pebblewriter

Year: 2012

  • Update on NYA: May 8, 2012

    UPDATE:  May 8, 2012

    NYA has completed its Head & Shoulders pattern, targeting 7340 on the downside.   The Mar 30 forecast has played out nicely, although it took a little longer than expected.

    My gut is that NYA will remain stalled between 8300-8450 and not complete the larger Bat pattern at 9679.  I suspect it will chew up the next two weeks or so, ranging from 8100-8450 before breaking down on the smaller rising wedge.

    NYA has also overlapped its October 2011 high, which has serious implications for the Elliott Wave picture, as waves 1 and 4 are not supposed to overlap.

    I’ll defer to folks who know much more than I about EW, but I believe this overlap strongly suggests the past seven months rise is a corrective, rather than impulsive, wave.

    The harmonic picture continues to be a bit obtuse, as has been the case with NYA.  The recent top completed (and overshot) a Gartley pattern.  But, 7340 is pretty much no-man’s land from a harmonic standpoint.  It’s about .500 of the Aug 2011 to Mar 2012 rise, and .707 of the Nov 2011 to Mar 2012 rise.

    It also intersects with the larger rising wedge/channel bound around the first week of August 2012, so we’ll put a pin in that time/date for now.

    Longer term, NYA appears to be tracing out a diamond pattern.  Whether it breaks up (continuation) or down (a top) remains to be seen.  But, the next move would seem to be to the lower bound of the pattern.

  • VIX Inverse H&S Completes

    Other completed H&S patterns:  RUT, NYA, COMP, NDX

  • 3rd Time a Charm?

    UPDATE:

    Down to 1350.76 so far, getting close to the .886 of the larger purple Butterfly pattern.  We didn’t bounce much at all when RSI first hit its fan line, a show of strength for the bearish case.

    The next test is the 60-min RSI, which has reached 18 — the low since August of 2011 and a sign of short-term oversold condition.  A push into the 17 range would be extremely bearish, though I suspect we’ll get a bounce before too long.

    A reminder of our downside targets posted on the 6th [see: So Far, So Good]:

    • 1349.42 — .886 of the purple Butterfly
    • 1343.41 — 1.272 of the yellow Crab pattern
    • 1340.03 — horizontal support, prev. Point X
    • 1323.85 — 1.618 of yellow Crab
    • 1317.63 — 1.272 of purple Butterfly
    • 1289.14 — 1.618 of purple Butterfly (and 2.24 of Crab)

    I talk a lot about bounces, but watch the market’s momentum.  If we slice through one level, consider adjusting stops rather than closing out positions.  We’ve seen it happen often enough on the upside — where logical reversal points were routinely ignored by a runaway bull.  The same thing can happen on the downside.  It’s just been so long that it’s easy to forget, LOL.

    ORIGINAL POST:

    This push below the neckline looks rather convincing, but — as before — the key is a close below it, currently around 1364.  The fly in the ointment is the RSI, which just tagged the fan line from Aug 2011.  It should provide at least a bounce.

    More shortly.

  • Update on AUDUSD

    AUDUSD can be viewed as having dropped into a long term channel back in 1997.  As its 2011 efforts to break out indicate, any significant upside will be limited by that channel.

    It now sits at a critical juncture —  the last fan line coming off the 2008 lows is the only thing standing in the way of a plunge to the midline currently around .85.  A hard bounce on this fan line, on the other hand, would buy it some time.

    From a fundamental standpoint, AUDUSD is probably as good a canary in the inflationary/deflationary coalmine as there is.

  • Crude, but Effective

    UPDATE:  1:40 PM

    VIX came within a point of completing its Inverse H&S pattern this morning but was beat back by the equities stick save. The purple channel we drew a couple of weeks ago was broken, but there is one last viable channel (yellow) that can be drawn — based on this morning’s high.  Anything beyond will have to be viewed as a break out.

    Based on the RSI channels we’ve been watching for the past few months, (more…)

  • So Far, So Good

    Over the past 5 weeks, our forecasts have been remarkably accurate.

    The Butterfly pattern identified back on Mar 29 [All the Pretty Butterflies] correctly called the 1422 interim top.  As anticipated on Apr 10, we got a bounce at 1357 (the .786 of the 1340-1422 rise) and began tracing out a head & shoulders pattern that fit with an analog of the Feb-May 2011 topping pattern [Analog Details].

    The analog been very accurate thus far, although the initial right shoulder bounce had us wondering whether the alternate path to 1462 was playing out.  Our RSI indicators kept us on the right path.  Instead, we got a complex H&S pattern, with a second test of the neckline and subsequent round trip to the shoulder line, accurately forecast in both time and price.

    Friday’s bounce at 1367 was within 2 points of our 1365 target [2d Time a Charm], with a nice little back test — as forecast — to the neckline, where we closed out the week.  The only reason I mention all the above is that, while this degree of accuracy is always desirable, it’s not typical and should not be expected.

    Regardless of how well your investments have performed the past five weeks, don’t forget that they are out to get you.  Even now, as it appears that the analog is playing out nicely, the financial establishment is working overtime to separate you from your money.  There will be more times, such as in January, when perfectly good harmonic and chart patterns don’t play out as they should.

    Always use stops!

    Now, with that out of my system, it looks like the results of the Greek and French election, on top of Friday’s dismal non-farm payroll numbers, is going to provide the push we need to get on with the downside.

    Remember, our target is 1288-1323, although 1288 has been fudged to 1295 simply because a dip below 1292 would be problematic for the bulls from a wave count perspective;  i.e., I think they’ll pull out all the stops to avoid it.

    Potential bounces along the way include:

    • 1349.42 — .886 of the purple Butterfly
    • 1343.41 — 1.272 of the yellow Crab pattern
    • 1340.03 — horizontal support, prev. Point X
    • 1323.85 — 1.618 of yellow Crab
    • 1317.63 — 1.272 of purple Butterfly
    • 1289.14 — 1.618 of purple Butterfly (and 2.24 of Crab)

    But, I divide the downside into three basic scenarios:

    (1)  stick save: Fed freaks over Europe, QEish leak limits downside to 1349.
    (2)  top case: normal Butterfly completion to 1.272 (1317) or 1.618 (1289.)
    (3)  panic sets in: crash and test bottom or large red rising wedge around 1200.

    I expected to be able to update all of the charts today, but my youngest daughter has been home with stomach flu while my wife and daughter #2 were at an all-day volleyball tournament.  Needless to say, it wasn’t as productive a day as I expected.  Look for updated charts Monday.

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

    Over the next couple of days, I’ll finish converting the new website to a premium site.  Many thanks to those of you who have joined up.  I hope you’ve been able to act on my forecasts; if so, you’ve more than earned back your subscription costs in the first week.

    To anyone still thinking about it, the end is near.  The old site will still display articles of general interest and delayed market updates.  But, members of the new site will enjoy the first and best of what I can put out.  To join now, click here.

    Good luck to all.

  • Random Walk, My A$$

    As we close precisely on the trend line between the Oct 27 high (which kicked off a 112-pt Inverse Head & Shoulders pattern) and the just completed (for the 2nd time) Head & Shoulders pattern, I’m reminded of how little fundamentals have come to matter.

     

    Oh, and for any Fibonacci haters out there, check out the time and price relationships between the two patterns.

     

  • 2nd Time a Charm?

    UPDATE:  11:30 AM

    I feel pretty good about my downside (primary) case now that things are moving along.  I mentioned back on April 25 [see: The Bulls Fight Back] that we needed to start down by Wednesday in order for the larger H&S to maintain some time proportionality between shoulders.  We got our reversal Tuesday, and have been moving down since.

    Also, check out the RSI and MACD on the chart below.  RSI broke the little fan line I threw up a few days ago, and has no support until it hits line k-5 — presumably below 1370.  MACD just saw a bearish cross and is approaching the center line.  Note, also, that SPX has fallen below its 10, 20 and 50-day SMAs.  The only remaining moving average to offer support are the SMA100 (at 1342) and the 200, way down at 1276.

    I’ve already seen a few Fed comments, talking up the economy, employment, etc.  And, SPX is pausing here at the neckline.  I assume that even the most fundamentally oriented and/or manipulative powers that be have a smart technical analyst on staff who explains to their bosses what happens when various patterns play out.

    So, there’s always a struggle at key moments like this. It’s interesting, all the same, that if we look very hard at all, we can find chart patterns that provide rationale for the price movements.  Here, at the neckline, we can see that RSI has also reached a midline of sorts in the channel we’ve been following.

    If we break the neckline, look for that back test somewhere around 1365 mentioned below.  After that, not much support till 1340, and then 1323.

    UPDATE:  11:15 AM

    Here’s the big picture, again.  The larger H&S, which completed but didn’t play out on Apr 23, is back in play.  If we can close beneath 1370, we’ll have a crack at a complex H&S pattern (two shoulders on each side) that targets the low 1300s.

    The harmonic picture supports this, by the way.  If the H&S plays out, the little Bat pattern (yellow) under construction becomes a Crab pattern.  These typically extend to the 1.618, but can go further (2.000, 2.24, 2.618, etc.)

    The larger purple pattern – a Butterfly – completes at 1317 (the 1.272) or 1289 (the 1.618.)  Hence, my call for a downside of 1295-1323.

     

    ORIGINAL POST:  10:30AM

    The Bat, Crab and H&S patterns are doing their thing, and we’re fast approaching the target we set yesterday of 1372. That was an interim target of course, because if we complete the larger Head & Shoulders target (again), the potential downdraft is to 1295-1323.

    I’m refining the larger H&S completion target to 1370.73 and the nominal target to 1300.

    The .886 Bat pattern retracement of the 1358-1415 rise from Apr 20 to May 1 indicates a turn at 1365.23.  So, if the pattern is to play out, that would be an excellent place for a back test to commence.

    Of course, TPTB will attempt to turn it again.  Cue the talking heads, or QEeak from deep inside the Fed that will attempt to turn the tide before it’s too late.

     

     

  • New H&S Pattern

    Nothing to do with markets per se, but this kind of story really makes you stop and think…  Anyone who thinks the same couldn’t be done just as easily with a FAB-250 from a Skyhawk is deluding themselves.

     

    UPDATE:  3:40 PM

    The H&S neckline back test we discussed in the 2:20 post below is likely complete.

    Note that the head of this little H&S pattern came at the 1.618 extension of last week’s 1392-1358 decline — in other words, a Crab pattern (drawn in yellow.)  And, it’s nestled in the C and D legs of the Bat pattern that completed at 1415 (the purple pattern.)

    After weeks/months of normally reliable patterns busting left and right, it’s so nice (not to mention profitable) to see patterns play out the way they should.

    UPDATE:  2:20 PM

    SPX traded through the small neckline and seems quite content to pause at the small fan line I posted about this morning.  It’s line k-4 on the chart below, and just so happens to correspond to the SMA 10 on the daily chart (1390.81.)

    In H&S patterns, neckline breaks are often followed by a back tests.  If the NFP print in the morning is lousy, we should head down to 1372 pretty quickly.  If the numbers are great (or the market perceives them as guaranteeing another round of QE), the pattern will bust.

    UPDATE:  1:15 PM

    Be cautious with this smaller pattern, though.  The 60-min chart shows a distinct possibility of a bounce at the neckline (as happened with the larger pattern.) Focus on the bold, yellow TL on the RSI below.  I would suggest anyone considering piling on shorts protect themselves, as always, with tight stops.

    UPDATE:  12:30 PM

    Over on the right shoulder of the Head & Shoulders pattern we’ve been watching is a… H&S pattern.  It would complete somewhere just below 1394 and targets 1372 — the (wait for it…) neckline of the larger pattern.

    Ever get the feeling the market is just toying with you?  Seriously, though, this fits rather well with the RSI indicators, which as I posted earlier, support the idea of another test of the neckline.

    If we get crazy positive non-farm payroll numbers in the morning, all bets are off.  Barrons is reporting consensus estimates of 165,000 (below), while Briefing.com estimates 140K.

     

  • Charts I’m Watching: May 3, 2012

    NOTE:  New on the MEMBERSHIP>MY PROFILE page, a sign up area that will allow subscribers to be texted whenever a new post is added or added to [note:  additions don’t seem to be generating additional texts — working on this].   I tested it last night, and it took only 3-4 minutes for a SMS text advising me of a new post to appear on my mobile.  It doesn’t appear to handle non-US cell providers, so I’m looking for additional vendors that can accommodate those outside the states.

     

    UPDATE:  1:15 PM

    Be cautious with this smaller pattern, though.  The 60-min chart shows a distinct possibility of a bounce at the neckline (as happened with the larger pattern.) Focus on the bold, yellow TL on the RSI below.  I would suggest anyone considering piling on shorts protect themselves, as always, with tight stops.

    UPDATE:  12:30 PM

    Over on the right shoulder of the Head & Shoulders pattern we’ve been watching is a… H&S pattern.  It would complete somewhere just below 1394 and targets 1372 — the (wait for it…) neckline of the larger pattern.

    Ever get the feeling the market is just toying with you?  Seriously, though, this fits rather well with the RSI indicators, which as I posted earlier, support the idea of another test of the neckline.

    If we get crazy positive non-farm payroll numbers in the morning, all bets are off.  Barrons is reporting consensus estimates of 165,000 (below), while Briefing.com estimates 140K.

     

    UPDATE:  12:30 PM

    Non-manufacturing ISM numbers confirm the economy’s slowdown.  Recall that the recent national numbers for manufacturers inexplicably showed an improvement — in stark contrast to the regional numbers and most other economic indicators I watch.

    The services sector (the larger share of the US economy) confirms what I suspect was a bad print a couple days ago.  We see worsening in the overall index (from 56 to 53.5 and vs expectations of 56.5) and in the categories of business activity, new orders, employment and prices (the largest drop of all.)

     

    ORIGINAL POST:  11:00 AM EST

    The RSI channel we analyzed (in excruciating detail) yesterday is holding so far.

    If we can break that last little fan line (k-4) things should accelerate a little to the downside, probably to test the k-5 line, which I believe will correlate with the H&S pattern neckline.

    It seems like the market is waiting for a sign of some sort for any serious downside to develop — which will likely come from Europe, China or MENA.  Why?  If good economic news drives the market up, and bad economic news increases (even falsely) the odds of QE, then it stands to reason that only an exogenous shock — one over which the Fed has less control — will drive prices lower.

    Having said that, the entire economic picture has the feel of a triangle pattern.  We careen from good news to bad, euphoria to despair — all the while drawing closer to the (IMO) inevitable day of reckoning where the mountain of debt shakes just enough to unleash a major landslide.

    We see a preview of the effects in places like Greece, Ireland, Portugal and increasingly Spain.  Total debt to GDP is much too high in these countries, but the US tops them all.  Official reports put acknowledged debt/GDP in the US at 101.5%.  But, as this Zerohedge article points out, the contingent liabilities such as the NPV of unfunded pension and health care drive our true debt/GDP to well over 300%.