Today was one of those kumbayah days when even lousy housing data, consumer confidence and Dallas Fed data couldn’t depress equity prices. The market spent all day reinforcing my faith in our forecast. Ah, those were the hours…
As everyone knows, the euro zone whack-a-mole game has been focused on Spain lately. So, the print-our-way-to-happiness bunch was understandably enthused when Spain announced they would truck $24 billion in Spanish sovereign debt over to failing Bankia — Spain’s second biggest bank — which would then exchange said debt to the ECB for something worth the paper it’s printed on. Presto chango, ipso facto… the boo-boo’s all better.
A perfect plan — except for one small detail: the ECB wants nothing to do with it. According to the Financial Times, the ECB wants Spain to implement (stop me if you’ve heard this one) a serious austerity plan and start living within its means — maybe even inject some real live capital. (more…)
Looking at the markets these past few days, I’m reminded of the prize that comes in a box of Cracker Jacks. Not a real prize, mind you — but one of those cheap little pictures where the image changes as you shift the angle from which you’re viewing it. It’s called a lenticular image.
Despite the uncanny accuracy of our forecasts these past couple of months, the road ahead seems to shift a little with every fresh look. I can’t remember the last time I agonized over a forecast for an entire three-day weekend.
Fridays before a holiday weekend have a tradition of being very, very quiet. Today seems to be no exception. Unless something weird happens, we’re aiming for a close around 1323, up a few points.
I’ve taken advantage of a relatively quiet morning in the markets to finish mapping the road ahead. There are quite a few harmonic patterns in play right now. My practice is to map all the apparent possibilities and look for confirmation (or lack thereof) between patterns — and then look for ways in which they agree or not with all the chart patterns, channels and analogs I’m watching.
It’s fairly exhaustive, so takes a fair amount of time. I hope to post the results in the next hour or two. In the meantime, the short-term forecast is still for increasing prices. This morning’s chop does nothing to change that, but does illustrate the importance of using stops.
Like yesterday, l will occasionally post short-term trading opportunities. For traders so inclined, the idea of shorting at 1328 and buying back at 1298 is a great trade. But, it requires a certain degree of vigilance. For the buy and hold crowd who aren’t interested in 30 point blips, feel free to ignore such forecasts.
Whichever camp you fall into, please remember to use stops at all times. These are very precarious times, where unforeseeable events capable of moving markets are unfolding daily. Please don’t get caught with a significant portion of your net worth hinging on any particular forecast — mine or anyone else’s — without protection.
For those of you who who haven’t yet signed up, prices are going up at midnight tonight (PST.) Current members are not affected, of course. And, as before, the first 100 annual members are grandfathered for the life of the site. If you’re a quarterly or semi-annual member, you might want to consider upgrading to annual. To sign up, click here.
Stay tuned.
Update: 2:30 PM
The 5-min RSI just broke out from a falling wedge on positive divergence. If it can stay above the upper bound this morning’s decline should be erased, and then some. Watch for a back test of the wedge, which would correspond with a back test of the little red trend line at around 1311.
Still working on the longer term picture. I’ll send a message as soon as it’s posted. At this point, all members should be receiving an email within minutes of when a significant post or update is posted. Please let me know if you’re not receiving these messages.
I’ve put the texting option back in the sidebar to the right. Just enter your cell phone and service provider and you’ll be notified of new posts. Note: it doesn’t notify you of post updates, just the initial publishing of a new post.
UPDATE: 4:05
That worked out pretty well. The falling wedge paid off as advertised, turning an 8-pt decline into a 2-pt gain at 1310.50 — just a smidge below our 1311 target. I hope readers were able to take advantage of it.
Since I didn’t complete the longer-term picture before the close, I’ll work late this evening and try to get it up before turning in.
BTW, I get a number of emails during the day from readers, and I’m good with that. But, I much prefer that anything market related — questions about strategy, investment options, etc. — go into “comments” on the post. I’m likely to see them more quickly, and more importantly, your fellow readers might benefit from the discussion. Thanks!
I wasn’t sure what to write about today until I got a great question from a reader, who hopefully won’t mind my reposting it here:
Pebble, I enjoy your analysis, but are you really saying you bought at the low on Friday and you sold at the exact high yesterday?
“After scalping a quick 36 points (going long Friday at 1292, selling at yesterday’s high of 1328.49) I got a little cocky and went long again at yesterday’s low of 1310 — even though it didn’t quite reach my 1309 target. I got stopped out on the opening and am looking for a good re-entry point — probably just above 1300 from the looks of the 15-min chart.”
DeMark 15 min is saying we will have a bottom shortly in the SPX.
Lately I’ve been very, very fortunate in my forecasts and trading. As readers know, I’ve been calling for a decline to 1288-1323 since April 9 [see: New Analog I’m Watching]. On May 6 [see: So Far, So Good], I refined it to 1295 and wrote:
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.
In between, the market hit my upside target of 1415 on the nose, and just about every interim target on the way down. We arrived at 1295 only two days later than my forecast from six weeks earlier (the purple line below.) So, trust me when I say I was fairly confident going into last Friday’s session.
We were completing a Butterfly pattern at 1289.14, a Crab pattern at 1288.69 and were approaching a Head & Shoulders target of 1289. And, a number of other indicators I watch were all screaming “here comes a bottom.” I really, really expected a bounce.
I had orders ready to go when we hit 1295. I drew a little trend line coming down the face of the RSI on the 5-min chart (purple dotted line, arrow A on chart below) and waited for it to be broken. When it did, I started selling short positions (at around 1295.) When RSI back-tested and showed positive divergence, SPX was around 1292; so I took a deep breath and started loading up longs (albeit with fairly tight stops, in case I was massively wrong!)
Was I nervous? Enormously. In my nervousness, I devoted practically an entire post [see: Message in a Bottle] to the fact that I’d written myself a note in an April 12 post [see: Analog Details] to bolster my confidence in what I knew would be a very nervous moment a month later. But, yes, after catching the very top, I caught the very bottom.
As to 1328, that was much easier. As I wrote yesterday morning [see: On Track] my 1330 target was based on the previous H&S neckline. But, I was also watching the Fib levels (red Fib lines above) and RSI activity — which was flashing overbought from the word go.
The rise started slowing as we approached the .500 at 1328.82. I felt we would probably build a Bat or Crab pattern to the upside, so a turn anywhere between .382 – .618 made sense. Here we were, slowing at the .5000. Hmmm…
I went to the shorter term charts (5-60 minutes) to see what they were doing and noticed a trend line was in danger of being broken on the 5-minute RSI (note the red dotted line that runs roughly from A to B.)
Within the next 15 minutes or so, that trend line was broken, and back-tested (the yellow arrow.) That was all I needed to confirm a good entry point; so, I went short — with stops a little over 1330 just in case.
And, it worked out pretty well — except that I got cocky and traded at the end of the day yesterday when SPX very nearly hit my 1309 target (it was my birthday, I was loopy on pineapple upside-down cake.) Had I looked at the 5-min chart again, I would have waited.
So, I got stopped out this morning at around 1305 and sat out until 1296-1298 (discussed at 10:40AM, occurred at 12:25PM) which so far is looking like the right move. Note the back test of the channel — setting up more positive divergence. I have stops in just below 1292 just in case, and still believe we’re in for lots of chop.
With respect to DeMark, I know a lot of folks who follow him, and it seems we’re often of the same opinion. But, I’ve never studied his methodology and don’t really keep track of his forecasts. I do take some comfort — especially when taking a contrarian view — when smart people express concurring opinions.
I sat watching my daughter play volleyball all weekend and ran into another dad who’s very smart and also in the investment management biz. He asked how I’d done in the markets lately, and I started to tell him about catching the rise to 1422, the decline to 1357, the rise to 1415, and the decline to 1292.
As I went on, I could see the word “bull****” forming on his lips. I stopped talking and went back to watching volleyball.
These are the toughest times in investing — calling a top or bottom, then watching an opening that threatens to undo it. I mentioned in yesterday’s first post I was expecting a choppy next few days. Talk about understatements…
After scalping a quick 36 points (going long Friday at 1292, selling at yesterday’s high of 1328.49) I got a little cocky and went long again at yesterday’s low of 1310 — even though it didn’t quite reach my 1309 target.
A quick glance at the 15-min chart would have convinced me to wait. I got stopped out on the opening and am looking for a good re-entry point — probably just above 1300 from the looks of this chart.
UPDATE: 10:40 AM
This kind of choppy price action is the price the market pays for getting off to such a strong start Monday. We just tagged the .786 retracement of the rise from the past couple of sessions — the 1300 target from above — but there’s plenty of momentum on this decline so I’ll take another look as we approach the .886 at 1296.14.
There is a potential Bat pattern under construction, though I much prefer a better-defined Point B than yesterday’s low. From that low to the subsequent high was contained in one 15-minute bar. Ideally, there’s more separation than that.
UPDATE: 10:55 AM
Going to take another swipe at it here at 1298 with a 1292 stop.
Our forecast remains on track. Since calling the 1422 top, we’re up a little over 20% on a cash basis (versus -6.5% for SPX) in a little over seven weeks. We’re likely to pause around 1330, as this represents a key TL on RSI as well as the neckline of one of our recent H&S patterns. The chart below shows several key price levels coming up.
Today’s rise continues our successful run — now up 18.5% in the 5-6 weeks since the new pebblewriter.com came online (knocking on wood…) As expected, we got a sizable reversal off the Crab, Butterfly and H&S patterns.
As discussed in today’s earlier post, the 60-min channel is again being tested – – to the upside, now. A study of the RSI picture indicates that SPX will likely (more…)
The analog I posted on April 9 [see: New Analog I’m Watching] accurately forecast the move from 1422 to 1357, back up to 1415, then down to 1292. As detailed in the last post [see: Why Bother], merely selling short SPX at the tops and buying in at the bottoms we forecast would have earned investors over 17% versus negative 9.4% for a buy and hold strategy. That’s a differential of 26% that gets the new pebblewriter.com off to a great start. Now, will it continue?
When I first floated the idea of going pro with pebblewriter.blogspot.com, one reader’s response really struck a chord:
In getting the economy apparently going again, a serious stock fall would not help…so it won’t happen until every card is played… So it’s up and up… with perhaps a brief pause for technical patterns…a few plateaus to get the attention of the manipulators to get the machine running again.
Sure enough, following the old pebblewriter’s phenomenal first few months, I found myself stopped out multiple times as normally reliable chart and harmonic patterns were overwhelmed by the money printers’ manipulative efforts. Was the reader right? Was it time to throw in the towel and buy an index fund?
2011 v 2007 Analog
Instead, I buckled down and worked harder. I augmented my techniques with additional indicators. I learned how to apply harmonics to both price and time. And, I began a search for more analogs — the type of pattern that enabled me to score a 28X in July-August 2011. The new pebblewriter.com reflects those efforts and IMHO is off to a phenomenal start.
How phenomenal, exactly? Suppose you began following the new site when it went live in late March and did nothing but buy the S&P 500 when I called the bottoms and sold short when I called the tops. You would have earned over 17% in the past 33 days (4.6% from 1422 down to 1357, 4.2% back up to 1415, 8.7% down to 1292) versus -9.4% if you just held on for dear life. Yes, really.
Current Analog
Now, a 26.4% outperformance ain’t too shabby. Of course, leveraged ETF, futures and options traders did much better — as did those who shorted JPM or GS when I called their tops on March 27th. But, please, don’t join pebblewriter to earn 17% every 33 days. There’s no guarantee it’ll happen again.
Do join, on the other hand, because over the course of the next year, you’ll become adept at the exact same techniques I used to forecast this 130-point decline almost to the penny or forecast the July 2011 crash to the very day. You can dump your WSJ and turn off CNBC, because you’ll be able to identify and trade on effective fractals, analogs, harmonic and chart patterns that the main stream financial world doesn’t even understand.
If you’re a buy-and-hold investor — pebblewriter.com is for you, too. Who wants to sit around, worrying about the next 20% plunge? Wouldn’t it be nice to see it coming? Wouldn’t it be cool to avoid it, or even profit from it? I thought so.
The new pebblewriter.com is dedicated to helping members learn — from me and from each other. We’ll explore new ideas and new concepts in a safe and supportive environment. No black boxes here — every forecast I make explains why I’m expecting a particular move. And, when I screw up (and, I will) we’ll talk about it and try to learn from that too.
Still not sure? Since starting the premium pebblewriter.com on March 22, I’ve posted the following forecasts. Could your investment portfolio have benefited from these calls?
If you’re one of the 1,000 — 2,000 people who read pebblewriter for free every day, I have good news and bad news. The good news is that I extended the introductory pricing through the weekend. Those of you with quarterly or semi-annual membership can upgrade to an annual membership to lock in savings before prices go up on Monday, and I’ll even refund the amount paid for the initial subscription.
The bad news is that starting this weekend, all posts related to the current markets (what’s going to happen now that we’ve fulfilled my forecast) will be available to members only. Tomorrow’s post that discusses whether the analog is still in play (and why) will be password protected. When the markets start moving again, will you be ready or will you be kicking yourself for not signing up at the cheaper rate?
I know, it’s the ugly side of capitalism. But, a lot of effort goes into explaining stuff, versus trading my own account. It takes away from other personal and business interests, and it eats into my own investment returns. I spend quite a few hours every day racking my brain to help my readers make more money. A little quid pro quo is fair, right?
Recent comments from readers:
You and your analog/bat/crab/butterfly tools are dazzling me! Thank you for all you are doing to help me learn to use these beautiful new tools!
Wow, great call! We closed right at 1295!
You are one of the few that have it right per my friend. Your TA has been extremely close to the market trends, and only a few other sites can claim this.
I have been quietly following your blog for some time. I have my own technical system for trading in place, but I do appreciate what your eyes and experience is telling you, I greatly respect your charting, and I think your charts are absolutely worth paying money to view.
…a HUGE thank-you for your diligence and inspiration. It is a Luxury to have your Charts and comments.
I have really enjoyed your site since finding it in June. You were actually the only one on XXXX’s site I noticed calling for higher and doing it in a nice and professional manner….. Thus, I checked it out and played on the sidelines – thank you again…. Since then, I feel like I have learned a lot, but have really enjoyed your wit and writing style too…..I am not a very good trader, but I am trying to learn and would love to learn more/ become better…..
That’s my goal, folks. I want each and every one of you to be confident enough to dump me this time next year (but don’t; I have feelings too.)
