Thursday, September 30, 2010

Market Timing Update (9/30/10 Close)

[945PM] Perhaps sideways fourth wave action in EUR.USD for a few days -

[925PM] Futures update and thoughts on the bullish count -
The blue count (bullish) in the first chart below puts today's decline into perspective with respect to the larger wave structure over the past week.

From this perspective, it's no wonder that the blue count and the red count (bearish) are in sync. Tricky business indeed. So is the VIX wedge (chart to the right).

The key level is last Thursday/Friday's low as mentioned in the [4PM] update - 1117.25 in ES and 1122.79 in SPX.

[4PM Stocks and USD] Observations regarding the RUT in yesterday's EOD update and the price action in the RUT today have been helpful in identifying today's top.

Odds now favor a multi-week or multi-month top (Chart 1), now that we have a clear five wave decline from today's high (Chart 2, red) . However, the rebound from today's low does not appear complete (Chart 3, red) .

The top bullish count survives until 1122.79 in SPX is violated. Partial confirmation comes when today's low is violated. See Chart 2, blue. The main reason being that the 5-wave decline could be the tail end of a complex second wave retrace or the first part of a zigzag that is the tail end of a complex second wave trace.

As mentioned in the Intraday Update, the USD index likely needs one more lower low to complete its decline (Chart 4). The proposed additional decline could also truncate as it is wave five of five, but a lower low is norm.

If this scenario plays out, it would correlate with the proposed rebound in stocks well ([Y] of ii-up in Chart 3).

Real Time Update (9/30/10)

Archived at MTU Real Time.

Wednesday, September 29, 2010

Market Timing Update (9/29/10 Close)

[1111PM]ES update -
Some thoughts regarding why a large triangle wave (iv) is not on the top of the list. But it is prudent to keep it in mind as the general shape in many indices does look triangle-like.

[1] In ES, it is at odds with RUT and TRANS.
[2] In SPX/INDU/COMPQ/NDX, it is also at odds with RUT and TRANS. Moreover, the new high in cash indices yesterday demands yesterday's high as wave b of the triangle, which may require truncation of wave b of the triangle in COMPQ/NDX as well as ES.

[4PM]Stocks -
The actions in the $RUT in recent days have been informative.

The end is in sight.
If the proposed wave iii of (v) does not extend -
- the top is within the reach of one more small advance (blue count ) if not already in (pink count)
- whether one counts recent waves as an ED or not, or when the proposed unorthodox ED started
- note that the proposed wave iii of (v) is short than wave i of (v), implying that the top is also conveniently capped. One can do his/her own calculation.
- The RUT is now finally above the June and August highs, nicely completing the table in That's All Folks! (9/24/10), as George H pointed out intraday.

Oh, the caveat - the above logical conclusion depends on the proposed wave iii of (v) not extending. We'll take it one wave at a time.

If wave iii of (v) does extend, the top will likely reach the top end of our target range of 1158 - 1164 and approaching the 0.786 fib retrace. Conveniently, the $RUT will show the way if the next up leg exceeds the cap for the proposed wave v of (v).

Comments in yesterday's EOD update continue to be very much applicable. Please refer to those comments and help save some on-line real estate. But here are the updated charts and squiggles on SPX and ES.

Real Time Update (9/29/10)

Archived at MTU Real Time.

Tuesday, September 28, 2010

Market Timing Update (9/28/10 Close)

[1030PM] resuscitating the higher rate count
Against market mentality and actions of front running QE-2, a closer examination of the squiggles UST 10-year yield suggests that the count for higher rates (i.e. as discussed in The Bond Mania (8/20/10)) may just pan out, even with the threat of QE-2. We'll see.

[4PM] Stocks, Gold, Euro

Stocks -
The rally in stocks appear very tired. Expect a trend reversal or at least a deeper pullback in the near term.

Today's fresh high may even be deceptive unless the market spike up in a [3] of iii of (v) over the next one to two days per the blue-count in the following charts (RUT and SPX).

ED any one? It's probable that the top is within reach tomorrow if it is not already in. The pink-count in the following charts (RUT and SPX) highlight this possibility in the form of an ED. Yes, the pink-count is less orthodox and a bit forced, but I wouldn't discount it too much as fifth waves are sneaky creatures.

The alternative is that today's high is wave iii of an ED wave (v). But beware of the risk when one entertains the possibility.


Gold -
Gold appears toppy and ready to reverse for the intermediate term, against a potentially bullish background.

Euro -
So does Euro for the near term, against a potentially bullish background.

Real Time Update (9/28/10)

Archived at MTU Real Time

Monday, September 27, 2010

Market Timing Update (9/27/10 Close)

[520PM] Futures (ES)
The two recent pullbacks sport a similar structure (see arrows). There have been seven waves down with comparable size.

[4PM] Stocks
Odds favor the decline in SPX being a corrective wave ii of (v) since the late August low.

[1] SPX rolled over before reaching the target zone of 1158-1164 discussed in That's All Folks! (9/24/10), leaving room for the current pullback being wave ii of (v) rather than the top.

The VIX may still be itching to deliver its final low.

[2] Two potential corrective structure has emerged in ES(Dec) futures (Chart 1). The blue count shows a DoubleThree [A]-[B]-flat[C] structure. The red count shows a single downward flat - slightly odd looking but much more bearish.

The market is short-term oversold - this statement does sound amusing given the larger picture - perhaps making the less bearish blue count more likely.

ES(Dec) is around the 0.382 pullback mark going into the close.

[3] The wave structure in the cash indices may show a single downward flat, which is more obvious in $COMPQ. (Chart 2 and Chart 3 )

Real Time Update (9/27/10)

Archived at MTU Real Time.

Sunday, September 26, 2010

Real Time Update (9/26/10 Sunday)

[910PM, Sunday] Food for thought / confusion -
[1005PM, Sunday] Futures update (ES)
No follow through so far.
[849PM, Sunday] Futures Update (ES squiggles)-

[657PM, Sunday] Futures Update (ES)-
[620PM, Sunday] Futures Update (ES)-
Looks like the market is trying to get their in one shot. Monitor the 1158-1164 (in SPX cash) target zone. Please see That's All Folks! (9/24/10) for details.

Friday, September 24, 2010

MTU Weekend Ed. - That's All Folks! (9/24/10 Close)

Thoughts on the big picture

The stock market has made important technical advances over the past week. Most indices have now exceeded their June and August highs – a topping condition called for in Taking Stock (9/17/10).

Chart 1 updates the same table shown last week and highlights new changes over the past week in red. Given the satisfaction of this major technical condition and a clear five-wave advance since the late-August lows (Chart 2), the current rally is finally approaching its end.

The notable laggards are the Russell 2000 index and the Transportation Average. The implications are equally important. First, the current rally is more likely the end of a corrective rebound (Chart 3) than the start of a major advance. Second, the top is likely not yet in place.

In SP500, wave (v) has reached equality with wave (i). A potential target for the top is where wave (v) = 1.618 x (i) which is 1158 or 1164 depending on whether one takes the cash index low or the futures low as the start of the current rally. Let’s call 1158-1164 in SPX our target zone.

Once wave (v) is complete, VIX will likely have managed to put in its overthrow for the wedge (Chart 4).

At that time, That’s All Folks! at multiple degrees of the wave structure in stocks.

Squiggle countdown to the top

Based on the squiggle count of the December futures (ES), the logical location of [3] of i of (v) or iii of (v) is most likely the high around 130PM on Friday. See Chart 5 and Chart 6. The count after Friday’s high around 130PM is ambiguous – i.e. where wave [4] or iv ends. We’ll find out next week.

If we get an extended fifth wave that reaches the target zone, Friday’s high around 130PM is most likely iii of (v). If the fifth wave is relatively small and fails to reach the target zone, Friday’s high around 130PM is most likely [3] of i of (v) assuming the subsequent decline appears corrective.

The good news appears to be that the proposed count works for leaders and laggards across indices. Chart 7 presents the same count for SPX, Chart 8 for COMPQ and NDX and Chart 9 for INDU and RUT.

Real Time Update (9/24/10)

Archived at MTU Real Time.

Thursday, September 23, 2010

Market Timing Update (9/23/10 Close)

[4PM] The pullback has been very deep as warned in the entry below. Futures pre-market low was 1117.25/50 in ESZ0. The pm pullback came within a hair's distance from that low.

The decline so far perhaps counts as a double zigzag with a triangle wave [B], as well as a less ideal / too strong wave [C]. We'll see what the overnight session brings.

Wave (iv) can take additional decline, but anything more than a moderate lower low is not ideal. See the 948AM entry about a lower low in the cash index.

[1155AM] Count Update (ES)-
But futures has a pre-market lower low, making a count of 9 waves (perhaps missing a squiggle high, or not), which could signal the top of an initial rise (as wave i of (v)). A deep pullback (as wave ii of (v)) is likely given the strong run-up this morning.

[1145AM] Count Update (SPX)-
SPX has retraced between 0.5 and 0.618 of the decline at the moment and we have an incomplete initial impulse ( 7-wave visual so far.)
[1055AM] Count Update (SPX+ES)-
[948AM] SPX count update -
The top (or wave-1 of a much more bullish count) is in per the orange count.
The green count shows one more fifth wave push higher (truncate, extend, ED).
Leaning towards the green count based on the discussion in the [810AM] entry for now.
The cash chart could allow for one more lower low, but the futures charts says wave (iv) low is in.

[810AM] Overnight update (ES) -
This is the same chart shown in last night's [805PM] entry and updated. The decline overnight obeys the drawn trend line well, but does not look wedgy.
[1] The orange count shown in recent days is rejected.
[2] The green count survives.
[3] The current decline counts well either as a triple-three or a double-three depending on where one places the end of wave (iii) per the green count.

[4] The jobless claims report may be important and how much bull stops get taken out is also important the claims number does not generate a bounce.
[5] The overnight decline is stalling near the 0.236 retrace and the upward trend line since late August.