Negative divergence with the Baltic Dry Index as an indicator supports bearish equities view

Thanks to Trader Brian who pointed out the negative divergence between the drooping Baltic Dry Index ($BDI) against equities, that can be charted as I've prepared and posted below (using the S&P 500 ($SPX). This was one of the reasons Tony Caldaro gave recently for considering the rally most likely complete. I added a 20-period exponential moving average (ema) to the $BDI in the bottom indicator window which helps accentuate its weakness as it's fallen under this ema.

Since the use of the Baltic Dry Index in his weekend update made me think of the transports, I've also added my basic daily-bars chart of the Dow Transports. Talk about weak-looking indicators! Assuming we get a bounce in equities tomorrow, I can understand many may take the chance to sell, and I'll probably be doing it too ...! I've thought some more about Bernie Schaeffer's comment that there may not be enought optimism, i.e. that stocks may be able to climb a "wall of worry". I also know that in Elliott Wave theory, "c"-wave (and third-wave) movements are accompanied by awareness that the news is bad. Given that Elliott Wave analysts are charting that the markets' next move is a "c" (or alternatively 3rd wave, or even a 5th wave that will include its own internal third wave (and besides, fifth waves are capitulation moves) - we actually can expect any drastic drop ahead to be accompanied by bad news and very bearish attitudes soon enough. Just remember that on Tuesday on any intraday rally.

Natural gas continues to be a stinker - where might it end?!

Looking at the natural gas and UNG charts, why on earth did I comment today they're beginning to look interesting again?! Perhaps some kind of bottom-picking instinct? Frankly I've got to say two things up front: after a gap drop, it normally takes another day down lower on narrow range and smaller selling volume (or capitulation volume) before it's ready to go up again. Well, the indicators are still bad but selling volumes have lightened up. There's a possibility it needs substantially lower but I don't know if that's guaranteed. The monthly MACD is compressing and starting to try up to zero. But the 2nd thing I was going to say is - don't buy until you see a day that closes above the prior day's high. For anyone still long, don't despair, let's use logic and analyze this.

I'm on vacation and not much time to write. Will try to find time later. For now, the angles do look interesting and I want to analyze as soon as I can. We can also see if today was close enough to be something like a doji. One thing is that it may be at or close to symmetry when you look at the 2 drops from the June highs. Perhaps a large EDT in the works? There's also a Fib pattern called "shark attack" that this can fit and send it up for another retrace pop. (Meantime we'll also keep eyeing volumes.). So there are reasons to think another bounce (or more) can be in the offing.

View of the S&P500, banking and oil charts show early signs rally may be over, bounces to be sold from now on

The S&P 500 and equities indices generally dropped sharply this morning, many probing under Thursday's low. That was aggressive considering this was only one day after some made new highs on Friday! Readers know I've been growing bearish on the rally's prospects even while trying to avoid calling the top in too soon. Well now, the Elliott Wave pattern suggests to me that either we finished the fifth wave of the rally after all, or only the final 1st of wave 5 of "c" of "c" of primary "b". Whew, what does that mean?! Well, it means perhaps there remain the "couple more subwaves up" I've mentioned - but I'm not feeling that's likely. More likely, we see a bounce tomorrow if the ChartsEdge weekly points to the weekly high being tomorrow, and then downhill.

Below are Tony Caldaro's hourly SPX chart and a daily chart of my own for SPX. Elliott Wavers will see that today's low under Thursday's low means we confirm 5 waves completed on Friday. Here's how Tony himself describes the situation in his update this evening (you can find links to this at his site, at the right side of this page):

Coming off the SPX 1039 uptrend high the market pulled back 23 points into today's low. This pullback is the second largest of the uptrend, only exceeded by the 39 point decline between Intermediate waves A and B. The OEW 1018 pivot is important, and a print at 1010 and lower would confirm a break of that support. The next OEW pivot at 990 is the more important one. A break of that pivot would indicate that this uptrend and the bear market rally are likely over. Today's gap down was similar to the monday gap down following the SPX 956 uptrend high in June. Should the similarity continue the market should rally a few points above today's close before making a lower daily low tomorrow. Best to your trading!

One trading buddy from the site where I was a member last year left a comment today that I really appreciate, especially because it underscore the importance of the rally being (most likely) over:

For those with 401(k)'s in which the number of round trips is limited to one per quarter, you made an excellent point about being positioned defensively just in case the bulls' impending 20% pullback turns out to be the bears' crash and retest of the March low.

Once the Elliott Wave downturn is confirmed, it would be wise to transfer 401(k) equity holdings to a stable value or bond fund within the 401(k) in order to preserve capital. Once a bottom is confirmed, then begin dollar-cost-averaging back into a full equity position.

Keep up the good work in presenting analyses which balance the bulls' and bears' arguments.

Thanks and it's a great reminder this is what it's all about - "No Bull, No Bear, No Bias"!. Just a commitment to sizing up the markets as objectively and well as we can. For the benefit of everone who's trying to position to (1) protect capital, and (2) trade profitably.

Folks - if tomorrow is simply an opportunity to sell at a somewhat better price, and the SPX cannot crack 1027 then 1030/1033, 1037 again - I ask each one to reflect on what may happen if the market really does re-test the March lows next. Yes, I've got some cycles reasons to think the market makes an important high in 2010, but that doesn't preclude another sharp low first. Re-testing the March low may seem a bear's dream - but be prepared also for the types of social, economic and political ramifications of such a move. It probably won't be pretty.

Also below I'm posting charts of banking (KBE) and oil. Sadly time doesn't permit me now to say in words why these look bearish to me. I'll try to return later and augment this post with such comments. For now, just look at the indicators and you should get the idea!

ChartsEdge (US equities) map for 8/31

Thanks again Mike and ChartsEdge! Folks - one possibility that would help signal a top would be an ending diagonal triangle (EDT) pattern. If you want to know more about those, look for a post I made describing those, at my NB3 education blog (inlinks at right). If you see me posting or tweeting about an EDT, you'll know what I mean. I count EDT's as having their 5 waves as 1,2,3,4,5 (not like some who use a,b,c,d,e). This might even happen over today and tomorrow.

Big picture? The drop from this rally giving out can be a steep and deep one. I know and respect the views of some who think a drop will be only a moderate pullback. But it's best to be correctly positioned so that if it keeps going, one won't get wiped out. So if we see a test of this 1041 that's followed by a 5-wave drop (not like the drop Friday that looked like a 3-wave), then short looks right unless stopped out by a higher move. Compared to this approach - I really do see it as (calculated) gambling to stay in looking for 1053 or 1060 ... as I tend to put it, the market can but doesn't "have to"! A classic case of, how you play it really depends on your trading timeframe and style. Some may try to sell top tick, some may wait for trendline break or Elliott Wave pattern confirmation. I can and will continue posting my comments, but it's up to you how you make actual trading decisions. Just know that technicals are showing this market to be on thin ice, and one of these days a daily and/or weekly swing high will be the first crack that makes it give way.

Note to Mike - I'll keep watching UNG - any day it closes above prior day's high with good volume might do it.

So careful everyone, happy market navigating! And here's the map for today from ChartsEdge:
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ChartsEdge - Market Map for Aug31
Posted: August 30th, 2009 Author: Mike Korell
Filed under: One-Day Market Map »

Equities rally having reached price objective, can be measured for reversal: Turning Points update by Andre Gratian

Folks, here is Andre Gratian's weekend Turning Points update newsletter (you can always find Andre's Turning Points site in the list at the right side of the page). Looks to me like Andre is seeing things along the lines we've been discussing over this weekend - the rally being stretched, overbought, and due to correct. Fortunately Andre has some great technical tools to show us for measuring the "Turning Points" with the use of his indicators, trendlines, Fibonacci measurements and other indicators. Let's see what he's got to say:
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August 30, 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 2014. This would imply that much lower prices lie ahead. This will not be a straight-down decline, but a series of intermediate-term rallies and declines until we have reached the low point.

SPX: Intermediate trend - reversing! The counter-trend rally which started in March is now coming to an end. The price objective for a high is being reached and, to deceleration we have now added negative divergence. But we cannot call a top until we have a confirmed reversal.

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:
For the past month, I have been saying that when the SPX reached 1018, it had essentially reached its target and that we could expect a correction. I see no reason to change my mind. When the retracement to 980 ended and the index pushed higher, I gave an extended target of 1037 which was reached last Tuesday and followed by a pull-back. On Friday came another push to 1039 which could not be sustained and the index sold off, closing slightly down for the day.

Since the SPX touched 1018, technical conditions have deteriorated further, and when the index went to the 1037 new high, strong negative divergence was created both in the momentum and breadth indicators. On Friday, these indicators may have given a sell signal at the close. If so, we should open down on Monday.

As we will see when we look at the charts, there is a trend line which will decide this. If it holds, we could still see slightly higher prices.

When it reached 1018 and later, at 1037-39, the SPX was pushed back by the trend line which forms the upper portion of its wedge pattern. To change the increasingly negative picture, the index would need to break above this trend line on increasing volume and positive breadth, and it would need to do it quickly. We will soon be in September which is rated, on average, as the most negative month of the year for the stock market, and the deteriorating technical picture is not giving us any reason to expect anything different this year. Still, until we get a confirmed sell signal, we cannot say that a top has been made. Friday’s action -- a spike higher which cannot be sustained after a long run -- came close to giving a classic sell signal. Had there been more weakness into the close, it would have been more convincing.

Let’s now dissect the technical picture and look at charts.

What's ahead?

Chart Pattern and Momentum
The weekly chart clearly shows that the wedge pattern remains intact. The bottom indicator remains severely overbought, and some negative divergence is creeping in the top one. Note also that prices had a very short range and we closed in the middle of that range. No follow-through to the previous week’s strong attempt at moving above the overhead resistance is a bearish sign. If we trade below last week’s low, it should trigger a sell signal.

The entire pattern from 667 leaves little doubt that we are making a corrective wave. It may have come to an end last week if the small “c” wave was completed. It would also complete the larger “C”. If this is the case, we could start breaking some trend lines as early as Monday and challenge the entire wedge pattern.

There are several wave interpretations of the entire move from 667 -- and from the top as well, for that matter. Since giving it a label would only be a guess on my part, I’ll pass and leave it to the experts.

The daily chart (below) shows how the index created a (red) resistance line, which became the top of a wedge pattern.


The indicators show how weak the last attempt at moving up was. This is when they developed the negative divergence which suggests that the SPX does not have the strength to go through the trend line, and that it will be pushed back. Note the similarity of the “A” and “C” segments. “C” appears to be a small replica of “A”. In particular, notice the similarity between the top which formed at “A”, and the potential top which is forming at “C“. Unless something changes quickly, that segment will suffer the same fate. The change would have to come in the form of strength which takes the index through the red line, and it would have to come right away. If the first green trend line is broken, there is a good possibility that the index will go on to challenge the bottom line of the wedge and the former low of 979.

Even though the entire rally from March is deemed to be a bear market rally, it has shown unusual strength and there are plenty of trend lines, moving averages, and support levels which will have to be overcome to get a full-fledged decline going. The final confirmation that we may have started a serious decline will be when we break through the bottom trend line of the wedge pattern, currently around 960.

The hourly chart, below, illustrates the precarious position of the SPX at the close of Friday’s trading.


Somehow, the index managed to stay above the short-term trend line after failing to overcome the former high. It also found support above its moving averages.

I have a question mark next to the “C” label, because it is difficult to tell, at this point, if the move is complete, or if there is more to go. Only after it starts breaking some trend lines and former support will the SPX tell us that it has reversed. The crawling pattern on the short-term trend line -- instead of pushing away from it -- is a sign of weakness, but it could just as soon find some renewed strength on Monday morning and push away from it than break to the downside. There was a minor cycle which bottomed near the close which is probably responsible for the holding pattern. Not only do we need to break the black trend line, but the green one as well in order to give a sell signal and suggest that the C wave has come to an end.

Cycles
Longer-term cycles had been expected to top in early August. The fact that the index closed Friday 8/28 only 12 points higher than its 8/7 high is a testimonial to the pressure which they are slowly applying to the longer-term trend. Considering the rash of good economic news which has been published during the month of August, this is not much of a gain. And since this pressure is likely to increase as we go forward, it would seem inevitable that we are near the end of the move which started in March, at 667. Furthermore, these cycles are not expected to bottom until we are well into 2010, perhaps in conjunction with the next 4-year cycle low.

Of more immediate concern, the 13-day cycle is due to make its low on 8/4. This is one reason why the SPX may find it difficult to extend its upside progress at this time.

Projections:
The 1037 projection has been reached, and you might say tested successfully, on Friday when the SPX went to 1039 but was pushed back immediately. If it should find the strength to make another run to the upside, 1046-1048 would be the next target. Downside targets will be given to subscribers when the top has been confirmed.


Breadth
The McClellan summation index for the NYSE ($NYSI" chart at left, courtesy of StockCharts) is an excellent gauge of the intermediate condition of the stock market. You can see that the index has been making a pattern of deceleration and divergence over the past 3 weeks.

It is still overbought, and on Friday appeared to start rolling over. This is in accordance with the picture given by the price pattern and indicates that weakness is just around the corner.

The daily breadth readings are showing negative divergence relative to price as well.

In his latest “Technical Report”, Mike Burke mentions that new 52-wk highs have not been keeping up with the indices in the past few weeks. It is the same picture that we have in the NYSI. This is intermediate-term bearish.


Market Leaders and Sentiment
The sentiment indicator (courtesy of Sentimentrader) is not at an extreme, and I am not sure if this means that the sentiment needs to get more negative before we can end the rally. The indicator reflects the ambiguity associated with the market position as to whether we have seen the high, or we do not yet have a firm top in place.

Goldman Sachs has been a market leader. However, it has not led to the upside since the SPX made its high of 1018 and, if viewed as an indicator, it also reflects negative divergence. But as you can see on the daily chart below, it has not broken its trend line. One can assume that when it does, it will give a sell signal, and so will the market.


Summary
As they turn down, the longer-term cycles are slowly applying pressure to the stock market indices. Improving economic conditions have bolstered the averages, but we appear to be at the end of that process as price deceleration is becoming evident and negative divergence is appearing in all technical indicators.

This suggests that the end of the rally from the March low is imminent. However, there is some ambiguity about the short term and we cannot make a definite statement until we have broken a trend line. When it gets underway, the decline is expected to continue well into 2010.

Andre

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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.

Views of why precious metals' stalling out contribute to my defensive position in equities

Equities going up makes people feel good when they don't know or care that it's really the dollar going down. I won't post that gold chart yet again, but will post silver and platinum. Gold and silver continue to keep analysts guessing if bullish or bearish. Below is one of my charts of silver. I've also added a chart of platinum - yuck, can it get over that moving average resiistance?! Readers know I'm skeptical and lean to the bearish view of gold and precious metals. Since I also think the dollar and US bonds are most likely readying for a move up, this all ties in with my defensive position regarding equities. Trading day to day can and often is different. - and we might want to try trading the long side early this week if it looks like cycles will help the Elliott Wave count complete more definitively too.

Both equities and precious metals will have to prove they won't be turned down by resistance. You can see from the charts below that silver and platinum are in the ranks of assets that may well roll over and leave many deeply disappointed.

The cycles-based forecast for the week ahead in equities and gold, by ChartsEdge

ChartsEdge has released this weekend's set of forecasts for equities (U.S.) and gold. The free set for the week ahead is below. Subscribers to their service also get the month and three-month sets (been interesting to see, eh?!). We've always got to remember that, like their daily maps (generated using different methodology), they're intended to point to cyclic highs and lows, not necessarily specific price levels. More info on how they're generated is at the ChartsEdge web pages, which I've mostly also posted at my NB3 tools/education blog (links for all these included at right side of the page).

So here's how they're looking for the upcoming week:

Is it riskier to be a bull or a bear nowadays, as the equities markets "continue to defy skeptics"?

Some corners are beginning to note that sentiment is getting about as positive as ever since the 2007 highs in the equities markets! I've posted a couple of those at my UBTNB3 blog (links at right); some of the measures documenting this include the "Investors' Intelligence" and the Daily Sentiment Index (DSI). From an Elliott Wave perspective, the most recent wave up can be counted as a five-wave move which raises the possibility that the entire rally can be counted as complete. Then again, it remains possible that that small 5-wave movement was only the first little wave of the expected last fifth wave, meaning that the movement can extend with a couple more subwaves up. I tweeted on Friday that the morning drop (a great movement for daytraders, and a reader commented about how accurately the ChartsEdge map had depicted that - nice!) looked like a 3-wave "abc"... In Elliott Wave terms that means that the drop looked corrective, not impulsive, suggesting that there can still be a couple more subwaves up.

For bears this is frustrating of course! But the ChartsEdge work had suggested last week that the markets would go higher into the latter part of the week, and they did. The volumes during the week didn't suggest that the wheels were going to come off the wagon, either; and the Elliott Wave pattern had suggested (at least to my eyes) that the markets wanted a bit higher too. So that's why I kept saying and tweeting that there could be some more movement up - and there was. So what now?

Well I just explained that there can be a couple of more subwaves up, and so bears cannot be confident. But bulls shouldn't be confident either. Even if there are a couple more subwaves up, that doesn't mean that market will go over 1100, or even 1060. It theoretically can - there are some suggesting a higher trendline meeting about 1121 - but I'm not seeing that it "has to". It remains possible for the market rally to finish its movement and fizzle out in the area it's already testing. Maybe it's a matter of time, as suggested in my previous post here about ways to think on time and price of this rally. Even Raymond Merriman's weekly preview comments yesterday suggested that we may not see significant equities weakness until after Labor Day weekend. Of course I don't want to speak for him - that's just how I interpret his remarks.

Let's take a quick look at two other sources that we like to reference each weekend. There's the Monday Morning Outlook: Market Continues to Defy Skeptics by Todd Salamone (Schaeffer's Research, 8/30/09; their site is always included in the sites listed at right here). As their intro paragraph states:

Wall Street failed to make much progress last week, despite a wealth of economic data and key earnings reports. Still, the major market indexes maintained a slight upward bias, with the Dow Jones Industrial Average (DJIA) logging its sixth gain in the past seven weeks. The next week could be quite interesting, however, as August employment data and notes from the latest Federal Open Market Committee meeting are due. Speaking of the week ahead, Todd Salamone, Senior Vice President of Research, examines key resistance and support levels for the S&P 500 Index (SPX), while examining current CBOE Market Volatility Index levels and sentiment surrounding these indicators. Then, Senior Quantitative Analyst Rocky White takes a look at poll data from the American Association of Individual Investors (AAII), and how AAII poll readings have offered up solid contrarian readings in 2009. We wrap up with a look at some key economic and earnings reports slated for release this week.

In addition to some very interesting comments about the VIX and sentiment, Todd also looks at moving average-based support and resistance, commenting: "We see 1,000 as a potential level of support, while 1,060 could possibly act as resistance. As discussed last week, the 1,060 area is the site of the SPX's 80-week moving average, a trendline that acted as both support and resistance since 2005, and one that could prove important once again. Should the 1,000 level be breached, we see huge support in the 950 area, site of the SPX's 80-day moving average and former resistance in January and June."

But in a further note about sentiment, Todd adds:

The risk-reward is still in the bulls' favor. I was shocked to learn, for example, that retail investors, who have notably been wrong in 2009, grew sharply more bearish in the latest American Association of Individual Investors survey, even after the stock market made additional headway during that period. Per Rocky White's commentary below, you will see that this crowd has been wrong at major turning points in 2009. Moreover, cash stashed in institutional money market funds is not far below the levels of January 2009, but still far above the levels of January 2008. In other words, big "cash on the sidelines" is a valid argument for the bullish case, but stingy technical resistance levels are apt to come into play along the way, which will continue to unnerve investors.

Finally, I'll conclude by directing your attention to a very interesting commentary posted by Bernie Schaeffer last Wednesday. This piece addresses the huge rallies in Citigroup (C), Freddie Mac, American International Group (AIG), Fannie Mae (FNM), and Bank of America (BAC). In case you missed it, please click here to read this unique perspective.

Then Rocky White does some analytics on the AAII data. You'll want to see that, in order to understand why he concludes: "... we feel that the recent AAII poll readings are very encouraging." I'm sure that will be a surprise to many! (but not to the COTsTimer blog which had been suggesting that the end of August could prove bullish)

Now of course, Terry Laundry has updated his T Theory outlook again this weekend. And he offers additional treats, so anyone interested in his T Theory work whether new to it or for for a long time already, be sure to check it out! I'll just quote from what he's saying on his site (always included in the "other sites of interest" at the right side of this page):

Update for Sunday August 30 2009 If the audio server becomes overloaded and rejects your request just come back in an hour or so. Jeffery Young has provided a PDF of his A-D Ts Download Advance_Decline T Drawing and comments: "Take a look at the different T's I drew (attachment) using different center post dates for the A/D line. Quite a few of them come out but the interesting T is the green one that would mature on Sept 14th which is within a day or two of the maturity of the mystery volume oscillator T. I could be wrong but it is likely more than just coincidence. The Chinese market may also be tracing what might happen here with the recent high (our September high) and the steep drop and then moving to a new high a month or so later (our maturing of the October T). Just some thoughts and possible outcomes. I would not be surprised if the China A/D line had similar T's since they printed earlier than ours and became leading examples due to the strength of their economy." Jeffrey Young jeffreyisyoung@yahoo.com
Daily Chart with Ts Download SRT20090818wts

Update for Saturday August 29 2009 This weekend I am providing an update that includes the popular request for calculation assistance for the volume oscillator which follows below. The starting point is the chart data so that link comes first. The procedure may yet have some bugs, send corrections to my email address. To be continued Sunday
Download SRT090828
Calculation of the T Theory Daily Volume Oscillator
To calculate the progression of the blue Volume Oscillator as depicted in my daily chart above you need to recalculate the 18 day and 36 day Volume oscillator values that are noted in the chart for each successive day beyond this chart's history. The formulas used are very simple because they are based on exponential moving averages and use recursive equations that are easy to implement in any spreadsheet software package. Click on the chart PDF image for a view of the daily August 28 2009 volume oscillator indicators at the top of the chart.
I am providing these examples of daily calculations in the daily chart which you can use to check your own calculations or restart the process. I won't have time to answer specific questions but of course I will make any corrections and listen to suggestions on improvements. If you have an arithmetic problem, it should be easy to find someone that understand the simple math involved. Using a simple spreadsheet is best; it is easy to set up, fast to use, and makes the arithmetic error free.
Super trader Marty Schwartz who used this oscillator for some decades claims that one is better prepared to use the day to day pattern for finding bottoms or tops if you plot the oscillator values by hand on real graph paper. Watching the pattern for tops and bottoms evolve from one day to the next gives one better perspective on how this volume oscillator tends to anticipate changes in price trends. The computer generated chart is helpful, but he claims the day to day plot helps to get the better feel for it's leading characteristics.
Each day after the market close you will need to obtain the net on balance volume data for the NY Exchange. This can be obtained anywhere but is conveniently available on the web in a market summary section. The data is almost always in a Market Diaries section. See this recommended page Markets Diary: Closing Snapshot - Markets Data Center - WSJ.com

[At this point he includes a lot of calculation information, which I'll omit from this quote - just to go Terry's site where you can find everything]

After August 31 close I will post a review of the actual calculations and amplify as needed.

Terry Laundry

Quick Update for Wed Aug 26: T Theory tutorials are now available at ttheoryfoundation.org or use link here: T Theory Foundation
Hint: Let the audio download progress until it is complete before clicking on the play button. If you don't and have a slow connection the audio may abort. Some features are not yet implemented however you can email questions/comments on the tutorial subject matter to my Foundation Mailbox. More on Sunday

Interesting material, isn't it?! Meantime, yesterday I fiddled about with my chart settings for the advance/decline data for NYSE and Nasdaq. The results are below - using a longer time frame, keeping the advance/decline data (cumulative, daily) as the main view, but moving the price from the lower indicator window to be positioned behind price for a more interesting comparative view. The results look interesting, at least to me. The NYSE strength (upper chart) seems quite a bit more, while the Nasdaq (lower chart) looks relatively weaker. However, in both, when you look at the StochRSI indicator it shows negative divergence so it may be a way of telling us that the momentum is losing some strength here.

Where does all this leave me? All in all, I think I'll keep with the general idea that the market is edging closer to a top for this rally, just cannot be confirmed that it's done and it may well move higher. There's reason to believe a couple more subwaves up can still happen; and that the market has a bit further to go in order to rout out the bears and force some more capitulation. (Well - I've added the commitments of traders (COT) chart below, for the ES/S&P futures(mini) - the positions of all traders look relatively small as of last Tuesday, but the commercials were net short while both small and large speculators were net long.) Even while I'll still be thinking that, as the saying goes - since the music may be nearing an end, let's dance closer to the door. Meaning I think we should keep on being cautious in our approach to this market!

Note: also below I'm adding more charts showing the technicals and internals of the equities markets. The TRIN chart shows that TRIN is fairly low, and its moving averages are too. When the 10-day moving average of the TRIN is below .80 that's considered an overbought market due to correct. Conversely when it's above 1.2 it's oversold and due to rally. However, these levels can persist longer depending on whether the market is really trending. So if the market is really trending up then it can remain overbought longer, while the oversold conditions can cause it to move up more quickly. When the market is really trending down, the TRIN can remain oversold longer while the higher levels can result in quicker pushes back down. Finally I'm also additing McClellan Oscillator/Summation Index charts. You can see that the Oscillator moved below the zero line, again, for NYSE and Nasdaq - while also remaining within a triangular configuration so we'll have to see if it bounces up yet again. But when you look at it over time you can see that there is negative divergence showing in the Oscillator compared with price.

Seeing how "wave C" is shaping up to finish this rally soon: Objective Elliott Wave update by Tony Caldaro

Here's Tony Caldaro's weekend update of the Objective Elliott Wave picture in equities, and with his additional observations on other financial markets. You can always find his updates, and updating market charts, at his Elliott Wave Lives On site (in the sites listed at right):
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the ELLIOTT WAVE lives on
Market analysis using proprietary Objective Elliott Wave techniques
by Tony Caldaro

weekend update
REVIEW
For the week nearly every economic report improved. Case-Shiller home prices improved, as did, Consumer sentiment/confidence, Durable goods orders, New home sales and Personal income. Initial Jobless claims eased 10K, the first revision to Q2 GDP remained unchanged, but Consumer spending declined. Yet, the US market responded to the news by going sideways. The SPX started the week at 1026 and had the following closes: 1026, 1028, 1028, 1031 and 1029. In between it made a new uptrend high at SPX 1039. For the week the SPX/DOW were +0.35%, and the NDX/NAZ were +0.35%. The Asian markets were mixed but managed an average gain of 1.60%. Europe gained 1.10%, but the Commodity equity markets were mixed for an average gain of 0.55%. Bonds gained 0.8%, Crude lost 1.6%, Gold was +0.1%, and the USD (+0.3%) gained against the Euro (-0.2%) and Cad (-0.8%), but lost against the Yen (+0.9%). This week, ISM and Non-farm payrolls.

LONG TERM: bear market
The bear market of 2007 continues to unfold as projected, a three Primary wave affair. The first Primary wave was quite steep. The SPX dropped 58% (1576-667) over seventeen months, and the decline took the form of a 5-3-5 zigzag. Near the lows we projected a five month 50% retracement Primary wave B, which was later modified to between a 50% rally and 50% retracement. As of friday, the SPX has rallied 56% and retraced 41%. Therefore it has met the minimum requirements. During the Primary wave B rally the market has taken the form of a zigzag again. The wave counts are detailed in the weekly charts, link below. During this bear market every uptrend, and there have been seven of them, has ended at a long term OEW pivot. Back in March with the SPX around 700, we projected that Primary wave B would end at either the SPX 1041 pivot or the SPX 1107 pivot. This week the market ran into trouble at the 1041 pivot. On monday the SPX stalled at 1036, tuesday at 1038 and on friday at 1039. The range for these pivots are +/- seven points, i.e. 1041 pivot = 1034-1048. Should the SPX exceed this range it could then rally to the 1107 pivot, before ending Primary wave B. Primary wave C is still expected to either retest the SPX 667 low, or break further into the SPX 400 area. The next few months ahead should be quite interesting.

MEDIUM TERM: uptrend
Primary wave B has been underway since the March low at SPX 667. The first uptrend, Major wave A, took the form of a detailed zigzag rallying to SPX 956. Major wave B was a bit shallow bottoming at SPX 869, and also took the form of a zigzag. The current uptrend, Major wave C, is also unfolding in a zigzag. Intermediate wave A topped at SPX 1018. This was followed by a decline to SPX 979 for Intermediate wave B. Intermediate wave C is currently underway. There are some interesting fibonacci relationships at current levels: at SPX 1036 Int. C = 0.382 Internediate A, and at SPX 1047 Major wave C = 0.618 Major A. Both levels are within the range of the OEW 1041 pivot. Also of note are the negative divergences appearing on the SPX/DOW/NDX/NAZ daily charts, and the NDX/NAZ weekly charts. Plus, as noted last week, China is in a downtrend, the Baltic Dry index has been downtrending for months, and Crude appears to be weakening. Probabilites favor a Primary wave B high right around the OEW 1041 pivot.

SHORT TERM: Support for the SPX remains at 1018 and then 990, with resistance at 1041 and then 1061. Short term momentum finished around neutral on friday. The short term count from the mid-August SPX 979 low appears to be five waves. This could complete Intermediate wave C at a 0.382 relationship to Intermediate wave A. We noted in the review that the market traded relatively flat on a closing basis all week. The last time this occurred was at the SPX 956 Intermediate wave A top during the week of June 8th. This was followed by a gap down on monday as Intermediate wave B was underway. When the SPX breaks the 1018 pivot we'll get more evidence that the top is in. Should the SPX hit 1049 or higher Intermediate wave C is likely extending to the next OEW pivot. We should get the answer this week.

FOREIGN MARKETS: The Asian markets were mixed on the week for an average gain of 1.6%. Downtrending China was -3.4%, and Hong Kong -0.5%.
The European markets were both higher (+1.1%) and still both uptrending.
The Commodity equity markets were mixed for an average gain of 0.55%. Canada was +1.4%, and Brazil -0.3%.

COMMODITIES. Bonds rallied 0.8% on the week. Bonds have rallied off the current downtrend low and are getting close to a reversal.
Crude dropped 1.6% on the week as the $75 level offered some strong resistance. An ending diagonal may have formed.
Gold did its usual down monday-rise the rest of the week routine and was +0.1% on the week. Silver continues to lead the uptrend.
The downtrending USD (+0.3%) continues to hold the 77+ area, but its rallies continue to be choppy. The Euro (-0.2%) remains in a choppy uptrend, while the uptrending Cad (-0.8%) displays some weakness, and the Yen (+0.9%) strengthens.

NEXT WEEK: Busy week ahead as we close out August and enter the last month of the US fiscal calendar. Monday kicks off the week with the Chicago PMI at 9:45. On tuesday we have ISM manufacturing, Construction spending and Auto "cash for clunker" sales. Wednesday, the ADP index, Productivity, Factory oders and the FOMC minutes. Then on thursday the usual weekly Jobless claims and ISM services. On friday, Non-farm payrolls, the Unemployment rate and the Average workweek data. Again the FED has nothing scheduled. Best to your week!

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

From confidence to caution - for the week before more interesting times to come: Raymond Merriman's preview for next week

These are the weekly preview comments of Raymond Merriman, which he always provides at his MMA Cycles site (included in the sites listed at right here):
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Comments for the Week Beginning August 31, 2009
by Raymond Merriman

Review and Preview

Two weeks ago I mentioned that we were entering a time band of one of the most intense geocosmic signatures for this year, August 10-26. Indeed it was remarkable, although more in terms of mundane astrology than financial astrology. In the geophysical realm, there were at least four tropical storms started in the Caribbean and Atlantic. There was a devastating typhoon in Taiwan, forest fires in California and earthquakes in Japan. In the geopolitical realm, there was great sadness as the second Kennedy in a month made a transition. This time it was Edward Kennedy, who some consider the most effective Senator in modern history. This is consistent with one of the principles of Jupiter conjunct Neptune, which can be a theme of great sadness and tears. In financial news, President Barack Obama announced his re-appointment of Federal Reserve Board Chair Ben Bernanke. In my opinion, this was one of the best decisions - and best timed decisions - made by the president so far. To have waited much longer, or to not reappoint Bernanke, would have caused great chaos in the markets at a time when they need assurance and consistency. Although President Obama ran on a campaign of “change,” there are some things that are not wise to change when the economy has experienced such a trauma. Tax increases for small businesses would be another area that should not be changed, in my opinion, until we start seeing signs meaningful employment growth – real signs, back to where we were a year ago. Yet being in the downside of the Saturn-Pluto cycle, history is not on my side regarding holding small business taxes steady until employment picks up substantially.

Even though stock markets of the world were not as volatile as I would have expected, given the aspects involving Mars, Jupiter, and Uranus, they were nonetheless significant. Many markets made a “major cycle” trough around the midpoint of the cluster, August 18. Then from that low, many stock indices made new yearly highs this past week. In Europe, the Netherlands AEX, British Financial Times, and Swiss SMI indices all reached their highest levels since last October on Friday. The German DAX did the same last Tuesday, three days before the others. Yet all of these indices closed with some troubling technical (momentum) readings.

In the Far East and Pacific Rim, the All Ordinaries of Australia and the NIFTY Index of India made new highs for this year on Friday. Japan’s Nikkei made a new high on Wednesday. But Hong Kong’s Hang Seng and the MICEX Composite of Russia did not make new yearly highs last week, for a case of intermarket bearish divergence.

In the United States, the Dow Jones Industrial Average and the NASDAQ Composite both made new highs for this year during the day on Friday. But both closed with similar negative technical signs. Whether these signs of weakness relate to the fact that next week is a pre-holiday market (Labor Day is the following Monday), or whether they are real signs of deterioration starting to build, remains to be seen. The signs aren’t so bearish that we should give an outright sell signal yet. But it’s coming.

In other markets, both Crude Oil and precious metals shot up last week. Crude soared to 75.00/barrel for the first time in 2009 last Tuesday. Both Gold and Silver shot up sharply on Friday during the “Sagittarius Factor,” when the Moon was in Sagittarius.

Short-Term Geocosmics

Last week was significant because three planets changed signs. Last Tuesday, Mercury ingressed into Libra and Mars into Cancer. On Wednesday, Venus moved into Leo. Such numerous sign changes can correlate with a change in investor psychology, and indeed technicals suggest that the psychology may be changing from confidence to caution, perhaps more in line with the Mars movement into Cancer. That same Mars transit happens to hit the natal Pluto, opposite Sun, in the Federal Reserve Board chart. And with Pluto in Capricorn on the FRB Sun opposite Pluto, it is quite significant that Obama announced his reappointment of the Fed chair last Tuesday. The announcement was in line with the nature of Mars as far as timing is concerned. But there may be more problems than meets the eye with this decision, for they (Mars and Pluto) indicate a power play yet to come involving the Federal Reserve Board.

There are no major transits in effect this week that have a high correlation to market reversals. The next series starts on September 6 when Mercury again goes retrograde. It will last through September 29, and this one should be a stunner, for it happens with the third (of five) passages of Saturn in opposition to Uranus (September 15). That will also coincide with the one-year anniversary of the economic panic.

Longer-Term Thoughts

On September 15, Saturn will make its third opposition to Uranus. The first two were noteworthy. The first occurred on November 4, 2008 as the United States elected a new president. The stock market rallied to a major cycle crest that day. The second passage was on February 5, 2009, and again the U.S. stock market rallied to a major cycle crest. In both cases, the DJIA then dropped approximately 2000 points within the next 3-4 weeks. That doesn’t mean the pattern will repeat again, but traders need to be aware that it is possible.

From the point of view of Financial Astrology, we note that this one, or the fifth and final passage next July 26, may be the most important of all five passages, based on what else is happening at the time. In the case of the one coming up September 15, we note that the new moon of September 17-18 will conjunct Saturn, which is just the opposite of last year when it was a full moon occurring on this major geocosmic signature. The new moon is different than the full moon. Whereas the full moon may coincide with over-excitement and even panic in this case, the new moon may coincide with a sense of building something constructive and long lasting. But what is it that is being built? For after all, Mercury will also be retrograde during this full moon and third passage. What kinds of decisions are being made? Last year, after the September 15 full moon and start of the crisis, Mercury went retrograde and the TARP programs were passed by Congress and the White House, and then had to be altered over and over again. In this respect, government leaders need to be careful again about rushing to decisions before their time is ripe. One would think with the new moon and Saturn in Virgo, sign of health, that the issue would be health care and/or insurance reform proposals. I don’t think many people disagree with the idea that reform is needed (other than insurance companies and their lobbyists). But there is a major problem with creating a sense of understanding as to the “best way” to go about this. And the danger is that the White House and Congress may force passage of a bill before the majority of the population truly understands it.

If I were to make one suggestion at this time to the White House and Congress, it would be to take that time necessary to make sure the general public is on board. With Uranus in Pisces and in mutual reception with Jupiter and Neptune in Aquarius, the majority wants this reform and they want it this year. But they also want to understand it. And to force passage of this initiative just because the numbers are there, under Mercury retrograde and a new moon conjunct Saturn in opposition to Uranus, will likely create a whole new problem involving “trust with the public.” If not developed and passed with this consideration in mind, be prepared for another Saturn-Uranus crisis. It may or may not be reflected immediately in the world equity markets, although it could, because these chart patterns look a lot like August-October 1987. The danger may be more akin to societal disturbances in the relationship between the masses (Uranus) and the government (Saturn). It is quite possible that the next few weeks will determine the success of the Obama first term. After all, this opposition and new moon are occurring right near his natal Mars. Saturn on one’s Mars works best at building something with great attention paid to detail, tolerance, and patience. It fails when it tries to force something before it is ready, and in that case it often results in loss – loss of the battle or loss of one’s stature. Make it or break it – that is a symbolism for Saturn and Uranus in hard aspect. But make it or break it right, with support of others, if possible.

Announcements

It’s that time of the year again! Pre-publication orders for next year’s annual Forecast 2010 Book can now be placed. And once again there will be a discount to those who order before October 15. The retail price of the Forecast 2010 Book will be $55.00 this year. However, for orders placed before October 15, the special pre-publication rate is $45.00 (plus postage). Although 2009 is only approximately half over, the 2009 book has already been one the most accurate of all that have been written in the past 33 years. A list of many of those forecasts outlined in the 2009 book that have already come to pass is listed on our web site at www.mmacycles.com. And the critical reversal dates given for at least three of the markets have been 100% so far (Stocks, Currencies, precious metals), including the high and low of the year in many markets. As always, the book is published and mailed out around December 15. Your pre-order helps us determine how many to print. Please note that the Forecast books have sold out by the end of February in three of the past 4 years. So, order now and save big bucks, and also make sure you reserve a copy before they sell out! Once they are gone, they are gone. There are no second printings, although you can probably pick up “out of print” copies on various web sites for three times the cost afterwards. This year we are pleased to announce that you may order the Forecast 2010 book in five other languages besides English, as follows: Japanese (http://merriman.jp), Dutch (www.markettiming.nl), Spanish (www.mmacycles-spanish.com), German (www.mma-europe.ch), in Serbian (www.mma-balkan.com), and in Russian at www.urania.ru. These same sites also offer our weekly column in their respective languages.

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

I am oftentimes asked for recommendations of a money manager who uses my methods, since I won’t manage other people’s money. The thing is, almost all money managers I know use their own systems. But many subscribe to my services and share my thoughts about the future of the economy, various financial markets, and how to position one’s portfolio along these lines. One money manager who subscribes to our services that I would suggest for those looking to structure a longer-term portfolio, such as a retirement account, is Duke O’Neill of Boulder, Colorado. He can be reached at dukeoneil1@gmail.com, or 1-(303) 817-8263. For those looking for a professional trader of commodity and futures contract might consider Ted Lee Fisher at ted.fisher@comcast.net. Ted is a legend in financial futures and has a seat on the CME. Both are very knowledgeable of the tools I use, of the way I am looking at markets, and yet each makes their own decisions as to exactly when to enter and exit any market.

Our weekly comments can now be read in Russian at www.urania.ru, Japanese (http://merriman.jp), Serbian (www.mma-balkan.com), Spanish (www.mmacycles-spanish.com), German (www.mma-europe.ch), French www.lecochonsideral.info, and Dutch at (www.markettiming.nl).

We are pleased to announce our new official Japanese web site at http://merriman.jp. Here you can read our free weekly report in Japanese every week. You can purchase several of our books and subscription reports in Japanese, including or new weekly Gold report, Cash Currencies report, and both the MMA Cycles and MMA Japanese Markets Cycles reports. If you read Japanese, please feel free to check out this new site, created by Toshi Nippou Ltd. of Tokyo.

We are also pleased to announce the formation of our new Weekly Cash Currencies Report in English, to start the first week of June 2009. This report will cover our weekly analysis of cash Euro Currency, the Dollar-Yen, and the Euro-Dollar markets. For further in formation on this new subscription report, please visit www.mmacycles.com, and look under SERVICES.

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

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

Disclaimer and statement of purpose:
The purpose of this column is not to predict the future movement of various financial markets. However, that is the purpose of the MMA (Merriman Market Analyst) subscription services. This column is not a subscription service. It is a free service, except in those cases where a fee may be assessed to cover the cost of translating this column from English into a non-English language.

This weekly report is written with the intent to educate the reader on the relationship between astrological factors and collective human activities as they are happening. In this regard, this report will oftentimes report what happened in various stock and financial markets throughout the world in the past week, and discuss that movement in light of the geocosmic signatures that were in effect. It will then identify the geocosmic factors that will be in effect in the next week, or even month, or even years, and the author’s understanding of how these signatures will likely affect human activity in the times to come. The author (Merriman) will do this from a perspective of a cycle’s analyst looking at the military, political, economic, and even financial markets of the world.

It is possible that some forecasts will be made based on these factors. However, the primary goal is to both educate and alert the reader as to the psychological climate we are in, from an astrological perspective. The hope is that it will help the reader understand these psychological dynamics that underlie (or coincide with) the news events and hence financial markets of the day.

No guarantee as to the accuracy of this report is being made here. Any decisions in financial markets are solely the responsibility of the reader, and neither the author nor the publishers assume any responsibility at all for those individual decisions. Reader should understand that futures and options trading are considered high risk.

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Please note: This is not the same as our service titled
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Ways to think about the time and price of this rally

Lots of people are trying to find previous market patterns to compare today's bear-market rally, especially now that we're well above the January highs. The most common comparison is to the Great Depression era. Personally I think the better comparison is to bear markets around the 1830-1850 time frame, it's just not as convenient to measure! By the way, it'll be 6 months from the lows on September 6-9, right around the Labor Day holiday weekend. Holidays often have some bullish bias, and I've really got a feeling with the current political climate that "Labor Day" honoring workers should fit with that this year. The Fibonacci 90 days off the low was a relative high in early June. After early July with the low July 8, now we're approaching 180 days - 6 months. Which is also close to 9/9/09, and if you want to get creepy with numbers, "999" looks like an upside-down 666 .... hmmm (LOL?). Those interested in similar numbers ideas should also take a look at the "Timing ideas" I posted at UBTNB3 (links at right).

Meantime, "Chart of the Day has issued a look at time and price of the rally, so let's take a look at that, below:

Chart of the Day - Depression-Era Bear Market Rallies
August 28, 2009

For some perspective on the current stock market rally and how it compares the 1929-1932 bear market (which also included bank failures, bankruptcies, severe stock market declines, etc.), today's chart illustrates the duration (calendar days) and magnitude (percent gain) of all significant Dow rallies that occurred during the 1929-1932 bear market (solid blue dots). For example, the bear market rally that began in November 1929 lasted 155 calendar days and resulted in a gain of 48%. As today's chart illustrates, the duration of the current Dow rally (hollow blue dot labeled you are here) is longer than any that occurred during the 1929-1932 bear market. As for magnitude, only the November 1929 bear market rally resulted in a better performance than what has occurred during the current rally to date.

Chart of the Day is provided without warranty of any kind and accepts no responsibility for its accuracy or for any consequences of its use. Journalists and bloggers may post the above 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.

ChartsEdge (US equities) map for 8/28

Market Map for Aug28
Posted: August 27th, 2009 | Author: Mike Korell |
Filed under: One-Day Market Map | »

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Thanks once again, Mike and ChartsEdge!
Folks - we may not get an answer on wave pattern tomorrow. To a reader who commented about the odds of a down day Friday - that's a good eye, I just tend to place less reliance on that last day, and further I tend to go more by the daily map as the week progresses. I also find Fridays often finsh with some uncertainty about the exact Elliott Wave pattern. But this can be an exception!

The ChartsEdge forecasts are normally to be used more for timng than price level. But sure, a cycle low will be a low. But does it have to be part of a new wave down, saying wave 5 = B was done already? Or could it be a second wave of that last fifth wave? I do think the movement from Tony's last intermediate "b" looks a little small to be finished already. It can be, as Tony has provisionally indicated ... But it doesn't have to be.

Here's the deal: it depends on your trading timeframe and style, how you play it. Do you really need to short from the absolute top tick, if you're playing for a swing that may drop under the March lows? If you tried to short from 1037, you're doing fine unless it decides to go up in a 3 of 5 above 1041, maybe even to 1061. It may be better to wait for confirmation, which at this time looks like a failure of 1018 would be needed for that. Of course it's up to you!

So as always ... careful out there, and happy market navigating!

Equities markets tenacious for the typically bullish end-month time frame

Was this morning just a rehearsal for what we'll see next month? Despite the scary poke under 1018 in the S&P 500 (SPX), that level managed to give support for a move into the upper range of today and the two prior days. If this wasn't just a pullback up before rolling down again, it leave open the possibility of that fifth wave I'm thinkng the index still has ahead. It would fit with the tendency for a low late in a month that fund managers buy, readying for the new money coming in at the early part of the next month. So we'll see!

Not that I'm a raving bull. Whenever this ending part of the rally completes, I'm expecting a very significant selloff.

Volumes don't scream a sell pattern - yet - so a continuation remains possible even with negative divergence creeping in. As for indicators, today I'm showing the bullish percent for the SPX. It's still quite high! But it should be considered overbought. There are indicators on it too, which look like negative divergence to me.

ChartsEdge (US equities) map for 8/27

Market Map for Aug27
Posted: August 26th, 2009 | Author: Mike Korell |
Filed under: One-Day Market Map | »

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Thanks once again, Mike and ChartsEdge! Folks - if this all works as things seem to be shaping up, we should see another good movement up as wave 5. It's even possible we've already seen its own first small first wave, but a little difficult to be certain amongst the chop of the recent consolidation. We can be thinking in terms of a good third wave within the wave 5, along with numbers like Tony Caldaro's OEW 1041 pivot and Andre Gratian independently has projections in this area too. Support ideally to be maintained at 1022, and see if it can scale 1027, 1032, 1037 and a "brass ring" at 1042 ...! Not that we can expect this in one day - especially with headwinds like divergence from a possibly-strengthening dollar and VIX. And the banking index, and even the QQQQ's, possibly having already done all they can to contribute to the effort.

So as always, careful out there, and happy market navigating!

Public service info, pass the word: Helping families get untangled from overwhelming debt

Folks - there's a big issue facing more and more families as they grapple with costs for family members due to medical bills, aging parents needing help, etc. Please pass the word about these resources to help. "Now" is always the best time for struggling families to reach out and get help:

Families facing overwhelming debts from credit cards and other forms of debt have an alternative to mere interest-rate reduction, or bankruptcy. There are companies that really help reduce the total amounts owed. Sometimes families get into trouble because they're trying to help other family members, but the debt spreads; or other reasons make it imperative to get help. This article at Caring.com gives info and a link to find one of these good companies:
Is Debt Becoming Contagious in Your Family? Five Debt Triggers -- One Simple Solution at Caring.com. Below is a quote from this article:

Here are some of the common problems entangling families nowadays:

1. Medical bills. Who wouldn't help a family member out in a health crisis? But the need can be so great that it sinks everyone.

2. Mortgage payments. When one family member is about to lose a house, it's natural for another to step in. But co-signing loans or loaning money to make payments can make one disaster into two.

3. Property taxes. In my family this was what tipped the scales; my sister had to borrow $20,000 to cover my mother's unpaid property taxes and keep her house off the county auction block. Luckily, this was before the downturn, and my mother was eventually able to pay her back by refinancing her house.

4. Credit card debt. While this type of debt is individual, we've heard from many Caring.com members about parents deeply in debt and adult children wondering how to help them.

5. Gambling debts. Lonely older people are vulnerable to casino policies that can rapidly turn small debts into big ones.

If you're in this situation, I'm hoping that reading this list is making you feel better. You're not alone, and it's important not to let shame keep you from getting help.

I echo that sentiment. So I urge you to click and read the article and follow the link to find help. Share this info with others needing help, too. Do it now!

PS - Caring.com is a great resource for families with caregiving issues around aging parents, disabled family members, and the many related concerns.

Article: Doug Kass has turned bearish after having turned bullish in March

Here's a new summary (8/26/09) of Doug Kass' turn to the bear camp and his reasons why. As the summary states, you'll want to read Kass' full article ... I'll just note there's news tonight from Investors Intelligence that bears are lowest since 2007, and bulls are highest since December 2007! Well, I'll also point out that it remains possible for another 5th-wave push up - it's just as I said in my earlier post, no guarantees so this is a time to be very careful.

His reasons include the sentiment, as well as his view of the market being overbought. It's a good article so do check it out.

Doug Kass writes at The Street, and the summary with link below to the full article, is from Ockham / WallStreetPit.com:

"Anyone who reads TheStreet.com (NASDAQ:TSCM) with any regularity is familiar with Doug Kass. Mr. Kass is founder and president of Seabreeze Partners Management, and is a well known and respected financial market pundit. He was right on the money with his contrary opinion that the market was due for a rebound in March, and he even placed his S&P 500 price target at 1050. With Wednesday trading in the history books, the S&P 500 stands at 1028.12, which is certainly an impressive 54% rally from the trough. Its been a nice ride and now the market and the economy are in a completely different place more than five months after Kass' call. Accordingly, Kass is updating his outlook on the stock market based on the new environment. We have reprinted some of his article, but it is worth reading the entire piece."

A March Bull Turns Bearish for the Long Haul

S&P 500 continued consolidation before trying for another straw on the camel's back

Equities moved well (and promptly) as indicated by today's ChartsEdge map (thanks again, Mike and ChartsEdge!). And a nice little bonus that the low was at 1022, the high at 1032 - looking like that "string" of numbers like that, still "works"! We'll see if that can lead the SPX to 1042 to really ring the bell on Tony Caldaro's 1041 pivot, and I believe Andre Gratian has projection numbers in that neighborhood; if the strength can manage it. I'm leaning to the view that this consolidation paves the way for a small-level fifth-wave move up. Assuming that's right, there could be a good move up even overnight and tomorrow (which the ChartsEdge weekly forecast suggested too). But it's also possible for another dig to start from lower tomorrow morning, and then have the fifth-wave movement zigzagging up. It's also possible to see a fifth-wave move up become rather choppy.

The other reason to be very, very cautious is what's at stake. This move up is most likely topping out the whole bear-market rally from the March lows. It can extend to reach much higher, or it can theoretically be finished already. I kinda think we'll get a fifth-wave push higher. But no guarantees - so it's getting rather more exciting, really! For what it's worth, today the QQQQ's poked under yesterday's low. Yesterday being the first day the QQQQ's spent the whole day above their 50% retrace level of 39.82. We'll see if this becomes more significant, because it can be a clue that this retrace level can still affect the market.

Under the hourly SPX chart below, I've added my monthly chart of the Transports ($TRAN), mainly because I like to keep an eye on the big picture including its Fibonacci levels. It certainly does look like a large zigzag - including, that it can be topping out the B of a large ABC zigzag. It's a very sobering scenario, if that's the way it plays.

And now US Treasuries prices are supposed to drop again - right?!

unlike the corporate bonds represented by LQD (which I've commented on from time to time including yesterday here), US Treasuries have floundered in consolidation since meeting our symmetry targets. Some are now describing this as a triangle, and saying we should go long or short depending how it breaks out from this. I'm not convinced it's a classic or true Elliott Wave triangle, but without debating that, it's a pretty useful construct if you think flexibly in term of following it up OR down. As I read the indicators on the TLT and $TNX charts below, it's definitely possible that Treasuries will wind up moving higher, even if it's just a continued bear-rally that only makes a higher retracement back to the late 2008 highs.

ChartsEdge (US equities) map for 8/26

Market Map for Aug26
Posted: August 25th, 2009 | Author: Mike Korell |
Filed under: One-Day Market Map | »

Oil's new high on lower momentum sent it down again but support not broken (yet)

Oil dropped after tagging OPEC's desired $75 price, and you can see the lower momentum in the daily chart indicators. Below are my $WTIC chart, showing it remains above the uptrend line. Also Tony Caldaro's chart of it (thanks Tony!), which even suggests a wedge fifth wave. I'm thinking that if the wedge is right, it can want another push up - which could also occur with the additional push I'm thinking for the equities indices.

Falling under the support trendline would signal that something else is happening!

U.S. Dollar down, down, down ... until it isn't?!

So Bernanke's acceptance speech today said the Fed's goal is to helpmake the economy stable - is that supposed to include further dollar weakening? Well maybe, as all the activities inside the Beltway nowadays seem designed to grind the dollar lower! Check the Bernanke bill image- I guess the Fed has (or needs) 4 million of those for its balance sheet, if I understand today's news headlines correctly.

Below is my daily chart of the dollar index ($USD). It's worked its way essentially sideways, indicating it's inching closer to up or out. No new low here ... yet! As a trader I've got to say, let's see either way. I'm tilting to the idea it remains above the low (that went under 77.92). But if it loses support then it might be right to buy gold and ask questions later ...!

Equities consolidate before strong possibility of another zag higher in this zigzag rally

Equities followed the ChartsEdge map well, even though it happened quicker! Then at the end of the day, there wasn't enough power for the push up effort to make progress. Tony Caldaro's update at his OEW website points out that price has now done enough for the S&P 500 to satisfy his 1041 pivot; I've posted copies of his SPX daily and hourly charts below (thanks Tony!). You can see the momentum decelerating. You can even see what looks like a "bear kiss" looming in the daily chart's MACD (though it can be invalidated if it crosses back up again). Tony also points out that price can try another push up, but that if price gets beyond 1048 (meaning 1049 and above) then it points toward his higher pivot which I think is 1061. As for myself - I'm thinking today's movement is very consistent with consolidating before another push up to really complete this move. Also, that 1018 most likely should provide support until this move is done.

Previously we had something I called a "string" with numbers like 977, 982, 987, 992 ... Those types of numbers seem somewhat still working although they seem now more like 1018, 1023, 1028, 1033. But I don't want to make much of this because I do think it's changing now. We need to focus closely on the wave pattern so long as above 1018 and finishing out a fifth wave. It could finish fairly soon, or could extend - indicators strength will clue us in for that.

Recently I'd made a post saying there was a sell signal. There was, when the McClellan Oscillator went under zero. Then it came back up again ... It's still tracing out another triangular formation. The Summation Index isn't strong, but hasn't really rolled down obviously. Also I'm posting the NYSE advance/decline (cumulative), which has negative divergence in its own StochRSI.

Is another push up to another new high guaranteed? No, but I've got to say, it doesn't "look right" to be finished yet. As for those still perplexed by this rally, know this - as Tony has explained, this is a "zigzag" which is by nature a very sharp movement. It's sharp while it's moving. But when it's done, it's done - so let's tread increasingly carefully!

ChartsEdge (US equities) map for 8/25

Market Map for Aug25
Posted: August 25th, 2009 | Author: Mike Korell |
Filed under: One-Day Market Map | »

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Thanks once again, Mike and ChartsEdge!

Folks, now we'll see if today provides the kind of further respite to equities to work out the small wave 4 that Tony's thinking, in preparation for another move up for the small wave 5. Could that small 4th wave finish today? My sense is that it could. That matters less if you're daytrading. For swings, we'll have to see if the wave 4 can finish out and even all the first little "wavelet" push for the wave 5 up with a possible rise this afternon. (Assuming we get a rise like that, some will be talking about a "stick save" this afternoon - no harm in that!). And I know that Andre Gratian has similar projections, as he proves his subscribers intraday with his frequent emails and intraday charts of the SPX.

If this does all lead to the markets rolling over again whenever the intermediate c is done to also finish major c and primary B, then I almost feel sorry for Bernanke to be facing re-appointment hearings in Congress and the public arena with markets slipping again ...

But first things first - we've got to see how any further testing upward through the next week into early September does, vis-a-vis the numbers around 1035, 1037, 1041/1042; and if it can manage, 1053/1060. More immediate, if it can work out a small 4th wave consolidation or correction today, above 1018 where there's support. So as always, careful out there, and happy market navigating!

Corporate bonds ETF, LQD, continues marching higher - for now

Buyers still like corporate bonds. Who can blame then when public issuers are giving more concerns? Today, Moody's revised downward the rating/outlook for the Commonwealth (state) of Pennsylvania from stable, to negative. Besides, the LQD exchange-traded fund has been holding support and marching up along an upretend channel. I've got one projection to $105/106, and another from $108 to $110. Because it's getting so close to these numbers, it's a good idea to keep a watch on. The indicators confirm the waning of momentum.

Gold keeping bugs, bulls and bears guessing as long as possible, but running out of room even more

Some have started calling gold in a triangle and you can see why. It's been moving basically sideways with a contracting range. It's reasonable to expect a good movement whenever it's ready to break out. Frankly (and despite ChartsEdge's forecast showing a huge rise this week), as my readers know, I've been maintaining a skeptical view since the target met at 1007. If that was the B wave I'm thinking it is, then C down still awaits - nothing to hold long. The bullish view is that it's readying for a third wave up - nothing to short, so we'll keep an eye on either way!

Below are my daily and weekly charts of gold, and a daily chart of the $HUI gold bugs index. The HUI looks a little weaker; otherwise, the indicators really do look like a triangle. (Sorry about the weekly, I need to move those annotations away from the recent price candle bars!)