably goes along real well with the types of news we see today, with the Fed/Treasury/big boyz having to step in and rescue - er, buy bonds today, and now Janet Yellen being quoted on Bloomberg as saying that the Fed may have to issue its own bonds down the road ... yikes!) [By the way, it's very understandable that foreign holders of U.S. debt are doubly concerned if they think both bonds AND the dollar have further weakness ahead - they must have been delighted during 2008 when both were marching up.] But let's take it one day and one week at a time. Obviously, to keep this view in play for now, bonds will have to avoid making a new low here.


Readers here know that since mid-January, I've thought that the $XJY chart would move to higher levels. Then it broke to the downside out of what looked like a triangle, thus becoming a "triangle trap" - and it moved down to the Elliott Wave projection I described for a flat C-wave. That level put in the low - for now - and its movement since then looks like it can be an opening rally similar to what bonds have done. (Probably not a coincidence given how both have moved since December.) There's discussion about it getting to 117, but my projections on the monthly chart suggest it can move even more than that. Again, we'll see - right now, like bonds, $XJY just needs to avoid slipping to a new low here. Obviously this is interesting juxtaposed against the possibilities in the dollar chart. During 2008 both $XJY and the dollar were moving up, then since December they parted ways and $XJY started to move like the US Treasury bonds chart (for that matter, like VIX too). If $XJY breaks down under the 200-day moving average as shown on the chart below, then one of the primary objective levels I've got for it is approximately 83.


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*Interestingly, the Wiktionary page about the word "ebullient", at http://en.wiktionary.org/wiki/ebullient, explains that it's from the Latin word 'bullire', meaning "to bubble up". Hmmm - and here we thought all along that being bullish was simply a matter of the medieval practice of actually having bull vs. bear fights and picking sides in the market with such animism!