pebblewriter

Tag: harmonics

  • Horseshoes and Hand Grenades

    There’s an old expression that says “close only counts in horseshoes and hand grenades.”  So, we spent most of the day yesterday wondering whether the day’s 2336.45 lows were close enough to our long-held downside target of 2335.34.The tag was marred by premature reversals in oil and VIX.  Did the guys working the algos not get the message?  Or, were they just a little over-eager?  Admittedly, it’s tough to nail a precise value in an index as unwieldy as the S&P 500.  But, they went to all the trouble of engineering a backtest of a key Fib level.  You’d think they’d care…

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  • Whistling Past the Graveyard

    Only a couple of years ago, central bankers became adept at repairing the damage done to stocks after big shocks.  That changed with Brexit, when the strategy shifted to pushing stocks as high as possible before the damage was done… and, still doing all the requisite ramping after the fact.

    They perfected the technique after the US election, turning a 5% overnight dump in the futures to a breakout above important resistance — where stocks remain, today.

    It made a bold statement — that the market was resilient enough to weather a sea change in the political landscape.  This week should be all about proving how resilient it is in a rising interest rate environment.  Judging from the mild drop over the past week, investors are quite unconcerned.

    Does this make sense, or are investors whistling past the graveyard?

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  • Next Steps

    We’ve been watching a triangle form for over a month, wondering whether/when it would break out or break down. Yesterday, we got our answer.

    After coming within .40 of our 2170-2173 target on Monday, the triangle broke down — despite vigorous intraday ramping in USDJPY and CL.  Tuesday’s initial downside target at 2150 was taken out without any difficulty.

    New market-health-indicator Deutsche Bank, which reached our 13.98 target (+18.7%) from our bottom call on Sep 27, is wavering.  Having briefly pushed through resistance, it’s now clinging to support.2016-10-12-db-60-0600What’s next for stocks?

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  • Looking Back, Looking Ahead

    I remember 2011 like it was only five years ago.  William and Kate got hitched.  Adele was Rolling in the Deep.  And, Ben Bernanke, our intrepid hero, blamed Congress for the market’s meltdown.  Oh, and I launched pebblewriter.com.

    It was originally a Blogger site (pebblewriter.blogspot.com) and I did it mostly for fun, just to see if my thoughts on the markets could stand up to public scrutiny.

    My first post was on May 2, 2011.  I had come across some articles on harmonics, and found it weird, but intriguing.  Combining harmonics with what little I knew about chart patterns, it seemed to me that the S&P 500 was nearing an important top.  So, I posted it.

    2011-05-02 BacktestOkay, it wasn’t pretty.  But, it was accurate, which counts for something.  As it turned out, May 2 was the top.  It attracted a few regular readers, and I gained just enough confidence to keep the blog going.

    Two months later, we scored big time.  An analog I discovered rewarded us with a 245-pt (18%) short, plunging exactly when and where we expected it to.

    2016-05-18 SPX 2011This encouraged me to take the blog more seriously.  And, a few months later, I launched pebblewriter.com, offering subscriptions to serious investors and traders.

    Needless to say, there have been many times when things didn’t go as expected.  It took longer than I would have liked to fully understand the growing manipulation going on in  markets, primarily through algorithms involving USDJPY, CL, VIX, bonds, etc.  And, I’m still a much better chartist than trader.

    But, five years later, I’m pleased to say I’m starting to get the hang of it, averaging a little over 18% monthly since January 2015.  And, enough members have stuck around over the years that I’ve been able to make a living doing something that’s challenging and (usually) fun.

    Taking a look back at the past five years, I was surprised at what I found.  A few key data points:

    Screen Shot 2016-05-18 at 1.10.37 PMThey’re not zerohedge kind of numbers.  But, then, zerohedge doesn’t tell you where the market’s going to end up every day.  I have to admit being wowed by the last number.  2,100,000 words makes War and Peace‘s 587,000 seem skimpy by comparison.

    My favorite part of the job comes on days like today, when we nail a forecast made the previous week– despite 20- and 30-point spikes in the interim.

    And, once in a while, I get an email like this one I received today.  Totally makes my day!

    I know you say not to do this, but I tripled down based on today’s post… I bought  XXX May 27 203.5 puts at 1.01, .93 and .84.  I was cursing you out when they got down to .82, but an hour later I sold them for 1.70.  I’m not exactly a big-time trader.  But, today paid for my son’s first year of college.  Singing your praises, my man!

    Our five year anniversary kinda slipped by a few weeks ago without much fanfare. The markets were kinda crazy.  So, I’d like to make up for it.  We haven’t had a membership promotion in quite a while.  Let’s have a really great one and turn back the clock a bit.

    From now through Memorial Day, we’ll offer our $1,800 Annual Memberships at 2011 prices, only $500.  If you want to lock in your price for the life of the site, select a Charter Annual Membership for $750.

    To sign up now, CLICK HERE.

    We haven’t offered memberships at this price since — you guessed it — five years ago.  And, it’s safe to say prices will never be this low again.

    If you’re already a member, tell a friend and earn a free 1-hour phone consult or set of charts on a security, currency or index of your choice when they sign up.  That’s in addition to the $250 bonus rebate.

    And, if your fund or company commits to one of our bespoke, institutional plans for 4 months or longer, I’ll come to your place for a full day of consulting.1

    To sign up now, CLICK HERE.

    Thanks, everyone, for a great run.  Here’s to the next five years being even better!

     

     

     

    1 subject to availability, within contiguous 48 US states. Foreign travel available at additional cost.

     

     

     

     

     

     

  • Update on XLF: Aug 11, 2013

    As the cause of the global financial crisis, the financial sector caught the brunt of the melt-down — falling 85% between 2007 and 2009 versus SPX’s mere 57%.

    Since bottoming in Mar 2009, it has continued to move in exaggerated fashion relative to sectors receiving lesser freebies from its servants on Capitol Hill and Constitution Avenue.   In major rallies, XLF has averaged 1.44X the size of equivalent SPX rallies.  Its declines have averaged 1.34X SPX’s.

    In important declines, it has led SPX more often than not —  putting in a top 4 1/2 months before SPX in 2007 and 2 1/2 months in 2011.  In important rallies, it has launched in unison with SPX.

    Like SPX, it has ignored some of the normally influential patterns of the past several years. Access to cheap free money has trumped the valuation disasters lurking on balance sheets of companies that are legally exempted from accurate reporting.

    So, it’s with some trepidation that I point out a few approaching trip wires.

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  • Update on AAPL: Jul 31, 2013

    It’s not often I get the chance to plug a future competitor.  As some of you know, my son Kyle is helping me out this summer.  He will graduate in December with an Economics major and Personal Financial Planning minor from Texas Tech University in lovely Lubbock, TX.

    In addition to performing many rather thankless duties for me, he has spent a fair amount of time learning the ropes of charting and technical analysis.  I asked him his opinion on AAPL the other day, and am pleased to present his analysis.  FWIW, I think he did a very nice job.

    It wasn’t the easiest of assignments.  Since our bottom call on April 19 [see: Is it Safe?], the stock quickly rallied to our upside target (a nice 20% gain), then promptly gave back almost all of those gains.  After all is said and done, he feels bullish about the rally continuing – a forecast with which I agree.

    I hope to lure Kyle back after he graduates for more of the same.  Though, he seems pretty excited about the financial planning field.  Those of you in the biz who would like to chat with this bright young lad about his career plans, feel free to drop me a line.

    *  *  *  *  *

    AAPL rose sharply following its earnings release last Tuesday.  EPS was $7.47 on revenue of $35.3 billion. Both numbers beat Wall Street estimates. Analysts had been expecting EPS of $7.34 on revenue of $35.18 billion.

    It shot up 25 points, breaking through the midline of both the rising purple channel and a large falling channel (in white below) from the 705 high.  It backtested the white channel midline, then shot up yesterday to complete a Bat Pattern (yellow) at the .886 of the drop from 465 on May 7.

    The completed Bat Pattern could pay off with a drop to backtest the white channel midline around 430-433 (the last Bat Pattern – from 469.95 on March 25 – fell much more sharply, retracing .886 of its rise.)

    Such a pullback could ultimately be bullish, as it could form the right shoulder of another IH&S (red) that targets 525 – only a few points away from the 1.618 extension (522.39) of the 469-385 drop beginning March 25. This target intersects with the top of the white channel around August 5-12.

    But, given that the recent low was slightly higher than the April lows, a large IH&S Pattern has already completed.  It could go ahead and play out now.

    The current rising purple channel doesn’t intersect with the top of the white channel until lat August/early September, about the time it passes through the latest Bat Pattern’s extension to the 1.618 at 513.26.

    Both of these bullish scenarios assume that AAPL is able to beat its former highs of 465 and 469.95.  Many potential harmonic patterns on the way down from 705 have been unable to.  In fact, each successive high has been lower than the last.

    But, for now, we’ll remain bullish with a target of 514 by late August and 570 before the end of the year.

    GLTA.

  • Update on Gold: Jun 26, 2013

    It’s been a while since I last updated this page.  The equities markets have kept me working overtime, and I assumed our May 15 forecast had long since jumped the tracks.

    At the time, Gold had plunged 270 to 1321 per ounce in only 4 sessions, bounced at 1321 (the day after our bottom call) to within 13 of our upside target, and was returning for a second bounce — or not.   From that post [Update on Gold: May 15, 2013]:

    Now, at 1373, it has reached a critical juncture that should result in either a sharp rally to 1560 or a plunge to 1141 in the coming month or so..

    GC was closing in on the .786 retracement of the the rise off the 1321 bottom.  Playing the bounce was a low risk trade as long as one used trailing stops.

    Long positions could be played from the .786 (1357) or .886 (1340) as long as stops are watched very carefully and updated frequently.

    The downside case is probably stronger.  If the current plunge continues past 1321, there are only a few key levels of support before things get really nasty:

    • horizontal support at 1302-1309
    • potential Fib targets of 1276 (the 1.272) or 1219 (1.618)
    • Fib support at 1141-1157
    • Fib support at 947

    The bounce came a few days later at the .886 (1336) and despite gaining 84, couldn’t clear the big white channel midline, much less the smaller red channel (white in previous charts) it had been in since last September.

    When the big red channel from 1999 broke down on Jun 20, GC plunged again.  It failed to catch a bid at the first support level, but is approaching the second one this morning: the yellow 1.618 that completes the Crab Pattern at 1219.10.

    This seems like an opportune time to update the forecast, as gold’s price action continues to provide valuable clues as to investors’ expectations about QE, the value of the dollar and inflation.  Are the many calls for gold to fall below $1000 per ounce well-founded?

    Probably not.  We should get a decent bounce beginning at or near 1219 today that could take prices as high as 1320 or so by July 5-8.  A continued rally through the red midline would mean additional gains to 1357-1385 by mid-July.  But, there’s a better chance of a plunge to 1155 instead — and it need not respect the Crab Pattern about to complete, especially if today’s equity rally falters (gold certainly isn’t buying the MORE QE! snake oil.)

    Remember that 1155 is the .618 retracement (in white below) of the huge rally from 681 in 2008 to last September’s 1923 all-time high.  Around July 15, the bottom of the big white channel, the bottom of the red channel, the bottom of the big purple channel (it replaced the red one that failed on Jun 20) and a Fib Fan line all intersect with the .618 at 1155.

    Note, this is the same price target we identified in our April 15 Update on Gold.

    We can speculate about what circumstances might provide a floor.  The prevailing wisdom these days is yet another round of QE — or at least inflation of some variety. With interest rates on the rise, that seems likely enough.  We’ll stick a pin in the idea of a mid-July market calamity that necessitates Fed intervention.

    But, as long as 1155 holds (and, by proxy, the purple channel), gold will regain its luster.  It could rebound to 1525 by as soon as August and as high as 1760 by the end of the year.

    Each of the two significant spikes since the Aug 1999 low of 253 was followed by a retracement of between .382 and .500 of the rise from 253.  In May 2006, GC topped out at 1009 and then retraced just over 38.2% of the rise.  And, in Mar 2008, it retraced to about halfway between the .382 and .500 Fibs at 43%.

    The .382 Fib of the 253 — 1923 rise was 1285, so that ship has sailed.  The .500 is down at 1088.  1155 is about halfway between them (a 46% retracement.)

    A Fibonacci .618 on such a large pattern as this can be expected to provide at least a sizable bounce, but there is no guarantee.  The purple channel isn’t the most convincing fit in the world, and could fail in time as did the red.  If 1155 doesn’t hold, or if it merely provides a bounce, GC could complete a Gartley Pattern at the .786 (946.90) or even a Bat Pattern at the .886  (822) within the next six months.

    GLTA.

     

     

     

     

     

     

     

  • Update on DJI: Jun 19, 2013

    Since breaking above the 2007 high, the Dow’s been on a tear — eager to leave 2007-2009 in the past.

    In so doing, it sliced right through the white 1.618 extension of the 2011 correction and the 1.618 and 2.24 extensions of the drops from Apr 2012 and Sept 2012.

    What’s next?

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  • Update on USDJPY: Jun 18, 2013

    The pair has dropped like a rock since the purple channel broke down on June 5.  It reached the .886 Fib as expected [CIW: Jun 6], then immediately bounced back above the neckline of the H&S Pattern it had completed (in red, below.)

    The following day, it fell back through that neckline, and has spent the past three sessions trying to climb back above it.

    In the process, however, it formed a second H&S Pattern (roughly the dashed yellow line as the neckline.)  Either of them could send the pair tumbling to the white 1.618 at 85.66.

    But, the defunct purple channel has given rise to a decent-looking new channel (in white, below) that — if it holds — could pick up where the purple channel left off and carry USDJPY to new highs?

    But, what if it doesn’t, i.e. if the H&S Patterns play out?

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  • Update on USDJPY: May 29, 2013

    After recently completing a Crab Pattern at the 2.24 extension, USDJPY fell back through the purple channel midline to the 1.272 Fib level, where it is staging the backtest of the midline we forecast last week.

    While I expect the backtest to be successful, meaning a leg lower is in store, the 部屋に象 is the .618 at 105.58. Note that this is the 61.8% retracement of the 39% crash from the 2007 highs.  It happens to coincide with a number of significant channel lines, so tagging it could be a very big deal.

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