Wednesday, October 31, 2012

Market Timing Update (10/31/12)

[EOD] Stocks -
For the near term, SPX faces the neckline as resistance (Chart 1) and ES tests the potential wedge breakout line as support (chart 2). On balance, the burden of proof for the near term is on the bulls' shoulder.

[140pm] SPX/INDU update -
The neckline has been significant for some time. See charts.

[805am] ES update -
Month end, post hurricane Sandy.
ES finally regains the "neck-line" support (Chart 1). ES price structure offers a potential end to the Hope Rally point 6 decline (Chart 1 and 2, black). See Target Zone (10/26/12) for additional discussion.
The primary bearish count is an extended wave C down where the current rebound is a small degree wave [b]/ii] of C or [d] of an EDT C. (Chart 2, red)

Saturday, October 27, 2012

MTU Weekend Ed. - Target Zone (10/26/12)

Approaching target zone and at potential support

Following further weakness over the past week, SP500 has approached the proposed initial target area of 1390/1400 (Chart 1). Please see Dip (10/19/12) for additional analysis.

The structure of the decline since the October 18th high suggests a cluster of potential support around current levels.   A potential end to the six-week pullback is also likely especially when NDX has already retraced about 60% of the prior upswing and the correction appears to be adequate from a time perspective.  A rise above Friday's high could signal the next upswing.  Chart 2 illustrates.

[green] The proposed wave C-down is a zigzag, with [c]-down being a contracting EDT and already completed.
[red] The proposed wave C-down is a zigzag, with [c]-down being an expanding EDT still missing the final downward subdivision. A likely target is around 1400 under this scenario.
[blue] The proposed wave C-down is a regular “five”, still missing wave (v)-down. The low should be above 1390 and likely around 1400 since wave (v) cannot be larger than wave (iii).
[purple] Note that the purple count in Chart 2 highlights a more bearish scenario, but it is also subject to a potentially deeper rebound first.

Reconciling NDX price action, a long term perspective

A major challenge to our bullish interpretation (i.e. our anticipation of a terminal advance suggested by our Hope Rally model) is the pronounced weakness in the Nasdaq 100 index (NDX), its recent failure to break above a 10-year channel (Chart 3) and a visual five-wave decline (albeit an overlapping one) from its September high.

Chart 4 illustrates the prospects of a final upswing to complete the major advance since the 2010 low.

[blue] The advance since the 2010 low is a contracting EDT. The recent weakness is [b]-down of E-up. Wave [c]-up of E-up is likely to achieve the typical overthrow.
[green] The advance since the 2010 low is a regular "five." The recent weakness is wave 4-down. Wave 5-up will bring about fresh recovery highs, likely meaningfully higher than that under the aforementioned EDT scenario.

Friday, October 26, 2012

Market Timing Update (10/26/12)

[1125am] SPX update -
Potential wedges as discussed in yesterday's update. See chart - green and red.

[8am] ES update -
A decent place for this potential multi-week correction to approach its end, in the form a flat-like structure. See charts.

Thursday, October 25, 2012

Market Timing Update (10/25/12)

[EOD] Stocks -
So far the neckline resistance has proven to be formidable (Chart 2). Let's see when ES can recapture it. See 135pm entry for tracking squiggles on SPX, particularly the EDT count.

[135pm] SPX update -
Let's entertain the green count - [a][b][c] decline with [c] being an odd EDT. See tracking count chart.

[1020am] SPX/INDU update -
tracking counts. see charts.

[810am] ES update -
ES is trying to recapture the neckline support. The neckline represents resistance at the moment.

Wednesday, October 24, 2012

Market Timing Update (10/24/12)

[EOD] Stocks -
INDU is approaching a pattern-implied target (Chart 1). In addition, Chart 1 presents the top tracking counts. Chart 2 offers a squiggle count on SPX.

[120pm] SPX update -
color coded tracking counts from the recent swing high.

[945am] ES update -
A small-degree wave [v] down appears likely (red). See chart.

Tuesday, October 23, 2012

Market Timing Update (10/23/12)

[EOD] Stocks -
Rebound from the day's low hits neckline resistance. see chart.
[1005am] SPX update -
Larger count in Chart 1 and squiggles in Chart 2.

[9am] ES update -
Overnight session decline is likely a small degree 5th wave (Chart 1 blue) to wrap up the proposed [a] of C or C itself (Chart 2 red). Top alternative count is wave [iii] down of an extended C-down to complete a large flat-like structure (Chart 1 red).

Monday, October 22, 2012

Market Timing Update (10/22/12)

[645pm/PS] ES update -
ES found support and rebounded off Fib-236 retrace of the prior upswing (Chart 1). The rebound now has regained the prior base channel support (Chart 1). At the moment, the AH rebound retraced Fib-382 of last week's decline (Chart 2).

[345pm/EOD] Stocks -
Primary count is a counter-trend pullback against the upswing off the June low - see Dip (10/19/12) for discussion. Given the current leg of decline is a five-down, the proposed C(or Y)-down or [a] of C (or Y)-down is approaching its end. The pending rebound will shed additional light. See charts.
From a time perspective, the prior upswing lasted about 15 weeks, the current correction has lasted about 5 weeks so far.

[120pm] SPX squiggles -
SPX wedging to finish [a]-down of Y-down or all of Y-down.

[905am] ES update -
Primary count is the red count in the chart.  See Dip (10/19/12) for discussions.

Saturday, October 20, 2012

MTU Weekend Ed. - Dip (10/19/12 close)

Bottom line - The upswing in U.S. stocks since June likely ended in September.  Stage is being set for a potentially final but meaningful upswing of the Hope Rally.  It's probable that the Hope Rally was already complete in September, to be sure, but this more bearish scenario appears to be a less likely alternative at the moment.

After we posted Correction Approaching Its End (10/12/12), SPX rose 35 index points (or +2.5%) to Thursday’s high but failed to make a higher high.  Friday’s plunge effectively wiped out all the recovery gains. Moreover, the losses in Nasdaq indexes were about double their rebound gain, creating lower lows. It is interesting to note that Friday was the anniversary of the 1987 stock market crash as well as an option expiration day. In hindsight, our prior conclusion is not only short lived, but likely off by a wave degree.

The relative severity of Friday’s sell-off strongly suggests that the upswing since the June low likely ended at the September high for the broad market (Chart 1, red). Within the framework of our Hope Rally model, the September high is point number 5 and the current multi-week dip is likely on its way to reach point number 6, likely to be followed by a final but meaningful upswing to point number 7 (Chart 2).

Our Hope Rally model does allow point number 5 to be terminal (Chart 2), especially as the proverbial death cross is looming on the SPX monthly chart (Chart 3). However, this more bearish scenario appears to be a less likely alternative at the moment.  See below.

Silver linings
Potential support from key moving averages - As a result of Friday’s plunge, senior indexes are once again testing their 50-day SMA and Nasdaq indexes their 200-day SMA. These key moving averages represent potential support for the near term.

Still corrective wave structure since the September high - To date, the pullback from the September high is best counted as a three wave decline.  Two potential wave structure emerge  in the form of a W-flat-Y or W-triangle-Y (Chart 1, red).  The squiggle Chart 4 on SPX anticipates a small-degree 5th wave decline before a rebound per W-flat-Y or an immediate wave E rebound per W-triangle-Y early next week. A subsequent final decline is likely to follow to complete wave Y of these structures.  A potential target zone is around 1390/1400 in SPX.

Near term positive divergence from market internals - In contrast to the negative divergence seen during the prior upswing, the SP500 advance-decline line was able to make a higher high last week and hold its ground (Chart 5).

Potential near term VIX consolidation - VIX once again reached its upper Bollinger band.  Chart 6 shows a potential sideways consolidation in VIX in recent months, potentially a wave B counter trend move. 

Friday, October 19, 2012

Market Timing Update (10/19/12)

[815am] NQ update -
Fib anniversary of 1987 crash. Opex. In NQ, a potential 5-up and 3-down (double zigzag). See chart.