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Monday, October 21, 2013

Monday, 10/21/13 update




Here's another long term count that hasn't yet been considered.  It has the correction that ended on Oct 9 as Major W4 of Primary W III, with Major W5 in progress and headed for a significant top.  The problem with this count is the same as that of labeling the August correction as Intermediate W4 of Major W3 - they both are much more shallow and short lived than the associated 2nd waves in their respective series.  But there still is a sense here of a major top forming, at least for this analyst.  Just looking at the chart, it's obvious that upward momentum is receding as compared to the trajectory of the prior two years.  So this count is worth considering.

Saturday, October 19, 2013

Saturday, 10/19/13 update

Let's recap the last couple of weeks.

First, the Obama administration announced the selection of Janet Yellen as the replacement for Ben Bernanke as the chair of the Federal Reserve.  She is a Keynesian and is known as a monetary dove.  Really, all you need to know about her and what her program for the Fed is likely to look like can be inferred from this excerpt from an article about her that appeared in the NY Times:
"As the central bank’s vice chair since 2010, she has pressed for stronger measures to reduce unemployment, battling the doubts of other Fed officials about the value of continuing to expand the Fed’s enormous stimulus campaign."

Second, after a lot of flying feathers and consternation from Congress and the President, our government has the green light to borrow (and thus spend) another TRILLION dollars.  And that's a trillion dollars beyond the 3 trillion dollars or so that it already collects in taxes.  That's Trillion with a T!!

So naturally the Wall Street reaction is a strong rally.  You see, the American stock market is a perpetual motion money machine that will NEVER AGAIN fail.  If I seem cynical, it's because I am.  You see, I have this (apparently) bad habit of thinking through the situation and seeking to understand what it's eventual consequences are likely to be.  And I believe that those consequences are likely to be quite negative.  But what needs to be recognized is that those consequences might take some time to develop.  So for right now the strength in equities makes a certain amount of sense, especially if your time frame is short term.

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There are still two possibilities in the short term following the highs established at the Sep 19 top. Those are whether that high represents the top of Minor W1 of Inter W5 (Alternate #1 below) or the top of Inter W5 itself (Alternate #2).  If it's the top of Minor W1 then Minor W2, W3, W4 and W5 need to occur.  If it's the top of Inter W5 that would also mark the top of Major W3 and some serious bear market activity should start to develop.

The pattern from the Sep 19 high into the Oct 9 low can be counted as a 3 wave move into that 1640.00 low.  Depending on which alternate is in play, that low is either the bottom of Minor W2 with Minor W3 of Intermediate W5 now in progress, OR it is the low for Intermediate Wave "a" of Major W4 with Inter Wave "b" now in progress.  At this point the odds favor the possibility that Inter W5 is still in progress based on the strong and clearly impulsive action off the 1640.00 low of Oct 9.  That action looks much more like what would be expected of a 3rd wave in an impulsive series rather than a part of a "b" wave in a correction.  In addition, the rally since the Oct 9 low has now carried above the highs of Sep 19, so if a Major W4 is in progress it has to be an irregular flat.  In that context a practical limit for the rally that's under way would be the point where the rally travels a distance that is 1.236 times the travel of the "a" leg of Major W4.  That point is at ES 1747.25 - beyond that point and it's almost certain that Alternate #2 can be ruled out.

Alternate #1


Alternate #2

  

Wednesday, October 16, 2013

Wednesday, 10/16/13 update

It's fall in and I'm in the apple business, our main gig is apple processing but I do have a piece of actual orchard, so time has been more limited than usual.  Thus I haven't been studying markets as closely as usual, in fact I haven't had any trades on for a good two weeks, not enough hours in the day to do the right job there.
But with that in mind, the time I have spent looking at equities has been troubling - this rally since last Wednesday's lows has felt odd.  Looking at the technicals there is nothing that really stands out, so I can't point at anything in particular that would substantiate the sense of hollowness, but it just doesn't feel right.
And in the ES it's notable that the price pattern since Sunday night looks a lot more like a couple of 3 leg sequences than fives.  So the following chart may be what is unfolding: a "b" wave of Intermediate degree stabbing towards the all time highs of Sep 19.  And that "b" wave is in it's "c" leg which is a developing ending diagonal.  This of course would be an Intermediate "b" wave in an ongoing correction and would lead to a strong and impulsive "c" wave sell off.


Of course the pattern since last Wednesday's lows could just as easily morph into a complete 5 wave impulse to it's eventual top.  So this is presented only as a possibility.

Sunday, October 13, 2013

Sunday, 10/13/13 update

BEAR FEVER - A psychological condition common in futures and options traders, especially those involved in equity markets.  It is characterized by an underlying strong bias towards favoring a bearish point of view.  It is most harmful when the individual afflicted with this condition is unaware of it's existence.  It is theorized that it's causal impetus is the result of a hugely successful bearish trade early in the traders career, which can be an exhilarating experience due to the speed with which bear markets tend to move as compared to bull markets.  The deleterious effects of this condition are numerous.  A partial list of those would include the following:
- A tendency to establish larger positions than is prudent in a possible bear market situation;
- A tendency to fail to recognize the end of a correction in a timely fashion, leading to holding a bear position longer than it should be held;
- A tendency to close bullish positions earlier than necessary on the belief that a big crash is right around the corner;
...............and so on......................

Therapy for this condition can be effective if the individual can be made to recognize that the community of futures and options traders is relatively small in number and financial resources as compared to the quantity and resources of all the other market participants, and that those other market participants have a strong commitment to a never ending bull market. 

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The series from the Sep 19th high into last Wednesday's low looks like 3 waves, with a nice impulse at the beginning and end but a whole lot of choppy and indecisive market action in between.  So very much a corrective sequence.

For intermediate term purposes the question posed a few weeks ago remains open: was the Sep 19 top Minute W1 of Intermediate W5 of Major W3 with Minor W2, W3, W4 & W5 yet to come as in Alternate #1 below, or was it the top of of Inter W5 and thus Major W3 as in Alternate #2?  If it's Alternate #1 then it's pretty definite that we saw the bottom of Minor W2 this week and thus Minor W3 is now in progress,  if it's Alternate #2 then last week's low was likely the end of Intermediate Wave "a" of Major W4 with a lot more corrective activity in the wings.  Right now the nod has to be given to Alternate #1 given the strong and impulsive nature of the move up off the 1640.00 low - much more what would be expected in a 3rd wave impulse than a "b" wave in an ongoing correction.  However, the news out of Washington this weekend would seem to portend a strong gap down open this evening, so if nothing else it will be interesting.  

  Alternate #1




 Alternate #2

Tuesday, October 8, 2013

Tuesday, 10/8/13 update

In technical analysis, nothing is 100%, and neither is Al's Daily Indicator.  The signal from Sep 30 was obviously wrong, and the indicator has now rolled over and is heading back below 1.000 (reading at today's close is 1.002).  Historically, the best signals from this indicator have occurred when it bottoms below .500, but even there it misses about 1 in 5 times.

 
The bearish alternate from last weekend's post is obviously in play.  Possible EW count looks like this on the short term:


Long term view:


Saturday, October 5, 2013

Saturday, 10/5/13 update

Last weekends short term EW count and forecast was obviously wrong.  Drastically so, I'll be the first to admit.  But the observation upon which that count was based has not changed, i.e. outside of the first few days off the Sep 19 top the action has been much more corrective looking than impulsive.  As of Friday close a case can be made for a double zig-zag count into the ES 1663.25 low of Thursday, which could well be the end of a corrective sequence from the Sep 19 ATH.   The action since then has an impulsive look to it, which is consistent with what would be expected if a new rally sequence has commenced.  Chart looks like this:


So is Lucy (powers that be) gonna sucker Charlie Brown (bears) once again into a failed kickoff?  Could well be - can't help but think that if Congress manages to resolve the budget circus then the market is liable to launch on a tide of exuberance.  Temporarily at least - debt limit circus standing close by in the wings.  Hope Charlie is wearing pads in the rear of his pants.

However, there is hope for the bears - a bearish ST alternate here has a 5 wave sequence bottoming at the Sep 30 lows with a flat in progress since then.  Additionally, that flat is currently in it's "c" leg, which should be a 5 wave impulse up, also consistent with what would be expected:


A possible target for that "c" leg is at the .50 retrace of the down impulse off the ATH.  That level is at ES 1696.75.

Friday, October 4, 2013

Friday, 10/4/13 2nd update

Confirmed buy signal on Al's Daily Indicator today with a spike above the 1.000 level (see Tuesday update).  So is this a good signal? Like anything else involving markets, this is a matter of probabilities (odds) - nothing is 100%.  In this case it's my opinion that the odds are fairly decent - the action off the Sep 19 ATH looks more corrective than the start of a major bear market.

 

Friday, 10/4/13 update

Still not able to update sidebar


ES (E mini S&P)
Hourly - DOWN f/Sep 19 - signal Sep 23
new Hourly signal UP f/Oct 3 - signal Oct 4
Daily - UP f/Jun 24 - signal Jul 5
EUR/US$
Hourly - UP f/Sep 24 - signal Sep 25
Daily - UP f/Jul 9 - signal Jul 11
AUD/US$
Hourly - UP f/Sep 29 - signal Sep 30
Daily - UP f/Aug 5 - signal Sep 6
GOLD
Hourly - DOWN f/Aug 28 - signal Aug 30
Daily - DOWN f/Aug 28 - signal Sep 12
SILVER
Hourly - DOWN f/Aug 28 - signal Aug 29
Daily - DOWN f/Aug 28 - signal Sep 12

Tuesday, October 1, 2013

Tuesday, 10/1/13 2nd update

Preliminary buy signal on Al's Daily Indicator today with a bounce up off a low reading of .812 from yesterday.  A preliminary buy occurs on any move up off a low reading below 1.000, buy is confirmed with a spike above the 1.000 level.