Pause is Suspect!!!

As I have been discussing all of August, a pause between 1040 and 1080 on the S&P would be suspect. Not too surprising then that we would gap down to 1040 on a Friday morning and then see a ramp job on little volume into the close.

We are at another decision point. Monday and Tuesday should define where we are at. If we head up I will be forced to close my shorts. If we head down, I will be a part of a very suprising and damaging 3 of 3 down. I am shockingly on the fence.

Hindenburg Omen Confirmed!!!

If wikipedia has a definition, it must be true. :P


http://en.wikipedia.org/wiki/Hindenburg_Omen


I will let you do your own reading on that. It is quite the mouthful.







Here are my two Elliott Wave count preferences. I am suspect in this 1040 t 1080 range and can't tell you much until we get out of it. No sense in micro managing this count here, as to be prooved a fool. The sell off has been considerably weak so far, which makes me quite reserved. Another move up, with a drop in the VIX to lower put option prices would be fantastic. And from a historical perspective, owning October Puts would definitely be in my favor. ;) We all know it gets very interesting when the real money is done with their vacations.

Winner Winner, Chicken Dinner

I was going to wait until we rolled over in the market before posting again. FOMC today provided a pump, but it was very much weaker than I had expected. I am hoping we rise tomorrow, Thursday, and Friday to my 1140 target. Over night futures and EUR/JPY tell me that we may roll over early, and I wont be fully loaded. QQ



The real reason for my post generates from www.Seattlebubble.com :



We just had the lowest July closing sales in 10 years. I am sure someone will try to paint this as a good thing, but it is really not. I will be looking for a home in December or January, but I am a little scared to grab a falling knife. If State layoffs start rolling around, I just might not be willing to grab.

On Schedule

We appear to be on schedule for the 1140 push. Options expiration is this week and will probably expire most Put options worthless........yet again. I think everyone knows what is around the corner, but making money has been quite difficult.

Once again I am posting hourly charts over a 90 day period. I do chart on smaller time frames, but posting the smaller time frames confuses most readers. If you look at the chart from the start of July, you can get a feel for the "energy" involved in every swing. These later swings are dissipating the last of the energy for this run.

The last of the push up will probably occur this week. I have two counts at the moment. One is an Ending Diagonal, and the other is a standard ABC corrective wave. Real confirmation of these counts only exists on the bottom trendline breaks. When this pattern completes it should be quite obvious.

I will hesitate in the 1040 to 1080 range because another count could turn this move from the July bottom into a zig-zag. I will be buying September Puts on Triple leveraged Bulls this week. I am hoping to get them cheap with the spike into the 1140 range. My friend is looking for SPY puts with a strike of $110 in the $0.50 area, near the spike. A falling VIX into Monday and Tuesday should make for some good options deals.

Some people ask why I am so Bearish. One reason really, its our insoluable interest problem. Too much debt and not enough income. We are at or nearing the location where we can't even attack the principle of our debt. The banks are leveraged to the hilt with depreciating assets, thus increasing their leverage arms and forcing the collapse of available credit. (residential and commercial real estate)

If you believe our Government creates our money, you are very wrong. Our banks do. They create money out of thin air, using debt, and the "promise to repay." If you care to understand the truth, please watch the 5 video part series:

http://www.youtube.com/watch?v=NiENaQMwzDY

Yep, too good to be true

There are so many possible counts right now, its clogging up my computer. One things is certain: Earnings are looking pretty bleak.

I think the Beast of all Beasts might just be around the corner. I show very strong resistance at the 1140 mark. This level also counts for a 61.8% fib retracement from the top. Putting an intermediate high there would also create pretty nice shoulder to short into. The swings are quite large, considering we are going sideways. This tells me there is still a great deal of uncertainty in the market. It also tells me that the fire escape door could be very very small. The Big Red trendline on the S&P futures has held for 3 months now.

If 1140 really does finish up Gold B, this move down will be one for the record books. If the building doesnt burn down after the turn, we probably have 1 more month of sideways movement. (I can't be certain of the degree of this zig-zag up we are in right now)

Too Easy?

I am pretty confident the move last Friday on Opex confirmed the intermediate top in the S&P. This count appears a little too obvious to me, which makes me nervous. If this count is correct we should see S&P 1000 by the end of next week.




Gold appears to be moving as expected too. I expect 1130 an ounce by the end of next week.



S&P Futures continue to behave reasonably in their multi month channel.

Death to Bonds???

The S&P is still holding 1100, so I will not be posting any micro EW counts until we get a trendline confirmation break to the downside.

What I will do tonight is borrow someone else's work. Someone named Daneric posted a very nice technical chart of the 30 year treasury bond, for the last 20 years. http://danericselliottwaves.blogspot.com/


He simply, elegantly, and perfectly states, "This one chart holds the entire world's Ponzi system in place." This statement is soooo incredibly true. A break of this Bond Bull market will force interest rates to rise, will dry up the last available credit liquidity, and will crush all.

Well said Daneric.

Beware the Ides of July?

Earnings season is upon us again. This should definitely add to the volatility fun in the next couple of weeks.

The S&P fell into the 4th of July weekend as expected, with one exception. The move down was not a 5-wave pattern, but a 3-wave pattern. If this analysis is correct, it leads me to believe that we will be bouncing in the 1000 to 1100 range for the next two months.

The real play will be a break of the light blue trendlines.

On a shorter term scale, we could have finished today, but I am hesitant. When looking back at the last upward move, I see a possible repeating fractal. If it is a fractal, we will probably see a gap and crap on Friday, which will signal the next move down.

The multi-month move in the S&P futures definitely tells us that we are at a decision point. The next couple of days are very important if upward momentum is to be maintained. I have placed my bets that it wont be. North of 1100 and I am very wrong.


Gold definitely broke down as expected. I expect $1100 an ounce in very short order.

Happy 4th of July

Hope everyone has a Happy 4th of July this weekend. My only request for the holidays is in regards to the Barbecue. If you see someone attemping to BBQ meat, and they smash the meat with the Spatula, please relieve them of their duties. Nothing ruins a summer event like a BBQ MEAT SMASHER!! zomg=fail@life



Today pretty much eliminated most Bullish opportunities for the rest of the year. The trend is almost certainly down at this point. Over the course of the next week, I expect a 5-wave pattern to become evident and should wash up around the S&P 1000 mark. I wont be able to post any charts until next Wednesday.



Another HUGE signal is moving averages. A significant amount of traders use moving averages to decide if we are in a Bear or a Bull market. Most denote a Bull market when the 50 day moving average crosses over the 200 day moving average. The cross is called the "Golden Cross." Likewise, if the 50 day moving average crosses under the 200 day moving average, the market is considered a Bear. The "Death Cross." Its just math.


Then we got the "Old School" technical analysis with a Head and Shoulders pattern. Top of the head to the neckline gives the target. In this case we are looking at sub 900 soon.

Gold toast - Market Toast???

Tonight it is pointing to yes. We will see tomorrow morning if the selling in Gold and the futures stick. The move in the Euro tonight tells me it just might.

Here is my Gold chart. I counted the move as being completed this morning, with confirmation selling through the 2-4 trendline. Another deep leg down should ocurr overnight or tomorrow morning.


And below is my S&P count. I believe we completed wave-2 up near the end of the day. My next target is about 80 points under where we are, with support being at 1000. If tomorrow opens deep red, we could get there even quicker than I expect.

Gold? Lol

Didn't your mother ever tell you that you shouldn't be doing what everyone else is doing? I did. While being a sheep in the herd can be quite comfortable, it can have some very negative effects. Not studying, partying in High School, buying stocks on leverage in the tech boom, reality TV, media driven politics, adjustable rate no down liar loans, buying into the "we are running out of oil and I need a new car now", global warming, believing banks are solvent, believing in bailouts, believing the economy is in good shape, and GOLD!!!

While going with the herd can be ok sometimes, it is best done while using your very own scrutiny and judgement. While partaking in a Bubble one doesn't have enough reference to recognize they are in it. The Tech Bubble, Real Estate Bubble, Commodity Bubble, and Gold Bubble are paradigms near impossible to recognize and it takes great confidence to stand tall.

That being said, I believe I am one of a few in the Deflation camp. Most people are under the belief that the USD will continue to fall. I believe it will strengthen, especially if the Fed ever does what is right and starts increasing interest rates. A strengthening dollar means one thing, destruction of asset prices through deflation and credit deleveraging. Commodities, stocks, and asset prices will decrease and there will be no winners. The USD will become the only true safe haven.

That being said, I believe Gold is approaching a possible tipping point. It is very difficult to call because there are countries literly falling apart. As their currency takes a nose dive, gold may still appear "safe."

Here is a three year gold chart:

The one year:

180 days with 4 hours:

180 days 1 hour:

The pattern is called a wedge. It is composed of 5-waves, all non impulsive. I believe $1266 may be the Gold high of this year. If the move is complete we should see a prolific breakdown shortly. A crash in Gold would also crash the stock market and all commodities.

As for stocks, my count is below. I believe Monday was the confirmation I needed to signify that the ten day move was over. I believe tomorrow we hit 1083 in the morning ending wave-1 down and head up for one or two days. The next leg down should help determine how deep this correction is really going to get. I still have all four longer term charts valid and in need of confirmation.

A Day of Weakness

Today can be called a "Gap and Crap" day. The market gaps up in the morning, it fills the gap, and closes below the previous day's close. This action is considered extremely Bearish.

I'll post my favorite count as of today's close. This is the combination pattern I have expected. It has just burned more time than I was projecting. Very few bulls have shown up in this sideways pattern. Any move over 1135 and I am wrong. The last little section of "E" tomorrow is hard to determine. I know anything below 1105 is a hard sell. We could easily fail over night, at the open, midday, or even at the close.

The count matches my expectations and my favorite indicators.

The S&P futures are currently having a near impossible time taking back their 1.5 year trendline. aka Big Red

The 800 pound Gorilla in the room is the FX market. Aka Fiat Currency trading. The swings in the world's currencies right now are astronomical. This last weekends news included China unpegging their Yaun to the US Dollar, short covering on the Euro at an all time high, and the Swiss deciding that it was no longer going to peg the Franc to the Euro. (Basically the swiss have been trying to back stop the Euro and just took on the biggest FX loss in history) Just remember that the rise in the stock market and commodities the last year are mostly due to inflation hedging, aka falling US Dollar.

I borrowed a graph from http://www.zerohedge.com/ This graph is the weekly change in Currency Contracts. This shows an uprecendented number of short coverings last week on the Euro. Basically the Euro put in new lows, Goldman Sachs put a 1.13 target on the EUR/USD, and short covering came in and lifted it to ~1.25 in just under a week. Quite an impressive short squeeze.

To me this looks very familar to an engineering phenomena called "Underdamped Harmonic Oscillations." Aka each cycle adds more energy to the system than the last cycle. I think you are most likely to notice this phenomena with wind, and associated with earthquake periods of building swaying. Below is a simple equation showing how it looks.

Most are more familiar with the end result...........................

One thing is certain, as you increase the energy into this system, the greater chance it has in breaking. I don't know how many oscillations the EUR/USD currency pair can handle, I have no clue of the final price locations, and I have no clue in the final direction. What I do know is that this is not a healthy pattern in nature and it can't be maintained. Every swing must add considerable energy. In this case, more money must be added on each swing to produce stability/equilibrium.

Attached you will find this similar pattern I found in early 2009 in the S&P. I recognized it immediately. I also added some fibonacci numbers. These showed how beautifuly elegant the market was moving. Most people wouldnt believe that we are pre-disposed to react predictably. Most people would not believe we are subject to such primal fear and greed cycles.

I must admit, I had a pre-concieved notion in what the effects were of undamped harmonic oscillation. While my principles were correct, my direction was wrong. ;)

No Confirmation Yet!!!

No Confirmation of the breakdown yet, but getting very close. The attached chart is my preferred count. This count is very much similar to the double combination and triangle termination pattern that I pointed out on the larger scale. (near the top around 40 days ago). Fractally it should behave very much the same.



All my technical indicators are rolling over here. Aka stochastics, hanging man candle, 50 day moving average is flat, etc etc. On the chart, the gold dashed line is my prediction of the next 3 days, should the pattern be confirmed. Once again, for the market to confirm this pattern, tomorrows open MUST be red. The question mark marks the juncture/decision point.



When analyzing the S&P futures for the last 37 trading days, it quickly becomes apparent how controlled the moves are within a channel. Usually when a channel bottom or top is thrown over, it suggests a trend change. And let me point out, that the final move is not always in the direction that it broke out in.

And below, I would like to point out the relevance of the red trendline we currently sit right under. It is a major support/resistance line stretching over last two years. The solid red trendlines depict the channel boundaries. Notice how it took many tries to get over this line? Notice how it took many tries to get back under it? Consider this line the rate of change in which people are fearful or would like to sell.

The lines, in between the two major red ones, each represent a Fibonacci retracement levels. It is my belief that Fibonacci retracement levels run perfectly horizontal when moving with the Primary Trend. It is my belief that Fibonacci retracement levels run at angles when moving against the Primary Trend.

Example is: These Fibonacci retracement levels appear to be working at this angle for the last 1.5 years. It is my belief that since this is an angled movement and the direction has been up, that the upwards movement has actually been running against the Primary Trend. If my theory holds, the Primary Trend is still a Bear. I definitely have more reasearch to do on this theory.

Wednesday June 16th, 2010

My calls/charts from the weekend were pretty spot on that we would rise most of the week on weak volume. We closed two days, barely above the 200 day moving average. This would normally be very Bullish, but I am feeling we did it on considerable weakness. We did it on very light volume and it just might be the final Bull trap.

I am hesitant to post tonight that we finished the seven day Bull move at the close of today's market because one last piece of verification is needed. A violent move downwards at tomorrow's open is needed to confirm. The extent of the move down will help further establish where we are.

The selling volume, the price movement, and the breadth of the market will determine if this is the move to 1040, or if we will experience more correction upwards on very light volume. If 1040 is broken next week, I dont have support until 900, which means it could get there in a hurry.





The Euro is still coordinating very nicely with our S&P futures. Tonight the Euro is looking rather weak. I am not too sure of "who" could ramp the Euro tonight, but I could wake up to once again see a strong Euro.

TA for Monday June 14th, 2010

To start off, I will keep my analysis very simple. The three things to watch next week are as follows:

S&P under 1040 = lights out
DOW under 9750 = lights out
50 day moving average crossing under the 200 day moving average = lights out
Euro making new lows = lights out







To complicate things, Elliott Wave theory suggests we are NOT impulsing up, which leads one to believe that large bullish moves upwards are most likely not in the cards. After retesting the lows at 1040 the volume just didnt pour in as one would expect for a bullish move. While prices can continue up, the signs of strength havent revealed themselves yet.

My counts suggest that getting short and staying short will be very difficult. The counts suggest this could really rip downwards at anytime, but my experience tells me that it will take longer than I am willing to wait. The only certainty at this point is the breach of 1040.

81 Failed Banks in 2010

We have a winner! That makes 81 failed banks this year. Everytime I see a Washington bank, it hits a little closer to home.

http://www.fdic.gov/news/news/press/2010/pr10133.html

Washington First International Bank, Seattle, Washington, was closed today by the Washington Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with East West Bank, Pasadena, California, to assume all of the deposits of Washington First International Bank.

As of March 31, 2010, Washington First International Bank had approximately $520.9 million in total assets and $441.4 million in total deposits. East West Bank will pay the FDIC a premium of 0.5 percent to assume all of the deposits of Washington First International Bank. In addition to assuming all of the deposits of the failed bank, East West Bank agreed to purchase approximately $501.0 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and East West Bank entered into a loss-share transaction on $418.8 million of Washington First International Bank's assets. East West Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-share transaction is projected to maximize returns on the assets covered by keeping them in the private sector. The transaction also is expected to minimize disruptions for loan customers. For more information on loss share, please visit: http://www.fdic.gov/bank/individual/failed/

Technical Analysis for 6/8/2010

It is my belief that our Economy runs on 40 year cycles. These are feast/famine cycles that are mostly associated with birth rates. The largest population to watch is the Baby Boomer population. Their actions should have drastic effects on our economy as they go into retirement. Ignoring their actions could lead to drastic investment short falls.



With this in mind, I have spent a lot of time looking for the generational stock market crash of epic proportion. Aka the lock limit down day where trading is actually halted. Our current financial situation is very much similar to The Great Depression. Most people fail to realize that the stock market halved itself 3 times from 1929 to mid 1932. The largest difference between our recent Bear rally is that the Bear rally in 1930 only lasted 6 months. Currently the Bear market rally is around ~14 months, or longer if we are not done. Keep in mind, in 1930 there was hope that the economy was recovering. Politicians and business men alike praised that all was well. The true problems really started surfacing in October 1930. While there are currently signs that things are "ok," our insolvent banks show that they are very much not ok.



I still have four longer term counts that are still applicable. My preferences are the two more bearish scenarios. I am 100% short from 20 minutes before the market close on 5/28/2010.










We are in very critical waters while we remain under the 200 day moving average as per this chart:



And finally, and most importantly, is the 800 pound gorilla in the room. Aka the US Dollar. A stronger dollar means a flight out of Stocks and Commodities. My target on the EUR/USD is down $0.03 by morning, which could equal nastiness for tomorrows open.