ORIGINAL POST: 9:15 AM
The ugly NFP has been called “not ugly enough” to bring on more QE immediately. Let’s look at how the current 10-pt ES loss might shake out on the opening.
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Tag: RSI
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Update on RUT: July 5, 2012
RUT is again nearing its previous highs of 856 (July ’07) and 868 (May 2011.) It’s already exceeded the .886 of each of those, and is rapidly approaching the .886 retracement of its most recent dip from 848 to 730 (March 27 – June 4, 2012).
As charted back on June 15 [see: Forecasts, Darts and Ouija Boards] we completed an Inverse H&S pattern that reversed the traditional H&S completed on May 8.
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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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Update on COMP: July 2, 2012
July 2, 2012
COMP appears to be following a set of channels within a much larger channel we identified months ago.
Whether it has the wherewithal to rise up out of the large red channel remains to be seen. In the meantime, we’ll focus on the short to medium-term picture. -
I’d Rather be Lucky
ORIGINAL POST: 3:40 PM
Today’s shaping up as planned. We’ve had a nice 10-pt move after tagging our downside target range of 1303-1308 yesterday and again this morning [see: Mixed Signals.] After fading yesterday’s opening at 1335, that represented a nice daily gain of 2.1%.
SPX has pushed up against its 60-min RSI channel and is showing signs of wanting to push through. Recall that our upside target for the next few days is 1342-1343. The ideal timing would be OPEX Friday, but don’t be surprised if we bounce around a bit and don’t arrive till Monday.
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Charts I’m Watching: June 8, 2012
ORIGINAL POST: 10:55 AM
It’s tempting to consider this morning’s drop to 1307.77 “close enough” to our 1303.47 target, but I’m not completely convinced. We have a nice buffer in, having shorted at 1325 yesterday [see: Moment of Truth], but the short-term RSI charts haven’t given a clear signal yet.
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Say What!?
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.
Good luck to all.
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It Won’t be Long
ORIGINAL POST: 10:00
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 AMThis 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.
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This one’s for any Quarrymen fans out there…
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Searching for a Bottom
UPDATE: 1:45 PM
So far, SPX has obliged us by tagging every one of our targets. The 1310 Fibonacci .707 retrace [see below] of the 2007-2009 collapse is our current intra-day low, and we’re presently sitting at the 1.272 target of the Butterfly incorporated into the analog I first posted on April 9 [see: New Analog I’m Watching.]
As I mentioned yesterday, I think there’s a very good chance we get down to 1289-1295 (depending on whether they can defend the very important 1292.) As oversold as things are getting, I wouldn’t even think about going long except, perhaps, to play a bounce — unless we’re able to break out of the acceleration channel on the 60-min chart.
It’s the dashed red channel that’s guided prices since 1415 (ignore the solid purple line, that’s just our forecast from April 10.)
UPDATE: 10:05 AM
Philly Fed numbers aren’t pretty, with a 5.8% drop versus last month’s 8.5% increase. Especially troublesome is the 6-month outlook, which has plunged from 33.8 to 15.0.
A negative 5.8% is bad enough in and of itself, but it looks especially ugly compared to consensus: +8.8-10.0%.
The Conference Board Leading Economic Index also missed, showing a 0.1% decline versus expectations of a 0.2% gain. This is the first drop since last September.
If it looks like the leading economic indicator line hooked down over the past few months, that’s because it has. Note the monthly rates of change — trending down from +0.7% in Feb to +0.3% in March and now -0.1% in April (not the sort of behavior you want to see in a recovering economy.) Here’s the official explanation from the Conference Board:
ORIGINAL POST: 9:39 AM
I’m watching the RSI for clues as to which of our targets SPX will settle on. Remember, the range is 1295-1323, though the number of unfolding events that could overwhelm our forecast is growing.
The daily chart shows several parallel trend lines that might provide the final stop. But, of course, lower stock prices often occur on a higher low in RSI — a phenomenon known as positive divergence, and a sign of a potential bottom.
Here’s a little better detail on RSI:
The white dashed trend line (7) is next up. It stopped moderate declines in April, September and November of last year and probably corresponds with our 1317-1323 target. Remember, 1323 is the small (yellow) Crab Pattern’s 1.618 and 1317 is the larger (purple) Butterfly’s 1.272.The purple dashed line (8) is associated with the declines in November of 2010 and a secondary dip in August 2011 and probably corresponds with either 1300 or 1317 on SPX.
The yellow dashed line (9) stopped the plunges in March and June in 2011, and provided the higher low for the actual August 2011 1101 bottom. March 2011 is the analogous point in the analog we’re watching.
Surfing these RSI channel lines is an inexact science, because turns rarely occur exactly in line with previous highs/lows. There’s a relatively high margin of error, say 5-8%. So, it’s possible that yesterday’s RSI low could be considered to have tagged the white line. If we get a strong rally off the Philly Fed survey or Conference Board numbers at 10am, we’ll call it that way.
There is one other Fib level we haven’t talked about much — the .707 from the 2007-2009 decline is just ahead at 1309.67. Many investors aren’t even aware of the .707, so it’s often completely left off charts. But, this is a long-term pattern, so it could easily come into play.
Last, the 60-min RSI shows a pretty good possibility of a bounce in the 1317 range. Between 1323 and 1317, 1317 belongs to the larger and more important pattern — the Butterfly. So, unless the Philly Fed survey is atrocious, we should get some kind of bounce there.
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Bet Your Bottom Dollar: Part Deux
UPDATE: 10:30 AM
Last night’s call on the dollar was timely. Check out the candle on the daily chart — the completion of both a Bat and Butterfly pattern.
EURUSD also seems to have put in a bottom, though as mentioned earlier it’s going to take ein Akt des Bundestages (literally) to save the euro now.
ORIGINAL POST: 2:00 AM
Back on April 30, I held my nose and plunged head-long into the dollar, also shorting the euro. I’m pretty sure I invoked that age-old expression of confidence: “here goes nothing.” Hopefully, lots of pebblewriter members went along for the ride.
In that night’s post [see: Bet Your Bottom Dollar] I put up the following chart:
I immediately regretted sketching out the forecast in such detail; and, in fact, I caught a lot of guff from a few readers for so recklessly calling the bottom (you know who you are, wretched givers of guff!)I didn’t look at the chart for a few days, but knew things were going my way. I just didn’t realize how well things were going my way… Here’s the same exact chart two weeks later.
It deserves a close up…if only to show how spooky a forecast it turned out to be.
Throwing caution to the wind, I also posted the EURUSD chart below and wrote:Meanwhile, the EURUSD shows signs of finally breaking down. Both the pair and the RSI action show a rising wedge that’s bumping up against a well-established channel.
Note Point D — the completion of a Bat pattern — sitting down there all by its lonesome.
It now looks like this:
Yikes! Harmonics don’t always work as well as they have this past month. But, when they do, man is it fun!************
As far as the road ahead, EURUSD crossed a incredibly important fan line today. It’s either fallen off a cliff, or it’s doing that roadrunner-running-in-mid-air thing. On the other hand, it has completed a Bat pattern (as has DX) that should mean a reversal. The next 24 hours are critical.
If I had to guess, the RSI leads me to believe we’re going to see a big bounce. But, I’m taking my profits and sitting this one out. If it plunges below the fan line, there’s plenty more downside where that came from.If it doesn’t, it’ll be because Merkel and Hollande are caught on video, breathlessly moaning “long live the troika” while mending post-election relations.
Seriously, though, a stick save would almost certainly entail a commitment to all things Greek, Portugese, Spanish, Italian, etc. and more LTRO — lots and lots more LTRO.
Stay tuned.
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For the last several weeks I’ve been double-posting pebblewriter.com stuff on the original blog and holding this open for former followers. This website has been up for nearly a month now, and it’s time to start winding the other one down. [why?]
If this blog is helpful to you, jump on the introductory prices while they last. I’ve extended the 10% off discount for all new members through this Friday, the 18th.
