Wednesday, February 11, 2009


The balk is an illegal movement by the diver defined as:

A false start in which a diver makes an obvious attempt to start the forward or back approach but does not complete the dive;

As pointed out in yesterday's charts, the market is straddling along support. Much as the diver above is in preparation to initiating her dive, it appears that the market today was tantalizing us with preparation, misdirection and indecision.

This is most clearly shown on a close up of an intraday chart. Look how on the 15 minute chart prices keep moving below and then back above the upward sloping support line that forms the bottom of our wedge from last November:

From late Tuesday afternoon, through all day Wednesday, the market has appeared non-committal, yet it appears to be building momentum for it's next move.

Here is how it looks on the 60 minute chart:

The drop we expected to come today seems to be still in the making. We can see prices bouncing off the springboard, the ledge, support, time and time again. I count four touches of support since late Tuesday.

For perspective, the 120 minute chart:

The big picture EW count remains unchanged. Here is a current Weekly chart:

There is no guarantee the market is going to dive off of that board. If certainty was attainable in the markets, someone would have let that cat out of the bag by now.

Well, notwithstanding delusional idiots, all we have are the probabilities and so far they are saying this sucker is about ready to hit the water.



mlomker said...

My count doesn't quite agree with your software although I can see why it considered that wave 5. I believe that the move down was wave 1 of 3 of (5) and near the close we peaked in a wave 2. Thursday should be wave 3 right out of the gate if I'm correct.

I may be wrong but the stop was so tight with this interpretation that I put on a larger than usual position at the close.

Anonymous said...

I think the primary count is what Mike is taking about. We are starting 3 of 3 of 5. That's a good bet.

There are a few alternatives, and none of them are bullish.

The first alternative, is the market is still in 2 of 5 and we could rise back up to the 889 to 896 resistance area, 2 of 5 will end there, and then 3 of 5 will begin.

The second alternative is 3 dropped the market to 741, a of 4 took it to 943, b of 4 dropped us to 812 and we are in c of 4 that will push SPX up to 1008 or the 38.2% retracement of 3, 1006 which would be the a = c wave of 4 measurement and 1007 which is the 4th wave of a lesser degree (4the wave of the 3 wave that dropped the market from 1440 to 741).

All the counts I see are bearish. I can not see a bullish count.

As closely as I look at alternative counts, that's bad.

If you are a trader, you need to be playing this market from the short side at some level. I recommend selling resistance, rather than selling breaks of support.

If you are a 401k player who is either in the market or in a money market, you need to stay in your money market and NOT invested.


Anonymous said...

Thank you for the support at this cliffhanger; I hope we make some money from which to show our appreciation. Though mostly short I've actually been losing this last two weeks.

Anonymous said...

I hope all of you haters of poor Americans eat it big time. Don't you realize while you make your small little profits, most others are losing their jobs, seeing their 401Ks along with their savings get wiped? Yeah, I hope you all make a ton of money then eat it the very next day.

Anonymous said...

I've been following this blog for years and am not making "small little profits."

Allan's advice has driven my ROE from an annual 12% to more like 30% and I have more than $1.7 million divided between his picks and in his superlative hedge fund- where a ton of money is made in terms of ROE.

That does not include the 200K+ I take out every year to pay for 1/2 of my living expenses.

The fact that the "little people" are losing their jobs that they never should have had in the first place, losing their houses that they never should have bought in the first place, and their 401(k)'s are going to zero full of stocks that they never should have owned in the first place, is not ONLY of no concern to me, I laugh every time another 500K jobs are lost and the RE market posts another record drop in prices and rise in foreclosures.

I say "Bring it on!" This is fun.

This is America, there are penalties for being an idiot. Stupidity is something we have never prized.

Let them eat cake! If they want they can even eat the cake crumbs that fall off my dining room table onto the floor.


mlomker said...

"I hope all of you haters of poor Americans eat it big time."

You do point out something interesting. In this recession the politicians decided to blame traders (they always blame somebody other than themselves).

Trading is similar to surfing...we look for the waves, we don't create them.

Anonymous said...

And your Rolls sits in the ditch as we speak Stanford...not too full of yourself are you Bernie, just a Good Ol' American?....Gary

Anonymous said...

and Oh Stanford....WE need more like you .... haha, Gary

mlomker said...

We have decisively broken the triangle in Globex. Barring a miracle rally today is wave 3.

David said...

Re: post #1, wave 3 right out of the gate. Nice call!

Re: American haters. I don't think anyone here hates America. As was said above - we don't create the waves, we just surf them.

But I agree, it is sad that so many people are suffering financially through this. But we have no control over the bad decisions they've made, so why should that prevent us from protecting our own money or making money in this environment? I have family members who didn't heed my sell warnings last year and I hate to see them lose while I gain. But what am I supposed to do. I just tell them don't sell at the bottom, there will be much higher prices later in the year, I hope they listen this time. :/

Anonymous said...

That's the hard reality. People spent money they didn't have. Governments borrowed and spent when they should not have. We went off the gold standard, etc. The excesses of the last 40 years are catching up with us.

Mike and Alan, very good calls. Alan you have been bearish and didn't waver. Mike, good call on stepping up and expanding your short position on yesterday's close.


David said...

Regarding yesterday's comment about the upcoming economic and cultural nightmare. I've been reading about this through people like Jim Sinclair and other doom and gloomers. I don't enjoy reading it but I do so because I believe in being prepared for all possible scenarios, even if I'm hoping these guys are just over-excited perma-bears who will ultimately be proven wrong.

Allan, one of the reasons I've come to respect your opinions is because you are neither bull nor bear, so I'm not happy to hear your dismal vision of the next few years. Others who frequent this comments section seem similarly objective. Does anyone else have anything to say on this subject?

Being unemployed and having to live off emini trading profits is scary and would really put my trading abilities to the ultimate test, but I could deal with it. But do I need to be buying a gun, hoarding gold, and stockpiling canned goods as some of these goldbugs suggest?

Anonymous said...

Don't you get it? While you all sit back and cheer the crumbling markets and hope to ride your waves, the government may come apart. And then what? You guys will be the first to go. Off with your heads! Better hide your money. Too bad it won't be worth a 100th of its present 'value' once the currency is devalued. Yeah, bring on the 'waves'! That's all that matters.....

Anonymous said...


Thanks for all your diligence and effort you put in to give us a frame-by-frame view of this market movements. I understand some of it and others are above me... There is something structurally wrong with our economy and a fix needs to be put in. That does not mean we wish bad to others or to the country.