pebblewriter

Year: 2012

  • Double Top?

    In the wee hours of June 11, I pondered the possibility that the e-minis were forming an Inverse Head & Shoulder pattern [see:  Big Picture.]  I posted this chart, which showed that the target of such a pattern would be 76 points away from the presumed neckline — the exact same distance as the just completed orthodox H&S target from its neckline.

    Of the road ahead, I wrote:

    I’ve spent a lot of time lately agonizing over whether we’ll go back up and produce a new high.  The harmonic picture suggests we’ll put in a lower high — a point C which, less than A at 1419 (on ES, 1422 on SPX), would get the party started to the downside.

    I can only imagine the amount of good money bears would throw away on puts and the like, trying to anticipate whether it was going to be a .618, .786 or .886 retracement.

    Once we approached 1420, though, the momentum would shift to the bulls and an enormous amount would go into positioning for the upside.

    What if it were simply a double-top?

    Well, here we are.  The e-minis tagged 1420 about 45 minutes ago.

    UPDATE:  10:00 AM

    SPX completed its own “double top” just after the open.

    This was as deep into the rising wedge we’ve been talking about as possible, and on the same day (but, not the same way) we speculated about last week [see: Moment of Truth.]

    But, of course, it isn’t a double-top if prices keep rising.  Currently, the daily RSI shows no negative divergence whatsoever (although it’s present on every shorter time frame.)  If we blow through 1422, the upside targets are numerous.

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  • Wedgie Alert

    In a sign of just how over-extended this upside push has been, consider this rising wedge on the 60-min chart.  It’s not proof of an impending swoon, but put into context of our other charts, it sure has that feel.

    As clean and simple as was the channel down from 1422 to 1266, the channel back up has been a mess.  I’ve redrawn it hundreds of times, as it continues to morph without rhyme or reason.   I sometimes peruse the Elliott Wave blogs out there, and I can see that many of them have also grown frustrated in trying to assign a legitimate wave count to this mess.

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  • Now What?

    Thanks for your patience today.  I’m taking advantage of the OPEX dulldrums (sic) to take a step back and evaluate the big picture.

    Yesterday, in another low-volume meltup, SPX exceeded my 1411 target by almost 7 points.  Recall that 1411 was supposed to be the level to which the market would run if it slightly exceeded our 1404 target from back in mid-June [see:  OPEX Games & Fed Up Yet?]

    My thinking at the time was that if we rallied all the way from 1314 (at the time) to 1404, the fan line from 1576 in October, 2007 would present a very tempting target at 1411.  Here’s the chart from June 20:

    At the time, I also thought the neckline (yellow dashed & solid white lines) of the April-May H&S pattern would come back into play down the road.  The neckline played into my expectation of tagging the .786 Fib at 1389 by July 5, which of course it didn’t do until July 27.

    I didn’t save that particular drawing set; but, here’s a very similar one I saved later that day with current prices applied.  The neckline did, in fact, come into play, but at the .886 of 1404.64 instead of the .786 of 1389.

    more in a few…

     

     

    * * * * * * * * 

    For those who didn’t catch it, here’s a terrific interview with ECRI’s Lakshman Achuthan on Bloomberg about a month ago.  In it, he discusses what exactly is a recession and why we’re already back in one — even though the MSM hasn’t recognized or acknowledged it.

     

     

  • Wake Me When it’s Over

    The snoozefest continued yesterday, with SPX eeking out another 2-pt gain — and still below Tuesday’s 1410 high.  That makes eight sessions in a row with pathetically low volume and daily range.  Something’s gotta give.

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  • Update on Gold: Aug 15, 2012

    Gold continues to trace out a large descending triangle.  Interestingly, though, it has now constructed an ascending triangle within the descending triangle (the white dashed lines.)

    Each is roughly 65% of the way from origin to apex — typically the point at which these things break out.  The larger triangle comes at the tail end of a spectacular run up in prices — meaning it is more likely (73% according to Bulkowski) to break upwards.  The smaller pattern could break either way, though a break down for another test of the 1530ish baseline certainly looks logical.

    There is little in the harmonic patterns to suggest one direction over the other.  A completion of any of the potential patterns means a trip outside one or both triangles.  But, the regularity of the travels from one bound to the other suggests playing the swings and/or the breakout.

    A break upward from the small triangle at 1634 would likely result in a run to(at least) the upper bound of the larger triange — currently at 1655.  Likewise, a break of the small triangle’s lower bound (currently at 1592) should be good for a trip down to 1530.

    Since prices most recently tagged the lower bound of the small triangle, I’d be inclined to continue playing the upside at the moment; but, from 1609 to 1633 is only about 1.5%. Stay tuned.

    GLTA.

  • Moment of Truth

    SPX has been tracing out a channel over the past several months, but its RSI has clearly formed a rising wedge.  The divergence begs the question: “which will prevail?”

    Regular readers know I’m a fool for chart patterns in general and RSI chart patterns in particular.   But, that’s a solid channel that’s withstood some pretty nasty headlines.  And, as we’ll see below, it is exactly parallel to the channel that guided the Dec 2011 to May 2012 ramp.  We’ll see if we can find some corroborating evidence to guide our forecast.

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  • Charts I’m Watching: Aug 14, 2012

    ORIGINAL POST:  7:30 AM

    We got the long-awaited fan line tag a few minutes after the opening this morning.  We had been looking for 1411, but since that call the fan line has declined a bit; 1410 gets the job done.

    The bigger picture is beginning to resolve itself.  The daily charts for SPX, NYA, RUT, COMP, DJIA, NDX, VIX, DX and EURUSD are presented below.

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  • Strange Brew

    If you found yourself scratching your head today, you’re not alone.  SPX finally shed a couple of points — the first loss in seven forgettable sessions.  VIX reacted by selling off by 1.04.  Huh?  DX followed suit, settling  0.18 after being down as much as .66 from Friday’s high.  Come again?

    I wrote about VIX last Thursday: “The smaller harmonic patterns point to potentially lower values, so look for a drop to the mid-13s if the move up is contained.”  But, never in my wildest imagination did I anticipate said drop in the absence of a run up in stocks — let alone a drop in stocks!

    Whenever I’m vexed by VIX, I turn to VIXandMore.blogspot.com.  I have no connection with this wonderful blog, but am frequently impressed by the depth of expertise.  If you’d like the full explanation, click on the link above.  But, the short version is that today was VIX roll day, and the two components of VIX (VIN and VIF — really) conspired to significantly depress VIX.  One mystery solved.

    As for the dollar, it broke the rules Friday — up almost .30 on a day when stocks were also up.  So, today was perhaps a make-up call.  The EURUSD is showing strength after completing a Crab pattern (in red, below) last week.  After retracing .618 of the Jun 29 to July 24 drop, the pair threatens to complete a Gartley pattern (in purple.)  The .786 (1.2552)  intersects with a major channel around the end of August.

    BTW, the Gartley needn’t necessarily pan out.  As I noted a couple of weeks ago, there’s a very strong line of resistance at 1.24 that was broken back on July 5.  Closing up above it again could take some doing (or, at least a favorable decision by the German Constitutional Court.)

     

    I have many more charts to post, but am running out of juice.  I’ll leave readers with one last chart that represents the whole lot of them.  The ETF UKX is approaching its Fan Line off the 2007 high as well as the .886 Fib retracement level.

    Last week, it came to within a very manageable 0.7% of tagging both.  Yesterday, it closed off a bit, so it now needs 1.17% more to complete its Bat Pattern at 590.04.  A number of euro zone countries report GDP tomorrow.  If numbers come in at or above expectations, don’t be surprised to see FTSE go up and complete the pattern.

    More in the morning.

     

     

     

     

  • Assimilate or Die: August 13, 2012

    VIX overshot its .886 on Friday, losing .60 in the same way SPX gained 3 points — all in the last few minutes of the session.  Is this price action a signal of a continuing rally, or is it a futures related drop that signals the rally’s last gasp?

    As of the close on Friday, VIX had gone just about as far as it could in the latest falling wedge.  Any lower and the pattern would be broken, and the falling wedge is as reliable a chart pattern as they come.  Just look at the rally at the bottom of the last wedge.

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  • NDX Update: Aug 12, 2012

    It’s been a while since our last look at the big picture in NDX.  I’ve focused more on broader indices such as SPX, RUT and NYA.   And, NDX has been subject to excesses, thanks to the impact its largest component — AAPL — has on its performance.

    But, over the past several months, it’s been one of the more predictable indices.  In our Apr 1 forecast, I wrote that its small rising wedge had run out of steam and it was due to reverse and test the lower bound of its larger wedge.

    In the May 1 update, I put a number (2438) on the downside target, revising it on May 8 2446 to reflect the just-completed H&S pattern.  Sure enough, on June 4 it bottomed at 2443.92 to tag the lower bound of the big wedge.

    Since then, NDX has reached the Fibonacci .786 of one pattern and the .886 of another.  Is this another important turning point?

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