pebblewriter

Tag: crab

  • The Hangover

    Bulls had quite the party last week.  SPX broke through fan lines, Fib levels and resistance galore on decent volume and breadth, reaching our 1472 target in a big blowout party hosted by the ECB/GCC/FOMC.

    We discussed this target as far back as March 18 [see: Big Picture].  It was refined further a few weeks later in my posts re an analog I developed [see: New Analog I’m Watching].

    The timing ended up being off, as we made essentially two right shoulders in that H&S pattern, and thus reached the bottom in early June instead of early May.  It also took longer to get up to 1472 than I expected – 3 1/2 months of gut-wrenching chop instead of the nice 3-wave move higher I charted.

    SPX also fell further than the 1305-1317 target I originally anticipated.  I amended it along the way to as low as 1295, never imagining we’d break the 1292 support level.  But, in general, the analog played out pretty darned well — establishing new highs and turning many bears into bulls.

    The great thing about reaching targets, of course, is the profits.  Our theoretical long/short SPX portfolio is up about 55% in the 5 months since that analog was posted [see: results.]  The scary thing is figuring out where things are going next — as it’s absolutely no fun giving any of it back.

    Are we really on a sustainable path to SPX 2000 now that Bernanke has practically guaranteed the market will never go down?  Or, are we due for a killer hangover — those 208 points vanishing faster than a Vegas bachelor party security deposit?  The answer, as usual, is somewhere in between.  Though, since I shorted at 1474 Friday, you can probably guess how I expect this to play out.

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  • Update on Gold: August 22, 2012

    UPDATE:  August 22, 2012

    Today, gold reached the 1655 target from our August 15 forecast — closing at 1656.20.  Note that this represents a probable breach of the descending triangle upper bound as well as a tag of the Fibonacci .886 level of 1655.70 for a proper Bat Pattern completion.

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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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  • Bat Patterns

    Bat Patterns are one of the more common harmonic patterns.  They are similar to Gartley Patterns, except that the AB retracement can be anywhere less than the Fibonacci .618 of the XA leg and the AD leg completes at the .886.

    Because the AB leg can be anything < .618, we have to be a little careful as we approach the .618.  A reversal at .600, for instance, could be a Bat or a Gartley that came up a little short.  So for those that are close enough to go either way, we’re cautious around the .786 (the Gartley completion) too.

    Likewise, a presumed Bat pattern that is approaching the .786 on its CD leg can throw us a curve and put in a bigger reversal there than at the .618.  If this happens, there’s a pretty good chance we need to move the Point B to the .786 and prepare for a Butterfly Pattern extension to the .1.272 or 1.618.

    Likewise, a Bat Pattern that completes at the .886 could evolve into a Crab Pattern — which features a Point B anywhere up to the .886.   The pattern above, for instance, could be just the XA and AB legs, with an ultimate completion at the 1.618 of 892.12.  Bottom line, either play a minor reversal at the .886 or have a pretty clear idea of the medium and longer-term potential.

    In the chart above, for instance, there’s a trend line that should provide support near the last session’s low.  So, there’s a decent chance that the existing reversal is all we’ll see.  As always, stops are recommended just beyond the expected target just in case the pattern fails — as it does about 30% of the time.

  • Going For It

    ORIGINAL POST:  11:15 AM

    In something akin to a recess appointment, the market is making a run for our target area (the rectangle in the chart below) during a holiday-shortened trading session.  We’ll look at the chances it has of getting there and the most likely impediments.

    First, the little pullback we had to the midline yesterday was the 10-15 points I’d been discussing.  I wondered whether we’d get something bigger, but this morning’s action lays that option to rest.  It does, however, open the door to a bigger pullback at the 1.272 coming up.

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  • Forecast Revision

    Note:  only six charter memberships are left as of EOD Thursday.  I’ll keep this going until they’re gone.  Congratulations to E.J., P.B. and T.J. for locking in today’s annual rate for the life of the site.

    * * * * * * * *

    Well, we got the rebound we were expecting…although it was a little unnerving.  As I posted at 10:30 yesterday — with SPX down 16 points at 1315:

    We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

    Sure enough, by late in the day we had rebounded to within 2 points of the opening, just like on March 29.  More importantly, we were right back on track with our forecast (the solid yellow line.)

    Likewise, the dollar caught up to our forecast (solid yellow line) in one fell swoop.  I was getting a little nervous, watching the growing divergence over the past few days.  The previous H&S was in danger of being busted; and, although we kept one foot on the long-term channel line, we were moving further and further away from the presumed right shoulder target.  No more.

     

    The pattern over the past 10 sessions suggests we’ll top out this morning at 1357.28.  That’s a Bat pattern retracement from the June 19 1363 high.  I’m also altering our forecast going forward.

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  • Harmonics Scenarios

    Periodically, I like to go through and chart the various harmonic scenarios for both the upside and downside.

    It helps to pass the time while sitting and staring at the computer monitor, watching our forecast play out (so far, so good.)

    It’s also helpful in generating a set of potential outcomes for the market over both the near and longer-term.

    DOWNSIDE SCENARIOS

    Remember, all harmonic patterns begin with a significant reversal which we call Point X.  Over the past year, we can identify several obvious Point X’s, each of which generates its own set of Fibonacci retracements when paired with the recent 1422 high.

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  • Update on Gold: June 18, 2012

     

    GC soared over $1200/oz since losing 30% in sympathy to the global market meltdown in 2008.  Most of that rise took place in an acceleration channel.

    In the past year, however, the most prominent pattern has been the descending triangle (purple, dashed.)

    Continued…

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  • Channeling VIX

    VIX has very nearly reached the channel mid-line, Inverse H&S and Crab pattern targets I posted back on April 18  [see: VIX at a Crossroads], though we’re 2 days behind schedule.

    Our IHS target was 28.10 and the Crab pattern target was 27.12, expected to occur on May 30.)  Friday’s high was a very close 26.71.  It’s close enough to be considered complete, but a little follow through Monday morning would tie things up in a nice neat bow.

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  • Why I’m Buying

    ORIGINAL POST: 10:05 AM

    I’m a bit surprised the Plunge Protection Team didn’t protect 1292 (but I imagine it means a Fed governor or the Bernank himself will be making an appearance sometime this morning.)

    I had set a mental stop level of 1295 yesterday, given the ongoing weakness in the euro and inability of the market to close positive on the day.  Two schools of thought going into the NFP release this morning: (1) that they would manipulate it upward, as usual, or; (2) that a brutally honest (hence, depressing) number would clear the decks for QE.

    I think the enormity of the miss (69,000 vs 150,000 expectations) clears the deck — and then some.  From a charting standpoint, it doesn’t hurt that we just completed a bullish Crab pattern at the bottom of a pretty convincing looking falling wedge with the SMA 200 just below current prices at 1284.56.  So, I not only lifted my remaining stops as the market fell this morning, I am buying more here at 1287.

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