Market Timing Update

MTU Weekend Ed. - Turn Window (2/17/12)

2012-02-17T19:07:00.001-05:00

... draft in progress, subject to change ...

There are now enough waves - it feels like too many waves at times - to help us narrow down three major candidate counts. In addition, prices are now approaching the middle of a fib turn window for the Hope Rally.

Market Timing Update (2/17/12)

2012-02-17T06:49:00.004-05:00

[11am] DAX update -
Near term top tick likely within sight, if not already here. See chart and see 710am entry for the larger count.

[710am] DAX, ES update -
Getting close if it is [v]-up. DAX [v]=[i] at around 6983. ES a bit more if equality plays out (i.e. if [v]-up actually extends). See yesterday's EOD update for key options.

Market Timing Update (2/16/12)

2012-02-16T08:30:00.007-05:00

[EOD]Stocks -
Chart 1 shows key wave structures in SPX from its Dec-2011 low (blue) and Nov-2011 low (green). The pending high of the advance off the overnight low has the potential to be one of the following. The squiggle count in Chart 2 help illustrate these top counts.

(1) blue (i)-up of [v]-up
(2) green (b)-up of [iv]-down
(3) blue [iii] from Dec-low OR green [iii] from Nov-low. See the red count in Chart 2.
(4) (much less likely) blue [v] from Dec-low

The personality of an anticipated retrace will clarify the odds - note the multi-day negative divergence in Chart 2.

[855am]ES update -
Note the more bullish blue count, which is still competing with the topped red count.

[840am]DAX update -
Note the more bullish purple count, which is still competing with the topped blue count.

Market Timing Update (2/15/12)

2012-02-15T06:56:00.007-05:00

[EOD] Stocks -
In yesterday's EOD update, we observed three options which is refreshed in Chart 1 below. Today's price action sheds more light on the relative likelihood. We list these in order below. Please disregard the inconsistency of the wave degree labels among different charts - will clean them up in the future.

[most likely] Wave four since the Nov-2011 low has already been in progress for a few days. See Chart 1 green and Chart 2 purple. Wave structures in the Transports appear to corroborate (See chart to the right).

[likely] The impulse wave from the Dec-2011 low is over. A major trend change is at hand. See Chart 1 blue and Chart 2 green alt. The problem with this count is that it is hard (while possible) to count the new high in SPX today.

[less likely] Wave [iii] of the impulse wave from the Dec-2011 low is itself extending. See Chart 1 and Chart 2 pink. The problem with this count is that it does not work for the Dow.

[1pm] SPX squiggles -
see 2nd chart below
[1125am] SPX squiggles -
primary tracking count - green

[710am] DAX, ES update -
It's easier to count DAX and map it into ES. Best counted as an extended fifth at the moment, but also see yesterday's EOD update for a more bullish alternative that is gaining attention. In either case, a near term pullback is likely not far off.

Market Timing Update (2/14/12)

2012-02-14T08:42:00.009-05:00

[EOD] Stocks -
Price actions over the past four days raise the odds of extension at one degree larger than previously anticipated. See
Chart 1 (daily) - blue alt (iv) with blue [iii] is itself extending extending.
Chart 2 (30 min) - pink (iv) where the green [iii] is itself extending.

A close contender is wave four at a degree higher, with today's low as wave (a). See
Chart 1 (daily) - green [iv].
Chart 2 (30 min) - purple (a)

The bearish count places the rebound into the close as the first wave ii-up. Breaking the range over the past four days will offer confirmation to these possibilities. Chart 3 to the right offers a squiggle count on 1-minute bars.

[240pm] SPX update -
Note that SPX is likely the weakest of the bunch for today.

[955am] SPX update -
Given the wave structure of the DAX, odds appear to favor the green ii-down of (v)-up count.

[840am] ES update -
The tug of war continues between a larger wave 4 correction off the Nov low (red) or the end of a final small-degree 5th wave off the Dec low (blue). Similar spot if one interpret a double zigzag off the Dec low (i.e. the start of the second B or the end of the second A).

Market Timing Update (2/13/12)

2012-02-13T07:03:00.003-05:00

[EOD] Stocks -
Based on Chart 2, expect a final blue [5]-up or could truncation per the EDT. Green extends.

[1430pm] SPX squiggles -
Also to td12: wonder if this chart is what you comments are referring to. Regarding NDX and its new high today, see the extensive analysis in the latest weekly, as well as the 215pm entry below.

[215pm] SPX/NDX update -
NDX made a new high, ES/SPX did not confirm yet. In both indexes, either the green (SPX) or gray (NDX) wave (v) is in progress, or the larger degree fourth wave (purple 4 in SPX and green 4 in NDX) is already in motion. See NDX points the way (2/10/12) for details.

Given that the Dow, TRAN, midcap and RUT are lagging, the bearish ii-up in SPX could survive. Let's see.

[7am] ES update -
Up on news regarding Greece. Squiggles best count as seven up from the recent low in ES as well as DAX at the moment.

MTU Weekend Ed. - NDX points the way (2/10/12 Close)

2012-02-10T16:08:00.009-05:00

P.S. Latest Barron's cover: Dow 15,000

Bottom line -
[1] The past week has the potential to be monumental - new recovery highs in select stock indexes but no net advances by the end of the week.
[2] The potential upward breakout of the VIX index foreshadows the downside potential in stocks.
[3] Wave structures in the Nasdaq 100 index shed light on where the market stands within various cycles.

Overview
The past week has the potential to be monumental. The Dow and the Nasdaq Composite (including NDX) made impressive new recovery highs since their 2008/2009 troughs. Yet major U.S. stock market indexes made no net advances by the end of the week. With the exception of the Nasdaq 100 index which gained 18.15 index points (+72bp), SP500, the Dow and the Nasdaq Composite lost 2.26, 61 and 1.78 index points respectively.

Friday’s decline has the potential to start a meaningful downward swing (Chart 1 and Chart 2). The January 30th low, which is around 5% below recent highs in various indexes, is a reasonable target and re-evaluation point (See discussions on NDX below).

Moreover, perhaps the potential upward breakout of the VIX index (Chart 3 to the right) is foreshadowing the downside potential in stocks. In Downgrades, QE3 and Top Tick (1/13/12), we observed that "the recent upswing in stock markets (in U.S. and Europe), reduction in risk premia (in European bonds and SP500 VIX, etc), and the muted reaction to alerts of imminent downgrades Friday are likely indications of risk being priced out rather than in." The market may be righting its course.

NDX points the way
At this juncture, perhaps the Nasdaq 100 index (NDX) is one of the best candidates to shed some light on where the market stands within various cycles - near term, intermediate term and long term.

The weekly chart (Chart 4) shows that NDX is potentially wrapping up a corrective wave b advance since its 2002 low in the form of an upward flat (blue) or the initial impulse advance of a new bullish cycle off the 2008/2009 low (green).

The daily chart (Chart 5) shows that the volatile 2011 is a complex wave (4) under this interpretation. Wave (4) either ended at the December low (blue) or November low (green).

The 30-minute chart (Chart 6) offers a detailed count on the advance since the December low. The 10-minute chart (Chart 7) zooms in on the wave structure since January 30th. The potential for a downward reversal is evident based on the blue count in Chart 6 and Chart 7. The gray count suggests one more push higher. Dropping below Friday's low offers initial confirmation of the end of the post-December advance/wave as the proposed gray wave (iv) and wave (i) would likely overlap in NDX.

Market Timing Update (2/10/12)

2012-02-10T07:14:00.003-05:00

[150pm] SPX squiggles
See 2nd chart below.
[10am] VIX update -
breaking out

[935am] SPX/INDU update -
See charts and see yesterday's EOD update for discussion.

[710am] ES update -
ES and DAX share a similar near term wave structure. See charts.

Market Timing Update (2/9/12)

2012-02-09T07:39:00.004-05:00

[EOD] Stocks -
The (proposed) wave structure of the Dow (INDU) is very telling (see 1245pm entry). Price has now declined to the lower trend line of a proposed EDT. Allow for a final wave (C)-up of wave [E]-up of wave [v]-up as labeled - it should be C-up of (E)-up of [v]-up to be consistent, technically speaking - but as stated in the 1245pm entry -

[E] minimum requirement met. [E] capped by 13045.38, likely around 12960. See charts.

[1245pm] INDU update -
Beautiful waves. Potential EDT in INDU, annotation reads:
[E] minimum requirement met. [E] capped by 13045.38, likely around 12960.

[1115am] SPX update -
SPX potentially wedging.

[740am] ES update -
ES wedging again, perhaps at a couple of degrees. See charts.

Market Timing Update (2/8/12)

2012-02-08T06:48:00.002-05:00

[EOD] Stocks -
We now have a visual 9-wave advance from the Jan 30th low (where wave [iv] was marked in Chart 1).
blue - Once the 9th wave ends, a top should be in place.
green - wave v of (iii) is itself extending. [3] is up in progress with [4]-down and [5]-up to follow.
red - wave v of (v) is itself extending. [3] is up in progress with [4]-down and [5]-up to follow.
Chart 2 offers a squiggle count.

[1115am] SPX update -
Extension or reversal. See charts.

[645am] DAX and ES update -
Where to mark various 4th waves appears to be the key.

Market Timing Update (2/7/12)

2012-02-07T06:53:00.007-05:00

[EOD] Stocks -
See 330pm entry. In addition, some chart clean-up in the chart to the right. Note that
(1) The red count adopts a funny wave [iv] to paint a top tick at today's high based on the blue squiggle count in the 330pm entry below.
(2) The green wave v of (iii) or red (v) of [v] could still extend. No confirmation of a reversal yet - dropping below today's low will do.

[330pm] Proposed EOD count SPX -
The Dow made a new recovery high. See thoughts on longer term counts in Ready, Set, ***! (2/3/12).

[1130am] SPX squiggles -
While more bullish squiggle counts exist (e.g. wave 3 extending), this area appears to be a logical place for a pullback (e.g. to initiate wave [iv] down). see 2nd chart below - 5 wave up from today's low.
[11am] SPX update -
The market has spoken with a higher high in INDU. The following chart shows the count on SPX.

[650am] ES update -
The green count on chart 2 shows a decent top tick. The red count tracks continued subdivision.

Market Timing Update (2/6/12)

2012-02-06T07:07:00.005-05:00

[330pm] proposed EOD update -
Top counts are bearish blue ([1]/[2]) and bullish green (with perhaps [C]-down to come).

[12pm] DAX update at the close -

[7am] ES update -
If no extension (red), the rise from the December low is over. See Ready, Set, ***! (2/3/12) for details.

MTU Weekend Ed. - Ready, Set , * * * ! (2/3/12 Close)

2012-02-03T16:04:00.013-05:00

Bottom line -
[1] The current high in SP500 is near the end of a five wave run off the ~~October~~ December low, or wave iii of (iii) of [v] if wave [v] fully extends.
[2] A triple-three or leading diagonal structure of the Hope Rally off the 2009 low in SP500 projects a major turn date in early March (+/- 1 month) based on the fibonacci relationships within the proposed structure.

Details -
near term wave structure
SPX rose an impressive 2.17% this past week. A 2.47% downward swing from 1333.47 to 1300.49 at the beginning of the week was short lived and the market rested itself for another push higher. As a result, near term wave structures got increasingly discernible. For example, Friday's high is likely ticks from the end of a larger five wave advance since the December low or wave iii of (iii) of [v] should wave (iii) of [v] decides to extend. See Chart 1 and Chart 2.

longer term counts - interesting Hope Rally fibs
Our primary tracking count in recent months describes the rally off the December low as a post triangle thrust C wave (Chart 3). The 3rd-wave-like personality associated with this advance lends more support to a post-triangle thrust than a C wave of a zigzag off the October low. This count remains on track, especially if the near term count highlighted above plays out.

However, as noted in Shifting Odds (1/20/12) and Squeezed (1/27/12), with the Dow just a hair shy of a new recovery high and NDX already at its new recovery high for the Hope Rally, odds continue to shift to more suitable longer term counts.

For example, Shifting Odds (1/20/12) identified a long term bearish triple-three or bullish leading diagonal Hope Rally as top contenders. Chart 4 refreshes.

On closer examination, one notes some interesting Fib relationships within the proposed triple-three/leading-diagonal.

Chart 5 offers a count of the Hope Rally under this interpretation. Note that wave [W] lasted 14 (= Fib13+1) months and wave [Y] lasted Fib 8 months. If wave [Z] should last a Fib 5 (+/- 1) months, the projected end of the Hope Rally is early February (5-1 months) or early March (5 months) or early April (5+1 months).

While the Dow has effectively achieved the minimum price-level requirement under this proposed count, the broader market is lagging. This implies that SPX could
[1] either truncate - but one shouldn't make premature assumptions,
[2] or experience another down-up subdivision with a potential truncation in INDU. We have the Y2K experience as a precedence - see chart 6 in Shifting Odds (1/20/12)

Market Timing Update (2/3/12)

2012-02-03T07:41:00.005-05:00

[320pm] SPX squiggles -
see the 2nd chart below and the 1010am entry for the larger count.
[1010am] SPX update -
to extend or not to extend

[830am] ES post payroll report -

[740am] ES update -
Larger degree wave structure is also taking shape.

Market Timing Update (2/2/12)

2012-02-02T06:42:00.007-05:00

[EOD] Stocks -
See 2nd chart below.

[1250am] SPX update -
Follow up to the 1150am update. See chart.

[1150am] SPX update -
In the order of likelihood - The green wave (iv) may still be in progress (or just ended), OR wave (v) in SPX may be an EDT (even already truncated) given the wave structure and the divergence between SPX and INDU. See annotations on the 2nd chart below.
[655am] ES update -

Market Timing Update (2/1/12)

2012-02-01T07:15:00.007-05:00

[EOD] Stocks -
Small-degree wave structures are reasonably straight-forward. See charts.

[120pm] SPX update-

[940am] SPX update-
near term options

[730am] DAX, ES update-
Higher high in DAX and US small cap futures.

Market Timing Update (1/31/12)

2012-01-31T08:42:00.007-05:00

[EOD] Stocks -
It's important to note that the rebound from yesterday's low to today's high in SPX is not a regular five wave advance since the proposed 3rd wave would be the shortest. As such, Chart 1 shows the near term options.
blue - bearish - A zizzag rebound from today's low likely has ended. Yesterday's low is likely to be breached.
green - bullish - Another upward wave is in progress, following an expanded flat pullback to today's low. We could be dealing with an x wave (instead of a i/ii/[1]/[2] setup), but expect yesterday's low to hold in this case.
Chart 2 shows the larger count.

[12pm] DAX update at the close-
We have a five up from the recent low in DAX. The blue or green counts in first chart look more probable.

[11am] SPX/ES update -
A visual 5-down from the AM high in SPX cash, could also be interpreted as wave C-down of an expanded flat correction in ES. We'll find out.

[1010am] SPX/ES update -
Not a regular five-up from the low in SPX cash as wave 3 is the shortest. See charts.

[9am] ES update -
Month end, with near term options.

[840am] DAX update -
Near term options remain. See charts.

Market Timing Update (1/30/12)

2012-01-30T08:49:00.006-05:00

[EOD] Stocks -
SPX is making all the right turns for a bearish LD or 1/2/[i]/[ii] decline. Recovering above last Friday's high will confirm a corrective pullback which would most likely be a wave [iv] off the December low. See charts.

[1230pm] DAX update -
A visual overlapping five down from the recent high. But squiggle count reveals near term options. See charts.

[12pm] SPX squiggles -
Wave structure off today's low. See the 2nd chart below.
[1030am] SPX update -
See the latest weekly commentary for details.

[845am] ES update -
As discussed in Squeezed(1/27/12), "something has to give." It appears to be the support line (Chart 1).

The overnight drop in ES helps us to eliminate the triangle possibility and leaves open the rest as highlighted by this chart in Squeezed (1/27/12). Chart 2 below updates.

MTU Weekend Ed. - Squeezed (1/27/12 Close)

2012-01-29T09:20:00.004-05:00

Bottom line -
[1] SPX and DAX are squeezed by increasingly narrow up-channels. Something has to give.
[2] SP500 index volatility has entered a range where past major tops were made.

Details -

Both SPX and DAX are squeezing their way along supply-resistance lines defined by increasingly narrow up-channels (Chart 1 and Chart 2). In fact, last week saw the first two consecutive daily declines in SPX since its December low. SPX finished week up by less than one index point on a close-to-close basis.

Our assessment remains unchanged. The advance off the December low remains incredibly mature, if not already over (Chart 3 and Chart 4). Please see Shifting Odds (1/20/12) for longer term scenarios, especially as the Dow closed just 1.7% away from a new recovery high with its recent high only 34.05 index points short. Chart 5 to the right shows top near term scenarios based on the squiggle count on ES.

At the same time, risk premium as measured by the VIX index remains low (Chart 6). While the low levels of implied volatility has been justified by declining realized volatility, current VIX levels leave little margin of safety. Perhaps more telling, the 20-day realized volatility dropped below 10% per annum this past week. It has now entered a range where past major tops were made (Chart 7).

Market Timing Update (1/26/12)

2012-01-26T07:02:00.004-05:00

[EOD] Stocks -

[230pm] SPX update -
If the proposed [v]-up needs to extend, this is a logical place to do so.

[1105am] SPX squiggles -
Five waves down from the high.

[935am] SPX update -
The wave structure off the Dec low looks increasingly mature.

[7am] DAX update -
Logical spot for at least a pullback. DAX still within the base channel, up against the mid-channel line and 0.618 retrace, but cushioned by MA200 at the moment.

Market Timing Update (1/25/12)

2012-01-25T06:59:00.006-05:00

[EOD] Stocks -
A seven wave sideways correction places today's low as wave [iv] off the December low (Chart 1). Wave [v] = [i] at 1350.37 and [v]= 0.618 [i] at 1334.05.

However, the squiggle structure off today's low is quite complete (Chart 2). If the proposed small degree 5th wave (wave [v]) does not extend further, the top tick off the Dec low is in sight. Naturally, one shall prepare for truncation (or even absence) or extension as 5th waves (as well as 1st waves) are fickle.

[320pm] SPX Squiggles -
See 130pm entry for the larger count.

[130pm] SPX update -
The lower in INDU this AM could mark the end of [iv]-down, which totals 7 sideways waves (blue). The red count counts a yet-to-be-completed expanded flat / triangle. See 2nd chart below.

[1235pm] SPX squiggles post FOMC -

[945am] SPX update -
Possibilities, but keep in mind that failed technical patterns can potentially and forcefully point to the opposite direction. Keep an eye on the HS structure.

[7am] ES update -
Testing trend-line support once again.

Market Timing Update (1/24/12)

2012-01-24T06:45:00.010-05:00

[EOD] Stocks -
Chart 1 updates the larger count where the recent high is likely the end of [iii] (green) or [v] (blue) off the December low.

This morning's sell-off presented a potential head-and-shoulders structure with measured target around 1290-1300, if the current pullback is a small-degree 4th wave.

The decline from the nominal high is so far three waves down and three waves up - not overlapping so far, and with the upswing within its base-channel so far (Chart 2). This structure presents several options (triangle, flat, WXY, 1/2/1/2). The market will sort it out. Many wise people have mentioned that trading and analysis are not entirely the same animal.

[135pm] SPX update -

[1115am] SPX update -
A bigger three-down and a smaller five-up in SPX. Let's see if it morphs into a seven-up before overlapping. Otherwise leave room for a triangle/flat or something more bullish.

P.S. Adopting expanded flats in the squiggle since the the low this AM allows one to count a seven-up. The plot thickens.

[640am] ES update -
ES about to loose trend-line support. Measured move from a potential HS targets the red lower trend channel line in SPX cash.

Market Timing Update - (1/23/12)

2012-01-23T07:03:00.003-05:00

[EOD] Stocks -
This morning's high is likely the top of wave [iii] (green) or wave [v] (blue) off the December low (see chart in the 1030am update).

Odds appear to favor the still bullish green count wave [iii] based on the squiggle structure from the high. See chart in the 327pm update. Wave [v] could truncated but it's premature to speculate on that.

For the larger picture, see Shifting Odds (1/20/12) for details.

[327pm] SPX squiggles -
The best squiggle count from today's high is likely a zigzag down and an upward flat up. See the 2nd chart below.
[1030am] SPX update -
channel

[7am] DAX update -
DAX thrust out of a small degree 4th wave. ES in a similar position.

MTU Weekend Ed. - Shifting Odds (1/20/12 Close)

2012-01-20T16:17:00.014-05:00

Have a healthy and prosperous Year of the Dragon !

Bottom line -
[1] The upswing off the December low in stocks is getting incredibly mature. The lack of confirmation between broader market indexes and INDU/NDX is bearish (less bullish) near term.
[2] If the Dow makes a new recovery high, odds would shift to favor a larger triple three correction or a leading diagonal bull-run off the 2009 low.
[3] However, a new recovery high does not exclude a (meaningful) near term decline. It had happened before with a 17.18% sell-off in the Dow.

Near term outlook
Markets continued to price out risks this past week, with SP500 up 2.04% and 10-year Treasury yield up 17.5bp. In fact, the Nasdaq 100 index made a fresh recovery high and the Dow is just 1.22% away. On the other hand, broader stock market indexes lagged: SP500 is still 4.2% shy of a new recovery high and the NYSE Composite Index is 11.36% away. With the upswing off the December low in stocks getting incredibly mature (Chart 1 and Chart 2), the lack of confirmation between broader market indexes and INDU/NDX is bearish (less bullish) near term.

Long term considerations
If the Dow makes a new recovery high, odds would shift to favor a larger triple three correction (Chart 3, red, cycle wave b) or a leading diagonal bull-run (Chart 3, blue, [1]-up or I-up) off the 2009 low. The long term wave structure of NDX (Chart 4) appears to favor the bearish cycle-wave b-up interpretation. Chart 5 presents these long term counts on SPX.

However, a new recovery high in the Dow does not exclude a (meaningful) near term decline and could even indicate that the Dow has topped. It had happened before.

Recall the Y2K experience. The Dow topped two months before SPX at the turn of the century. A 17.18% sell-off in the Dow quickly followed before SPX bounced back to a minor new all-time high (and a major market top) in March 2000. The Dow, however, was not able to eke out a new high. See Chart 6.

Market Timing Update (1/20/12)

2012-01-20T07:09:00.002-05:00

[1230pm] SPX update -
LD down or small-degree 5th wave up to finish [iii] or [v].

[705am] DAX, ES update -
the larger picture
DAX - first red bar this week, testing 200MA, let's see if 200MA holds.
ES - reacting to the wedging trend channel.

Market Timing Update (1/19/12)

2012-01-19T07:16:00.003-05:00

[EOD] Stocks -
Getting closer. Earnings driven volatility in after-hour trading.

[12pm] DAX, SPX update -
Getting close.

[715am] DAX, ES update -

Market Timing Update (1/18/12)

2012-01-18T06:43:00.009-05:00

[P.S.] ES -
This chart shows the ES perspective (see EOD entry below).

[EOD] Stocks -
For the near term, a meaningful pullback (for example, targeting 1280-1290 or better) is likely to surface before SPX reaches 1314.64 based on EWP rules with the assumption of a regular five off yesterday's low with no extension. See Chart 1.

As Chart 2 shows, the proposed pullback is likely
(1) wave [iv] off the December low, which puts SPX and DAX in sync (see 1130am entry below)
(2) the start of the larger wave (C)-down based on the primary count(see Chart 3).

[1230pm] SPX update -
wave 5.

[1130am] DAX at the close -
DAX poke above its SMA200 but closed under. Squiggle count could accommodate moderate upside, but is not guaranteed.

[650am] DAX, ES update -

Market Timing Update (1/17/12)

2012-01-17T06:37:00.005-05:00

[EOD] Stocks -
SPX to regained near term support due to the overnight/European push, but promptly lost it by the end of the day.

The subjective primary count is that either the top tick is in or a deeper/lengthier pullback is necessary. In other words, odds does not favor an immediate rebound.

At the moment, odds moderately favor wave [iv] being still in progress given the wave structure in DAX etc and a number of 3-wave swings in recent days. See charts.

Chart 1 (SPX) -
[red] Top is in. Chart 2 (ES) offers a squiggle count based on this interpretation.
[green] wave [iv] triangle
[purple] wave [iv] expanded triangle, double-three, flat.

[11am] ES update -
Potential end of an ABC small-degree 4th wave decline ending with an EDT. DAX is in a similar spot.

[730am] ES update -
ES has regained near term support, but is also up against overhead treadline resistance. Squiggle count also appears nearly complete.

[635am] DAX update -
The SMA200 (around 6384) and the October high (around 6430) are first tests whether sub-waves are extending higher. But squiggles are nearly complete on a five up since the December low.

MTU Weekend Ed. - Downgrades, QE3 and Top Tick (1/13/12 Close)

2012-01-13T15:51:00.018-05:00

Downgrades

Late Friday, Standard & Poor’s Ratings Services announced cuts on 9 euro zone member countries. It downgraded France and Austria by one notch (from AAA to AA+) but retained the AAA rating on Germany. See Chart 1 for complete rating changes (source: Standard & Poor’s Rating Services).

These new ratings not only better align with risk premia already observed in financial markets but also create structural incentive for euro-zone members to work together with a greater sense of urgency and coordination to address the sovereign debt issue. Net-net, Germany is likely to benefit.

News of downgrades was leaked to financial media early Friday. Market resilience, especially a strong rebound from the day’s lows in U.S. stocks, added fuel to the U.S.- Europe decoupling talk, which has been buoyed by the recent stock market upswing and macro data releases.

The U.S.-Europe decoupling thesis is likely rational exuberance since monetary policies, economies and political interests have remained very much intertwined, if not more so now than before. The recent upswing in stock markets (in U.S. and Europe), reduction in risk premia (in European bonds and SP500 VIX (chart 2), etc), and the muted reaction to alerts of imminent downgrades Friday are likely indications of risk being priced out rather than in.

QE 3

Speculations about additional quantitative easing by the Fed are getting intense - see Fed to Weigh Further Easing Amid Doubts about Recovery (1/13/12) from CNBC.

We discussed prospects of QE3 in Hope and Resistance (11/11/2011). We concluded that if history is a guide and also from a technical analysis and Elliott wave perspective, odds favor at least one if not two more rounds of policy accommodation (most likely QE in this case). Please see details in that piece.

We showed Chart 3 on U.S. bank excess reserves then with full annotation. Chart 4 updates, with the most recent data without annotation. Our conclusion remains unchanged - the stage is potentially set for another round of (quantitative) easing.

Top tick

A logical place for a top tick in U.S. stocks could be in place from a wave structure perspective based on the primary count (Chart 5). (Please see recent weekly commentaries for top alternative counts.) In addition, Friday morning's decline in SPX broke a key support trend line which is now potential resistance.

It's possible to count a complete zigzag from the December low in SPX (Chart 6, blue). Under this interpretation, the rebound from Friday's low is a small degree wave ii which "kisses" the prior support line (red, Chart 6) and is likely to say "goodbye". A key risk to this generally bearish interpretation is additional quantitative easing (see above), but market can move faster than the Fed.

The near term bullish alternative sees the top tick after a small-degree wave [v]-up run. But it's now prudent not to take it as a given. One higher high at a time.

Market Timing Update (1/13/12)

2012-01-13T06:54:00.005-05:00

[1045am] DAX, SPX/ES update -
DAX - Wave [iv] still in progress (green) as a triangle/flat or wave [v] morphing into an EDT (blue). The red count shows that the high is in with truncation. Primary count is green to be in sync with SPX/ES.

SPX/ES - One can count a five-down from the overnight high in ES. Wave [iv] (green), if it is one, has hit its target area around 1280 and likely has ended as an expanded flat.

[935am] SPX update -
Primary count (green)remains on track. See yesterday's EOD update for details.

[7am] DAX, ES update -
DAX - 5th extending, targeting MA200 which is currently around 6394
ES - triangle, combo three, or small-degree 2nd wave retrace.

Market Timing Update (1/12/12)

2012-01-12T06:23:00.010-05:00

[EOD] Stocks -
The subjective primary count labels today's bounce from the day's low (see 1055am update) as (x)-up of [iv]-down (see the green count in Chart 1). The red count offers a corrective alternative. Chart 2 offers a squiggle count to support the primary count. If so, a reasonable target area for wave (y)-down of wave [iv]down remains 1280.

It's probable that wave [iv] ended at today's low. But let's take one higher high at a time.

[1055am] SPX update -
One can count a five-down in SPX and also a five-down in ES with an extended 5th. Per the primary green count, [iv] or (a) of [iv] is likely done in the form of an expanded flat.

[640am] ES update -
ES approaching the end of an impulse (green) or double zigzag (red) off its December low and wedging.

[625am] DAX update -
As mentioned on Jan 4th, DAX is gunning for its 200MA. Here it comes. Wave structure wise, we likely have a small-degree 5th wave extension as proposed in yesterday's update.

Market Timing Update (1/11/12)

2012-01-11T08:40:00.005-05:00

[EOD] Stocks -
The subject primary count is the green count in Chart 1. Wave (c)-down of [iv]-down is likely next and is likely to push SPX to the 1280 area.Chart 2 reminds us of the larger picture.

[335pm] ES/SPX update -
Potential flat - if so, expect wave (v)-down of [iv]-down to show up next and overnight. SPX has the same wave structure if one accepts a lower low during pre-market hours. See the [840am update] for the larger count.

[840am] DAX, ES update -
Potential 5th wave extension in DAX and 4th wave (green) in ES.

Market Timing Update (1/10/12)

2012-01-10T06:33:00.007-05:00

[EOD] Stocks -

Despite the near term options, U.S. stocks are getting at least near term overbought and key indexes are "wedging" and are accompanied by visible negative technical divergence. Chart 1 (SPX) and Chart 2 (INDU) track the primary count.

Chart 3 (SPX) to the right shows the primary near term tracking count - a regular five (green) or a triple-three (triple-zigzag?) off the December low.

It's probable that the green [iii] and the first red [z] are already complete with truncation if the proposed small-degree fifth wave does not extend.

With respect to the red triple-three count, it's possible that the last three morphs into an EDT itself.

[120pm] SPX, ES update -
Potential small-degree 4th wave in SPX and ES.

[940am] SPX update -
The red count caps SPX at about 1314.14. Challenges to this count is that wave [iv] as marked is "fat" and resulted in no net retrace.
The green count requires no cap at the moment. The upper trend channel is a reasonable target area.

[630am] DAX, ES update -
DAX- Small degree 5th wave likely.
ES - approaching the end of a triple zigzag (purple) of wave [iii] of an impulse (green).

Market Timing Update (1/9/12)

2012-01-09T06:31:00.003-05:00

[EOD] Stocks-
For the near term, the subjective primary count is the green ascending triangle [b] wave in Chart 1. The market likely just completed a complex (boring) wave (d) of the proposed triangle. The Jan 5th low is the key pivot associated with the count.

Chart 2 zooms out and refreshes the larger degree subjective primary count.

[1pm] SPX update-
The counts are getting creative with this tight range. The primary count is the green count, subjectively speaking. Otherwise, bearish to quite bearish.

[630am] DAX, ES update-
Potential small-degree 4th wave in DAX and potential small-degree triangle in ES.

MTU Weekend Ed. - Top Tick (1/6/12 Close)

2012-01-06T16:02:00.008-05:00

Benchmark U.S. stock indexes are likely wrapping up the upswing from their October 2011 lows. Chart 1 refreshes intermediate term counts on SPX presented in 2012 outlook (12/30/11). The primary count of an EDT advance since the 2009 low with the current upswing as wave (B)-up of wave [B]-down remain unchanged. The red and green labeled counts are major alternative counts.

Despite the Santa rally and the early January advance, SPX is still below its October 2011 high. The current upswing should likely end above the Oct-2011 high based on the larger wave structure. However, signs that SPX could truncate should not be overlooked:

[1] The Dow is already meaningfully above its October 2011 high (Chart 2), presenting an interesting divergence at the moment. Can the broad market catch up?
[2] For the very near term, a failed triangle / consolidation area as marked by the green count in Chart 3 should be at least near term bearish, lending support to the bearish leading diagonal count (blue, Chart 3 below). A breakout upward would offer a chance to grab 1300 in SPX. The green count is intriguing with its layered triangles.
[3] From a time perspective, the 3-month rebound since the early Oct-2011 low is now adequate with respect to the 5-month sell-off from the early May-2011 high, and offers a potential fib turning point.
[4] Last but not least, VIX is likely tracing out its final subdivision of its multi-month decline from an EWP perspective (Chart 5 to the right). Valuation-wise, VIX is inching toward fair value with respect to the most recent market volatility, which is unlikely to be sustainable going forward.

In other words, the minimum requirement for a swing top has been met (Chart 4, below). The top tick is in sight.

Market Timing Update (1/6/12)

2012-01-06T08:47:00.005-05:00

[345pm] SPX squiggles-
see the 2nd chart below
[140pm] SPX squiggles-
A potential corrective rebound and impulsive decline.

[1000am] SPX, DAX update -
Last call for near term bulls at 1265.26 support on a potential triangle (green). Otherwise, at least a deeper retrace. DAX is in a similar near term situation.

[850am] ES update -
There was an upward thrust (potentially post triangle) after the labor report, but appears to be lacking momentum/follow-through and with bearish divergence at the moment (Chart 1). Keep an eye on the larger picture (Chart 2).

Market Timing Update (1/5/12)

2012-01-05T07:13:00.006-05:00

[EOD] Stocks -
There's no change in the primary big-picture count (Chart 1).
For the very near term, we have choices (see Chart 2)
(bearish - blue) Today's advance is a deep retrace of a prior LD declin, applicable to both INDU and SPX
(moderately bullish - red) wave (v) of [v] is in progress, may have truncated though, see 155pm entry for details.
(very bullish - green) wave [b] consolidation is still in progress, wave [c]-up to come.

[155pm] SPX squiggles -
see the 2nd chart below. Choices for the one-degree higher count are
(1) a fifth wave about to truncate or extend - black,
(2) a d-e-e-p 2nd wave retrace of an LD decline (red, and red in the 1105am update)
[1105am] SPX update -
tug of war between bull (green, red alt) and bear counts (blue, red).

[710am] DAX, ES update -
From a wave structure perspective, DAX looks relatively more bullish at the moment than ES. DAX is approaching the 0.382 fib retrace. See yesterday's chart for the larger count.

Market Timing Update (1/4/12)

2012-01-04T07:12:00.006-05:00

[EOD] Stocks -
First of all, today's high is a logical place to end a five-wave advance since the December low - if it is a five-wave advance.

Please see the red count in Chart 1. Since the top is capped by 1188.50 in SPX, a truncation as marked is not unreasonable. The final 5th could extend, but under 1188.50 by this count.

Chart 2 offers a squiggle count of the final subwave. Although it is not visually obvious that the EDT as marked is of contracting nature, it turns out to be one if one does the math.

Whether the near term top is the entire wave C (as marked in Chart 3) or just [i] or [a] of C remains to be seen.

The divergence between SPX and INDU is notable. SPX is still below its October high (Chart 3) while INDU is well above its October high (Chart 4). Can SPX catch up? We'll find out.

[735am] ES update -
Potential small-degree 4th wave. Moreover, the green count gets ES to the upper trend channel as marked. But note that the minimum requirement for a high is already met.

[710am] DAX update -
Note the 200D-SMA.

Market Timing Update (1/3/12)

2012-01-03T07:17:00.004-05:00

[EOD] Stocks -
The primary count is a post triangle thrust (see 2012 Outlook (12/30/11 close)) (Chart 1). The minimum requirement for a high was met in 2011. Today, the minimum requirement for a high is met on the squiggle level, either with a truncated small-degree 5th (Chart 2, red) or a double three (Chart 2, blue).

Upside potential exists with near term uptrend still intact. Potential targets are around 1330 as marked in Chart 1.Separately, the IHS projects a new high (or almost a new high) as marked by the green line in Chart 1.

The December low, where the potential triangle B ended, is key to both bullish and bearish counts.

[11am] SPX update -
Getting close. See the larger count in Chart 1 and 2012 Outlook (12/30/11 close) for details.

Squiggle-wise, if the advance off the Dec 20th low is a five, it should be capped at 1288.50 as the red [iii] is shorter than the red [i] as marked. Otherwise, look for a double three or extension.

[730am] DAX, ES update -
Potential post-triangle thrust and a bull trap. See 2012 Outlook (12/30/11 close) for details.

MTU Weekend Ed. - 2012 Outlook (12/30/2011 Close)

2012-01-01T21:11:00.023-05:00

Happy 2012!

The following discussion offers a subjective outlook on some key markets from an Elliott Wave (EWP) perspective. EWP rules and guidelines and macroeconomic analysis help clarify the (relative) likelihood of competing scenarios (counts). Primary counts reflect the assessed odds on U.S. stocks and long bond, gold priced in USD, NYMEX crude oil and USD per Euro. Let's see how much this outlook pans out in a year's time.

U.S. stocks

Odds favor the 2011 low in U.S. stocks to be breached, sooner rather than later, before an advance to new highs.

In EWP terms, SPX is likely tracing out an ending diagonal triangle from its 2009 low, following the completion of a decade long flat correction. The 2011 high is likely wave [A]-up of the proposed EDT. Currently, wave [B]-down is in progress. Wave (C)-down of wave [B]-down will likely breach (or at least retest) the 2011 low. See the blue primary count in Chart 1.

Chart 2 offers a more detailed short term count to support the validity of the primary count. Note that the minimum requirement for wave (B)-up of wave [B]-down has already been met, although a deeper retrace is probable.

The accompanying macro development is likely to be (relative) liquidity contraction and expansion (i.e. capital flows) among financial assets.

U.S. long bond

The 30-year U.S. treasury bond is wrapping up a three-decade long advance.

The accompanying macro development is likely to be continued policy-driven low rates in the mean time but QE-fatigue thereafter, and eventually reflationary expectations.

In EWP terms, the bull market in the U.S. long bond has traced out a complex three: double zigzag - triangle - double zigzag - triangle - double zigzag. See Chart 3. See the section titled "Bond, Rhythmic Bond" in Points of Recognition (10/28/2011) for a more detailed discussion.

Although the minimum requirement of a top has been met by virtue of a higher high, prices may advance (spike?) to the upper trend channel.

Gold priced in USD

The correction in gold prices since mid-2011 is likely approaching its end, if it is not already over. Following a new high in gold prices, a more meaningful top is likely to form.

The accompanying macro development is likely driven by perception of the "endless debasing" of paper currencies and continued and perhaps escalating geopolitical tension.

In EWP terms, the 2011 high in gold prices is wave [iii]-up of 3-up with respect to the 2008 low. The pullback in recent months is wave [iv]-down of 3-up. Expect wave [v]-up of 3-up to materialize in 2012. See the blue primary count in Chart 4.

Odds shift to the red alternative count in Chart 4 if the decline in gold prices accelerates.

Crude Oil (NYMEX)

NYMEX crude oil ($WTIC) prices are likely to rebound higher before a major top develops. Once the top forms, the 2008 low is likely to be breached over time.

The accompanying macro development is likely that of continued and perhaps escalating geopolitical tension.

In EWP terms, $WTIC has been retracing its 2008 crash along the path of a potential triple zigzag. See the green primary count in Chart 5. Wave A-up of the final zigzag was complete at the Q4 2011 high. Once wave B-down is over, wave C-up to new recovery highs will complete the proposed triple zigzag. Note that wave B-down may be complete or may enjoy a deeper retrace.

Odds shift to the blue alternative count in Chart 5 if $WTIC breaches its 2011 low without making a new new recovery high.

USD per Euro

Since the traditional U.S. dollar index is heavily dominated by its euro component, a view on EURUSD likely offers a better signal-to-noise ratio.

The euro has been consolidating with respect to the USD since its 2008 low. This multi-year sideways consolidation likely has not ended.

In EWP terms, EURUSD is wrapping up a multi-year triangle wave [B], with a final wave (E)-up of the triangle to surface once the current decline ends. See the blue primary count in Chart 6.

Once the triangle is complete, a steady march toward parity is likely to follow. Since the prior wave [4] and wave (4) of [3], as labeled, are both above parity, it would not be a surprise if EURUSD bottoms somewhere above parity.

Odds shift to the red alternative count in Chart 6 if EURUSD drops below 119.13 before a meaningful rebound.

The accompanying macro development is likely that of a tenacious but ultimately futile global effort to kick the can down the road with respect to the European sovereign debt crisis.

2011 Weekly Commentary

2012-01-01T21:09:00.000-05:00

* EOY update (12/23/11)
* Make or Break (12/16/11)
* ... so goes the world (12/9/11)
* Talk and Action(12/2/11)
* Shaping Up(11/25/11)
* Keep it simple(11/18/11)
* Hope and Resistance(11/11/11)
* Intermediate Term Count Update (11/4/11)
* Points of Recognition (10/28/11)
* Chicka Chicka Boom Boom (10/21/11)
* Retrace or Breakout (10/14/11)
* Progress (10/7/11)
* Around the World in 5 Waves (9/30/11)
* Twist and Turn (9/23/11)
* Update (9/16/11)
* Moment of Truth (9/9/11)
* Taking Shape (9/2/11)
* Support and Resistance Matters (8/26/11)
* Wave Logic (8/19/11)
* Benchmark Low (8/12/11)
* Reading the "crash" (8/5/11)
* Revelations(8/2/11)
* Reading the Impasse(7/29/11)
* Breaking Out?(7/22/11)
* Range Busting to be(7/15/11)
* Terminal Wave (7/8/11)
* A Fresh Shot (7/1/11)
* The Big Picture (U.S. Stocks), June 2011 Update (6/25/11)
* Short Term Update (6/17/11)
* Tracking Scenarios (6/10/11)
* Thoughts on long term counts (6/3/11)
* QE Fractal Projection(5/27/11)
* Stalled,Follow-through and Reversal(5/20/11)
* Consolidation(5/13/11)
* Multi-asset outlook(5/6/11)
* Breakout(4/29/11)
* Decision Point(4/21/11)
* DX and EURUSD, Potential x Waves too(4/21/11)
* Stocks, VIX and DX(4/15/11)
* Unfinished Business 2011(4/8/11)
* Brief Update(4/1/11)
* The larger count (stocks and USD)(3/25/11)
* Path of least resistance / support(3/18/11)
* Awaiting Resolution(3/11/11)
* Europe Points the Way?(3/4/11)
* Decision Point(2/25/11)
* Bull market, B-wave and Beyond(2/18/11)
* Logical Ending Points(2/11/11)
* A Potential x Wave(2/4/11)
* Dip or Top (1/28/11)
* Were it not for financials ...(1/21/11)
* Hope Rally Ends Here (Jan 2011 attempt)(1/14/11)
* Near Term Update(1/7/11)

MTU Weekend Ed. - EOY update (12/23/11 Close)

2011-12-23T15:59:00.006-05:00

There will be no updates next week. Enjoy the rest of 2011!

SPX closed the week above its 200-day SMA. In addition, INDU rose above its December and October highs. Meanwhile, Nasdaq lagged notably. And the VIX got "uncomfortably" low.

Chart 1 offers tracking counts which accommodate the current rally as bearish wave C-up or bullish wave 3-up. On balance, odds appear to favor the bearish count.

The squiggle count puts SPX at the end of wave [iii] or wave (c) up for the Santa rally (Chart 2).

VIX appears to be approaching the end of a double zigzag decline (Chart 3).

Last but not least, the updated chart of triangles of maximum confusion (Chart 4) shows where the market might be if any one of those triangles is playing out.

Market Timing Update (12/23/11)

2011-12-23T07:39:00.007-05:00

[1255pm] ES update -
Santa Rally update 2. See 2nd chart below.
[915am] ES update -
Santa Rally update. Let's see if there's follow-through.

[740am] DAX update -
DAX is not nearly as bullish as ES for the near term, although options exist.

Market Timing Update (12/22/11)

2011-12-22T06:30:00.006-05:00

[EOD] Stocks
See 240pm and 1255pm entries for the large and small time-frame counts - take note of the potential IHS if the rally does not fail. SPX closed just a bit shy of its 200 SMA.

Here's a count on the ES.

[240pm] SPX update
Larger working count, approaching 200 SMA, if the advance doesn't fail, note the potential IHS by the green line. See the 2nd chart below.
[1255pm] SPX update
Moment of truth is upon us. Note the relative weakness of nasdaq but the relative strength of RUT. Also ES is yet to make a higher high at the moment.

[1145am] DAX at the close
DAX at MA50 (chart 1) with a messy near term squiggle (chart 2)

[635am] ES update
Deep retrace. Let's see if it can push to a higher high. It's still in the base channel and within the scope of a wave 2/B rebound. The chart to the right offers the big picture count.

[630am] DAX update
DAX relatively much weaker than SPX/ES in terms of its most recent upward retrace which is still slightly shy of the 0.618 fib (Chart 2).

Market Timing Update (12/21/11)

2011-12-21T08:36:00.003-05:00

[340pm] SPX/ES update -
On balance, odds favor the expanded flat count (blue) or the more bearish count (red) on the cash SPX. The overnight high in ES is still intact.

[1215pm] DAX, ES update -
Tracking counts, you be the judge. Red, bearish. Blue/Green, bullish.

[830am] DAX, ES update -
Five wave up from the recent low is complete. Let's find out if it is
(1) the end of an expanded flat in DAX and ES or
(2) the 1st wave up of the next swing up or
(3) most confusion, a truncated upswing already

Market Timing Update (12/20/11)

2011-12-20T06:36:00.012-05:00

[PS] GDOW update -
An update on GDOW for clues. Key observations -
Bullish count (blue) - The triple zigzag as marked is plausible but non-overlapping and slightly odd-looking. Perhaps a zigzag from the orth. high is closer to the truth assuming a corrective decline.
Bearish count (red) - Nine visual and non-overlapping waves down from the nominal high makes a nice impulse wave with an LD wave 1. Wave 2, however, is shallow. Today's rebound is likely A-up.

[EOD] Stocks -
A strong emotional advance today makes an excellent impulse wave (Chart 1, ES, below).As a result, SPX/ES retraced to the 0.618-fib.

SPX ended the day with notable negative divergence with technical indicators as well as with market breadth (Chart 1-ED and Chart 2-SPX, below), implying that a near term pullback is likely.

That pullback will tell us if today's advance is just wave C of an expanded flat (Chart 3-ES to the right, black and purple, Chart 2-SPX, purple, red?).

[325pm] SPX update -
Hitting 0.618 fib retrace. see 2nd chart below.

[1240pm] DAX update -
Initial confirmation of an upswing at 5775.24. The next overlap at 5919.56 to invalidate a 4th wave rebound, Dec high to invalidate a 2nd wave rebound.Let's see if it can.

[940am] SPX squiggles and ES update -
wave 3 off the ES low appears to be extending. Leave room for a rebound in the form of a flat - this could be wave C of that flat.

[635am] DAX, ES update -

Market Timing Update (12/19/11)

2011-12-19T07:21:00.006-05:00

[PS] GDOW update -
The following chart refreshes Chart 2 (GDOW) of Make or Break (12/16/2011).
With today's price action,
(red, bearish) Barring a crash, wave 3 does not appear to be extending. So we put a wave 5 around today's low. Note, as labeled, wave 5 cannot extend very far as wave 3 is shorter than wave 1.
(blue, bullish) The best count at the moment is probably a triple zigzag, running out of space at the 1687.64 low.

[EOD] Stocks -
The afternoon plunge pairs nicely with the void in DAX (see 12pm entry).
ES counts as a triple-three or an impulse down, probably complete.
SPX counts well as a triple-three from the orth. high (blue) or a double three from the nominal high (blue). Bearish counts requires more creativity at this stage (see red and purple) due to the initial overlap.

[12pm] DAX update -
Lower low, adding weight to the impulse decline count. Paris CAC looks worse and London FTSE does not look much better. That said, the minimum requirement for a 1-down or A-down has been met.

see Make or Break (12/16/11) for additional details.

[715am] DAX, ES update -
Corrective count says that a triple-three is complete in DAX and is most likely complete in ES as well with a truncation.
It's possible to count the overnight low as the end of an initial impulse decline from the nominal high in DAX (purple) and ES (red). But one more 5th wave down appears to offer better wave form.

MTU Weekend Ed. - Make or Break (12/16/11 Close)

2011-12-16T21:13:00.012-05:00

It's possible to count major stock indexes as being at various stages of an impulsive decline. While the initial overlap in price structure along the current decline and the lack of notable risk aversion offer prospects of a corrective retrace, stocks are yet to offer confirmation of any sustainable upswing. Global stocks have arrived at a make-or-break point - making it above the December high or breaking the November low, possibly beyond in either direction.

On Dec 12, 2011, we observed: "Looking to GDOW for clues reveals that all (parts of the world) is not well." Following an additional 4.21% decline over the past week, GDOW apparently has arrived at a make-or-break point.

Chart 1 shows the top bullish (blue) and bearish (red) counts on GDOW since its October low. More importantly, the squiggle count on GDOW in Chart 2 shows

(1) a completed zigzag correction since the December high on the (immediate) bullish side or
(2) further "immediate" weakness on the bearish side which is at best a wave 5 down or at worst a [iii] of 3 mini "crash". Let's figure out the wave degree afterwards.

One cannot help but notice the high correlation of key global stock indexes. Like GDOW, major European benchmarks (Frankfurt DAX, Paris CAC and London FTSE) are at various stages of impulsing down on the bearish side or a double three at or approaching completion on the bullish side. See Chart 3 to Chart 5 and also ... so goes the world (12/9/11).

In the U.S., NDX is still leading the slide. SPX and NDX are yet to offer confirmation of any upswing. See Chart 6 (NDX) and Chart 7 (SPX).

Let's not forget the triangles of maximum confusion discussed in recent weeks (Chart 8) as well as the curious behavior of the VIX (Chart 9).

Market Timing Update (12/16/11)

2011-12-16T07:12:00.002-05:00

[225pm] SPX update -
an attempt to make sense of the squiggles.

[710am] DAX, ES update -
DAX - No confirmation on an upswing yet. FTSE looks relatively more bullish. Leave room for an impulse down from the orth. high (RED).
ES - The best bearish count is the tricky 1/2/[i]/[ii] (or LD down from an orth. high), otherwise, swing low should be in.

Market Timing Update (12/15/11)

2011-12-15T09:01:00.001-05:00

[340pm] SPX update -

[9am] DAX, ES update -
DAX - The recent low is either wave 7 (blue) or wave 9 (green)down from the nominal high. Rising above 5852.43 confirms an upswing. The recent low is around 0.618 retrace.
ES - In a similar spot as DAX. Green - low is in; Blue - one more swing low; Red - bearish 1/2/[i]/[ii] setup.

Market Timing Update (12/14/11)

2011-12-14T07:13:00.005-05:00

[EOD] Stocks -
Odds appear to favor (at least) a local low. See the 225pm entry for details on SPX/ES - there's little change into the close, except for a squiggle lower low.

Chart 1 on DAX is telling as well - blue or green count, double three complete. Is it only an initial wave W down? We'll find out soon.

Remember the triangles of maximum confusion discussed in recent MTU weekend editions? (Chart 2) It's possible that the current decline is the RED triangle - i.e. wave (e)-donw of B-down of (B)-up. If so, wave C-up of (B)-up since the October low is next. So the Nov low is (half) important, half because the current decline could be only wave c-down of (c)-down for the triangle.

[225pm] ES, SPX update -
0.618 retrace in DAX and 0.5 retrace in SPX/ES. If the decline is indeed corrective, its low is likely here or very nearby based on the green count in ES from its nominal high in the form of a zigzag (5-3-EDT).

[710am] DAX, ES update -
DAX - zigzag or (i)/(ii)/i near completion, at least a small degree rebound likely.

Market Timing Update (12/13/11)

2011-12-13T08:04:00.008-05:00

[EOD] Stocks and VIX -
The preferred/anticipated near-term weakness materialized in both stocks and gold.

Chart 1 updates the top tracking counts on SPX from yesterday's EOD update chart.
Price profile fits a news-driven E-wave of an EDT (Chart 1 blue, bullish), especially when viewed in conjunction with the DAX structure (see 1210pm entry below). SPX has retraced around 40% of the recent rise and has reached the middle of the green box. This is a good place for a small-degree b wave or 2nd wave retrace.

On the bearish side, wave structures support an LD wave 1-down (Chart 1 red, bearish) in SPX as well as DAX. More bearish 1/2/[i]/[ii] setup exists.

The next rebound will be telling and is likely to be deep. The Dec high is now a hurdle.

VIX has been dropping counter intuitively with the decline in stocks. However, the current decline could be bearish for stocks as a visual EDT is concluding (Chart 2, green). In addition, lower VIX could be deceiving as the term structure of vol based on VIX futures are rising going out into 2012.

[1210pm] DAX update at the close -
Near 0.618 retrace, double zigzag decline can be counted as complete. Otherwise, a lengthy LD down, probably still incomplete.

[8am] DAX, ES update -
color coded tracking counts. DAX relatively more bullish than ES. In ES, add a green [x] to next to the red [ii] as a double three possibility.

Market Timing Update (12/12/11)

2011-12-12T08:06:00.013-05:00

[1120pm] GDOW -
Looking to GDOW for clues reveals that all (parts of the world) is not well.

A visual five-down from Dec 5th high hints at near term lower lows.
The December high is a hurdle to overcome based on this bearish count. The connecting wave B is not so good looking, but the larger ABC structure does not suffer from truncation.

[EOD] Stocks -
The SPX cash index hints at a completed double three (Chart 1 blue). But ES could use at least small degree 5th wave down to a lower low (Chart 2, black) that may or may not come (Chart 2, green). Note that GOLD could use a small degree 5th wave down to a lower low as well.

Bonds (slightly higher) and VIX (actually lower) have not been confirming potential for extended decline in stocks so far. Probably the market is resting its hope on the Fed tomorrow. Let's see.

Conclusion,
bullish - leave room for an EDT wave [c] (Chart 1, blue alt).
bearish - this is a 1/2/(i)/(ii) setup, enjoy the slide. (Chart 1 and Chart 2, red).

See this chart under the 1225pm entry for the larger count.

[130pm] INDU squiggles -
Potential end of an ABC decline from the nominal high based on the bullish count. See 2nd chart below and excuse the degree label inconsistency. Further price action will reveal if it is more bearish - i.e. 1/2/1/2.
[1225pm] ES update -
The wave structure in ES has finally cleared up.

[1125am] NDX update -
positive divergence between NDX and SPX. (Partial) gap fill likely. See 2nd chart below.
[1045am] DAX update -
Blue - double three approaching its end.
Red - expanded flat rebound following an LD-down or more bearish 1/2/1/2 setup

[8am] DAX, ES update -
DAX - The preferred / anticipated decline in DAX is playing out. See "... so goes the world (12/9/11)". Will it truncate or extend?
ES - A small degree 5-down from the overnight high on the squiggles.

MTU Weekend Ed. - ... so goes the world (12/9/11)

2011-12-10T20:29:00.010-05:00

To say “as Europe goes, so goes the world” may be a stretch. However, the European sovereign debt situation has certainly been driving financial markets on both sides of the pond. Correlation among markets has been high. Look for clues from Europe.

Macro Picture
Markets have traded with much focus on the ECB policy meeting and the “make-or-break” European summit over the past week.

ECB actions turned out to be a non-event. A nominal rate cut was offset by Draghi’s less accommodating comments. Those who have been hoping for aggressive bond-buying support from the ECB were duly disappointed.

The European summit turned out to be neither making nor breaking. There’s agreement on future fiscal discipline by EMU members but no EU-wide treaty to enforce the new fiscal rules. There’s also agreement to funnel €200 billion to the IMF. Recall the unconfirmed whisper of an IMF "Global TARP" - Nikkei reported this past Wednesday that G20 planned to funnel $600bn into IMF to backstop the European sovereign debt crisis.

In Talk and Action (12/2/11), we observed that
“Theoretically speaking, the U.S. Fed is likely the only central bank that can carry out effective quantitative easing at the moment. (To a lesser extent, IMF could act as a conduit of funneled money.) Japan comes as a distant second and investors should forget about direct and effective ECB quantitative easing at the moment.”

So far, so good. Despite promises of future fiscal discipline, European government funding issues and creditor mark-to-market pain are still here. Ironically, the bond market - at the moment - is doing a fine job in pricing in and differentiating risks through adjusting spreads - monetary union or not. Look for additional printing by the U.S. and fund-flow through IMF as a conduit. A global TARP may indeed be a short term fix.

Frankfurt DAX
DAX appears to have substantial upside potential if it can overcome a couple of serious trend-line resistance (Chart 1 blue or red [i]). Expect the 0.618 fib retrace level to be hit. Otherwise, the risk of a truncated rebound means that the Sep/Oct lows are at risk (Chart 1, red C and Chart 2 red).

Chart 2 reveals a five wave decline from its nominal high on Dec 5th, with the recent rebound as wave 6. Odds appear to favor an additional wave down as a corrective sequence requires 7 waves (Chart 2, blue) - rising above 6077.17 before a lower low invalidates the blue count. For example, the green count shows a completed 7-wave decline from the orthodox high on Dec 2nd.

U.S. SP500
U.S. stocks are in a similar spot - approaching trend-line and key moving average resistance. Chart 3 sums up the working bullish (blue) and bearish (red) tracking counts on SPX.

With U.S. stocks at a much deeper rebound level, SPX needs to successfully rise above its MA200 (and ideally take out the October high) to eliminate the potential of a truncated rebound (Chart 3, red-alt, i.e. October high holds).

Chart 4 counts the rise from the Nov low as a completed zigzag (red) or a incomplete larger zigzag (blue). Both counts allow for a push lower. Chart 5 shows the squiggle count from its recent nominal high.

Last but not least, keep in mind the following chart of maximum confusion (Chart 6).

Market Timing Update (12/9/11)

2011-12-09T10:06:00.004-05:00

[EOD] Stocks -

[245pm] SPX squiggles -

[1220pm] DAX, SPX update -
DAX closed at the "neck line". SPX wedging up.

[1005am] DAX, SPX, ES update -
DAX - prior support at the "neck line" is now resistance (blue). LD-down (red)
SPX - rebound from the green box. Various tracking counts shown in ES, see yesterday's EOD update for description.

Market Timing Update (12/8/11)

2011-12-08T07:05:00.007-05:00

[EOD] from an ES perspective -
Here's the assessment from a futures (ES - december) perspective, where we play the "where-is-the-top" game once more.

[red- bearish] A topped at 1262.75. C topped at the AM high of 1272. It's all the way downhill from here.

[blue - "immediately" bullish] A topped at 1266.25. B is an expanding triangle approaching its end. New high next.

[purple - bullish] A topped at 1268. B is a flat approaching its end OR B is a more complex structure (flat - X - three).

[EOD] Stocks -
At the open, we observed that SPX has a chance to reach Dan's virgin box area. The market is now at the edge of the box at the close (Chart 1).

Chart 1 offers a (red) count where the market has topped following a double zigzag rebound (with truncation). This count corresponds to the red count in Chart 2 which zooms out.

Chart 3 to the right offers squiggle counts on the decline to go with Chart 1.

[335pm] SPX squiggles -
see 2nd chart below
[935am] SPX update -
Has a chance to reach Dan's virgin box area.

[840am] ES update -

Higher high on data and news. Pullback over (blue) or expanded flat (red).
[7am] DAX, ES update -
ES - yesterday's PM ramp did not register a higher high. No higher high during the overnight session either. Let's see what the AM pre-market ramp does.
ES/DAX - at the same time, no clear downward count either. A bunch of threes for some time.
Bank of England - rates unchanged

Market Timing Update (12/7/11)

2011-12-07T07:06:00.007-05:00

[P.S.] DAX is telling -
ABC correction is over or is extending.
Back testing the "neck line" - needs a push.

[EOD] Stocks -
Whispers of "Global TARP" - Nikkei reports G20 to funnel $600bn into IMF to backstop the European sovereign debt crisis.

It would not be a surprise if the report is accurate. In Talk and Action (12/2/11), we observed that "
Theoretically speaking, the U.S. Fed is likely the only central bank that can carry out effective quantitative easing at the moment. (To a lesser extent, IMF could act as a conduit of funneled money.) Japan comes as a distant second and investors should forget about direct and effective ECB quantitative easing at the moment. From this perspective, it's not surprising that the Fed is "shouldering" some of the international burden."

How come that it is easier to get G20 countries to take actions than to get EMU nations to do so? - printing.

count update - no change from the 340pm entry.
(Subjective) primary count is for a expanded flat decline which is still missing wave [c]-down.

[340pm] count update (SPX, INDU)-
primary count is at least one more wave [c]-down in SPX or wave [c]-down / wave [e]-down in INDU, until proven otherwise. See charts.
P.S. Triangle in INDU just invalidated. So wave [c]-down in both SPX or INDU, until proven otherwise.

[7am] DAX, ES update -
DAX remains range-bound and ES is wedging up.

Market Timing Update (12/6/11)

2011-12-06T07:09:00.006-05:00

[EOD] Stocks -
The chart to the right updates tracking counts on ES discussed in the 710am entry below.

INDU made a higher high while other indexes lagged, making it likely that yesterday's high is the top of the initial rise from the Nov low (Chart 1, blue).

Note that it's possible to count today's high as the end of a five-up (Chart 1, green) with truncation in many indexes. It's also possible that INDU diverged from the rest of the pack, topping out today instead of yesterday.

Chart 2 zooms out to keep counts in perspective.

[245pm] SPX squiggles -
potential post triangle thrust or else.

[1210pm] DAX update at the close -
Big picture count and squiggles.

[710am] DAX, ES update -
tracking counts. let's see if the apparent five-up from the overnight low in ES is a new upswing or wave c of an expanded flat.

Market Timing Update (12/5/11)

2011-12-05T06:45:00.007-05:00

[EOD] Stocks -
It's possible to count a completed five up from the Nov low (Chart 1, blue) and completed small-degree five-down from today's high (Chart 2, red).

Then again, squiggles are squiggles, a double zigzag is missing a final C-up (Chart 1, red), and an extended wave v is missing waves [3][4][5] (Chart 1, blue).

However, note the deteriorating breadth along surge from the Nov low (Chart 1, bottom panel). This leg of advance is running out of steam.

[1150am] DAX update at the close -
Potential triangle intact. Let's see which way it breaks. Moment of truth - till tomorrow. See the 2nd chart below.

[10am] Transports update -
Most bullish count of the recent surge is 1-up (blue) or A-up (purple). Most bearish count of the recent surge is C-up of an expanded flat (red) with Oct high surviving. Can map into SPX.

[935am] SPX squiggles -
see the 2nd chart blow.
[857am] ES squiggles -
Especially if it should reverse around here. Also consistent with a potential barrier triangle outlined in the 645am entry, or a flat wave [b]/[ii] correction.

[645am] DAX, ES update -
Potentially larger triangles in both.

MTU Weekend Ed. - Talk and Action (12/2/11 Close)

2011-12-03T12:51:00.014-05:00

Latest development
SPX saw its November low over the past week. It's now official that November was an inside month, which should not alter our intermediate term tracking scenarios much (see below).

Talk is cheap but actions are apparently welcome. Stocks responded to coordinated actions of reduced USD swap line pricing by the FED and new bilateral FX liquidity swap lines among six major central banks. SPX surged 8.75% over the past week from its low to high intraday. Will December be able to escape the October range?

Additional Easing
Speaking of actions, the extra monetary policy accommodations did not come as a surprise. Recall that Hope and Resistance (11/11/11) infers that if history is a guide, the stage is potentially set for another round of (quantitative) easing. Chart 7 in that piece is reproduced here as Chart 1 to the right.

Updated data released by the Fed reveals a continued slow slide in banks' excess reserves at the moment. This past week's policy actions confirmed our assessment that recent reserve withdrawal was a sign of stress rather than healthier underlying demand. It's quite possible that we have not seen the end of additional easing, despite better domestic macroeconomic readings of late.

Theoretically speaking, the U.S. Fed is likely the only central bank that can carry out effective quantitative easing at the moment. (To a lesser extent, IMF could act as a conduit of funneled money.) Japan comes as a distant second and investors should forget about direct and effective ECB quantitative easing at the moment. From this perspective, it's not surprising that the Fed is "shouldering" some of the international burden.

Intermediate term tracking
We've been formally tracking three intermediate term counts since the beginning of November (see Intermediate Term Count Update 11/4/11). Chart 2 (bull market), Chart 3 (hope rally over) and Chart 4 (hope rally still in progress) offer updates.

Maximum confusion
Chart 5 above- under the interpretation that the Hope Rally is still in progress - postulates a number of potential triangles that would offer maximum confusion. Given heightened market volatility in recent months, the utility of these triangles is likely beyond mere entertainment.

Near term outlook
For the near term, it's appropriate to focus on the wave structures of SP500 futures as much of the recent surge came overnight.

At least a pullback is likely in progress as Chart 6 shows. Friday's high is likely

1-blue) the end of an initial impulse from the November low, or
2-red) the end of a double three rebound from the November low, in the form of double zigzag - X - double zigzag, or
3- green) the end of wave b-up of wave (ii)-down of wave [iii]-up of the post-November-low advance, where wave [iii]-up is extending.

Market Timing Update (12/2/11)

2011-12-02T08:30:00.001-05:00

[845am] ES update -
Double zigzag or impulse up from the Nov low in ES (Chart 1). Note the larger counts in Chart 2.

[830am] DAX update -
Prepare for truncation or extension. As Chart 1 shows, if the small-degree wave (iii) off the Nov Low does not extend, wave (v) is capped by 6422.08, which is shy of the Oct high (Chart 2). Note in Chart 2, the subjective primary count is the blue, which is a double-three, with the pending high as A of the second three.

Market Timing Update (12/1/11)

2011-12-01T07:03:00.009-05:00

[806pm] ES update -
Potential triangle still in progress. Let's see which way it breaks.

[215pm] ES update -
Potential triangle or flat 4th wave in ES. See 2nd chart below.Odds favor a flat/double three in SPX cash index.

[1145am] DAX squiggles at the close -

[835am] ES update -
Unlike DAX, the proposed 3rd wave off the recent low in ES is longer than the 1st wave.
[735am] DAX update -
Note the proposed 3rd wave off the recent low in the 2nd chart is shorter than the 1st wave. This limits the upside potential for the 5th wave if one materializes, unless it is wave i-up of (iii)-up.

Market Timing Update (11/30/11)

2011-11-30T07:28:00.005-05:00

[9pm] Maximum Confusion, for entertainment purposes only at the moment -
A bullish triangle (green, contracting) and a bearish triangle (blue, expanding) for maximum confusion (whipsaw). Note that the July high likely holds for the bearish-blue triangle, but new highs likely for the bullish-green triangle. Waves for thought.

[EOD] Stocks -
See 330pm entry below - with this updated chart.

[330pm] Stocks -
Today's surge is a "small-degree" 3rd wave or a C wave. Here's how it might fit into the larger count.

bullish (blue) - to push above the Oct. high to at least complete a counter trend rebound against a visual five-down from the Apr/May top ... with potential to be part of a larger 3rd wave to new highs.

bearish -
(a - purple main) to complete wave D-up of an ED-type wave (C)-down, likely to below the Oct low. Rising above the Nov high invalidates.

(b - purple alt) to complete wave [ii] rebound against the decline from the mid-Nov orthodox rebound top. Rising above the Nov high invalidates.

(c - red) to complete wave X-up of (Y)-down, likely to below the Oct low. Rising above the Oct high invalidates.

[730am] ES update -
Month End. The pre-market surge pushed ES to its 50D-MA. The pre-market surge is likely wave (v)-up (end of [i]-up) or wave [iii]/C-up based on squiggles.

Market Timing Update (11/29/11)

2011-11-29T06:37:00.010-05:00

[EOD] Stocks -
ES triangle broke downward in AH trading (Chart 1). Chart 2 updates tracking counts on SPX.

[320pm] ES triangle update -
Let's see if it is a bearish or bullish triangle or not even a triangle.

[110pm] SPX, Transports update -
"1/4" overlap at various degrees in TRAN, but not in SPX - bullish on balance. However, leave room for a five-down in SPX (red as marked) and an LD-down in TRAN, under the bearish interpretation.

[655am] DAX, ES update -

DAX/CAC (and to a lesser extent FTSE) experienced major overlap which eliminates the rebound being a 4th wave at any degree. Thus, odds continue to shift towards bullish counts for European benchmarks.

Both DAX and ES are now at the upper channel resistance. Reaction here will be telling.
In addition, ES is approaching is 50D MA - see big picture chart to the right.

ES has 7 waves up from the nominal low. Bullish count in blue. Added the purple count to accommodate the rebound being a 4th wave at an even higher degree.

Unlike stocks, no higher high in Gold, nor in Oil.

Market Timing Update (11/28/11)

2011-11-27T21:34:00.009-05:00

[EOD]Stocks -
Based on ES, the surge from its low is a visual five-up (Chart 1, blue), although a zigzag wave [iv] may just ended at the 0.382 fib if ES experienced a truncation (Chart 1, red) which is not unreasonable given the shortened Thanksgiving sessions.

Based on SPX, the decline from today's high is not conclusively actionary (Chart 2, blue), although it could very well be (Chart 2, red).

Based on Transports, the decline from the most recent nominal high is 7 waves (Chart 3, and 1040am entry) - unless a pretty extended 3rd wave (Chart 3 red) is in play.

On balance, odds favor the bullish count, with at least one more push higher, and perhaps with potential to eventually surpass the Oct high.

For the very near term, the decline from today's high could use another leg down, as C-down of a corrective structure or (iii)-down if today's high is indeed a wave [iv] top.

The bearish possibility of a wave [iv] top is more easily seen in the wave structure of GOLD (Chart 4).

[1040am]Transports and INDU update -
Wave structure in transports (Chart 1) favor the bullish view (purple or black)given that there are 7 waves down from the most recent nominal high - unless a pretty extended 3rd wave (red) is in play.

[7am] ES bear count revision -
Bumping the the rebound one degree higher by employing a truncated fifth - better form - as another possibility. Bull count is unchanged. See the 620am entry for more.
[Nov 28, 620am] DAX and ES update -
DAX / FTSE - nice-looking ABC November decline , look for 1/4 overlap for confirmation.
ES - A visual five-up in place at the moment. See Sunday night update (below) for discussion.

[Nov 27, 930pm] ES update -

It's amazing sometimes how waves eventually unfold and clarify themselves. See Chart.

If BOTH the large triangle and the small triangle as marked are valid, odds now favor the bullish count (BLUE, i.e. moving at least above the Oct high).

If only the small triangle as marked is valid, the tug of war between the bulls and the bears continues and odds favor at least one more low (RED and Alt-Blue).

Note that the Sunday night gap up has at the moment stalled at the implied (ii)-(iv) channel line. We'll see what transpires overnight.

P.S. With the Sunday night's gap up in stocks, there is, at the moment, no breakdown in EURUSD, no breakout in DX, no breakout in U.S. bonds, all at the brink of doing so.

MTU Weekend Ed. - Shaping Up (11/25/11 Close)

2011-11-25T15:16:00.004-05:00

The November sell-off in stocks has now become orderly enough for one to narrow down top counts and identify (at least local) turning points. See charts.

In addition, stocks have retraced around the Fib-0.618 of the October advance. This is the first major correction of the October advance - if it is one. See Keep it Simple (11/18/11) for big picture tracking.

Market Timing Update (11/25/11)

2011-11-25T08:29:00.003-05:00

[950am] Cash index (INDU/TRAN) update -
INDU/SPX is in a similar spot as the two main ES options - wave iv (purple) rebound or impulse complete at the low (red, blue) (Chart 1).

However, if one sticks to Precther's EWP strictly - wave 3 never the shortest - waves in Transports suggest an extended 3rd wave or a double zigzag yet to complete (Chart 2). The red [1][2][3] in chart 2 should read i, ii, iii to make the degree consistent.

INDU/SPX is not subject to this dilemma. While it is possible the decline in INDU from the nominal high (gray) is a completed double zigzag or a completed five-down (blue, red),it's prudent to leave room for at least one more down swing.

[830am] DAX, ES, DX update -
DAX - around equality C=A
ES - At the moment, "endless" extension makes 9 waves down from the black B and 7 waves down from the green B, and 11 waves down from the nominal high of 1272.25. This decline is where benefits of not rushing the wave count show.
DX - USD about to break out upwards

Market Timing Update (11/24/11)

2011-11-24T00:23:00.002-05:00

[1030am] ES, DAX update -
Lower low in both, after a 4th wave (see black count below) rebound in ES.

[1220am] ES update -
ES rebounding in quite overnight trading and has recovered about 50% of Wednesday's decline at the moment (Chart 1). Chart 2 offers a larger count. See Wednesday's EOD update for details.

Market Timing Update (11/23/11)

2011-11-23T07:08:00.010-05:00

[EOD] Stocks -
Stocks have a shot at at least a local local (end of five-down from the Nov high) as evidenced by Chart 1 (transports) and Chart 2 (ES, green).

Chart 3 shows how a decent sell-off into the close today may be the "final" small degree fifth wave. Note that the low in ES ended at the mid-channel line. The near term low is the low based on the green count. The black count has (iv)-up and (v)-down yet to come.

It is informative to keep an eye on the larger picture (Chart 4). ES has retraced near 0.618 fib of its Oct. advance. No hint of intermediate term direction yet. Directions? yes. See big picture scenarios in Keep it simple (11/18/11).

All the best to those who observe the Thanksgiving holiday. And best wishes for the rest too.

[315pm] ES squiggle update -
Going back to where we started the day -
Green - low is likely in.
Black - (iv)-up then (v)-down to conclude [v]-down

[1150am] DAX, Transports update -
DAX closed at its low of the day.
Look to transports for clarity. Small degree 3rd wave should extend if TRAN drops below 4554.60 (current low 4565.94). Otherwise a bounce, at least. See 2nd chart below.
[1010am] Count update INDU -

[705am] ES update -
ES retraced more than 50% Fib. Keep an eye on the bigger picture.
Squiggle-wise, role-reversal. The overnight low likely completed the green impulse down. But the green impulse down with an extended [v] is likely missing a final thrust.

Market Timing Update (11/22/11)

2011-11-22T06:31:00.009-05:00

[EOD] Stocks -
Decent-sized sell-off during after hours, but no lower low yet. Perhaps the potential triangle highlighted in the 210pm entry panned out, or wave [3]-down of v-down is already in progress (Chart 1).

At the same time, it's entirely possible that today's low is the low based on the black count on ES (Chart 2).

[210pm] SPX/INDU count update -
Hard to rule out a small-degree 4th wave still in progress, despite the lower low today. Various tracking counts.

[1140am] SPX and DAX squiggles -
SPX - expanded flat or wave [v]-down.

[935am] SPX / ES squiggles -

[830am] ES squiggles -
Post-GDP, potential expanded triangle connecting wave. We'll see if it is.

[7am] ES, DAX update -
ES - One more lower low based on the green count. Correction done or a deeper 2nd wave rebound based on the black count. The chart to the right shows potential squiggle counts.

Market Timing Update (11/21/11)

2011-11-21T07:20:00.011-05:00

[EOD] Stocks -
Stocks have satisfied the minimum requirement of at least an initial low. That is, a five waves decline from the recent high (Chart 1, purple).

It's possible that the correction to the Oct. advance is also complete at today's low (Chart 1, gray). Is it possible to count the rebound from today's low as an impulse wave? Possibly - see Chart 2.

On the bearish side, there should be at least one more lower low to complete the retrace-down (Chart 1, blue) or wave (i)-down of [iii]-down (Chart 1, red).

As a result, today's low is a key pivot.

[1111am, 1228pm] ES squiggles -
[11:11am] Approaching the end of an impulse or the end of the 3rd wave of an impulse.
[12:28pm] Given wave development, the red 3 should now read (iii) of [iii] of 3. Stretched?

[1020am] NDX update -
Bull (green) and bear (red) counts. The bearish count has the rebound terminating with a triangle. Expect a small degree bullish (i)-up or bearish(ii)-up next under these counts.

[945am] INDU squiggles -
Five-down from the recent nominal high.

[720am] ES, DAX update -
ES counts well as a completed/near complete five-down from its Nov 13th high.

MTU Weekend Ed. - Keep it simple (11/18/11 Close)

2011-11-19T10:01:00.011-05:00

Intermediate term update

Stocks have met the minimum requirement for a counter trend rebound since the October low (Chart 1). The bust of a much discussed triangle may offer confirmation of another meaningful down-swing:
1] wave (3)-down of [3]-down or [A]-down of cycle wave c-down (Chart 1) or
2] wave (C)-down of [X]-down of a mid-term correction to the Hope Rally (Chart 2 blue).
3] wave (C)-down of [2]-down of a cyclical bull market (wave five) (Chart 3, blue).

It's probable that the decline since the October high may be a partial retrace of the October advance, given the October breadth thrust and still shallow retrace of key international stock market benchmarks (see Hope and Resistance (11/11/11) ). Chart 2 (green) and Chart 3 (purple, green) illustrate the potential for another advance to recovery highs once the correction to the October advance is over.

Near term outlook
As it was the case during the Jul-Oct sell-off, transports continue to offer more trackable wave structures since the October low (Chart 4).

With this past week's decline, stocks have now met the minimum requirement for a net partial retrace of the October advance (Chart 4, non-extended purple and green), in terms of wave structure despite the lack of a lower low in many indexes.

Potential for a (much) deeper pullback exits (Chart 4, extended purple, blue, red). In this case, the rebound off this past week's low is a small-degree wave B or wave ii rebound, which may or may not be complete (Chart 5).

This past week's low is likely a key pivot on the bearish side. The high on Nov 15th is likely a key pivot on the bullish side.

Market Timing Update (11/18/11)

2011-11-18T07:02:00.004-05:00

[10:45am] INDU squiggles -
Five-up in INDU and possibly in Transports - not so obvious in SPX) - raises the odds of low being in place or a 2nd wave rebound. See worst case scenario counts in yesterday's update.

[925am] ES squiggles -

Potential pop and dump.
If the impulse wave count (black) plays out, expect a bullish pop (wave 5-up) and dump (wave 2/B retrace) for the cash market.
If the corrective wave count (red) plays out, expect a weak pop to account for ES overnight advance and then dump.

[910am] FTSE, DAX update -
DAX looks more bullish than FTSE, unless both are tracing out an LD-down.

[735am] ES update -
And here is a larger count to pair with the squiggle count (7am entry). See 2nd chart below. If black B, this is a wave [iv] rebound. If green B, the low is in or this is a wave [ii] rebound for wave C extension.
[7am] ES update -
Flat or impulse up from the overnight low.

Market Timing Update (11/17/11)

2011-11-17T07:08:00.009-05:00

[P.S.] Worst/Best case scenario -
A thought experiment of the worst/best case scenario for bulls and bears is useful at this juncture. In this section, the words primary/alternative are used only to indicate left and right portions of a complex label, without indication of likelihood.

Let's start with the easier-to-count chart of transports (Chart 1).
The worst-case count for the bulls and the best-case count for the bears is the primary red count - today's low is (i)-down of [iii]-down as indicated.

The worst-case count for the bears and the best-case count for the bulls is the alternative red count and the green 4. Both counts have a zigzag completed at today's low and call for a (near) immediate rise to new highs.

The rest of the counts are sandwiched in between these two, such as the further downside potential of wave C.

Now moving on to the more complicated chart of the Dow (Chart 2).
The worst-case count for the bulls and the best-case count for the bears is the purple count of a string of 1s and 2s. Today's low is [3]-down of i-down of (iii)-down of [iii]-down as indicated.

The worst-case count for the bears and the best-case count for the bulls is blue count where a zigzag completed at today's low. A (near) immediate rise to new highs is expected.

The rest of the counts are sandwiched in between these two, such as the further downside potential of wave C.

Given the divergence between transports and the rest (higher high in TRAN), I think that odds favor Nov 15th high being the start of an initial or final decline.

[EOD] Stocks -
While the low of terminal/initial decline could be in, there could be one more small-degree 5th wave before it completes. Because on a squiggle level, it looks better if there would be a wave 5 decline following a wave 4 bounce (Chart 1), depending on where wave [ii]/[b] actually topped (Chart 2).

[1250pm] Chart clean up (INDU) -
Triangle dies, potential EDT (bullish) or LD (bearish) survive. See chart.

[1110am] Count update (TRAN, INDU) -
Transports continue to offer clearer waves. The much discussed triangle survives SPX by less than an index point and ES my 2 index points.

[707am] ES update -
potential triangle and EDT or wave C/3 down.

Market Timing Update (11/16/11)

2011-11-16T07:10:00.005-05:00

[EOD] Stocks -
Transports continue to offer some clarification of the wave structure (see the 125pm entry). Chart 1 updates and shows that the sell-off into the close is either the start of the next swing down (red, bearish) or a small degree [ii]-down of 5-up (blue, bullish). In the bullish case, blue-3 is shorter than blue-1. Thus, if blue-5 should be capped (solid green line) if not already topped.

Chart 2 updates the various tracking counts on INDU. Note that the much discussed triangle survives as of today.

Chart 3 (right) illustrates some bullish squiggles. The point is that price actions are not necessarily bearish, but it's prudent to leave ample room for (much) deeper declines. The Nov 9th low is a key marker.

[125pm] Transports update -
The "clearer" structure in transports may help clear a few waves. Map it into SPX if one wants to do so. The red B to the right of the chart should read X to pair with the red W.

[955am] INDU update -
End of a larger triangle (blue)? post-triangle thrust of a smaller triangle (red)? or None of the above (purple)? - see Chart 1. Squiggle count in Chart 2.

[710am] DAX, ES update -
There are too many potential triangles. It's prudent to leave room for further declines, as [c]/[y]/(iii)-down.

Market Timing Update (11/15/11)

2011-11-15T07:40:00.006-05:00

[EOD] Stocks, A tale of (too) many triangles -
The first chart on INDU illustrates.
[Green - bullish] could be working on an LD off the October low.
[Blue - bullish] a potential triangle as X-down from the October high may have ended at today's low or with one more decline as (c)-down of [e]-down.
[Red - bearish] today's rise could be concluding [b]/[ii]-up with [c]/[iii]-down to come shortly. The proposed [b]/[ii]-up is itself a triangle-like structure. If one is a purest, odds favor [b] over [ii] under this interpretation.

The second chart shows the squiggle count on ES from today's low. So far, we have a zigzag-up with potential for it to morph into an impulse wave advance.

[2pm] INDU squiggles -
Potential EDT? And from a bearish perspective, end of wave [b]/[ii]-up?. From a bullish perspective, initial impulse of the post-triangle thrust. See the 2nd chart blow and the chart to the right.
[1pm] INDU squiggles -
watch the bearish count of an expanded flat x, and the green trend-line. Otherwise, breaking out upwards.

[1140am] DAX update -
The week is young. But there's a decent looking five-up from today's low in DAX.

[740am] ES update -
Momentum of truth for the potential triangle. Triangle or not, a bunch of threes so far, so leave room for small and large wedges or even a bearish triangle [b]-wave (red trend-line).

Market Timing Update (11/14/11)

2011-11-14T07:01:00.007-05:00

[EOD] Stocks -
See the 330pm entry for squiggle counts. Today's decline has met the minimum requirement for a wave E-down of a potential triangle in stocks. At the same time, there's room for further pull-back with today's low as wave (w). The chart to the right presents the larger count.

[330pm] ES and INDU update -
zigzag down so far. Is it 1/2/[i]/[ii] - up (larger degree, green INDU) or down (smaller degree), abc-down or w-down? See charts.

[1150am, 1240pm] DAX and INDU squiggles -
1150am- Little movement in DAX. Corrective or LD decline in INDU.
1240am - INDU approaching potential trend-line and fib support and potential end of an (initial?) ABC decline.

[7am] DAX, ES update -
see the weekend commentary, Hope and Resistance (11/11/11) for details.

MTU Weekend Ed. - Hope and Resistance (11/11/11 Close)

2011-11-12T08:50:00.022-05:00

Intermediate Term Counts
Our focus remains on the Hope Rally. Intermediate Term Count Update (11/4/11) presents three main tracking counts. The following charts offer update for
(1) Hope Rally is over (Chart 1, right).
(2) Hope Rally is still in progress (Chart 2).
(3) It's a bull market (Chart 3).

Hope ...
There are a number of bullish near term (days/weeks) and intermediate term (weeks/months) developments for U.S. stocks.

First, potential triangle price patterns set the stage for the next advance in stocks.

Chart 4 and Chart 5 below highlight potential triangles in the Dow and the Nasdaq 100. Similar price patterns can be found in SPX and the Nasdaq composite.

Triangles, being continuation patterns, imply that recent recovery is likely to continue. Since the triangle in NDX is already complete, the pullback in SPX/INDU may be complete as well with the coming retrace being a small degree 2nd wave rather than wave E of a developing triangle. For example, the transports have already made a higher high, invalidating the triangle. The Dow is also very close to break out upward.

On the other hand, a break below the recent low is bearish and likely be accompanied by at least a (much) deeper pullback - movement following a failed pattern is often significant.

Similarly, since the assumption of a truncated 5th wave is necessary to label a five-wave advance in the VIX from its low to the recent high, there's room for the VIX to resume its Hope Rally down trend. For example, a potential wedge in the VIX, as outlined by the red trend-lines in Chart 6 (right) can push the VIX lower for some time. Declining risk premium is likely bullish for stocks.

On the other hand, the blue count (which is bullish on VIX and likely bearish on stocks) assumes a truncated 5th wave and can very well end soon with a terminal triangle as marked.

Second, the breadth thrust in October portends meaningful (near term) gains if past experience is a guide.

The lower panels of Chart 2 and Chart 3 above highlight the spikes (breadth thrusts) in the NYSE advance-decline ratio. The last time there was such a breadth thrust was in August 2007, three months before the all-time high in stocks. Santa rally / January effect after all?

Third, the stage is potentially set for additional (quantitative) easing if history is a guide. (See the last section.)

... and Resistance

Note that the market is approaching a long term resistance zone in SPX - see Chart 1 to Chart 3. This resistance zone has rejected the market's advances four times since 2000. Reaction to this resistance zone will be telling.

Quantitative Easing III
The recent market turmoil has (again) been accompanied by a meaningful (but not too significant) draw-down in bank excess reserves at the Fed (Chart 7). Given the recent rise in funding costs ("surging" LIBOR, widening TED spreads) and "tape bombs", odds favor liquidity needs over reflation, until further development.

History also shows that each episode of liquidity driven contraction in bank excess reserves since 2008 has been met with a round of quantitative easing.

From a wave perspective, there are five visual waves up in bank excess reserves since the onset of the financial crisis with the 3rd wave up being the shortest. The current decline in bank excess reserves counts well as [iv]-down of 3-up of a long upward impulse or the second [b]-down of Y-up of a zigzag rise. Both counts suggest new highs in bank excess reserves. More quantitative easing in the cards?

If history is a guide, the stage is potentially set for another round of (quantitative) easing.

Market Timing Update (11/11/11)

2011-11-11T07:53:00.006-05:00

Note - Each count is usually color coded.

[EOD] Stocks -
tracking counts, see the 2nd chart below.
[1410pm] VIX update -
Speaking of triangles (again) - Here are a couple of counts on VIX that please bulls and bears alike.

[1015am] Count update -
Will continue to focus on INDU as it shows clearer wave structures.
The bullish count has the decline as a 4th wave (green), a 2nd wave (green)or a sideways X wave (blue).
The bearish count has the decline as a deeper X wave (blue) or a trend reversal (red)

[810am] ES, NQ update -
Speaking of triangles - while there appears to be a developing triangle in ES (chart, left, below), the low could very well be in place given a (more) complete potential triangle in NQ (chart, right, below).

Otherwise, see various tracking squiggle counts on ES in the chart to the right. 1/2/1/2 bearish and bullish, LD bullish, some kind of x wave (or even ED) bearish. For cash charts, see yesterday's EOD update.

[750am] DAX, FTSE, GDOW update -
As discussed yesterday, DAX has satisfied the minimum requirement of an ABC correction (so has GDOW). Let's see if this decline gets more complex or time consuming or impulsive.

Market Timing Update (11/10/11)

2011-11-10T06:50:00.009-05:00

Note - Each count is usually color coded.
[EOD] Stocks -
Market closed before waves can develop. The various options presented in the 340pm entry remain on the table. The following charts illustrate.
(Red - bearish) expanded flat with a potential EDT wave c-up.
(Green - near term bearish) wave [b]-up of a corrective decline either ended at today's high or will end with a post-triangle upward thrust.
(Blue - near term bullish) Leading diagonal triangle yet to be completed. Possible 12/12/... set up.

[340pm]INDU update -
Potential post-triangle thrust up, or wave 5 up of an LDT/EDT into the close. see the 2nd chart below.
[215pm]INDU update -

[1140am]Europe update at the close -
DAX and FTSE - see charts

[840am] ES update -

[650am] DAX update -
Dax has satisfied the minimum requirement of a low. Let's see if the decline gets more complex of impulsive. Note the wedge possibility too.

Market Timing Update (11/9/11)

2011-11-09T07:10:00.004-05:00

Note - Each count is usually color coded.
[EOD]Stocks -
At the end of the day, we have a 5-3-5 decline. Chart 1 shows the tracking counts and rough location of the potential bottom, including today's low.

(Subjective) primary count remains wave X (blue), followed by wave 2 (green), followed by the bearish count (red).

[920 am] DAX and FTSE update -

[710 am] ES update -
Pullback to complete X-down of (B)/(2)-up likely has started overnight (Chart 1, ES). Technically, it's nice to see an EDT playing out once (in a long while) as discussed in yesterday's 340pm entry and this chart therein. As discussed, it's prudent to leave room for the larger bullish count with the overnight high being 1-up since the October low - better seen in INDU.

Squiggle count on ES since the November low is shown in Chart 2. The green bullish count is for entertainment purposes, if nothing more.

Market Timing Update (11/8/11)

2011-11-08T07:24:00.009-05:00

Note - Each count is usually color coded.

[340pm, EOD ] Stocks -
340pm - The green bullish count in INDU is intriguing (Chart 1, below), although it does not work well with SPX. At the moment, the market is at the overthrow territory of a potential EDT and at the mid-channel line. More after the close.

4pm - (Subjective) primary count is that a wave [x]-down retrace is still missing (c)-down. The recent advance is (b)-up of [x]-down, perhaps better seen in GDOW (Chart 2, below). While US stocks have retraced deeply in October and November, the "broader" GDOW has not yet done so.

Given the deep retrace in US and UK, I'd be monitoring London FTSE (Chart 3, right) for signs that negate the bearish count (i.e. Hope Rally is over - See the corresponding section in Intermediate Term Count Update (11/4/11)).

[1255pm] SPX/ES update -

[1130am] DAX at the close -

[725am] DAX, ES update -
Small degree C or 3 in progress in both DAX and ES

Market Timing Update (11/7/11)

2011-11-07T08:31:00.008-05:00

[550pm] INDU update-
INDU showing "better formed" waves. Here's the big picture since the Oct. low.

[340pm, EOD] Bull and bear counts -
The structure in ES is telling. More after the close.
Bull - a tolerable five with a triangle 4th wave and minor overlap. Leave room for extension.
Bear - double zigzag (red), zigzag (boxed red)
Chart 2 shows the tracking squiggles on SPX cash.

[1140am] SPX update -
There are changes in the tracking counts as the market remains range-bound (see 835am entry). However, the wave structure is rich.
[835am] ES update -
Quite a turn-around from the AM low in ES. Multiple possibilities including the possibility of a truncated c*, a terminal triangle c** on the bearish side and a triangle [x] and a completed three x on the bullish side, all depending on which side of the congestion area ES breaks out.

MTU Weekend Ed. - Intermediate Term Count Update (11/4/11 Close)

2011-11-05T17:04:00.009-04:00

Large stock market swings millennium to date, particularly those in 2011, have produced enough structure to shed additional light on the intermediate term path of U.S. stocks. It’s a good time to gather our thoughts. Please see The Big Picture (U.S. Stocks), updated June 2011 for discussions on the long term count.

Top long terms counts can be categorized as follows.
(1- new bull market ) The 2009 low marked the beginning of a new bull market, impulse wave advance in EWP terms.
(2- hope rally is still in progress) The 2011 sell-off is a major yet a mid-term correction of a corrective rebound against the 2000-2009 decline.
(3- hope rally is over) The 2011 sell-off marked the resumption of a major bear market dating back to 2000.

I have some thoughts regarding which scenario is more likely, but it is prudent to let the market speak for itself. Here are some details. In all cases, please note the role of a decade-long support-resistance zone going forward.

It's a new bull market (Chart 1)
It’s reasonable to label the 2000 top as the end of a third wave, given the sideways nature of the
bear market over the following decade. Under this interpretation, the 2000-2009 correction, a fourth wave, takes on the structure of an expanded flat. However, there is much ambiguity surrounding the degree of the proposed third wave. As a result, there is much ambiguity surrounding the ultimate upside potential of the fifth wave in progress. See Chart 1.

Hope Rally is still in progress (Chart 2)
The 2000-2009 bear market, an expanded flat, is labeled as wave a (or w) of a much larger correction. The rebound since the 2009, the Hope Rally, is wave b (or x). Once the Hope Rally is over, a wave c (or y) decline is likely to push the market to new lows.

However, the 2011 sell-off is a major yet a mid-term correction of the Hope Rally. Two top counts are worth noting.

(green) The October 2011 low marked the end of a running flat or an odd looking (W)(X)(Y) correction dating back to the 2010 high. The current upswing will break above the decade-long support-resistance zone to complete a large zigzag-like [A][B][C] structure. Wave [C]-up can end below or above the 2007 high - that’s the nature of b waves.

(blue) The May 2011 high marked the end of an initial zigzag-like structure as [W]. The decade-long support-resistance zone where the market is current approaching is likely to offer resistance and induce a wave (C)-down of [X]-down. Thereafter, the final zigzag-like structure as wave [Y] will possibly produce an inverse head-and-shoulder pattern around the decade-long support-resistance zone and then push the market to new recovery highs.

Hope Rally is over (Chart 3)
The 2011 high marked the resumption of a bear market dating back to 2000.

Two top counts are worth noting. The 2009-2011 rebound, the Hope Rally, is wave b (or x) under one count and wave [2] under the other. The key differences between the two counts are the magnitude (large vs. huge) and wave structure (proportionate vs disproportionate three waves) of the resumed bear market.

(blue) The 2000-2009 bear market, an expanded flat, is labeled as wave a (or w) of a much larger correction. The 2009-2011 rebound, the Hope Rally, is wave b (or x). A wave c (or y) decline is in progress and is likely to push the market to new lows in a proportionate three wave structure.

(red) The 2000-2009 bear market is an incomplete expanded flat with the 2009 low as wave [1]-down of wave c-down. The 2009-2011 rebound, the Hope Rally, is [2]-up of c-down. Wave [3]-down is in progress, which is likely to be large and forceful.

Market Timing Update (11/4/11)

2011-11-04T07:34:00.011-04:00

[EOD] Stocks -
tracking counts, particularly those on the ES
[150pm] DAX and SPX update -
DAX - DAX has chance for the next wave C / 3 down, if the market sells off into the close and/or over the weekend. Otherwise, at least another move up based on the purple count (a small "zigzag" or a larger triangle 4th wavehttp://www.blogger.com/img/blank.gif?) or something more bullish. See this chart for the larger count.

SPX - various options, but the bearish counts are almost running out of time on a higher high.
[1130am] SPX squiggles -
One more lower low to make it a five down from the recent high. See the 2nd chart below.

[830am] ES update -
A small degree 5th wave after the jobs report or the second part of abc-x-abc.

[735am] DAX update -

Market Timing Update (11/3/11)

2011-11-03T06:31:00.007-04:00

[EOD] Stocks -
Squiggle count and the larger count refreshed. See charts.
[1230pm] DAX at the close -
See this chart for the larger count. The 2nd chart below shows the tracking squiggles.
[1130am] SPX squiggles -
ES still below its AM high at the moment.
[950am] SPX update -
Let's see which way it leans, red, blue or green.See the 2nd chart below.

[830am] NQ update -
A possible hint that low is in based on a potential expanded flat correction in NQ.

[640am] ES, DAX update -
ES - flat or something more bullish

Market Timing Update (11/2/11)

2011-11-02T07:56:00.007-04:00

[EOD] Stocks -
Chart 1- Primary count is a small-degree corrective rebound in progress (red/blue), with the alternative of a low in place (blue-green).
Chart 2- Larger count.
As mentioned in the weekend commentary, leave some room for a more complex wave (2)/(B) rebound if the low is not in.
[115pm] SPX squiggles -
See the 2nd chart below.
[1pm] DAX at the close -
Appears to be a wave b/B/[ii] rebound into the close.
[1110am] SPX update -
[8am] DAX, ES update -
ES - overnight high likely the end of wave iv or another wave (x)

Market Timing Update (11/1/11)

2011-11-01T08:20:00.011-04:00

[EOD] Stocks -
Primary options are [ii]-down of 3-up, X-down of 2-up, and 3-down (Chart 1). The decline from the high appears to be 7 waves so far (Chart 2), with INDU breaking into a lower low during the PM sell-off and AM low in SPX intact. Sometimes, the anticipated 5th wave never comes and sometimes counts are rushed. But the bullish divergence on the 30-min frame (Chart 1) should be noted.

Also, VIX surged 4.81 index points (+16.06%). Whether it is the start of another bull run or the end of a small-degree expanded flat remains to be seen (Chart 3). It's prudent to monitor both options.
[130pm] DAX update and SPX squiggles -
see the 2nd chart under the 1110am entry for updated SPX squiggles
[1110am] SPX squiggles -
5 or 7 waves down from the top in SPX cash, hope to be able eliminate some counts later today.
[940am] Euro update -
Regarding the appreciation of the euro in October, is it a better five (black) or better three (red)? You be the judge. See the 2nd chart below.

[920am] NQ update -
Expanded flat, rare expanding EDT, topped?
[830am] DAX, ES update -
DAX - retracing at least a five up since late September, possibly a flat since mid September
ES - at least a near term trend reversal, prudent to leave room for a complex wave (2)/(B) rebound as discussed in Points of Recognition (10/28/11).
Green tracks the immediately bullish count as [ii]-down of 3-up. Blue/Red track the bearish count.