Saturday, August 01, 2009

Time for a cold one

I came across this chart today, categorize it in the "for what its worth" department:


Let's see how the above seasonality charts compare with my own SPX chart:


SPX - 120 minute


Counting eight bars from the right we can see the gap-up open to a new summer high in Thursday's first bar. But look underneath at the Elliott Oscillator. Eight bars from the right is a major divergence, not even close to a new high for the move. If the S&P breaks below 985 Monday and stays below it, we get a trend sell signal that should carry at least 50 points lower. That would coincide with a break down of the trend regression channels with even more bearish implications.

Zooming out, here is the Weekly chart with Fibonacci levels and the False Bar Stochastic:


This is where the above seasonality chart is especially poignant. Prices have engaged the first major Fibonacci level of 38.2%. A turn down here, accompanied by a break down of the regression channels and another crossing of the FBS down below it's signal line adds up to compelling evidence of a change of trend that could lead to the initiation of the next impulsive leg down.

If this analysis sounds familiar, it is because it has been hanging around these charts for the past six weeks. The consensus of the bulls is that we are in a new bull market, that the recession is over, or about to be over, that the government has pumped enough liquidity into the system to have saved the day and that the bear market is finished and its loyal adherents, especially those like me who say the worst is yet to come, just don't have a clue.

Remember, in March, this bearish take was the view of the many. Today, August 1, it is the view of the few, as another piece of the puzzle falls into place.

All of this is predicated upon a break below support on the above two-hour S&P chart. This has not yet occurred and unless and until it does, the trend is higher.

Finally, skimming across the web today, I found this:

Dear Members,
Remember that in this week newsletter we predicted crash in commodities and stocks on 4th August so plan your all trade before., if you are already in trade as per recommended in newsletter then hold your positions. Also dollar will move huge up on 4th so accumulate on weakness of today and tomorrow.

Also we mentioned in newsletter that no need to trade this Thursday and Friday because both of these days are negative and mistake bound to happen. Today's trend will be proven false.

Great fall in metals, oil and grains from next week.We expect more than 10% fall in a week.

This kind of opportunity never come again and again, also astrology can only predict this kind of events. By Tuesday evening you will come to know why you subscribe financial newsletter.

Thanks & God Bless
Mahendra Sharma'
www.mahendraprophecy.com

I never heard of this guy or his web site and have no idea if he is a kook or a prophet. But I'll take his advice before Cramer's, who as you may know, is madly bullish these days, along with all of the cheerleaders on CNBC.

That's it for a Saturday in August. It's 110 here in the desert and about time for a cold one.


A

12 comments:

Anonymous said...

THE BEAR DIED

We've had v5 months in a row of upmoves in the market.

THE GOVERNMENT FIXED IT

THE BULL REIGNS

CRAMER IS A GOD- NEVER BET AGAINST HIM.

BASICALLY YOU'VE GOT IT ALL WRONG

David M Gordon / The Deipnosophist said...

The consensus of the bulls is that we are in a new bull market, that the recession is over, or about to be over, that the government has pumped enough liquidity into the system to have saved the day and that the bear market is finished and its loyal adherents, especially those like me who say the worst is yet to come, just don't have a clue.

No question, Allan, that the present environment for the economy is especially hellacious. I bet we all can feel the gears grind as we move from a state of rampant consumerism to a nation of savers; you see it every time you go to any store or mall: fewer shoppers, and fewer shoppers with bags. But to conflate into one statement of 'fact' various thoughts whose adherents do not fall within the same camp paints a picture that lacks a the nail and the wall to hang it, leave alone the frame for it all to cohere. (Hey, let's mix metaphors! :-)

I suppose I am one of those people who haven't a clue. (I agree! :-) But my thoughts and perceptions re the economy, Washington's misguided attempts to fix things, and the markets do not conform at all with your statement. I do derive some comfort that the markets have conformed to my expectations since 1999 (the Great Panic of 2008 included). And until the markets reveal some behavior that worse is yet to come, I will stay with the thesis that brought me successfully to this particular, peculiar moment in market history.

But I am just one person, and small fry at that! Certainly, I do not influence markets; shit, I cannot even influence the 7 readers of my blog! But I sure would like to influence this heat wave; don't know about you, but I am melting!

Tom D said...

The first chart with the Magee & Edwards quote is good. They called it a broadening formation or broadening top. Wilder called it a reverse point wave. Jimmy Dines called it a megaphone top. Some call it a five point top. Some others an expanding triangle. Wolanchuk calls it a spando. There may be a dozen other names for it.

One trader I know used a bisect (fork) of the previous leg from its previous extreme. This one has fork boundaries that fit tightly with the triangle boundaries. The theory is that the price should at least come down to the middle line of the fork (Andrews median line) which would be support. If it can get through that it would have a chance at breaking through below the triangle.

There is another reason why this could be a top formation: five pointers are reversal formations, but when they occur at the end of a four pointer of larger degree (in a correction) it strengthens the argument. Now can you see the points of the larger degree four pointer? Hint: the first point is in November last year and the current high is the fourth point.

Four pointers are continuation patterns....

http://screencast.com/t/Av7M3WZwlwo

thomas said...

Interesting charts you put up to compare....hard to know what to think,though... I spent all night reading Prechter's newsletters....I understand the anticipation of the big wave 3 crashing the market down,but my sense of the timing is that now would be way too soon for that....maybe in a year or even two...?... but this movement now setting up,could it be something like wave b of an a-b-c-....followed by the next step in the Upward movement of the primary wave 2,started in march...that needed to give us more than the june highs... that Prechter talked about.... and it makes sense,since the greater S/R line would point to the 1000-1100 area on the chart...and if price were to get there, my sense of timing would suggest arrival around christmas/new year time..... which,presuming a 'bad' christmas sales report,could trigger the start of the next bigger wave down.... many different possibilities,I suppose,...even the astrology has some value. I am an astrologer,myself... the august 4 th prediction, is because thats the day of the next Full Moon...I have it as aug.5th... and the full (and new) moon does often correspond with a trend reversal... but its tricky...sometimes its a small retracement,to the next new or full moon, where the big reversal then happens...hard to predict sometimes. its just one tool to use among many.

Anonymous said...

Allan these doomsday calls are getting old already. You strike me as an adaptable fellow and it appears you get the daily sync of the markets, although blue wave seems to be getting chopped to pieces lately, but why the need to keep the crash card in your back pocket? I know you will come back and say you never made an official call but you did say a significant move down would happen before the end of the stanley cup final and we have gone up significantly from there.

Chet

Ubreako said...

Allan, I know your bit of an expert on biotech. Wanted to ask you on income/dividend paying stocks when the final wave C washout plays out. I know of the MLP's which have the canadian tax structures which are in flux. Do you have any names so we can start doing some research on ?

Many thanks for any info you provide.

Ubreako said...

Allan, I know your bit of an expert on biotech. Wanted to ask you on income/dividend paying stocks when the final wave C washout plays out. I know of the MLP's which have the canadian tax structures which are in flux. Do you have any names so we can start doing some research on ?

Many thanks for any info you provide.

Mike said...

>It's 110 here in the desert and about time for a cold one.

Got any DAYTIME baseball games left in the season over there?

Nothing like a lazy afternoon at the park.

-Mike

Allan said...

Ubreako: Better to look for those dividend paying stocks after the deluge, some may disappear.

Tom: The only reason for continued rising prices is to get as many participants as is possible off the bear wagon. Your 2CS indictor might be a good gauge of when sentiment has shifted bullish enough for the end of times to begin.

David: Your recent market oriented posts have been excellent, I hope some if not all of my readers have visited your site for an intelligent bullish take on things: http://eutrapelia.blogspot.com/

Thomas: please feel free to contribute your astrological analysis, I would even welcome a guest blog in this fascinating area of market timing and psychology

Mike: There are now more fans at the Cardinal pre-season camp in Flagstaff then come to watch the local minor league Diamondbacks.

thomas said...

Hi Allan, thanks for the greeting....I've become a dedicated follower of your blog...very good IMO,I appreciate what you do here.
I'm an expert on astrology,but a novice on investing....so it's an ongoing educational process for me to study what the moon indicates for 'timing' markets.


I started here ....with this thread from Elite Trader. presented by a true master trader,named yoohoo... I think,if I remember, this thread also has a link to a major research study done in the 90's by a university,examining the correlation between the moon phases and market movements.
Its worth reading as well...and my take from it is that there IS a correlation, they found one, and specifically recognized this idea...that the moon somehow does influence human emotion...(a long history of police report data from every culture in the world,as well as hospital data, confirms this concept as well)....and in so far as 'market sentiment' involves market movement, even the current bear market rally,stoked by the phony cheerleading/misleading of the government/wall st. propaganda machine is demonstrating ...manufacturing public mood to 'convince investors to see blue skies'... the government knows how much a part public emotion plays in the game of investing and market movement....this study confirmed exactly this...and this concept was central to the study...such that the biggest correlation among many different cultures that were examined in the study.... the biggest correlation was found in cultures that were/are ...underdeveloped,localized,emerging markets,and small cap oriented...why...because these smaller ,more personal markets and cultures...are (my words) more personal,more impacting on the individual....if you know what I'm saying...like a family business versus a giant impersonal mega business.... the family business has more personal emotion vested...thus the 'market sentiment' is more influenced by.... the Moon in whatever markets have that 'smaller,more personal,more human' energy ....i.e. if you find the markets that are driven more by 'emotion' you may find a greater influence of the Moon ....I suggest Forex markets as a good example....or what else, bubble markets....precious metals? junior miners? now ...maybe there can be a case made for ...swine flu bio teck stocks, for the same reason. etc...where emotion plays a greater role... (my personal trading thus far has been only Forex,so thats the market Ive been looking at, and I do see correlations to full moon and new moon reversals in the EUR/USD charts Ive been following for the last year.)
In any case, heres the link to the thread on Elite Trader. Theres also an interesting posts in it showing some kind of wave graphs that someone posted they have a program that spits out the waves of the lunar cycles connected to markets ....check it out... Thomas


http://www.elitetrader.com/vb/showthread.php?s=&threadid=76224

Anonymous said...

Be careful with the psychics, Allan. If you are having to fall back on astrology to back up your thesis then maybe you need to re-examine things. First Arch Crawford, and now this? I've never heard of anyone making any money by going to psychics in search of stock picks or lottery numbers.

Anonymous said...

Allan, the fact that you allow the contrary points of view and rabid criticism of your view all point to the high integrity of your site. Those of us who CAN read and process KNOW exactly where you stand. Ignore the d**a**es. You've been on the right side of this market move...this the informed know!

And when NNVC is at a $100, then whiners will really be whining!

Mike