pebblewriter

Tag: rising wedge

  • Last Call: Dec 07, 2012

    Feeling pretty jazzed, as things should finally get underway today.  Today’s theme music from the late jazz great Dave Brubeck, the last of his kind.  This track features Brubeck, Paul Desmond, Eugene Wright and Joe Morello doing what they did best — laying down some hot licks.

     

    ORIGINAL POST:   9:15 AM

    Though the jobs numbers will give a boost to the market this morning, it shouldn’t be enough to break to new highs.  SPX should come within a few points of completing an inverted H&S pattern, but ultimately fail near the .786 or, more likely, a little Bat Pattern at the .886 (1420.82)

    For anyone who missed the opportunity to go short when SPX nailed our upside target [see: At Last] on Monday, this could be your last chance.

    The rally from 1343 has felt strong, but it’s no more than a back test of a broken channel. The next major move should be much lower.

    As always, stops are advised in the event the pattern completes.  Though this analog has worked beautifully since last April, they all fail eventually.

    BTW, the jobs numbers from BLS weren’t quite as fab as they would have us think (I know — I’m shocked, too.)  In the last four years, those over 55 have scored decent job growth.  Younger workers and those in their earnings prime — not so much.  From Zerohedge:

    UPDATE:  11:45 AM

    The dollar has been a veritable billboard for harmonics lately.  It completed a Bat Pattern back on Sep 14 (red pattern), retracing .886 of its rally from February to July.  Since then, it’s retraced 50% of the drop (not shown, but a Bat Pattern from Aug 28 channel mid-line break.)

    It then proceeded to complete a Crab Pattern (in yellow), reversing at just beyond the 1.618 of 81.138 in mid-November.  Since then, DX formed a nice falling wedge that saw it complete a Gartley Pattern on the 5th (in white.)

    Some might see the purple and red patterns as having further downside potential.  The red Bat could go on to form a Crab down at 74.335 (which would line up nicely with the purple .886 at 74.158.  If our analog/forecast busts, I’d say that’s a good possibility.

    But, it’s hard to ignore the recently broken channel for EURUSD.

    UPDATE:  1:20 PM

    Stocks reversed nicely from this morning’s high, which came within  48 cents of our 1420.82 target — good enough for government work.

    Lots of excitement about financials the past couple of days.  It was certainly one of the hot sectors today, offsetting generally poor results from services and, of course, AAPL.  When it comes to significant moves, financials often lead the broader markets.

    So, in a period when we’re looking for a sizable sell-off, it would be helpful to have the financials on board.  Fortunately for our forecast, they are only one good pop away from being ready.

    For more, check out today’s Update on Financials.

  • Without a Net

    The toughest moments for those of us who chart publicly are those right after calling a significant top or bottom.  There are some instances when pretty much everyone and their mother can see a turn coming.  Other times, it feels like you’re sailing through the air, frantically searching for the catcher and hoping he hasn’t chosen this moment to take an unannounced coffee break.

    The first wave down after any significant top is just plain fun.  It worked!  Sit back, bask in the glory, etc.  Then comes the corrective wave.  Heart-in-throat time.  You know it’s going to retrace some of that first wave down, but how much?  Most chartists develop sweaty palms around 61.8%.  Your stomach starts churning at 78.6%.  At 88.6%, time for your favorite vice.  And, God help us if it’s a double top.

    Following an analog is generally the worst.  Virtually no one else sees it coming, and there is a long list of reasons you’re probably wrong.  Taking a tour around the net last night, that certainly seems to be the case now.  The euro is soaring, the dollar is tanking, and the market has spurted 80 points in two weeks — only 50 points from a five-year high.

    It’s made even worse if the first wave down didn’t break out/down of whatever chart pattern it was in.  Yesterday’s reversal was impressive — going from up almost 8 points to down 8.But, we never quite reached my 1424.41 target — coming up .68 short — not to mention the Inverted H&S target.

    And, we haven’t yet broken down from the rising wedge. A re-test of the high is officially on the table until that happens — hence the importance of using stops.

    Once the wedge is broken, the next support is usually either an important Fib level or a morphing of the wedge into a channel.  In this case, we have strong horizontal and Fib support at 1400.  If we convert the wedge to a channel, it has a mid-line currently around 1402 and a channel bottom around 1390.

    A rising channel would be bullish, of course.  And, I haven’t a bullish bone in my body right now.  We draw it, though, because we have to try to get inside the head of all the bulls out there and figure out where they’re likely to jump in and buy.  Channel mid-lines and bottoms, as well as important Fib levels, definitely qualify.

    UPDATE:  11:35 AM

    Nice reversal off this morning’s highs again, turning a 4-pt gain into a 4.5-pt loss where SPX bounced off the 10-day SMA (in red below, currently 1405.37.)  The SMA 20 (white) is down around 1392 and, like the 50 (blue, 1419), is due to continue falling. Fifty sessions ago was Sep 20, two sessions post the Sep 14 high of 1474.  So, all else being equal, the SMA 50 should start coming down as those higher components to the moving average roll off.

    The 200-day moving average (thicker red) is down at 1385, so it’ll be a while before the 50/200 cross.  And, we are officially back below the 100-day (thicker yellow) at 1410.59.  Look for the 50/100 cross in the next few days.

    The next battles involving moving averages will likely come at 1380, involving the SMA 200 and the SMA 20 at the intersection of the bottom of the rising white channel and the top of the falling red channel.  The 50% retracement of the 1343 to 1423 rally is at 1383.54, which intersects with both channels on Thursday.

    So, we’ll keep an eye out for a significant bounce Thursday at 1383ish.  Remember, the .786 of the 1576 – 666 crash is right there at 1381.50.  And, bulls will want to limit this “correction’s” downside to the next Fib level lower — on the way to new highs, of course.

    The EURUSD, in the meantime, has reached Sunday’s upside target of the .886 at 1.3084 and has completed a fairly decent looking rising wedge of its own.

    UPDATE:  12:10 PM

    The dollar has reached the bottom of the white channel we charted Sunday [see: DX Update], just beyond a .618 retrace of the move up from 78.725.  It appears to be basing for a move higher.

    I’m expecting a 5% move by around the end of the year.   What does that mean for stocks?

    continued for members…

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  • Charts I’m Watching: Nov 26, 2012

    MEMBERSHIP NOTE:  I have set up a Twitter Account (@pebblewriter). I will endeavor to tweet important intra-day alerts within a few minutes of posting them in these pages.  I believe you can arrange to be notified of any updates by text or email.  Alerts will contain a link that directs followers to the pertinent post.  I’m new to this, so bear with me as I get the hang of it.

    Also, last call to take advantage of the Hurricane Sandy membership promotion [details HERE.]  Donations of $100 or more to the relief effort  will earn you $200 off the cost of an annual membership.  It’s a great chance to do well by doing good.

    Last, as posted a few days ago, monthly memberships have been discontinued.  Monthly members who convert to Annual Membership are eligible for a rebate of their most recent monthly payment.  New pricing for all membership categories goes into effect at the end of the month.

     

    ORIGINAL POST:  9:20 AM

    Here’s where we left off Friday.  I’m not thrilled with the idea of adjusting channel lines to fit with an overshoot of a target.  Looks a bit hinky on the 60-min chart…

    …even if it fits fine on the daily.

    But, here’s the chart that really convinced me to stay short (from 1404, 10:30 EST in members’ section) over the weekend, even though SPX slightly exceeded my original stop of 1407.  Remember, this is a short-term trade only.  Our core position remains long.

    The RSI ran into the upper bound of a well-formed channel (yellow) at the end of the day.  So, it’s either break-out or break-down time – regardless of what price was saying.

    And, in the 60-min time frame…

    Meanwhile, the dollar was breaking out of a week-old 60-min RSI channel and appears to be setting up for a back-test of the broken channel and recently broken moving averages (10-day = 80.88, 20 = 80.78, 200 = 80.9).

    UPDATE:  11:30 AM

    SPX broke down through the important 1400 price level, and is likely on its way to completing a proper B-wave for this corrective wave on its way higher.  Friday, I updated the primary forecast to reflect a significant sell-off into the middle of the week, followed by a strong recovery.

    This scenario is in play if we reach the low 1380s in the next day or two — something that seemed unlikely on Friday, but would seem less so if we traded down through the SMA 200.

    continued for members… (more…)

  • Charts I’m Watching: Sep 24, 2012

    The rising wedge we were watching Friday broke overnight and has carried into this morning’s session, with an initial drop to 1452.06.

    This completed a Bat Pattern at the .886 retracement of the 1474 to 1449 drop (also a small Crab Pattern.)  We should thus get a sizable bounce from 1452 — probably at least to the white channel midline of 1456.51 — also the .618 of the small red pattern.

    UPDATE:  10:10 AM

    This morning’s drop to the .886 suggests some interesting moves.  Remember that the .886 not only represents the completion of a Bat Pattern, it is also the Point B of a potential Crab Pattern.

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  • Update on Oil: Sep 20, 2012

    Oil has tumbled the past few days, begging the question “what about QE3?”  It was supposed to prop up commodity prices.  There are many competing theories as to the influence of elections, Saudi assistance, etc.  But, the bottom line is CL had tagged some important channel lines and simply corrected.

    There are some pretty obvious long-term channels, as well as two huge rising wedges. The first one broke down only 50% of the way to its apex in price, and 61.8 of the way in time, yet — as is often the case with early breaks — prices came back to tag the apex in time (as well as a major channel line.

    The latest RW broke much later — .707 in time and .786 in price — and is already beyond the apex in terms of time.  The apex is around 144 — close enough to the all-time high of 147 to be considered a double-top were it to come into play.

    To do so, however, CL would have to break through a fan line from that 147 high.  As the following chart shows, the fan lines have been pretty effective at signaling major moves.

    The next such potential support is just below at around 88.  But, this line has been broken twice before on strong plunges, and CL seems determined to make another tag on the long-term support represented by the solid yellow channel line below at 78.

    But, to do so, it’ll have to break through triple harmonic support.  CL is also nearing the largest pattern’s .500 Fib at 90.24, which corresponds with the .382 on two smaller patterns at about the same price.

    It’s easier to see on the close-up.

     

     

     

     

  • 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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  • 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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  • Update on RUT: July 25, 2012

    Like the rest of the market, RUT is exhibiting either a pretty deep retracement in the midst of a triangle wave higher or something more onerous —  the early stages of a wave 3.  While the jury is still out, I believe the charts favor the former.

    RUT finished a Bat Pattern (in red below) yesterday — this on the tail end of another Bat pattern that I posted just the other day.

    Yesterday’s low also registers as a .618 retracement of the AD leg of the first Bat pattern (.618 of 729.75 to 820.44.) which is a typical payoff to a Bat pattern completion.

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  • Charts I’m Watching: July 23, 2012

    Looks like I jumped the gun Friday, getting back in too early after scoring 15 points on the downside.  We have a substantial cushion, being up 626 points/45% since inception on March 22, but I really hate giving any of it back on a off-hours dump like this.

    As I posted Friday:

    If you didn’t get short ahead of time, the likely downside of this push is the small channel bound at around 1364.  I don’t think it would be worth jumping in at this point.  Of course, if we break 1360, it’s a different story.

    Having a stop at 1360 doesn’t help much when the market gaps open down 20 points.  So, we’ll focus on where we’re likely to end up today.

    While the upper bound of our rising wedge has been pretty clear, the bottom has so far refused to present a crystal clear picture.  Whether or not to include which tails has left the exact slope muddled, which means it’s difficult to anticipate the probable low this morning.

    There is a trend line (yellow, dashed) in the daily RSI that indicates a bottom is already in, but it’s not a TL or channel line I’ve been following, so it warrants further study.

    It caught the tumbles on Apr 10 (-28.25), June 11 (-42.25), June 25 (-24), July 12 (-19.75) and is thus skilled at putting a stop to big drops.  It has just been tagged this morning. (more…)

  • 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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