Tuesday, February 03, 2009

Peaking

As the following chart indicates, the market peaked today right between Fibonacci 38% and 50% levels. It can go higher and reverse, or it can simply reverse at the Open on Wednesday and never look back:


Adding to the argument for an imminent reversal is the False Bar Stochastic indicator along the bottom of the chart. It has risen along with prices from Oversold at the recent lows and is now entering the Overbought area. A cross-over and reversal down in this indicator should be confirmation that the next wave down has begun. Another way of looking at this (if you don't have a stochastic indicator in your pocket) is that any serious weakness tomorrow will trigger a Stochastic Sell Signal.

Below is a Market Club Trade Triangle chart of the same S&P index:


Note how well the Weekly Sell Signals fared in the this Triangle Trading chart. The September 4, 2008 Sell Signal generated a gain of 365 points, or about 30%. The most recent Sell triggered on January 14, 2009 at 857. A similar 30% gain will take the index all the way down to the 610 area on the S&P, near the bottom of the range targeted by the Elliott Wave analysis.

There are no sure things in trading market indexes. But there are Wave 3 declines which are characterized by violent, demoralizing, blood red market conditions. If you nail the right side of one of these suckers, you can profit handsomely. That's why we're here and that's what is so exciting about the current analysis.

As Dylan so eloquently put's it, "It's not dark yet, but it's getting there."


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12 comments:

Anonymous said...

Allan...you are profound...know how to rip into my heart...Thank You, Gary

Tom D said...

Buddy, you know that I was as reluctant as a bear as I was reluctant as a bull beginning almost two years ago now. The fact is I sat mostly on my ass in cash then and still am now. That has worked out OK especially with the dollar rally and deflation boosting dollar value. Break even is good value added during deflation.

I never minded being short in futures, but I have never liked shorting stocks since you could lose more than your betting stake (way beyond margin debt too). I'm too old to trade futures now, but with pocket change I am trading a lot of compressed closed end funds with dopey audiences for short term (days) 10-15% gains. I really think the big money wil be made for the next 5-10 years in range trading, not in grandiose "armagedooooom" shorts.

But I've got to hand it to you for your crash prediction last summer JUST before it happened. That was special and so are you!

The Red Wings still suck, however.

TD

Allan said...

suck [to],

(colloquial) Term of general disparagement, to indicate that the subject or situation is unfortunately or unreasonably objectionable, and has no redeeming qualities. With at, indicates a particular area of deficiency.

Used as a term to describe the Detroit Red Wings, it is an antonym: words that lie in an inherently incompatible binary relationship as in the opposite pairs i.e. as a synonym for I love the Red Wings.

Michael Lomker said...

Tom, perhaps it was just a typo but you can certainly lose more than is in your trading account with futures. If you're suggesting that futures brokers are more likely to get you out in time than a stock broker, then okay.

If you want to make a risk-controlled short play then options might be the best--buy some puts and see what happens.

Anonymous said...

ARE YOU PEOPLE ALL DAFT?

"Peeking" = "Peaking"

This guy is a closeted communist.

That explains why he shorted for months into this big bull market.

Wayne said...

Looks like the 50% retracement target has been breached and we're closing in fast on the 61.8 percent line (853-ish). The weekly triangle won't turn until 890 tho (doubt that'll happen).

Allan, would your current orientation change to bullish if the SP500 went as far as the 100% Fibonacci line (877-ish)? Or would that be too soon to tell?

Regards,
Wayne

Allan said...

Wayne: 877 would invalidate my analysis, but the good news is only 877 would invalidate it, so this action, although painful if short, is within parameters and I still expect MAJOR TURN at any time.

Anonymous said...

Don't know if you are following GNTE..mentioned here on Jan 1 ..it's up 500+% in about a month....not the next NNVC but WOW what a stock!! Gary

Anonymous said...

Allan:

Do you follow ORBC?

Anonymous said...

Allan,
Do you think the gold sector will follow this wave down also?
Appreciate all your insight,
BC

Michael Lomker said...

>Do you think the gold sector will follow this wave down also?

Can't speak for Allan, but I believe that it'll suffer from deflation when people have to cover their stock positions. We're going to have a fantastic buying opportunity for gold at the next bottom--inflation will start becoming a factor once the remaining leverage has been flushed out of the market.

Anonymous said...

Holy crap.....WHO THE FU_K ARE YOU?: