P2 and 60-min
30-min and 5-min
Monday, March 15, 2010
Market Timing Update (3/15/10 Close)
The following charts represent my SPX/mini working count. For big picture alternatives, please see my weekly commentaries. The links are located in the left side bar.
P2 and 60-min
30-min and 5-min
P2 and 60-min
30-min and 5-min
Friday, March 12, 2010
MTU Weekend Ed.- The small caps point the way (3/12/10 Close)
Bottom line: Odds favor a meaningful sell-off in stocks once the advance since the Feb 5th low runs its course. The upside potential is moderate at best.
Most major U.S. stock indices, with the exception of the Dow, have made new recovery highs. Expect the Dow to do the same soon. In the very near term, there is additional near term upside potential in the advance since the Feb 25th low, based on intraday counts. A small degree fifth wave is currently extending. However, the upside potential is moderate at best and odds favor a meaningful pullback with substantial additional bearish potential.
Note that with the new recovery high, the Russell 2000 index has exhibited a nicely formed triple three or a double three with a large final ending diagonal (my primary count) since the March 2009 low (Chart 1). These potential corrective structures lend support to the view that the current rally is a counter-trend rebound within a larger bear market. In fact, a double three with a final diagonal triangle (which is contracting in the RUT and expanding in other indices) offers simplicity and describes the wave structure of all indices well. For example, Chart 2 illustrates the double three structure with an expanding diagonal triangle in the SPX.
Most big picture counts point to at least a meaningful pullback ahead, even by the most bullish count. For example, Chart 3 to 5 reflect and update the scenarios discussed in An EW Roadmap (3/5/10). Please see comments on these charts which outline the underlying logic.
There's one immediately bullish exception. This is a low probability scenario in my view, but is worth monitoring. The 2/5/10 low could marks the end of the primary wave [X]-down of cycle wave x-up which takes on the form w-x-y(-z). Please see the alt2(bullish) count in the Russell 2000 (Chart 1) and the Bearish Count w-x-y (Chart 4).
Most major U.S. stock indices, with the exception of the Dow, have made new recovery highs. Expect the Dow to do the same soon. In the very near term, there is additional near term upside potential in the advance since the Feb 25th low, based on intraday counts. A small degree fifth wave is currently extending. However, the upside potential is moderate at best and odds favor a meaningful pullback with substantial additional bearish potential.
Note that with the new recovery high, the Russell 2000 index has exhibited a nicely formed triple three or a double three with a large final ending diagonal (my primary count) since the March 2009 low (Chart 1). These potential corrective structures lend support to the view that the current rally is a counter-trend rebound within a larger bear market. In fact, a double three with a final diagonal triangle (which is contracting in the RUT and expanding in other indices) offers simplicity and describes the wave structure of all indices well. For example, Chart 2 illustrates the double three structure with an expanding diagonal triangle in the SPX.
Most big picture counts point to at least a meaningful pullback ahead, even by the most bullish count. For example, Chart 3 to 5 reflect and update the scenarios discussed in An EW Roadmap (3/5/10). Please see comments on these charts which outline the underlying logic.There's one immediately bullish exception. This is a low probability scenario in my view, but is worth monitoring. The 2/5/10 low could marks the end of the primary wave [X]-down of cycle wave x-up which takes on the form w-x-y(-z). Please see the alt2(bullish) count in the Russell 2000 (Chart 1) and the Bearish Count w-x-y (Chart 4).
Thursday, March 11, 2010
Market Timing Update (3/11/10 Close)
Stocks, near term prospects - to keep it simple, note that visually,There are nine small waves so far from the Feb 25th low, signaling an end to an impulse.
There are five larger waves so far from the Feb 5th low. We are either approaching the end a 5th wave or the 3 of 3rd wave.
Wednesday, March 10, 2010
Market Timing Update (3/10/10 Close)
* The decline from today's high in the SPX (1148.26) is clearly corrective (Chart 1). Thus Odds favor a higher high, which will push SPX even closer to a recovery high.* Price actions do look wedgy over the past three days. The possibility of a corrective rebound since the Feb 5th low remains, be it a "P3"-like [ii]-up or a Wave A or Wave C in an aging "P2"(Chart 2, Red). Chart 3 offers a squiggle count, which places the advance into the close as the last leg of [E] of the wedge.
* This wedge also fits as wave v of (v) under the bullish count (Chart 2, Green)
* Chart 2 offers a more bullish alt count (Green/Alt) which reflects an extended fifth wave. Today's high is likely iii of (v) in this case. Also see Chart 3 (green).
* An even more bullish alt count (not shown) assumes an extended (iii) in Chart 2. In that case, the market is only at iii of (iii).
* VIX was able to preserve its low and actually managed to print a decent sized green bar today (up more than 1 index points), implying a less bullish stance on stocks. See Chart 4.
Tuesday, March 9, 2010
Market Timing Update (3/9/10 Close)
Stocks-The Transports, NDX and the Russell 3000 index joined the other indices and made new recovery highs today. The next up is the Russell 1000 index, which is only 1.08 index points away from a new recovery high from today's high. The Dow and the SPX are yet to get there. Overall, short term market conditions are favorable to the upside given the momentum across indices.
However, wave structures calls for an end to the advance since the Mar 4th low (Chart 1 SPX mini), and potentially since the Feb 25th low (Chart 2 Dow mini), as well as potentially that since the Feb 5th low. This offers a sliver of hope for a non-confirmation between these senior indices and the rest of the pack and a "P3"-like count in the Dow and SPX - see the first scenario discussed in An EW Roadmap (3/5/10). The risk to calling the top or a near term top is an extension of the small-degree 5th wave, or an extended 3rd wave one degree higher, or this top is only A of (Z) - a variation of the second scenario discussed in An EW Roadmap (3/5/10).
Monday, March 8, 2010
Market Timing Update (3/8/10 Close)
SPX- The best count is that SPX is still consolidating in a small degree 4th wave in the form of a triangle approaching its end. See Chart 1 and 2. An alternative is that the 5th wave is already in progress, potentially tracing out an ending diagonal - but it is too early to tell. Either way, odds favor near term higher highs.
The big picture scenarios discussed in the Weekend Ed. remain applicable.
The big picture scenarios discussed in the Weekend Ed. remain applicable.
Saturday, March 6, 2010
MTU Weekend Ed.- An EW Roadmap (3/5/10 Close)
The Nasdaq Composite index and the Russell 2000 index rose to a new recovery high on Friday, while large cap indices have remained below their January peaks but appear poised to do the same. In global markets, the FTSE 100 index also eked out a tiny new recovery high while the high is unconfirmed by the DAX and the CAC40.
MTU’s primary view (that the January peak finally marked the start of the next primary degree decline) is at the brink of being rejected. It is already the case in smaller cap indices given the new recovery highs. There should be clarity on the larger cap indices over the next week or two.
Objective EW analysis offers the following ROADMAP for U.S. stocks. I list the top four scenarios in the order of increasing bullishness. The first three characterize the rally over the past year as a bear market rally whereas the last scenario describes it as a continuation of the existing multi-decade bull market.
I’m sympathetic with, at the moment, Scenarios 2 and 3. But I am by no means discounting the most bearish Scenario 1 yet. I also think, at the moment, Scenario 4 is a wild card scenario. I’ll adjust my view if necessary based on additional market development.
An EW Roadmap for U.S. stocks (as of 3/5/10 close)
Scenario 1. The January peaks hold for the large cap indices while the smaller cap indices top now.
*This type of non-confirmation among major indices at market tops have occurred in the past and could also turn out to be the case this time.
Most recently, it occurred at the 2007 top. The Dow, SP500 and the Wilshire 5000 index topped on Oct 11, 2007 while the Nasdaq indices topped 14 trading days later, on Oct 31, 2007. SPX had retraced up 73% and the Dow has retraced up 70% as the Nasdaq indices made new highs.
Mar 5, 2010 is 32 trading days later than the 1/19/10 peak in several cash indices. SPX has so far retraced up 89.6%, and the Dow has so far retraced up 82.3%.
*The wave structure since the 2/5/10 low, particularly in the Dow, counts well/better as being corrective so far (Chart 1). If so, this count accounts for the triangle (as marked on Chart 1) well and prevents it being counted as a second wave. Note that it is not easy to count the rally since the 2/25/10 low as an impulse wave, unless it is the beginning of an extended wave – iii of (iii)[iii] OR (iii) of [v].
Scenario 2. The market is just approaching the end of the primary degree advance since March 2009, in the form of a triple three (Chart 2). Expect new recovery highs but with moderate upside potential before a primary degree trend change to the down side begins.
*Within the second intermediate wave (X), the 11/2/09 low was lower than the 10/2/09 low in some indices such as COMPQ, lending support to interpreting it as an (X) wave.
*It is obvious from Chart 2 that the triple threes have progressed with successively smaller percentage gains. If this pattern holds, the eventual top should be below 1279.03, and very likely in the neighborhood of 1168.86 where (Z)/(Y)=(Y)/(W) in percentage terms AND where C of (Z) is roughly equal to A of (Z).
Scenario 3. The March 2009 low marks the end of a 9-year cycle wave w in the form of a flat and the beginning of a cycle wave x-up.
*This count faces a particular challenge in Nasdaq indices. The structure between the 2000 peak and 2009 trough does not resemble any of the three categories of flat structure as the 2007 peak is lower than the 2000 peak but the 2009 trough is higher than the 2002 trough.
*Thus it’s possible that the Nasdaq indices is out of sync with senior indices and is tracing out a different structure at the cycle wave degree.
*This cycle wave x-up can probably lasts about 18 to 30 months, starting from March 2009.
*Or this challenge lends support the big picture count in Scenarios 1 and 2.
[3A] The 2/5/10 low marks the end of the first leg of primary wave [X] or the entire primary wave [X] (Chart 3A).
*If the 2/5/10 low is (A) of [X], (B)-up of [X] is currently in progress with moderate upside potential. If [X] turns out to be a flat, wave (C)-down of [X] is likely to pull SPX to below 1000. Note that the 0.382 retracement is at 965.69.
[3B] The rally since March 2009 is an impulsive primary wave (A)-up of cycle wave x. The 2/5/10 low marks the beginning of wave 5-up of (A)-up (Chart 3B).
*The challenge to this count is that it is not easy to count any intermediate degree advance since March 2009 as a “five”.
*In order to prevent (3) of [A] from being the shortest under this count, wave [A] should peak below [1189.34-1215.82] or [1210-1239.70]. In other words, expect a higher high with moderate upside potential from current levels.
Scenario 4. The supercycle wave (V) since the mid-1930s still in progress. The March 2009 low marks the beginning of primary wave [5]-up of V(V) (Chart 4).
*This is the alternative count I discussed in The Big Picture (2/21/10).
*The rally since the March 2009 low is most likely intermediate wave (1) of [5], to be followed by (2)-down of [5] once complete. The intermediate wave (2) correction should at least retrace back to around the 1044.50 level with a real potential to retrace much deeper with the appearance to retest the March 2009 low as second waves have the tendency to do so.
* The wave structure of the post-March2009 advance is the same as that in Scenario 3B (Chart 3B). The comments in Scenario 3B regarding its challenge and its upside potential are also applicable here.
MTU’s primary view (that the January peak finally marked the start of the next primary degree decline) is at the brink of being rejected. It is already the case in smaller cap indices given the new recovery highs. There should be clarity on the larger cap indices over the next week or two.
Objective EW analysis offers the following ROADMAP for U.S. stocks. I list the top four scenarios in the order of increasing bullishness. The first three characterize the rally over the past year as a bear market rally whereas the last scenario describes it as a continuation of the existing multi-decade bull market.
I’m sympathetic with, at the moment, Scenarios 2 and 3. But I am by no means discounting the most bearish Scenario 1 yet. I also think, at the moment, Scenario 4 is a wild card scenario. I’ll adjust my view if necessary based on additional market development.
An EW Roadmap for U.S. stocks (as of 3/5/10 close)
Scenario 1. The January peaks hold for the large cap indices while the smaller cap indices top now.
*This type of non-confirmation among major indices at market tops have occurred in the past and could also turn out to be the case this time.
Most recently, it occurred at the 2007 top. The Dow, SP500 and the Wilshire 5000 index topped on Oct 11, 2007 while the Nasdaq indices topped 14 trading days later, on Oct 31, 2007. SPX had retraced up 73% and the Dow has retraced up 70% as the Nasdaq indices made new highs.
Mar 5, 2010 is 32 trading days later than the 1/19/10 peak in several cash indices. SPX has so far retraced up 89.6%, and the Dow has so far retraced up 82.3%.
*The wave structure since the 2/5/10 low, particularly in the Dow, counts well/better as being corrective so far (Chart 1). If so, this count accounts for the triangle (as marked on Chart 1) well and prevents it being counted as a second wave. Note that it is not easy to count the rally since the 2/25/10 low as an impulse wave, unless it is the beginning of an extended wave – iii of (iii)[iii] OR (iii) of [v].Scenario 2. The market is just approaching the end of the primary degree advance since March 2009, in the form of a triple three (Chart 2). Expect new recovery highs but with moderate upside potential before a primary degree trend change to the down side begins.
*Within the second intermediate wave (X), the 11/2/09 low was lower than the 10/2/09 low in some indices such as COMPQ, lending support to interpreting it as an (X) wave.*It is obvious from Chart 2 that the triple threes have progressed with successively smaller percentage gains. If this pattern holds, the eventual top should be below 1279.03, and very likely in the neighborhood of 1168.86 where (Z)/(Y)=(Y)/(W) in percentage terms AND where C of (Z) is roughly equal to A of (Z).
Scenario 3. The March 2009 low marks the end of a 9-year cycle wave w in the form of a flat and the beginning of a cycle wave x-up.
*This count faces a particular challenge in Nasdaq indices. The structure between the 2000 peak and 2009 trough does not resemble any of the three categories of flat structure as the 2007 peak is lower than the 2000 peak but the 2009 trough is higher than the 2002 trough.
*Thus it’s possible that the Nasdaq indices is out of sync with senior indices and is tracing out a different structure at the cycle wave degree.
*This cycle wave x-up can probably lasts about 18 to 30 months, starting from March 2009.
*Or this challenge lends support the big picture count in Scenarios 1 and 2.
[3A] The 2/5/10 low marks the end of the first leg of primary wave [X] or the entire primary wave [X] (Chart 3A).
*If the 2/5/10 low is (A) of [X], (B)-up of [X] is currently in progress with moderate upside potential. If [X] turns out to be a flat, wave (C)-down of [X] is likely to pull SPX to below 1000. Note that the 0.382 retracement is at 965.69.
[3B] The rally since March 2009 is an impulsive primary wave (A)-up of cycle wave x. The 2/5/10 low marks the beginning of wave 5-up of (A)-up (Chart 3B). *The challenge to this count is that it is not easy to count any intermediate degree advance since March 2009 as a “five”.
*In order to prevent (3) of [A] from being the shortest under this count, wave [A] should peak below [1189.34-1215.82] or [1210-1239.70]. In other words, expect a higher high with moderate upside potential from current levels.
Scenario 4. The supercycle wave (V) since the mid-1930s still in progress. The March 2009 low marks the beginning of primary wave [5]-up of V(V) (Chart 4).
*This is the alternative count I discussed in The Big Picture (2/21/10).*The rally since the March 2009 low is most likely intermediate wave (1) of [5], to be followed by (2)-down of [5] once complete. The intermediate wave (2) correction should at least retrace back to around the 1044.50 level with a real potential to retrace much deeper with the appearance to retest the March 2009 low as second waves have the tendency to do so.
* The wave structure of the post-March2009 advance is the same as that in Scenario 3B (Chart 3B). The comments in Scenario 3B regarding its challenge and its upside potential are also applicable here.
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