Intra-day: August 3, 2011

ADDENDUM:  10:35 PM EDT:

Thanks to ewtnewbie for this question on Daneric’s excellent EW blog:

Pebble, love your stuff.  I’m glad you cleaned up your Fib chart–it was getting hard to read.  I haven’t redrawn mine yet, but are you thinking today as ‘a’ up, with ‘b’ and ‘c’ to come to get to 1270ish–or time to add to shorts here at 1260 for sub-1230?

Your comparison chart shows that the topping action in 2007 had a multi-day retest of the neckline, but only wicks above it, no closes. If that holds true this time, we not see 1270 on a closing basis. Just something to think about. 

Sorry, sometimes I go a little overboard with the TLs.  But, sometimes I think one is done affecting anything and delete it.  Then, surprise!, right back in the soup. 

Gotta tell you, the question re a-b-c is my biggest challenge with EW (aside from the dain bramage.)  I’m always wrong with the size/scale of corrective waves, thus leave labeling to those much more capable.  In fact, it’s probably why I dove headfirst into chart patterns, TL’s and harmonics…no labeling!   With that disclaimer out there, my guess is today was the whole enchilada.  Probably not “big” enough, but that’s pretty much what happened in 2007 so it’s good enough for me.

As far as 1270, you’re probably right.  I looked at this a little closer after reading your question.  Bottom line, we’ve extended almost exactly the same from the 6/16 to 7/7 move as we did the equivalent 2007 move (11/26 to 12/11.)  The bounce in 2007 was to the .786 level.  Today, that would equate to about 1279.

Looking at the 5/2 to 6/16 move… the equivalent 2007 span (10/11 to 11/26) extension was right about 115%.  The fib retrace was about .85.   Now, we’re just a smidge past 115% down, and .85 would take us up to around 1273.

I can’t really argue with 1273 or 1279, as that’s where I’ve shown the bounce going to for the past two weeks.  It’s also where my regression channel -2 std dev line is.  But, I’m a little troubled by the idea of that big a bounce.

Hence, the only reason I’m not completely committed on the short side just now — and the reason I took the trouble to play the bounce today.  I can see the bounce stopping right here and now, or tagging that line on the backtest.  But, seeing as how it’s a difference of only 20 pts in the scheme of a 100+ point swing, I can live with the ambiguity.

END OF DAY:  8:45 PM EDT:

Trying really hard not to get distracted by the intermittent noise.

Standing firm,
weathering the storm,
sticking to the plan,
staying the course,
keeping the faith…

UPDATE:  3:40  PM EDT:

Tagged the 1260 IHS target, a little over the 1258 resistance.  Watching a rising wedge getting close to its apex of around 1265 (the other IHS target, hmmm…)

Also seeing a divergence between price and RSI/histogram.  Time to add to shorts.

Looking at the candle we’re likely to leave on the day.  Hammer is a popular candle, but not always a good indicator.  Bulkowski has a good discussion.

UPDATE:  1:45 PM EDT:

Getting awfully close to 1258.  Will go ahead and close out the longs I was playing the bounce with and start scaling in some shorts.  It might indeed go higher in the short run, but I’m fairly certain it’s going lower in the medium/longer term. 

UPDATE:  12:45 PM EDT:

Two little inverse head & shoulders patterns setting up on the 1-min chart.  Might be the boost we need to do a proper c leg of the a-b-c here.  Targets are 1260 and 1266.  I’m watching for a break above 1252 on the upside or 1240 on the downside before adding more to any positions.

Although, it’s likely 1258.07, now that it’s been broken as support, will act as resistance to any further bounce (see below.)

UPDATE:  11:00 AM EDT:

Playing the bounce off the crab here.  Initial target 1257, then 1270.

UPDATE:  10:30 AM EDT:

Market down 12, looks like more to come.  Next logical place to pause is TL and completion of bullish crab at 1233.

UPDATE:  10:05 AM EDT:

ISM not as bad as it could have been..  Index fell from 54.6 to 53.3.

Factory orders came in at a 0.8% decrease instead of -1.0%.  briefing.com does a great job of graphing the trends.   Here’s the report, available here.

UPDATE:  9:50 AM EDT:

Reached the important 1249.50 level of support; this would be the logical place for support to come back in if it’s going to. I imagine any bump we get will be limited to 1268 or so.

The factory orders and ISM non-manufacturing data is due to be released at 10.  Factory orders are durable goods (got it last week – bad) and non-durable goods like food.  Given the food inflation we’ve had, the non-durable aspect of factory orders might compare positively to expectations of -1.0%.

We saw the  ISM manufacturing numbers come in barely positive last week.  I don’t expect services to be any better, especially given the reported layoffs in the financial sector.  The market’s looking for 52.

ORIGINAL POST:  9:25 AM EDT

The Swiss cut rates to 0%, trying to halt CHF meteoric rise…

And, the rest of the currencies vs S&P; futures…

More later.

Comments

Intra-day: August 3, 2011 — 7 Comments

  1. 1273-1279 as a retracement works well with my EW count, which calls for 1276 off the entire move from 1347.

    At any rate: If you're on the Titanic, it doesn't matter whether your ticket was for first or third class; you're still aboard a sinking ship.

  2. Thanks for that. Would have to agree with all the economic stuff…but you know that already. I get the exhaustion argument, but it's kind of like bollinger bands. Even when things appear so far out of whack that they MUST revert, they can keep redefining "normal" all the way to unexpected levels.

    This only happens at extremes (by definition); but, I think this is one of those times. My feeling about last summer is that we probably would have crashed back then, but not for QE. I get that earnings look pretty decent for a lot of companies. But, at the end of the day, a lot of these profits are the result of M&A; activity, restatements, etc.

    And, for those companies making loads of money selling stuff overseas, they better hope the rest of the world gets/stays healthy, cause we're going broke pretty fast around here. And, there aren't many tools left to manufacture a rebound.

    Europe is where we are, or worse. And China, IMO, isn't as strong as they'd like everyone to believe. There are pockets of strength elsewhere, but can they withstand the turmoil around them, when their trading partners' currencies are crashing and sales are slumping? I doubt it. Look what's happening in Switzerland and you'll see what I mean.

    We're all in the same boat, both healthy and sick economies. The sick are in the back, bailing as fast as they can. The healthy are up front, pointing: "Look! Their half of the boat is sinking!"

  3. Thanks Pebble.
    In general order of reasoning:

    James thinks the July and August data is horrible, partly based on the debt limit fiasco but also based on global slowdown. He and many others had been bullish based on easy money available to companies, and they can cite dozens and dozens of examples of increased dividends, lessened debt burdens via refinancing at lower rates, and increased buyback announcements. Now he's calling for at least negativity here due to the data coming out and expected to continue coming out.

    Todd Harrison generally fees we've treated the symptoms but not the disease. He adopts the view of another that the original "lifeguards" are now getting pulled under, so at some time haircuts will have to be taken all around, no matter how painful. He won't rule out push higher, but his general thesis is negative intermediate term.

    Kevin Depew and the TD system look at exhaustion. They called for weakness from May to September based on a pattern of many months of strength since last year (a 9 month pattern). The TD patterns consider all time periods, including daily, weekly, monthly, on anything with a price. They felt the upside played out on the indices by the pattern that ended in April, but now believe the weakness period is ending, at the same time that a 13 day down pattern would have signaled selling exhaustion two days ago on the S&P.; The "buy" signal however does not trigger until a price flip (close higher than the close four days earlier) triggers, and those odds seem long right now. But ultimately, Kevin is also looking at "dispersion", where now not everything is going up at the same time the way it did last decade for many year. The bullish perspective is that its a stockpickers market, but the beginning of a new bull.

    I hope I mentioned this before, but the reason I pay attention to Kevin is because of the ridiculous call last August or so that he was as "bullish" as he'd been in 10 years or so. Thus began the great an shocking wave that many of us are now looking back at from a bearish perspective as the "C" of 2.

    Sorry for the length of this, but I hope that explains at least somewhat the basis of the various views of those I cited above.

  4. Hey Josh, How 'bout that? Just answered that same question for someone else (see above addendum.) Let me know if that answers it. It's about all I have to go on, now.

    BTW, I don't have much time to read a lot of other blogs. Any time you want to bounce something off me, feel free. It's easier, though, if you provide a link and/or synopsis of the competing argument — not just the prognosis, but the reasoning behind it.

  5. Hey Pebble, I'm still torn by the calls, but saw Todd Harrison at M'ville today write that he expects the March '09 lows in 2013, and Kevin Depew seems to acknowledge the weakness to be faced for the general market though they are adamant that its somewhat safe for some stocks going forward.

    You've been doing great, and I'd be rich(er)! if I had followed you to the letter the last 3 months.

    So one last thought, and that's from a recent bull turned bear… James Kostohryz (or something close). His suggestion is to short any S&P; rise of –more than 40– points. Based on today's action, that would seemingly be a call to short any approaching retest of the 200 dma.

    Any thoughts on the odds of us getting back to 1270s soon, or is the whole world waiting to sell before that happens?

  6. Thanks, AR; I appreciate the kind words. Although, I think the quality suffers on days like today!

    I always look forward to reading your posts, too.

  7. I'd posted this comment on the 'anatomy of a short, day 9' page. Probably should have posted it here.

    Sorry I haven't dropped in for a while. But I just wanted you to know that I really like your stuff. I like your vision, your attitude (confident, spirited but not arrogant) and your writing ability. It's a great combination.

    I don't know if you've noticed or not, but the number of bloggers out there who can hardly put together a coherent sentence, let alone a nicely flowing paragraph is really surprising. Some of them are borderline illiterate. lol But that's one thing you've got going for you that I really appreciate, along with all the other good stuff. Keep up the great work. I'll try to drop in more often.