Friday, April 29, 2011

MTU Weekend Ed. - Breakout (4/29/11 Close)

The big picture
Chart 1 updates the table in Unfinished Business 2011 (4/8/11). This past week saw the DJ transportation average and the Nasdaq composite index recover above their respective 2007 highs, following the lead of the RUT, MID and NDX in early April. Moreover, transports made a new all time high.

We now have 7 major indexes that have recovered their loss from the 2007 top. Short of declaring a new multi-year bull market, this development appears to support A Potential x Wave (2/4/11).

In addition, SPX has finally broke above a decade-long resistance zone discussed in Decision Point (4/21/11) and in prior discussions (Chart 2). This zone is now likely to act as support. It should be noted that while this decade-long price zone appears significant with respect to SPX, similar structures are not present in many of the other benchmark indexes.

Near term outlook
Near term concerns highlighted in Decision Point (4/21/11) appear to be largely behind us. Odds favor a continued rally to complete a five wave advance from the March low (Chart 3, blue), short term consolidation notwithstanding.

The competing bearish count (Chart 3, red) has the market completing wave B of an incomplete correction since the February high.

Chart 4 and Chart 5 offer squiggle counts based on these top tracking counts.

Top calling
If one disregards the relative size of the corrections since the July 2010 low for a moment, one can count a nearly complete 7 wave advance which potentially completes an ABCXABC structure. Chart 6 presents this (highly?) speculative count.

Note that this count allows the top to be already in place, or developing into an EDT, or developing as a regular five. A major deficiency in this count is that the connecting wave X is undesirably small. It appears to be a lower probability but interesting count to monitor.

A potential EDT in ES
For the very near term, there's a potential ending diagonal triangle developing in the SPX emini (ES) going into the weekend. If so, the initial downside target (or support) is around 1352 (Chart 7 and Chart 8) . The proposed retrace would be wave (iv) of [iii]-up since the March low based on the bullish count. There's further downside potential should any of the highlighted bearish counts plays out.

Market Timing Update (4/29/11)

[1235pm] Mid-day update (SPX, ES) -
A potential 1-2-3 / a-b-c from the 4/18 low

[820am] Overnight update (ES) -

Wednesday, April 27, 2011

Market Timing Update (4/27/11)

Tracking counts on SPX. And DX is approaching the floor of the small wedge as shown.

[8am] Overnight update (ES) -

Tuesday, April 26, 2011

Market Timing Update (4/26/11)

[EOD] Stocks -
Chart 1 shows the top bullish (green) and the top bearish (blue) counts. On the blue count, [c] is about 0.58 times [a] at today's high.

Chart 2 offers a squiggle count of the latest impulse up.

[1136am] Squiggle update (INDU)-
[735am] Overnight update (ES)-

Monday, April 25, 2011

Market Timing Update (4/25/11)

[830pm] EURUSD -
Here is an updated count on USDEUR. Please see DX and EURUSD, Potential x Waves too (4/21/11 Close) for a detailed discussion.

If the advance in EUR vs USD from the 2010 low is a zigzag (in hindsight), there should be one more down-up sequence before EUR tops. (alt Blue Count) If this is the case, the proposed wave [iv] is likely to retrace to around the 4/18/2011 level, implying that the USD index is likely to rebound to around the 75/76 area before a final decline.

If the advance in EUR vs USD from the 2010 low is a double three (ABC-X-ABC), EUR likely has topped. (primary Blue Count)

The ultra bullish count is indicated by the green labels.

[EOD] Stocks -
The advance since the April 18th low is either complete (red) or requires the final touch of a small degree 5th wave (Chart 1).

Note that one can count this morning's decline from the nominal high as five down in the cash indexes (SPX as well as INDU), but the decline from the overnight high in ES is a three at the moment (Chart 2).

The current top is either the bullish (i)-up of [iii]-up of 5-up, OR the semi bearish [x]-up of a large incomplete correction since the February high. Please see Decision Point (4/21/11) for a detailed discussion.

Note that Futures (ES) did make a fresh high (Chart 3). So it's possible that a zigzag wave [x] (or [b]) is complete or nearly so (if the market is still in a small degree 4th wave today as indicated in Chart 1 above).

[925am] Overnight update (ES) -

Saturday, April 23, 2011

MTU Weekend Ed. - Decision Point (4/21/11 Close)

While stocks have pretty much followed the (near term bullish) primary count (Chart 1, blue) presented in Stocks VIX and DX (4/15/11), this week’s volatility has presented ample concerns to warrant a closer look at a (near term bearish) competing scenario.

The particular near term bullish primary count in Stocks, VIX and DX (4/15/11) describes the decline from the April high as a second wave. Furthermore, if the proposed second wave decline did not end during the week ending 4/15/11, SPX would find support around 1294.

Indeed, the low in SPX before the strong recovery to 1337.49 this past week was 1294.70 on 4/18/11 (Chart 1).

However, there are concerns …
[1] There’s a great amount of unevenness/non-confirmation across indexes. INDU made a new recovery high, while other indexes lagged, some significantly (e.g., SP400 and Russell 2000).

[2] The upward gap at the open this past Wednesday is the largest one since the March 2009 low, if we exclude the one following the flash crash (Chart 2). It may be unusual to see such a large gap at such a late stage of the rally (i.e. [iii]-up of 5-up of the blue count in Chart 1).

[3] The current advance represents a fresh attempt to conquer the decade low resistance zone after a failed attempt in February (Chart 3). The resistance zone has yet to turn into a support zone for the market.

[4] At this critical juncture, negative divergence between price and technical indicators is now apparent on the daily time frame (Chart 1).

[5] At the same time, risk premium has shrunk to record levels with VIX collapsing to fresh lows during the entire hope rally (Chart 4).

… that warrant a closer look at another count of the hope rally which turns near term bearish. See the red count in Chart 5.

Thursday, April 21, 2011

MTU Weekend Ed. - DX and EURUSD, Potential x Waves too (4/21/11 Close)

A wave [B] (or wave [X]) decline in the USD index
A major development this week is the collapse of the USD index (DX) to below 74. The late 2009 low in DX has now been breached, invalidating a number of bullish counts as a result.

Short of sending the relative valuation of the U.S. Dollar to the abyss (Chart 1, red), and given the near record low sentiment towards the buck and the somewhat overlapping wave structure in DX during the recent decline, a wave [B] (or wave [X]) decline appears to best fit the wave personality (Chart 1, purple). The decline could technically be a lengthy 2nd wave (Chart 1, blue), but it may prove to be too optimistic and the burden is on the buck to prove its strength if and when the downtrend reverses.

The proposed primary count suggests that DX is in the middle of a multi-year upward flat. At the moment, it is not clear if we'll have a regular flat where the 2008 low will hold or an expanded flat where the 2008 low will fail. Chart 2 presents two tracking count of the near term decline.

The implication is that once the proposed wave [B] is over, the USD index will launch a five wave rally to above 90, and possibly to above 100.

Given the overwhelming weighting of the euro in the USD index, it's hard to imagine a turn in DX before euro tops.

The primary count on euro's strength relative to USD over the past year is a wave [X] (Chart 3, blue), similar to the primary count for U.S stocks (see A potential x wave (2/4/11)). The green count in Chart 3 offers a super bullish interpretation, which appears less likely at the moment. However, the nature of the [X] wave can have the euro will top below or above 1.50.

Chart 4
presents two tracking counts on EUR.USD. The primary count (Chart 4, blue) has the euro's advance in its final stretch if not already topped, assuming wave [v] does not extend. Should wave [v] extends with the recent high as (i) of [v], euro will rise above 1.50 with ease after a brief pullback. A decline below 1.41 calls the top based on the primary count.

Market Timing Update (4/21/11)

[122pm] Count update (SPX, INDU) -

[830am] Overnight update (DX, ES) -

Wednesday, April 20, 2011

Market Timing Update (4/20/11)

[EOD]Stocks, VIX, DX, Euro -
after hours advance in ES shown.
Vix and USD at fresh lows of the hope rally.

[1030am]Count update (SPX) -
INDU made a new high, other indexes are lagging at the moment.

[Overnight update] USD, ES -

DX fell to 74.30 at the moment. The top candidates for the long term tracking count are the blue and purple counts in Chart 1 below. Chart 2 below offers two near term tracking counts.

Stocks surged overnight, consistent with a third wave advance, with the dow and ndx futures nearly making new highs.