pebblewriter.com just wrapped the 3rd quarter at the top of its class.  Investors who bought SPX at called bottoms and sold at called tops would have earned over 27% (66.57% since inception last March.)  For details, click here.

Annual membership rates are going up by $100 on October 3.  But, the next 30 annual members who sign up by midnight, October 2 will score an annual membership for only $665.70 ($10 for every percentage point since inception.)

That’s an $800 membership for only $665.70 — about what you’d pay in 12b-1 fees on a $10,000 mutual fund, a few months of iPhone use, or a 15-gallon drum of Jet-Lube food-grade grease.

While pebblewriter.com might not be as entertaining as a drum of grease, it should be more educational.  And, with all due respect to the guys in Cupertino, our directions have been a lot better.

For $1.82/day, you’ll get access to the entire site: long-term and short-term forecasts, trading ideas, rants on politics and the economy, everything.  But, most of all, you’ll get an education.  I do my best to explain why I see things the way I do; so, by the time I’m cruising the halls of the End of the Line Rest Home in my shiny new scooter, you’ll be a pro.

Last time we did this, the discount memberships disappeared in just a few days.  Back then, we were up only 37%.  So, tempus fugit.  Enter the coupon code “QUARTER3” when you sign up.  Thanks muchly.

sign me up!

p.s.   If you’re already a member, we’ll just tack it on your existing membership.   If you’re already an annual member, remember that pebblewriter.com is just me.  There is no apprentice or back up plan, so if I’m hit by a bus or come unhinged, we’re both out of luck.

p.p.s. Remember, to get the discount, you must enter the code “QUARTER3.”

UPDATED:  September 28, 2012

We’re up 66.57% since inception on March 22 — a little over six months.   A competing “buy and hold” portfolio would have earned about 3.44%.  I guess we’re still earning our keep.

Now that we have the QE3 question behind us, directional trading is back on the table.  Personally, I won’t miss the scalping and day trading.  Although we managed to earn 5.39% in August, and 11.93% in September, it was very labor intensive and did not lend itself to sound sleep. We can now (hopefully) get back to our evil plan to calmly out-earn the earnest and outwit the witless.

Q3 official results are in:  + 27.61% versus Q2’s 38.46% and the S&P 500’s 5.6%.   We didn’t have the benefit of an analog this time; but, we did have all the lovely uncertainty surrounding QE3 and ESM.  With those milestones under our belt, how difficult could the Fiscal Cliff and the presidential election be?

I’ll post mutual fund and hedge fund universe results as soon as they’re available, but I’m not aware of any actively managed fund that has earned 66% in the past six months.  Best of all, we did it in a broadly diversified portfolio (long or short the S&P 500), with no options or futures, no leverage and without hitching our fortunes to the iPhone.

As always, thanks for your support.  I don’t say it nearly often enough, but I appreciate the faith you place in me to do this every day.  In celebration of another great quarter, we’ll run a membership special this weekend!  Keep an eye on these pages for details.

 

	pebblewriter	S&P 500
Mar (from 3/22)	.50	.37
Apr	9.35	0.0
May	14.59	(6.27)
Jun	14.52	3.72
Jul	10.29	1.23
Aug	5.39	1.96
Sep	11.93	2.45

as of Sep 28, 2012

* * * * * * * * * * * * * * * *

as of September 28, 2012

Inception to date:                  +66.57%

S&P 500:                                +3.44%

Differential:                            +63.13%

More details and important disclosures here.

ORIGINAL POST:

The dollar’s rising wedge played out perfectly, but after the close.  We got a channel tag as expected, and are lurking in the bottom part of the channel.

 

EURUSD’s falling wedge, in the meantime, also played out perfectly — but after the close.

SPX is selling off this morning, but should find support at the purple channel bottom around 1435-1436 and rebound.

If the channel does hold — preferably at the .786 or .886 of the pink pattern, look for the Gartley Pattern we discussed yesterday to complete at 1456.21.  Why?  Yesterday’s high was a perfect Fib .618 retracement of the 1463.20 to 1430.53 drop.

UPDATE:  10:25 AM

That should be about it for the downside.  SPX reversed at the .786 of one measure, and the .707 of the larger one.  We didn’t quite reach the purple channel bottom, so there’s the possibility of one more push to 1434.74  — the .786 of the larger harmonic grid.

DX has tagged the red channel and the .786 of the yesterday’s move down.

And, EURUSD has back-tested the recently-broken purple channel, and more importantly, is finding support at the white channel at the .786 retracement of yesterday’s rise.

I’m still long from yesterday, as I believe this is a ploy to shake out loose weak bulls for the next run up.  If SPX bounces off the intersection of the red and purple channels at around 1435, I would be a very aggressive buyer, with stops at 1430 or so.

More in a few…

UPDATE:  12:00 PM

We got the reversal we were expecting, with a low of 1435.60, and started up right at our Point C.  Just completed a little Inverse Head & Shoulder pattern that should help us up to the .382 at 1442 (two of them, actually.)  Moment of truth, for it’s also the red channel midline.  Don’t be surprised if we get a little pause.

UPDATE:  12:25 PM

The IH&S played out nicely, with a tag of the target at the .382, then a little push above the midline before the reaction — which will probably be to 1440-1441.  Assuming we retake the midline, our next resistance is 1448.54 at the .886 of the 1450-1435 decline.

It’s the last point at which the short-term downside harmonic case holds water.  Given that we just reversed at the .500, a Bat Pattern reversal is on the table until we take out the .886 and, more importantly, the 1450.2 high for this small purple pattern.

For now, I’m looking at this smallest pattern as a potential Crab.  Its 1.618 extension is virtually the same level as the .886 of the 1463-1430 decline (1459.22 v 1459.48.)  I look at such correlations as supportive of a forecast.

BTW, if SPX rises in a channel parallel to that of Wed-Thurs, it will only reach this 1448-1450 level today.  If it can break through, it has a good shot at higher.  I don’t know if we’ll reach our 1456-1459 target today, however.  The session is more than half over, and the high for the day (1443.62) was only 8 points off the low.  Another 8 points higher than that would put us at 1452-ish, right around the .500 retracement of the 1474 – 1430 drop.

Charts in a few…

UPDATE:  1:10 PM

Charts for the above paragraph…  So far, we’re replaying the slope of the last rise from 1430-1450.  If we stay in this new version of that same channel, we run out of room by the EOD around 1448-1450.  Remaining below the 1450.2 mark would also keep ambiguity alive — a hallfark of this market.

It’ll be interesting to see whether the any further corrections occur within this channel before we push through the midline, and if they do, whether they give us better guidance as to the eventual channel bounds.

UPDATE:  1:15 PM

Potential flag pattern setting up on the 5-min chart, indicates 1446-ish.

UPDATE:  1:35 PM

The flag pattern played out as expected, and we just broke back up through the midline.  Best of all, the new channel established is much steeper than the last, so SPX should really pick up steam.  If it remains in the channel, it could reach as high as 1454 by the end of the day (1453.11 was our target from yesterday.)

At some point, however, we’ll probably see a rising wedge take shape just to put a damper on things (representing the white channel line above that’s likely going to fail.  We’ll see how it shapes up, but SPX turns positive at 1447.15.

UPDATE:  1:50 PM

Getting a little reversal here at the white channel line mentioned above.  Time for the market to decide between the existing white channel (same slope as Wed-Thursday) or the new yellow one.  Max pull back should be to the broken midline and .50 Fib at 1442.90, but I imagine we’ll stop north of 1442.01 to keep the max bullish wave count alive.

UPDATE:  2:30 PM

It was too good to be true.  We’re back to the original white channel — now colored yellow to reduce confusion.  As I was typing this, we just got a big spike down below that channel, 1 pt in 10 seconds or so.  Check out the 1-min RSI — reaching this morning’s low TL (bottom yellow, dashed.)

There are two possibilities here: the rally is fizzling, or the market makers are trying to take out the weak hands.  For anyone holding long, it scares the crap out of you (from personal experience) and has you reaching for the sell button.

The intentions of MM’s aside, it certainly resets the technical picture, eliminating overbought conditions and providing room for the upside.  Charts in a few…

Here’s the 60-min RSI…

The upside is perhaps limited by the top red TL, but there’s ample support for another run up (even with negative divergence) at the dashed yellow line if the market can hold it.

The push down a few minutes ago back-tested the top of the flag pattern, and that held.  But, there’s a continuation H&S pattern setting up — completes at 1440.80.  If that plays out, we could lose any gains for the day.  It isn’t as high probability, as it doesn’t occur at a natural top, but it’s worth watching.

If, on the other hand, we can get back above that midline by 3:15, I’ll feel a lot better about the upside being intact for today.

UPDATE:  3:40 PM

That should be it for the downside (famous last words.)  We just retraced .786 of this morning’s run up, a few pennies from the purple channel bottom.  It would take a miracle to get back up to 1450 today.

But, it’s the end of the quarter (never underestimate window dressing), there’s a falling wedge completing, and the channel just held again.  Maybe if we all close our eyes and repeat “I do believe in fairies…”

 

UPDATE:  6:20 PM

Wow, what a finish!  One minute after posting the above chart — while all of you were no doubt repeating the magic words — SPX spiked 5 points in 8 minutes, tagging the underside of the broken channel.

Unfortunately for bulls, it ended there and reversed to 1440.  But, it was fun while it lasted; and, it gives me some interesting ideas about the power of group meditation.  Today, the stock market; tomorrow, the world!

* * * * * * * * *

I have a full weekend planned.  At long last, I will be changing the way membership fees are collected so that the site no longer needs to be SSL protected.  This will be great for Disqus users, who will now be able to attach charts and edit their posts more easily.  And, hopefully, it’ll cut down on log-in problems.

Also, we had another great quarter.  Preliminary results indicate about 27.6% for a total since inception (March 22) of 66.57%.   We came very close to last quarter’s 29.1%, and IMHO did it in a much more difficult environment without the benefit of an analog.

To celebrate, we’re having a membership special this weekend.  I announced a price increase over a month ago, but never got around to getting it set up (the market kept me busy enough.)  It won’t be quite as cheap as last go round, but it will be a nice discount.  I’m also introducing a monthly subscription option for those who don’t want to manually renewing every month.

I also have my eye on a new commenting system that operates more like a chat room.  I don’t know if I’ll get to it this weekend, but it’s on my to do list.  I continue to look for ways to improve the site and make myself more efficient.  One way is to make intra-day information available in real time for those who want that level of service.  More on that later.

And, last, some of you have asked about the analog study I’ve been working on for the past several weeks.  I am close to wrapping up my research, and should be able to post it this weekend.

As always, thanks for your support.  I don’t say it nearly often enough, but I appreciate the faith you place in me to do this every day.

 

 

We got the sell-off in the dollar and the bump in the EURUSD we were expecting at the end of the day yesterday.  It produced a nice pop in equities on the opening.  The burning question now is whether the rally can be sustained in the face of an truly awful durable goods report or whether it will fail at the bottom of the white channel.

FWIW, EURUSD and DX have both completed little H&S patterns (EUR is inverse) that could help them on their current direction — up for the euro and down for the dollar.

DX looks to be ready to return to the bottom of the little purple channel.  There is a red dashed TL on the 15 min RSI that if broken, however, means at least another test of the larger red channel or even a break out.

 

The EURUSD has also completed its own little IH&S, and is threatening to go up and tag the upper bound of the purple channel.  Lots of headwinds there, though, as it lost the white channel it was in overnight.  If it reaches the purple bound, it will no doubt be as a back test.  In other words, don’t expect too much from it as the momentum is already damaged.

I can easily envision a rising wedge developing, using the red dashed line as the lower bound and the white channel bottom as the upper.  Such a RW would probably stall out around the big purple channel bound — the .786 of the wedge and the .886 of the last move down — around 1.2893.

The key will be holding the red dashed line.  If it’s lost, look for a parallel white channel line and the .886 of the recent run up to provide the next level of support.

But, the trend is down.  And, whether we reach the purple channel or not, the EURUSD is likely heading much further down in the near future.  Note that this is a counter-wave up in a larger channel down after EURUSD completed several major harmonic patterns.

The channel down, in turn, is part of a larger, upward-sloping channel up (white) that is clinging by its fingernails.  Depending on whether you include shadows on the daily chart or not, it’s either on the verge of breaking down or already has and is back-testing the channel.

I wish I could say I knew which way it was going to break, but as of this moment, I’m still trying to figure it out.  These inflection points are the hardest part of my analysis — not made any easier by an underlying fundamental issue of which government can devalue its currency the fastest.

UPDATE:  10:35 AM

The rising wedge just punted and EURUSD fell to the .886 as mentioned above.  In so doing, it has set up a little falling wedge (in white) whose apex is at the largest white channel shown in the above chart.  Look for a breakout of this FW, as a failure means EURUSD has lost the bigger channel — an event TPTB will postpone as long as possible.

If that should occur, however, best to be short just about everything except the dollar.

Speaking of which, the dollar is in the exact opposite position as the EURUSD.  It is trying very hard to break out of the channel down it’s been in for weeks. It just completed several major harmonic patterns and the larger trend should be up.

But, it also just completed a Crab Pattern and three rising wedges in a row that failed at that channel bound.  It’s having a very tough time moving forward.

The doji — candle of indecision — on the daily chart says it all.

Summary:

I think the dollar is going to break out, but not until at least a tag of the bottom of the little purple channel — currently around 79.50-79.60.

Obviously, it could fall much further than that.  The larger red channel should prevail over the smaller purple one.  But, the red channel doesn’t run out of room until Sep 8-15 or so — at which point it intersects with the white channel up (ideally the 10th at around 79.)

Remember, DX recently retraced .886 of its Feb-Jul run from 78.12 to 84.24 for a well-defined Bat Pattern.  And, a 1.7% reversal is unusually small for a large Bat Pattern (the red pattern below.)  As we’ve discussed many times in the past few weeks, the channels on DX are all pointing up.

I think the EURUSD is going to break down.  The current purple channel down is the result of tags on the red 1.618, the peach .886, the purple .786, the pink .500, and the gray .382 (below.)

The larger trend, represented by the big purple channel, is also down.

EURUSD tagged the top of that channel on Sep 17, and has been working its way lower ever since.  But, it doesn’t have to move lower until Oct 9-15 or so, when the white channel and purple channel intersect near the .786 retracement of the move down since Sep 17 (ideally 1.3097 on Oct 9.)

Even then, it probably won’t be much of a move.  Remember, we have an American president to re-elect, and you can bet your last USD that TPTB will do everything possible to maintain the status quo.

For all its blustering, Wall Street knows that Obama & Co. has been very good to it.  A new guy, even though one of the 1%, is an unknown.  There’s an abundance of risk as it is.  And, suppose Romney has to cater to the Tea Party?  Slashing government spending wouldn’t do much for equities.

more in a few…

UPDATE:  1:00 PM

Speaking of equities… SPX just broke through the midline of the white channel that’s been guiding prices down since the 14th — the 1444 level we mentioned yesterday.  We should get a back test to the midline around 1444.24.

While that could be all the upside we get today, I believe there is more ahead.  I’m watching the red RSI fan lines off the recent bottom for a hint as to how much of a pause we’ll get.

The 60-min RSI also shows the potential for a slight retrace.  RSI broke out of the purple and red channels and the red, dashed TL, but has the white channel to contend with.

And, the daily RSI presents a few choices…

But, just like the plunge the past couple of days, the move likely isn’t over until we see (in this case) negative divergence on at least some time frames, and it just isn’t there yet.

The dollar shows we just tagged a small (white) channel within the purple channel at a .618 of the move up since Tuesday.  It would be normal to get a little pullback here — perhaps setting up a Gartley Pattern later today or tomorrow at the .786 of 79.526 and a tag of the purple channel bottom.

The DX 15-min RSI broke through a little TL of support (white) and is back-testing it — with the red TL below as the likely ultimate target.

 

UPDATE:  1:55 PM

Still no signs of negative divergence anywhere.  EURUSD is pausing here at the 1.272 of its probable Crab Pattern targeting 1.2943 — though there’s a .618 at 1.2932 that might catch it first.

Note, we’ve broken out of the purple channel and have retaken the original white channel up.  It intersects with that .618 pretty close to 4:00 PM Eastern.

If we get more of a pullback — say, off the white channel top — look for RSI to dip to the little oval as prices tag the lower channel boundary.  Still, no divergence…

UPDATE:  2:20 PM

Potential EOD target for SPX looks like 1453.11 (the .618 of the drop from 1467 to 1430) or 1457.71 (the.618 of the drop from 1474 to 1430.)  I’ll be watching DX and EURUSD and their respective targets, and will likely take profits at that point.

Of course, if we break down from the channels/wedges beforehand, that would also be a good time to take profits.  Remember to watch RSI.  Prices can break down from wedges, only to come back and tag the apex.  RSI is usually a good indicator when that happens.

I don’t know if anyone was stupid enough to overpay like I did for those SPY Sep 144 calls a couple of days ago  (.50?), but they expire tomorrow and they’ve doubled in price.  Just saying…

UPDATE:  2:35

DX and EURUSD both just departed their wedges slightly.  But, stocks haven’t reacted.  Delayed reaction?  Or, maybe just too many bulls on the loose (and short covering)?

UPDATE:  3:07 PM

Now, we’re properly set up for some negative divergence on SPX, EURUSD and DX.  SPX just tagged the midline of its little white channel up.  Look for support from the red, dashed RSI trend line?  If not, widening of the channel…

UPDATE:  3:20 PM

If we are going to get one last push, it’s just about time.  SPX has back-tested the 1444.24 midline and has fleshed out a potential channel on the 5-min RSI.

UPDATE:  3:52 PM

Here we go, big move by market makers.  Stocks dip big, while currencies are going nowhere.  Next 10 minutes should be interesting.

I suspect this is about options.  Look for things to break loose after 4:15, when SPY options close for the day.

UPDATE:  7:30 PM

Thanks for the kind words earlier, folks.  One of those days when everything turned out okay, but it was a tortured path, to be sure.  I apologize for not answering disqus posts intra-day, but there was simply no time.  I had my breakfast around noon, and will be enjoying my lunch at supper time.

Needless to say, we missed the full extent of the downside by selling early, then compounded the error by buying a little early.  Even so, we caught the vast majority of the move and are looking good going into the quarter-end tomorrow.  We had a little late-day market manipulation, so I took profits on some positions and remain long overnight.

I’ve been pouring over charts all afternoon and found some interesting stuff that will have to wait until after lunch/dinner.  I’ll send out an email when it’s up.  Stay tuned…

 

 

 

 

 

 

 

We reached our initial target of 1444 [from Sep 18] yesterday, a nice 30-pt gain since shorting SPX at 1474 on Sep 14.  Those who played the bumps as we saw them worked a little harder, but were rewarded with more than twice the return — hauling in about 75 points for a pretty cool 5.2%.

From yesterday morning’s post:

I thought we would get a bounce there and come back to tag my 1439 target Monday, but the market looks like it just can’t wait. The e-minis are down a few points, and that should drag SPX down to that 1439 level on the opening bell.

We closed our shorts and went long at 1444, which was premature.  Fortunately, we had a very tight stop in at 1443, so lost only one point (aside from the opportunity loss.)  I’ll be looking to go long again this morning after the dust settles — probably around 1438-1439.  But, we’ll see what kind of carry-over we get from yesterday.

Here’s what I’m looking at this morning:

UPDATE:  9:40 AM

There are a few harmonic targets just below the 1439.42 level — the 2.24 at 1438.20 and the .500 at 1435.54.  Looking for it to settle before jumping in.

More in a few.

UPDATE:  9:50 AM

That should just about do it.  I’ll take a stab at going long here at 1437, with tight stops at 1435.  Picked up a couple SPY Sep 144 calls at .50 to play the bounce just for grins.

UPDATE:  10:15 AM

There’s a channel within the big channel that’s easier to see without 20 Fib grids cluttering up the chart.  This morning’s low comes at a key intersection I’ve been watching.

continued… (more…)

In the last major update I posted on the dollar [see: Update – July 17, 2012], I argued that DX had pretty much run its course at 83.255 and would be heading down to tag the bottom of one of two channels it had been tracking: a steep purple channel at around 81 or the more mellow white channel somewhere around 79.30.

Five sessions later, DX reached 84.245 (a new 2+ year high at the rising wedge apex) and promptly plunged to our first target and paused.  Two long weeks later, it broke loose and dropped almost exactly to our second target — pushing slightly below our 79.30 target to 78.975 on Sep 14.

continued… (more…)