Another Armstrong article apparently issued recently this month

There seems to be a new article or newsletter from Martin Armstrong, posted at http://www.contrahour.com/contrahour/2009/04/martin-armstrong-using-the-scientific-method-to-model-the-economy.html. Set aside some time if you want to read all of it - I haven't finished it myself. Worth a look though, interesting concepts and discussion of how his Economic Confidence Model is set up.

ChartsEdge map for 4/30 - reprise, and comments for market cycle timers

I try always to remember to thank Mike Korell at ChartsEdge for his uncanny forecasts, both the weekly charts and the daily maps. He generates them using different methods for each (information on methodology, and subscriptions, at Chartsedge general site and specifically about the daily forecasts at Chartsedge Daily Market Maps). As usual this morning, I posted their daily map for today. And I was delighted that the market played it out very closely. That happens more often than not (especially looking at intraday timing rather than absolute levels). But, we shouldn't assume they'll always work, of course, or take them for granted - it's great to have the benefit of these forecasts.

This evening the joke's on me, I guess, because I looked in on the daily map link - and found it showing a map with today's date that's got a different shape for the day!

After I blinked, I looked again, and I don't see another daily map with the April 30 date in there, so I have to think that ChartsEdge issued a correction that I didn't see until the end of the day. What's really funny to me, is that the version I saw and posted this morning, worked just fine! Actually, that one seemed predictive for the SPX, and this one looks more like what the NDX did.

When you get right to it, the intraday cycle timing seems pretty much the same to me. And it's a reminder once again, it's really the intraday cycle timing (not absolute price levels) that these forecasts are to depict.

Cycles are just one of the methods that we look to bring here. Depending on readers' time frame and approach, you'll be wanting to consider various of the other methods we also bring to bear. Not everybody is into the use of cycles timing for analyzing market movements. But ChartsEdge's methods make it relatively simple to incorporate consideration of the cycles they analyze, into our market navigating.

Enjoy the news and analysis but pay attention to the charts: this may be the turn in equities

It's just a small pattern on the hourly charts but deserves attention from market watchers, investors and traders. The S&P 500 reached the 884 Fibonacci level I've mentioned for many days, and also a projection that Andre Gratian had at 888. Now, I will not speak for Andre except to note that he's been tracking both Elliott Wave counts as well as the A/D line. What I can point out is that the market has turned back down under these levels (along with the Nasdaq 100 doing the same at 1409.71, and the QQQQ's doing similar with the $35 level described earlier this morning in the post about the P&F chart).

These levels "ring the bell" on a number of different methods so we should not be complacent about this. Some are analyzing a pullback to about 780/790, which could be 100 SPX points or 1,000 Dow points. That's significant enough by itself. There are even methods that suggest much lower levels. It's too soon to say which may prove correct, but either one should be unpalatable to investors or traders looking to preserve long-side profits or thinking about when to take defensive positions.

Readers should understand that I cannot "guarantee" the market drops from here. It's just that this appears to be very significant and I do believe should not be ignored.

VIX remains above the 33.81 level despite equities' continued advance

VIX is continuing to show a divergence as it remains above our 33.81 level*, even though equities have pushed to higher levels.

One point of view can be that there have been lags, such as the VIX bottoming in February 2007 while equities didn't peak until October 2007. More recently, VIX peaked out before equities bottomed, both in the November lows and the March lows. It will be interesting to see whether the VIX may start leading the way higher (meaning lower for equities), even while equities may be lagging by putting in higher levels currently.

_____
*(see prior posts under VIX label for more info)

Another way of looking at the Nasdaq 100 (QQQQ's) using Point and Figure charts

For those who follow or use the ChartWatchers blog at Stockcharts.com, you can reference this entry: Triple Top Breakout for QQQQ - from the Don't Ignore This Chart! blog - "A run through the PnF scans reveals a triple top breakout for QQQQ on Wednesday. This means prices pushed the current "x" above the prior two highs (green arrow). Despite this breakout, QQQQ is trading right at potential resistance from the bearish resistance line." It's a downtrend line they've drawn along the prior set of higher lows on the P&F chart of the QQQQ's.

I'm thinking it may go along with the Nasdaq 100 levels I've described in recent entries here. Below is how the P&F chart displays today, at Stockcharts.com for the QQQQ's. I have not drawn any lines on it, this is just how it appears in the display (I also didn't make any special settings for it). P&F experts are welcome to add anything more about this. This chart shows where the QQQQ's broke above the recent swing highs, just as we've also charted in the Nasdaq 100 index. Normally the P&F projection would be to 51 according to this chart (again, I'm no P&F expert), but their charting system automatically applies trendlines. So it is obvious that the QQQQ's would have to break above the trendline resistance also (which looks like it means, close at or just above $35), in order to retain bullish potential.

ChartsEdge (U.S. equities) map for 4/30

Market Map for Apr30

Posted: April 30th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Comments to ChartsEdge »

Some suggestions for reading about the economic situation

I'm just posting these for interesting reading about the economic situation and general market thoughts, and not intended to be as actionable recommendations on the financial markets:

Todd Harrison's article at MarketWatch, Sell in May and go away?

An article pointed out to me by one of my trading buddies & readers, at OptionMonster: Puts surge in industrial, consumer ETFsxly xli, Thu 6:15 AM CT - "The XLY and XLI exchange traded funds both saw enormous put buying yesterday in action that appears very bearish."

Hendry: Markets Assuming Optimism, at GreenLight Advisor, 29 Apr 2009 at 8:09am, coverage of comments on CNBC by Hugh Hendry, the outspoken hedge fund manager and founder of Eclectica Asset Management. The video is posted there but also a written synopsis of his comments. Including this one: "The rise in bond yields shows that the yield curve is flattening, pointing to more economic weakness ahead."

Rebecca Wilder’s economic updates (April 16 – 23): Expected to slide through 2009 - 26 Apr 2009 at 11:58pm. Guest contribution by Rebecca Wilder, author of the of the News N Economics blog; includes various economics charts.

Jim Rogers isn’t buying a US stock recovery (Barron’s) by GreenLight Advisor, 26 Apr 2009 at 11:55pm: "Legendary investor Jim Rogers is skeptical of the latest rally in equities - as well the health of the global economy."

PS - correction to something I stated in a post recently - April 30 is the end of quarter for many hedge funds (I'd said end of FY / fiscal year, which is actually end of October for many of these funds.)

Musings on the monster: comments about surfing this rally wave

As the S&P 500 got to one number of the 881/884 area, and the Nasdaq got to one number of the 1398/1409.71 area yesterday, I just kept thinking that we're lucky not only to have had those numbers, but also the benefit of analysts such as Andre Gratian who has written in weekly updates posted here (and his daily updates to his subscribers) about his projections for levels above 875. As well as the ChartsEdge weekly forecast - readers here might want to click the label, "Chartsedge weekly" and look at that again. So far, despite some wobbles Tuesday morning that dug lower than their weekly forecast indicated, that weekly forecast has held in well to point to higher levels later in this week. As well as the ChartsEdge daily forecasts giving good guidance for intraday cycles. I haven't seen a daily map from ChartsEdge yet, but will post if/when I do.

Thought it may be a good idea to post some thoughts this morning as I see that the futures are well up this morning! I see that the futures moved to the higher of the ranges just mentioned - about 884 (although we'll have to see if the cash SPX gets there - seems likely it will). And about 1409 for NDX. Both of these represent Fibonacci levels. 884 is the .786 retrace for SPX back to the January 6 high, and 1409.71 is a 1.382 extension in the Nasdaq 100 as I explained in a post with chart, referenced yesterday and described over the weekend. For Fibonacci trading, what I'm accustomed to seeing many times is the number being tested with a slight overshoot, and then one looks to see whether or not a reversal pattern plays out. Any reversal pattern should be accompanied by volumes, and then indicators, that confirm it. An apparent reversal that gets broken to the upside would signal something different of course.

Sometimes a relatively small Elliott Wave pattern needs to play out at a Fibonacci level. When that happens, it looks like price resonates around the Fibonacci number, re-testing it more than once. I have the sense that a strong Fibonacci-based reversal doesn't do this however. My sense is that a strong Fibonacci-based reversal will test a number once, and then do its reversal job. But I'm not going to write that into stone.

All said - I outlined very recently (yesterday I think!) the three dominant Elliott Wave patterns of which I am aware. I was writing an email to a trading buddy this morning stating that one of them, Tony Caldaro's B wave up, could theoretically morph into an expanded flat that sees the B wave actually vault the Dow Jones Industrial Average to new highs. This is partly based on my knowledge of EW flats, which Tony once mentioned he thought this correction should become. Not all flats are expanded ... and Tony only projects to about 1100's in SPX. But as an "Elliotteer" I am aware that some flats do become expanded with the B wave climbing to new highs. So it must be considered. Especially since I saw Terry Laundry's chart on Tuesday, though I still haven't absorbed Terry's analytics and don't really know what levels Terry may project. And also, since I was reading up on Martin Armstrong's thoughts that some people seem to be posting about the Internet. I won't try to summarize but some of those ideas would support new highs (but, Armstrong seems to predicate that idea on the market first digging to new lows, such as Dow Jones Industrial Average to 4000).

So having referred to the eyebrow-raising idea of new all-time highs, there are also ideas of new lows, in some of the Elliott Wave analysts. I'm not prepared to run through an exhaustive "bulls versus bears" analysis of which ideas are more likely to prevail right now. I just want to mention that the levels indicated for today should be watched, perhaps more than any numbers we've watched since the March 6-9 lows.

I know that Andre Gratian, Tony Caldaro, and no doubt others, are looking at other numbers and projections that are significant in their systems. I did some additional reading of a couple of other cycles analysts that I review periodically - I think what I read last night, reinforces my sense of what's going on. And as I mentioned, overshoot can and usually does happen with the Fibonacci-based patterns I'm familiar with. But my personal strong sense is this: the timing and levels we are seeing indicated for today, around 884 SPX and 1409.71 NDX, need to be watched carefully.

Nasdaq 100 double milestone today at 200-day and 200-month moving averages

Earlier today I pointed out that the Nasdaq 100 index (NDX, often traded with the QQQQ's ETF) tested its 200-day moving average along with a Fibonacci area that I discussed in previous posts. If a celebration is in order, then we should also recognize that this index simultaneously tested back up to its 200-month moving average today! Both the daily and monthly charts are below. I could think of more to say, but right now it would be the usual - we've got to see where the market goes from here; typically the 200 MA represents at least initial resistance. There may be some cycles time frames that are coming due, now or very soon, as well.

ISE sentiment data continues to make contrarians feel more uneasy about equities markets' path

The sentiment data provided by ISE (see the ISE website in "other sites of interest" listed at the right side of the page here) continues to show bullish sentiment. You can see in their table (image below) that their All Equities ratio closed the day above 160 (middle column of the table - I use All Equities to factor out options on bonds). I've been curious about their "All Indices and ETFs Only" ratio, although I haven't yet been successful in finding explanations about it on their website. Anyone with information on it is welcome to comment about it. What I decided to do this afternoon, is to display that ratio in the ISE's interactive chart that sits atop their table (i.e., in the upper part of the image below). I selected a time frame going back to November 5, 2008, to take a look at how this ratio played out in the time frame just before and since the drops into the November 2008 and early March 2009 lows. So, even though I don't have explanations about what the ratio is supposed to represent, it's plain that it has a very distinct inverse correlation to the equity market's movements during this time frame. Given that this ratio is relatively low once again, I have to interpret it as one of the bearish signs for equity markets currently.

By the way, I also included (upper right image) today's "top bullish" and "top bearish" at ISE. I don't want to comment too much on this, because the several times I did comment, I later found that sometimes it was a better contrarian signal than at other times. For example, it helped paint a bearish picture of GM (and if memory serves, Delta) that, along with a rising wedge chart structure, helped us be in advance of the weakness that occurred. But when it related to ETF's, I think it didn't always work as well, perhaps because market participants may be using ETF's as a hedge against other positions they're taking on specific stocks. Today, FAZ is included as "Top Bullish" - so a contrarian would say, FAZ may go down and the financial sector may move up. Since I don't really know if this could be a way of hedging short positions in individual financial sector company stocks, all I will do in this post is point it out. Later we can look back and see which way this hot sentiment in FAZ might point for subsequent sector action.

Is the U.S. dollar testing support, or testing my chart and hypothetical diagonal?

The U.S. dollar fell today, along with bonds continuing their move down. At first appearance it looks like the it fell under trendline support I marked on my $USD chart. Then again, I drew those trendlines a while ago on the bigger view of this chart, and as you can see there are prior price spikes underneath that line. $USD did push back up after having moved closed toward its lower Bollinger Band, too. So I'll have to see if it's merely "testing" my chart and the artfulness of my trendline drawing (or rather the lack of artfulness on my part in drawing that trendline). Clearly it will violate my hypothesis of a diagonal upward, if it makes a swing low underneath the one in mid-March. If that happens, it may move much lower in a C-wave down, or could even drop to new lows (as I suspect some are hoping, along with a big rally in gold). At least I am not seeing negative divergence on the daily chart (below), so it may be too soon to abandon this chart with its trendlines.

Intraday comment on QQQQ's, the Nasdaq and the equities markets

The Nasdaq 100 ($NDX) market (with the QQQQ's as a commonly-traded ETF) has now tested up to a Fibonacci retrace level I described in my post, Keepin' it simple: Numbers and lines on the Nasdaq 100 index chart this past weekend. I discuss it a bit more today in this post, NDX at 1.382; TRIN, CPCE at my UBTNB3 blogspot. Investors and traders should want to keep an eye on how the Nasdaq 100 and the QQQQ's react from this level, not just today but after today. The specific level would be at about 1388, or just above 1409, in the NDX.

Below is a chart showing how the Nasdaq 100 index looks right now. This test of the Fibonacci level I described in that prior post, is also occurring as the index more nearly tests its 200-day moving average, probably the most widely-watched moving average for position investors and traders. There's been a bit of negative divergence in the indicators, which doesn't guarantee a pullback (or worse). Personally I think that chart reaction after today will be what we'll want to watch closely.

Will the yen surprise investors by how it moves out of this test?

The XJY chart that I use for tracking movements of the yen shows that XJY (or FXY if you chart that ETF) has moved into position to confirm either one hypothesis, or the other. One is that the XJY completed a large Elliott Wave flat (apparently needing that one more low under its 200-day moving average to complete a fifth wave for the C-wave of the flat ABC) and is now in process of moving to new highs. The other is that XJY is only completing a pullback and will very soon roll over much lower. Moving above the 106 or especially 106.88 level on this chart will help confirm the first hypothesis. You can also see on my monthly chart (daily and monthly charts are both below) that I've got channels marked that XJY should remain above in order to stay on track for that. Breaking under those channels, and moving under the 200-day moving average, would see XJY moving lower (with one level at about 83 for that scenario).

Investors should keep an eye on the yen partly because of the inverse relationship that the yen tends to have for equities markets.

Emerging Markets ETF (EEM) moving into critical tests of support

Following up on the emerging markets review we initiated a couple of weeks ago - sure enough, EEM (the emerging markets ETF) did encounter resistance at its 200-day moving average and dropped down away from it. Initially it found support at the Bollinger Band (BB) midline and tried again for the 200-day moving average, then dropped again. It can be interepreted as a consolidation before trying again, and that's consistent with the BB's now closing toward this small range. Now the lower Bollinger Band is at 25.49 on the daily chart (below), and can provide support if EEM needs it while remaining above the still-rising 50-day moving average. The indicators, not surprisingly, look consistent with the halted momentum.

Prospects for EEM may well be consistent with the several options for the U.S. equities markets that I outlined in my post earlier this morning. The most dire would be if EEM has completed a wave 4 up that implies it's going to roll over to new lows. I haven't independently verified whether EEM has the same Elliott Wave count possibilities on the big-picture, as for U.S. equities, but the weekly chart of EEM (also below) looks similar enough to suggest it's a valid comparison. Notice on the weekly chart that the 50-week moving average (MA) recently crossed under the 200-week MA. That's typically a bearish cross with longer-term consequences. It's not uncommon when such a bearish cross occurs that price will jump up when, or shortly after, the cross-under occurs ... followed by resumption of the downtrend. If that's the case for EEM, then investors should brace for more downside to come.

Obviously, remaining above the 50-day MA will stave off such bearish possibilities, so that's a line that EEM investors should keep their eyes on. If the EEM is able to get above its 200-day MA, that will substantially improve its prospects, and provide an additional line of support. It's also evident from the indicators that EEM investors shouldn't feel complacent about getting that support.

ChartsEdge (U.S. equities) map for 4/29; and comments for Fed Day and beyond

Market Map for Apr29

Posted: April 29th, 2009
Author: Mike Korell
Filed under: One-Day Market Map
Comments to ChartsEdge »


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Today being "Fed Wednesday" with any announcement at 2:10 pm, along with other things on the economic calendar today, can add volatility especially this afternoon. Remember that we don't have to be heroes, and that the day after "Fed day" is usually the better trading day!

From the swing perspective, we already know that above 875 points toward 881/884 (along with other pivots and levels identified by Tony Caldaro and Andre Gratian). The scenarios we are working with include:

* Andre's primary count view, that we are in a wave 4 up that would have a relatively mild pullback (perhaps to the 780/790 area but I don't want to speak for Andre on that), followed by a push to higher levels as he's showed on his trendline charts in his weekend updates;

* Tony's primary count view, that we are working out a large wave B up (and you can see his daily updates at his site, in addition to his weekend updates posted here, describing the likely count path along the way), that when completed will see the SPX up somewhere about 1100;

* Well - there's an EW view out of a certain town in Georgia, that seems to be talking about the markets being in a large wave 2 up that would target either the 1100's area or higher (such as a .618 retrace to 10/2007) in the SPX - but frankly, I don't see that count as having merit.

* Another wave 4 up view, as described in the AllAllan blogspot with trendlines charted out for the Nasdaq (see Daily Nasdaq 100 (All Allan, 4/23/09)), that says we're putting the finishing touches on the wave 4 up and either now, or soon, just starting the small first wave of what will lead to the big wave 5 down taking the market to new lows. I know that Allan of that blogspot is not the only trader who has that as a viable count possibility, and we should be cognizant of it too. One big clue that we see it would be if the SPX doesn't find support at the 780/790 area.

Meantime, we've got today and the rest of the week ahead of us. I think back to my little remark Sunday, about the ChartsEdge weekly forecast showing up from Monday's open with my comment that it might lead to buying a long ETF with a stop under Monday's lows and let it run for the week. Of course the market yesterday morning took out anyone with a stop at Monday's lows, but I would hope that the ChartsEdge daily map yesterday coupled with that weekly forecast would have either kept folks in a swing like that, or encouraging them to reset it. Because the futures are up now, and we've got the ChartsEdge daily map indicating higher. But the markets, like sports, throws these unexpected curve balls and requires quick reflexes, especially when looking at the short-term charts.

Taking a step back, the bigger picture hasn't changed and remains open to the count alternatives I described above. And the dollar is still above the trendline I've marked on its chart, with oil and gold remaining at levels lower than many expected for a bull run already, and bonds fell yesterday looking like they may play out the additional pullback I described this past weekend. So unless we see the markets fly past 884 with similar moves in other asset classes by the end of this week, we can expect to be looking at these same alternatives in these markets - sifting the tea leaves of indicators - this weekend. So continue to be careful out there today, and happy market navigating!

Sentiment indicators aren't showing immediate warning signs of a pullback

The sentiment indicators are actually a bit mixed today, but there are signs that can support a continuation of the equities market rally higher. For example, the bullish percent for the Nasdaq Composite at 53 has not yet rolled over and its StochRSI indicator hasn't either. The one for SPX (at 61.8 - Fibonacci fans can smile on this one!) did roll down but looks like it's either in the "bear kiss" phase, or trying to stay in action for another push upward. The ISE All-Equities did flick up again, closing at 180, but the put/call ratio measured by $CPCE was up at the end of the day. Granted, .82 isn't a greatly high number for CPCE, and this is after a compressing move down in this ratio over a number of weeks. But it did touch its upper Bollinger Band so it could even be viewed as an interim positive for the markets.

Tomorrow's calendar has several events, the most notable of which should be the Fed with any announcement at 2:10 pm (Eastern Time). The SPX closed with a doji candlestick today - a pattern signifying "a sense of indecision or tug-of-war between buyers and sellers" (nice description from Stockcharts.com's glossary/chart school). So maybe we shouldn't hold strong opinions either, about which way the markets "must go" the rest of this week. I know my trendlines on my SPX chart (below, followed by sentiment indicators charts) aren't quite like Andre Gratian's, so I hope you can focus mainly on other information the chart is showing. Such as the relatively lighter volume yesterday and today, making the pullback of these two days look more orderly on the daily chart than they may have felt during the trading days looking at 5-minute and 15-minute charts. The other indicators actually remain in positive territory and not overbought. I don't want to be overly optimistic, but we should remain receptive to the possibility that the market keeps working off overbought conditions by the zigzagging it's been doing for a few weeks now* and could yet move higher.



*Trading buddy once told me to be alert for a pattern that looks like Bart Simpson's hair (it's Bart, right?) - the point being, after a rise followed by a choppy consolidation, with some amount of pullback, be alert for another push up that moves well above the consolidation range's levels. I don't know if he's seeing the current pattern in the SPX as fitting this description (I'll try to find out). If it does quality, either now, soon, or after a pullback - then it could make a nice move to follow. Just sayin' - be open to the possibility.

Bonds may be edging down to test lower support levels

Here's an update about bonds - I posted over the weekend some thoughts about US Treasury notes and bonds having another move to the downside, with certain target levels that can remain above longer-term support. Here's an intraday look at TLT showing that bonds are showing weakness today, so we may be seeing some of that now.

Does market breadth and symmetry tell us the market's train will be north-bound? Perspectives from Terry Laundry's T Theory

Terry Laundry's remarkable work with T Theory not only indicated that the rally from the early March lows would be a good one, but has not apparently turned even more bullish. I'll need some time to absorb what he's describing, and I believe I missed posting his chart last week, so today I'm posting his chart from his 4/27 update yesterday as well as his prior one from Monday last week (4/20). Be sure to check out Terry's audio comments that go along with and explain his analysis, at T Theory website. Especially because of the long time period he's projecting, this is something we'll want to get a handle on!


Hare are his comments that went along with his April 20 update (his chart from that update is below):
"Comments; The Current T is projecting a rise to end of May/Early June and doing fine for this period, however the small blue channel sketched in the S&P suggests the market is very short term over extended and need a correction before resuming the T's advance."


For what it's worth, the late May/early June time period he mentions is a time frame I'm also interested in because of other things I'm seeing in the charts, as well as possible cycle dates from a couple of different cycles methodologies. I didn't realize Terry Laundry had that also (I was traveling last week and didn't see his comment on that until now.)

The TRIN indicates that we may be premature if looking for equities to move much lower

While the TRIN itself is flickering between positive and negative for the day (approximately 1.6 or a bit above), the moving average levels of the TRIN need to be considered. This is especially true for position investors and swing traders. Here's what Stockcharts.com says about TRIN interpretation according to the founder of this indicator, Richard Arms:

Richard Arms developed the TRIN, or Arms index, as a contrarian indicator to detect overbought and oversold levels in the market. Because of its calculation method, the TRIN has an inverse relationship with the market. Generally, a rising TRIN is bearish and a falling TRIN is bullish. Sometimes you will see the scale of the TRIN inverted to reflect this inverse relationship.
.....
A number of TRIN interpretations have evolved over the years. Richard Arms, the originator, uses the TRIN to detect extreme conditions in the market. He considers the market to be overbought when the 10-day moving average of the TRIN declines below .8 and oversold when it moves above 1.2. Other interpretations seek to use the direction and absolute level of the TRIN to determine bullish and bearish scenarios. In the momentum driven markets, the TRIN can remain oversold or overbought for extended periods of time.
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:trin

The TRIN isn't the only indicator to use, but the way it's looking with the moving average seems to warrant consideration. Right now it's been continuing to rise, but all my moving averages on my TRIN chart from Stockcharts.com - the 3-day MA, 10-day MA, 13 DMA, and 20 DMA are above 1.2. The only exception being the 50 DMA but that's to be expected. So when I'm sizing up this market and looking for weakness, I would prefer to see TRIN moving average levels that are lower (or, that are lower and just beginning to turn up).

Again, just one indicator, but should be kept in mind.

Apparent triangle forming in the banking index and levels to watch

The usual thinking about triangles is that price should break out of them, moving in a continuation of where price was heading when it entered the triangle. That doesn't always happen, however. A "triangle trap" can occur where price breaks the triangle and reverses back in the direction it had been moving. Now it looks like the banking index ($BKX) might be in a triangle, so we should watch how it moves. Previously I showed resistance levels (you can find my prior posts on this using the "Banking" label at right), and I've also identified a potential C=A target level approximately 41.80 if it could push higher. This index could still come out of the triangle to that level, which would also put it by its 200-day moving average (MA). The Elliott Wave count could be interesting to work out, but we do know at least that many triangles that are "standard" - where price would in this case move up again - have a target equal to the widest part of the triangle, which can look consistent with a target level like that. But what if the triangle is broken to the downside?

On my banking index chart (below) I marked a couple of Fibonacci retracement levels, one of which was already met and the other being slightly above where the BKX is now. The slower moving indicators remain where they can support another push up, but the faster-moving StochRSI looks weak on this daily chart. You'll note that the StochRSI indicator can remain "oversold" for a while as price continues to drop, so its value really is in saying whether to remain in an existing trend trade, or otherwise look to exit or to time a turn when the StochRSI turns back up again (above the 0.2 line). If the BKX breaks to the downside, we'll also have to watch whether it gets support at its 50-day moving average, and/or the lower Bollinger Band. Falling below those may give support to the Elliott Wave alternative idea that there still remains yet another fifth-wave, new low for the banks.

I've also posted below my VXO chart so you can see that it's been edging up higher. There is a natural tendency for the volatility index to jump a bit on Mondays and weaken off a bit on Fridays, but this looks like a different type of stepping up movement (jump higher, then intraday easing off, but still a definite move above the 33.81 Fibonacci level we saw tested on Armstrong's cycle time date).

Andre Gratian says no major support broken yet
I'm tied up, can't post much today
Just wanted to pass it along
Will see how ChartsEdge map plays out too

Quick comments on volatility with your coffee

Looking like the ChartsEdge weekly may be off the table, at least for levels. We will need to size up which trendlines may give support going into the Fed tomorrow. But we also need to think that the Fed may be more interested in helping bonds, at least at some point. Many hedge funds end FY April 30, too, if that may be a factor.

You've gotta know I'm still watching my VIX and US dollar charts as guides, and you know those don't give help now for the big picture.

The Nasdaq 100 could be seen as on a trigger so if any pullback up doesn't exceed the high just put in, that can be bearish. I know there's one EW fellow, AllAllan in the blogosphere, who's showing that index getting ready for a wave 5 down to new lows .... Brrrr! Will see! There can be other alternatives so watch the levels significant to your time frame, and we'll see what Fed Wednesday does to all this tomorrow!

ChartsEdge's (U.S. equities) map for 4/28; oil slipping down slope of hope; and other comments

Market Map for Apr28

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

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Thanks once again to Mike and ChartsEdge! Today looked like a see-saw struggle between the daily map and their week-cycle forecast, and it looked like the daily map ultimately prevailed. The declines including the current futures doesn't look like they necessarily break trendline support, but of course there are views in which moving down from here implies lower targets. I'm a little hesitate to post what my personal views are, partly because I don't want to look biased or stupid (LOL) and partly because I can still see this going either way. But one thing seems fairly certain - although it's a bit premature to say, but the ChartsEdge weekly forecast looks like it may not "work" for us this week. But do keep it in mind, and do consider it for timing of cycle lows/highs during the week. Then there's the Fed on Wednesday, with any announcement at 2:10 pm (Eastern Time). I'm starting to wonder, if the Fed has to make tough choices about what gets propped up .... nah, I'll stick to the technicals tonight.

I remember making comments at one point about other industries that might start contributing more seriously to market declines, not just the banks. Well today "investors" decided to target the transports, and they did fall under the 3000 level I've been mentioning. When you look at my chart of the Dow Transports (below) you can see that this index fell to support, so it didn't break support yet. But remember I mentioned that "investors" or traders might seize upon a trigger day that looks like a loss of the 200-month moving average at about 3000? Well based on having lost that level today, I do believe that this index should be viewed skeptically unless and until it can regarding that level. The slight increase in volume with today's drop contributes to my thought that a pullback, or more, may be arriving for the transports. (I know, people are blaming swine flu ... the chart already placed the transports into position for a pullback, but maybe swine flu will become the new excuse for a lot of sectors!)

Then there's oil ... I remember posting a while ago showing the daily and monthly charts, and how oil had risen nicely but not hugely in an uptrend channel. It had just fallen to the bottom of that channel the last time I remember posting about it. I stated that it could be a speculative long if it didn't lose that level. Well it wobbled down under it a bit, then rebounded to an interim swing high, and weakened off again. Sure enough, after moving outside that uptrend channel it moved sideways, then even lost its 50-day moving average! Did a little pullback up, but then it fell again and tonight there's talk of less oil usage due to - that's right, swine flu is being blamed now for a drop in oi also! I would not put it past this chart and the monthly chart, to see oil drop to a new low. Certainly it's hurt by having fallen under the 50-day moving average!

I already posted about the dollar this afternoon, and there's buzz this evening about the yen and the euro. Maybe we see the dollar and the yen push up more against the euro per the charts I've been showing - finally!

Then, there's the McClellan Oscillator - it moved down a bit more for the Nasdaq, pointing toward but not (yet) at the zero line. [Not posting it here since I just posted the McClellan charts as of Friday, at my UBTNB3 blogspot.] Similar with the ratio indicator but the Summation Index looks like it remained relatively high. The NYSE McClellan chart has the same look, except its Oscillator didn't edge under the interim swing lows of the recent weeks (as Nasdaq's did).

Finally there's the NDX:SPX ratio, which I did post (below). You can see it pushed to a higher level today, and there's bearish divergence in the RSI indicator on that chart. Since it's an indication of investor interest in buying "riskier" securities or general bullishness (and we haven't posted it in a while), it's worth taking a look since it's looking closer to a peak of some level.

For U.S. dollar, it's not easy being green: when TA predictions don't make sense until days like today

The dollar was "in the green" today, pushing positive after falling sharply on Friday. Readers know I've been discussing the chart potential for the U.S. dollar to continue pushing upward into late May. Even though that hasn't "made sense" from a fundamental standpoint, it's been in the charts - in the form of a Fibonacci analysis and one Elliott Wave potential I've been describing. Other Elliott Wave analysts have been talking in terms of a third wave up that would take the dollar strongly higher, or alternatively expecting the dollar to descend much lower as gold skyrockets in its own third wave up. Of course, their scenarios could still happen, but to my eyes, my Elliott Wave diagonal idea seems to remain in play. This includes the "zigzag" nature of the move up. Keeping it simple, so long as the dollar remains above the uptrending channel line that it rose from again today, it remains possible for it to play out the diagonal scenario for some weeks longer. Moving above last week's high will help confirm it, while moving under Friday's low would negate this scenario.

Notice that all this has been based simply on chart analysis of the wave structure, although somewhat influenced by corresponding wave structure potentials in the euro and even gold. It hasn't been based on the fundamentals, and indeed the fundamentals called for a weaker dollar. News reports trumpeted these reasons when the dollar had precipitous falls, as occurred several times in recent months (as you can see on my chart, below). It's sad in a way that technical analysis can point to the dollar rising, and then on a day like today it takes bad news to fill in the fundamental "reason" for the dollar to go up. Here's one headline about the dollar today: Dollar's reaction to swine flu temporary? (Global Forex Trading, Apr 27, 2009) - "The US dollar has strengthened against all higher yielding currencies on the fear of a global health pandemic." Of course, the article's question remains valid, is this a temporary rise? Maybe it depends on how you define "temporary." I already stated that falling under the trendline anytime soon would negate my hypothesis of the diagonal upward into late May. Now, if my diagonal idea proves out over the next month with a high perhaps at or just above 92, then I'll be looking for the dollar to roll over and head down much more seriously. The only other scenario that would not have the dollar dropping seriously lower, either soon or after late May, would be that idea of the dollar positioning for a massive third wave up - if that happens, we'll know because it would then move strongly above the uppermost trendline on my chart instead of exhibiting a reversal pattern from that upper trendline in late May.

I've considered that massive third-wave up idea for the dollar, as advocated by a certain Elliott Wave group, and I don't find it to be the best "fit" for the structure on the dollar's chart. I also feel that it doesn't really fit the gold chart (and maybe not the yen chart), because I have the sense that gold will be taking off at some point and that's likely to occur with the dollar moving down when it's ready to roll over. But at least we know a parameter to look for, as I mentioned - observing the dollar's reaction if and when it may meet my upper trendline on my chart.

ChartsEdge's (U.S. Equities) map for 4/27

ChartsEdge's Market Map
for Monday, April 27 (at right):


Source/information: Chartsedge Daily Market Maps.


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Thanks Mike Korell/ChartsEdge!

Folks - yes, I see that the daily map "looks" different than Monday was indicated on their weekly cycle forecast! First, remember they are generated with different methods, and obviously have different time focus. (And that we're to use them more for timing than relying on absolute levels ... and if any map or forecast stops "working" then be sure to reference something else.)

Second, what's your focus - daytrading, swing trading, or managing a position? (Or in cash and making decisions about any of those time frames?) A number of good suggestions have been posted here that include support/resistance numbers, channel and trendline support/resistance levels, references to cycles timing, and technical indicators to watch. Plenty of information to see what works for you, your time frames, and your style. Happy marketing navigating!

Cautionary flags seem to be waving in both directions this week: Perspectives from technical experts Todd Salamone and Rocky White at Schaeffer's

Here's reading I can recommend at the beginning of each week, especially with reference to the sentiment outlook (with the volatility index (VIX), put/call ratio and related information); and other technical analysis sometimes included. The Monday Morning Outlook article today at Schaeffer's Research site is entitled "After a Long Winter, the Bulls Have the Momentum; Earnings, autos and banks still weigh on traders". And Todd Salamone's piece within that is entitled, "What the Trader Is Expecting in the Coming Week: Upside Bias Could Return With Post-Expiration Week Headwinds Blown Out". He posts a chart with 30-minute bars of the S&P 500 (cash SPX) with a trendline under the "clear pattern of higher lows going back to March 17" (same trendline included in one of Andre Gratian's short-term charts posted yesterday) and states: "The trendline support that connects these higher lows is currently sitting in the 840 area as we enter this week's trading."

He then goes on to say:

Market uncertainty prevails, and as I said last week, "Admittedly, it is a situation that is difficult to handicap, and this is why we continue to hammer home the point of having exposure to both sides of this market."

The risks to the bullish market momentum have not changed from last week. I'll quickly review a couple of risk factors:

1. The 10-day moving average of the all-equity International Securities Exchange (ISE) call/put ratio continues to roll over from optimistic extremes, consistent with levels that existed following bear-market rallies in May 2008 and January 2009.


2. The CBOE Market Volatility Index (VIX – 36.82) bounced higher from potential support at its 80-week moving average, currently situated at 33.56. A continued rise in the VIX would likely be coincident with higher SPX volatility stemming from an SPX decline. A positive is that the VIX high during the past week occurred around the 40 area, which is half the closing high in October and November 2008.

Support on the SPX resides around 840, as discussed in the opening of this report. Should 840 break, the 800-815 area would be the next support area, as the 80-day moving average is located at 815 and major options-related put support resides at the 800 strike. Potential resistance can be found at the declining 160-day moving average, situated at 884.13, and the round-number 900 level.

Read the full article for more on his perspective and recommendations. I do find it interesting that the 160-day MA that he likes to use, is right at that .786 Fibonacci retrace to the January 6 high (just under 944 SPX) that I've had in mind for quite a while - in case we do see the market find support and bounce yet again.

If you go on to read page 2 of the article, you'll find a piece by Rocky White (senior quantitative analyst at Schaeffer's) entitled, "Indicator of the Week: Short Interest & the Short Interest Ratio". He describes:

The rising short interest (along with average daily value) signals that the big money hedge funds are getting back into the market. However, as those hedge funds are going long the market and adding short hedges, the short-only players (those who are speculating on a market decline) are covering their positions. This short covering has added some fuel to the recent rally. However, it could mean the market is more vulnerable on the next pullback if the hedge funds stop buying and are quick to get out of their recent positions, especially if the short-only players are ready to get back into theirs. As Bernie put it, "This is bullish for the market while it lasts, but there could be a major price to pay for the dissipation of this unhedged short interest on the next pullback, as short-covering support will have been seriously compromised. And this phenomenon could also contribute to the rally's ultimate demise if the unhedged shorts decide to stick their toes back in the water and re-establish positions."

Again, I recommend reading the full article (including Rocky White's neat charts). As always - careful out there, and happy market navigating!

Keepin' it simple: Numbers and lines on the Nasdaq 100 index chart

Though we focus so much on the S&P 500 chart, we should also keep track of what's happening with the Nasdaq including the much-traded Nasdaq 100 (ETF for that being the popular QQQQ's). Here are a few numbers and lines to watch on the Nasdaq 100 index chart ($NDX), using my daily candlestick bars (at right). Obviously the potential resistance at the 200-day moving average (at 1398.70 on Friday) must be watched. Some might be thinking it's showing a reverse H&S or "W" bottom formation, but I'm not convinced it's showing the classic reverse H&S signs including volumes. McClellan Oscillator, Summation Index and ratio data for the Nasdaq market (which I posted at my UBTNB3 blogspot, see links at right) show breadth has been flagging, a bearish divergence. That oscillator would have to spike up soon in order to support a substantially higher move on this rally. Bulls may be hoping for a reverse H&S target such as approximately 1532 or 1553, but I'm a bit skeptical this index is able to push that high at this point.

The NDX already did test a significant Fibonacci retrace level at 1374.25, just on Friday. A close under Friday's low from which this index fails to rally can signify either the much-awaited "pullback" or something more. But if the NDX can continue above that level, it could be an early signal that it will be able to get above the 200-day moving average also. You can see other potential target levels at about 1388 and 1409 (one above, and the other below the 200-day MA).

A lot of people are looking for a pullback, mainly so they can get a good entry on a rally that frankly, many have missed. This means there are two potential ways the market could trip people up: one, by not providing a noticeable pullback for these investors to feel comfortable hopping aboard. Second, by having a pullback materialize, that then deteriorates into something worse. Moving above Friday's high, and certainly moving above the 200-day MA and the 1410 levels, can be signals for higher levels, in case of the first situation where there isn't a huge pullback. For the second situation, if a big pullback does show up, we can look at the recent swing low points for potential support, along with Fibonacci retrace levels and the technical indicators for pullback support levels.

*Update, P.S. (That Wikinvest tool can be interesting - saw they displayed this among related links, Daily Nasdaq 100 (All Allan, 4/23/09) - an interesting take that's bearish but cannot be ruled out simply on that basis.)

Turning Points for the S&P 500: Andre Gratian's fine lines for short-term and big-picture perspectives

Market investors and traders benefit from channel lines, trend lines, and support/resistance lines. They're used in many methods and guide us, even if other analytics give differing interpretations. Andre's comments and charts, below, show us a great set of lines to signal us when the rally is continuing and if and when the rally gives way to downside action. Andre has also kindly commented to me, when sending this weekend report, "Note that I have drawn the parallels to the November-March lows on the daily chart and that the one that is drawn from the October high is quite a bit higher than you show on your chart." Thanks Andre! I've been thinking of doing some more work on my charts and this is likely to be a great improvement. Meanwhile - let's see what Andre has for us, in preparing for the week ahead:

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April 26, 2009
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 is in a counter-trend rally of a corrective nature.
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:

This past week, the market has made us a little nervous because the anticipated weakness has yet to manifest itself, so this week-end, with the help of a few notations, I am going to let the charts speak for themselves.

The 8-week cycle which bottomed 4 days ago has pushed us back toward the high in a move which is very reminiscent of what happened on December 29. So, are we to move higher before we collapse? If we did, it would be sheer coincidence. For one thing, on that past date the 6-week cycle bottomed at about the same time as the 8-week, providing the condition for a stronger rally. This time the 8th week is alone and other technical and cyclical circumstances are also quite different.

That does not mean that we cannot move higher. Although conditions are nearly perfect for a turn, until real weakness appears, we are still in an uptrend. If we were to replicate the December move exactly, we would need to move to 895 before reversing. The minor cycle bottoming on Monday could be the spoiler.

If its impact is more than just a few points, and if the corrective structure is complete -- assuming that the pattern is correct -- we should reverse and decline until we have completed the “B” wave labeled on the hourly chart. The 15m chart shows that there are two projections a little higher which could be filled before we start down, and the MSO [momentum indicator] on the 15m chart could use one more small up wave to make it completely similar to the previous reversal patterns. Also, the A/D showed a little too much strength at the close.


Next is the hourly chart. On that one, I show what lines and levels must be broken before we have a confirmed decline. The dashed line has been the primary support to prevent a meaningful reversal. If penetrated, it should trigger some good selling and we have nearly 3 weeks to go before all the cycles which lie ahead have made their lows. Note that indicators are still moving up and that the MSO (middle), in particular, appears to need a few more hours to complete its topping action.


The 15m chart (above) also shows that, ideally, a few more hours might be needed on Monday to reach the 874 projection and complete the topping process.

As mentioned before, the NDX has been leading the SPX higher. It made a new high on Friday, and although the near-term pattern is the same as that of the SPX, this new high gives this short-term move a different meaning in the context of the longer term which could bring about the need to convert the current a-b-c into a 1-2-3-4-5, requiring another short-term correction followed by a final move to a slightly higher high -- not just for the NDX, but for the SPX as well.

To nullify this possibility, all indices will have to break below their April 23rd lows on the next pull-back. If they don’t, there is a very good possibility that the top of the move for the SPX will be 895-900, and not 875. This will not change the fact that a correction will take place afterwards. There is nothing that can make the cycles bottoming until mid-May go away. It will simply delay the correction by another 2 or 3 days. To prevent a new high, 835 has to be broken on the next decline.

I am going to hold off making a final projection for the correction until the top has been reached for certain.

Andre

Should bears take a walk on the buy side? - ChartsEdge's weekly cycle forecasts, and additional reasons to consider a bullish week

Dare we be bullish for another week? The forecast from ChartsEdge for the upcoming week indicates the rally extends yet higher. This means bears - and we - must consider the long side yet again. Going higher will surprise many! and short-covering could provide some fuel. Frankly I'm rather surprised myself by this forecast. But I won't stand in the market's way if it wants up! The market went mostly sideways week-over-week - and I have had a target of 881/884 in the S&P 500. But the ChartsEdge forecast points high enough to challenge the January 6 high in that index (and perhaps place the Nasdaq 100 and QQQQ's above their 200-day moving average). In light of this bullish-looking forecast I'm going to make additional comments below. Especially since I have been among those pointing to reasons why the market should go down now (with my target identified at 780/790 in SPX). If you have a hard time accepting a bullish outlook for this week, my best thought would be don't use options, try a long-side ETF (or maybe you're into futures trading), with a stop at whatever lows we see tomorrow (Monday) ... then just see what it does through Thursday or Friday. Low maintenance and low angst. (Not an investment "recommendation or advice"!)

*Update - adding additional reasons to be open to the long side this week: The standard Point & Figure (P&F) chart for S&P 500 targets 905* (while 943.85 remains classic resistance). My C=A target for the banking index, BKX, at ~41.80 wasn't met yet. The Fed on April 29. One of my readers points out a gap at 92.5 in SPY that may want to be filled. SPX might actually want to test its 200 day MA, like the Nasdaq. Watch VIX-if under 36, it looks bullish for equities. My post on bonds yesterday - may drop, along with dollar - keep an eye on those too. *Thanks to Andre, who actually uses P&F - he states on the P&F chart that I saw, it should better be interpreted as saying, SPX looks to 905 only if it gets past 875 (so we've got to let the market say whether or not it gets aboved 875). I know of at least one trader who's decided to hold short unless and until the SPX goes over 876 - I think based on the mid- to late February highs, which makes sense on a basic support/resistance basis!

So here are the weekly cycle forecasts as generated and provided by ChartsEdge:

Little joe never once gave it away
Everybody had to pay and pay
A hustle here and a hustle there
New York City is the place where they said
Hey babe, take a walk on the wild side
I said hey joe, take a walk on the wild side
-Lou Reed,
Take a Walk on the Wild Side

So are we ready to take a walk on the "buy side"?!! Hey, who am I to argue with cycles crunched through a neural network by ChartsEdge?! We can remember that their forecasts did get a "kink" to turn more bullish with the Fed action around March 18. Maybe they'll get another "kink" and we see more bearish instead ... or maybe we take this forecast at face value and see if there's anything else out there supporting the bullish case for the immediate future. One of course is the technical indicators looking positive still, on the weekly chart of the S&P 500 as Tony Caldaro included with his OEW update (posted a bit earlier here this morning).

We may also consider the market psychology as described by Raymond Merriman, in his weekly preview comments this weekend and last weekend (both posted here, use the "MMA weekly comments by Merriman" label to find any of his comments posted here). Here's a quote from what Raymond Merriman said this weekend:

This “secondary” high that is now happening may be related to the new moon in Taurus, which takes place Saturday, April 25. Stock prices oftentimes do get a lift into the new moon, especially Taurus, which rules assets and equities. If so, look for that decline to start in earnest this week. If not, then we have to shift our focus to the forthcoming Jupiter-Neptune conjunction, a 14-year cycle which – in this market climate and with this new President – would seem more likely to be very bullish, and whose influence may already be starting. I would think that Saturn turning direct on May 16 would temper the market’s advance before Jupiter-Neptune takes root. But it is interesting to note that in previous bear markets, stock prices tended to rally into Saturn stations, according to the work of subscriber and friend Lindsay Holt, of Santa Fe, New Mexico.

I added bold for emphasis to the parts we should consider (and yes, I'm planning to listen to Merriman's May 2 webcast). My late trading mentor gave consideration to Merriman's views and cycles forecasts, and I've learned to respect them too. I also remember one of Merriman's weekly commentaries talking about a rather dream-like optimism taking hold for a while, and I'm wondering if that may be happening too. I don't know financial astrology and don't plan to decide whether to believe in it or to learn more about it. But let's face it, this perspective on market psychology can be one reason to make sure we don't stand in the market's way!

Another factor I've been considering is the Fibonacci time discussion I posted March 7 or 8 - the weekend after the March 6 low - pointing out that it was in the time window of 1.318 years after the October 2007 highs. The 1.618 year time will be in late May. It's a simple thought, but just one factor in my thinking that perhaps the end of May can be a high rather than a low.

Also, I remember looking at the TRIN on Friday and being rather puzzled that it didn't look more bearish. In fact, the 10-day moving average of the TRIN may be in bullish territory. The Stockcharts.com information on TRIN states that Arms, who created it, considered it to be a bullish indicator when the 10-day MA is above 1.20 (bearish if below 0.80). I don't consider myself adept at the TRIN yet, however - so anyone who is, you are very welcome to comment on how you view this.

The forecasts for equities and gold both pushing upward probably has bearish implications for the dollar, with corresponding implications for other currencies. Therefore, this may also help propel $XJY on its chart higher (as I discussed in a post here yesterday). Currency traders may want to keep an eye on this (and I know there are some new ETF's for some currencies too).

Let's think about the trendlines too. As I posted yesterday or the day before, many are looking at trendlines that show the equities markets "should move down" now. These include the Chart of the Day trendlines, and the PTV-Investing blog's work with Gann angles and timing. My own trendlines, inartful as they are, seemed to have been broken to the upside (which can happen with a 4th wave for what it's worth). If other analysts' trendlines get broken to the upside, that would be a reason to expect the markets to push higher.

At this point I don't have much to add regarding Elliott Wave or other constructs about "why" the market should move higher from here. All I can really point to, along with the ChartsEdge weekly cycle forecasts you can see, are technical indicators like the McClellan Oscillator and Summation Index, the indicators on Tony's weekly chart of the SPX, perhaps the TRIN, and for that matter, Terry Laundry's T Theory updates which haven't shown the market needing a move down yet. It's true that the cycles "crunched" through ChartsEdge's neural net don't always "work" so we'll have to keep a close eye early next week. On the other hand, ChartsEdge's forecasts were a big factor in why I remained bearish during the swing highs in February that turned a lot of people bullish - and was I glad to be short when the market rolled over and kept dropping into March 6! Now ChartsEdge is pointing higher for another week, when "everyone" seems to be bearish. So, now more than ever - let's be careful out there, and not worry about needing to explain it or having it "make sense." If your constructs don't fit where the market is going, set them aside and follow the market. That's how surfers do it, and we will too!

Objective Elliot Wave comments for this bear market rally: Tony Caldaro's focus on the S&P 500

the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques

April 25
weekend update

REVIEW
The US equity markets' six-week winning streak came to an end this week. But the market fought back from the Monday/Tuesday pullback to end the week only slightly lower. For the week the SPX/DOW were -0.55% and the NDX/NAZ were +1.35%. The Asian markets were -1.1%, Europe was +0.7%, and the Commodity equity markets were +1.75%. Economic reports were sparse and displayed a low level of economic activity or continuing weakness. Much attention was given to the so called "bank stress test". The results were discussed with bank CEO's on Friday, and the "spin" version of the results will be announced on May 4th. An unverified source claims that 16 of the 19 banks tested are technically insolvent. Keep this in mind in the weeks and months ahead.

LONG TERM: bear market
We restate, as we have since the March 6th lows, that this is a bear market rally. We expected the financials to lead for most of the uptrend. But didn't expect them to resort to fantasy accounting methods to raise more capital. We also expected bullishness to increase during the uptrend, and it's likely to increase even further in the weeks ahead. This is not a new bull market. At best, the March 2009 lows will need to be retested in the months ahead. At worse, the March 2009 lows will be broken in the months ahead. When this bear market rally nears its end, it's time to sell.

Technically, the October 2007 bear market has declined in three Major waves: ABC. Major waves A and C subdivided into five Intermediate waves i-ii-iii-iv-v. The low in March 2009 completed this zigzag pattern and we labeled it Primary wave A. From that low a Primary wave B bear market rally has been unfolding. Historically, these types of bear market rallies usually retrace 50% of the entire decline. This suggests an upside target in the SPX 1120's. Since we have a long term OEW pivot at 1107 this has been our target for Primary wave B. The current bear market and previous bull market labeling is posted below.

MEDIUM TERM: uptrend
The current uptrend has been the strongest, in terms of points (209) and percentage gain (31.3%), since the bear market began. Technically it has done everything expected and more, as demonstrated by its resilience in the latter part of this week. This Primary wave B uptrend should unfold in three Major waves: ABC. Each of the Major waves should subdivide into three Intermediate waves: abc. Thus far we labeled the first set of Intermediate waves: a (SPX 834), b (SPX 780), and c (SPX 876). This should have completed Major wave A, and Major wave B should be currently underway. When the diagonal triangle ended Major wave A (SPX 876) we expected a sharp selloff for Major wave B. The parameters were noted in last weeks report.

The market sold off on Monday, but bottomed on Tuesday at SPX 827 and spent the rest of the week rallying up to SPX 872 on Friday. Currently we see no reason to change our labeling for Major wave B. From the SPX 876 high we have been labeling the low at SPX 827 as Minor wave A, and the current rally as Minor wave B. Minor wave C of Intermediate wave A should follow. Then we should get an Intermediate wave B rally followed by an Intermediate wave C decline to complete Major wave B. The entire uptrend is posted on the SPX hourly chart in the chart link below.

SHORT TERM
Support remains at 848 then 789, with resistance at 912 and then 935. Short term momentum was extremely overbought on Friday and ended the day with a slight negative divergence. The current Minor B wave rally may have ended Friday. The SPX did get extremely overbought on both the hourly and shorter timeframe charts. As a result of this rally we will probably need to raise our downside targets for Major wave B. And Major wave B may unfold a lot quicker than expected. For now, we'll remain with the parameters set in last weekends report, and adjust accordingly as the market unfolds.

FOREIGN MARKETS
The Asian markets were mostly lower on the week with only India's BSE displaying a gain. Uptrends remain in force.
The European markets were mixed with the FTSE up and the DAX slightly lower. Both still uptrending with the DAX leading.
The Commodity equity markets performed the best on the week +1.75%. The BSVP is leading these uptrends.

COMMODITIES
Bonds lost 0.6% on the week as the downtrend in Bond prices continues, with a developing positive divergence.
Crude dropped 1.8% on the week but it's still uptrending.
Gold rallied 5.1% off the $865 low. An uptrend is not confirmed yet, but it is getting close.
The Currencies took advantage of USD weakness (-1.5%) and the Euro rallied (+1.7%) as did the Yen (+1.9%).

NEXT WEEK
Busy week. The action starts on Tuesday with Case-Shiller home prices and a Consumer confidence reading. Then Wednesday Q1 GDP will be reported, estimates are around -5.0%, but we've heard estimates as low as -9.9%. Thursday then provides the weekly Jobless claims, the core PCE index, Consumer spending and the Chicago PMI. Then on Friday ISM, Factory orders and Auto sales. On Tuesday the FED starts its regular two day FOMC meeting, and will announce their findings Wednesday afternoon. This certainly provides the ingredients for a volatile week. Best to your trading!

CHARTS: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987
Love oneself, or love oneself and all others. It's a choice.
Your future depends on it. Time is short. Make the choice!

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Folks, you can always find Tony's Objective Elliott Wave website, including his daily commentaries and other services and his public charts (of many markets, indices, stocks, commodities, etc.) at his link, in the "other sites" listed at the right side of the page here. (Elliott Wave analysts, yes it's true that Tony has his own "special blend" of EW counting with the OEW system he developed. So, since I learned the "classic" way, I don't worry about trying to track my counts exactly with his, just appreciate his analysis and I think we get to the same place. We should pay attention to his weekly chart of the S&P 500, which he specifically included with his comments this weekend. Those MACD remains pointing up! and the RSI shows bullish divergence compared with the prior swing high, and is not overbought!)

Sentiment turning from peak waves a cautionary flag for equities markets

Sentiment indicators have recently been moving off the extreme levels we saw about a week ago. Can we interpret that as a positive, for the extension of the bear-market rally? Not really, based on looking at historical charts of sentiment indicators. First you'll see below the daily and weekly charts of the put/call ratio (CPCE). When you compare its levels against where equities markets have been over the same time frames, you'll see that equities haven't always peaked when the CPCE peaked. Sometimes a peak in equities occurred when the CPCE made an interim (higher) low and then moved up again. Chart position suggests this could be happening again. It's the same with the bullish percent charts (also below). The Bollinger Bands and moving averages, along with the "wave pattern" in CPCE's weekly chart, also suggest that a reversal can be in the offing.

You'll see (below) the bullish percent chart for the S&P 500 (BPSPX) and for the Nasdaq 100 (QQQQ's being the ETF for the Nasdaq 100) (BPNDX). Similarly, you'll see that these bullish percent charts really start "talking" when the percentage, and the indicators on these charts, start rolling over and moving down. Don't forget by the way, that the QQQQ's are flirting with their 200-day moving average at the same time. Okay, I won't say that these movements in sentiment indicators are guaranteeing that the equities markets are about to roll over immediately and drop to scary levels. Let's just say that the chart positions of these sentiment gauges are waving a cautionary flag.

When I posted the bullish percent charts a week ago, in preparation for the week of April 20-24, I stated: "At some point bullish percent will roll over and that will help signal or confirm that there's another move down in the markets. Didn't happen yet, but obviously getting very close." Well - when you look at the bullish percent charts below, you will see that the actual percent did move down, and the indicators started to roll over also. Sure, they will flick back up again if that's where the markets go, but on the long-term view these charts afford, my viewpoints is: "eeeek!"

I won't actually post yet another image of my VIX/VXO charts with this post, because I've been posting and talking about that also lately. While the volatility indices measure volatility and not pure sentiment, let's face it, they are pretty close. Given that the VIX plumbed what I really believe is a significant low, right as the CPCE marked one interim low and the bullish percent charts hit highs, I've got to think that these pullbacks are significant. And that the cautionary flag means we really cannot guarantee that an equities pullback doesn't become more bearish.

Could equities surprise and push up to even higher rally levels, along with these sentiment indicators reaching even more extreme highs? Sure, anything can happen! But over the time frames of these charts, we must respect the cautionary flags they are waving now.

U.S. Treasury notes and bonds ready to break out, or down, from consolidation: Look out for Bonds, James - Bonds

U.S. Treasuries, both T-notes and bonds, have languished since their drop from peaks late last year. Are they ready to move in another leg down, or will they rally up? If down, then I've got the level of 116.88 for T-notes ($UST) as a C=A price symmetry, reading the drop as an ABC movement. The first obvious signs would be if Treasuries make lows underneath the recent consolidation. (U.S. bonds ($USB) nosed a slight new low yesterday, but ten-year notes ($UST) did not.) The ten-year T-note closed on its low yesterday at 121.55, and moving to 116.88 would not even place it underneath its 25-month moving average (currently at 115.13, see first chart below). Moving under the 25-month moving average would signal something even more bearish for T-notes.

It's evident from the charts that U.S. Treasures need to rally up, as I noted with the chart of TLT (the U.S. bond ETF) recently. If TLT and Treasuries fall under their 200-day moving average, that's part of the sign that many traders are looking for to go short on the idea that another leg down is underway. However, if it's the case that cycles are saying U.S. bonds can move higher, they need to get started! Otherwise, if we do see another leg down but the 10-year T-note stays above that 115-116 area, then perhaps that will be a consolidation that allows yet another rally up in Treasuries.

Sure, I wasn't born yesterday, I'm well aware of the fundamental reasons why U.S. Treasuries are in peril of dropping lower and not looking back. On the other hand, I could think of other reasons why Treasuries might rally instead (sooner or later), into the C-wave up that Tony Caldaro's thinking of which is very close to my thoughts on U.S. bonds - if equities become really scary again, for example. But we don't need conjecture, we can just keep an eye out. After the long consolidation we've seen, bonds are likely to make a significant move soon. I'm just recommending that anyone following or trading the bond markets make sure to be on the right side of whichever direction this upcoming move takes. And, if it does happen to be a drop to the downside, we'll have to see whether or not the 115-116 level in $UST provides support.