Wednesday, May 25, 2011

Tuesday, May 24, 2011

S&P 500 2011 Elliott Wave Projection

Please study the principles of the table below for a minute. [For all images, click to enlarge.]

The present market structure reflects the principle stated in box 4 of the table above. (In the past, I showed this exact table and applied the analysis to the S&P 500, which did subsequently follow the a-b-c structure.) The correction that began from the 1370s on the S&P may be completing its a-wave soon. The image below projects two possible b-c waves. In one projection, the previous high will be reached, followed by a retest of the a-wave low; in the other projecting, the b-wave rally will terminate at a lower high and the market will subsequently make a lower low.

These projections are in line with the analysis of a range bound market that I did in late April. A chart from the post is reproduced below:

Finally, the S&P may have to touch the major trendline shown in the chart below before this corrective period will be resolved to the upside. One issue is that based on whether the chart is in log or arithmetic scale, the positioning of the major trendline relative to price and time alters significantly.

S&P 500 Intraday Bias, 11:45 AM

The bias has changed to neutral.

S&P 500 Intraday Bias, 10:00 AM


Saturday, May 21, 2011

Relative Strength In the Media & Blogosphere

Since around February, defensive sectors such as consumer staples, utilities, and healthcare have outperformed the broader market. This outperformance has been used as an argument that a bull market top may be forming. This thesis is being popularly disseminated; I have seen it mentioned by analysts and even in comments sections of blogs. These defensives also outperformed in the Summer of 2010, and often do during corrections.

This attention to a non-mainstream concept reminds me of 2009, when the Russell 2000 was greatly under performing the S&P 500 from late September to November. Similarly, this fact was popularly disseminated for its bearish implications and "sector rotation" became a buzz word. The relative underperformance was also projected to continue. From December 2009 to April 2010, the Russell appreciated over 25% while the S&P 500 rose about 10%.

Trends in relative strength (RS) are perpetually in the market. Like any other trend, when they gain popular attention, these trends are probably near complete. Also, in both cases from the last three years, RS was used to support bearish forecasts. The wall of worry remains.-- Breadth also remains strong, and the Fed accommodative.

As such, I would conclude that the market is currently in a corrective phase that will ultimately be resolved to the upside.

Friday, May 20, 2011

S&P Intraday Update

I think the low of the day may be in. The euro and stock markets have sold off in anticipation of the downgrade of Greece's debt. Sell the rumor, buy the news.

S&P 500 Intraday Bias, 10:00 AM


Thursday, May 19, 2011

Wednesday, May 18, 2011

Monday, May 16, 2011

temp post

will not be available to post today

Sunday, May 15, 2011

Copper Intermediate Term Prediction

Above is an arithmetic, weekly chart of copper. A basic Elliott Wave count suggests that copper is in a correction that will precede another leg up. Since copper is a sort of leading economic indicator, I infer from this projection that the stock market will also continue to rise.

Friday Recap

Because blogger's posting dashboard was down, I could not post this information in real time.

Friday's S&P 500 intraday bias was neutral

I bought SSO (2x S&P) at 10:09 AM at 54.78

Friday, May 13, 2011

Temporary Post's dashboard was down today and part of last night. Since it's Friday and the market is closed already, I will bring the site up to date later this weekend.

Wednesday, May 11, 2011

T Theorem Experiment Results

Below are two charts. They are a "before and after" of a short term T analysis that I presented earlier in this blog and of its follow-up. Link.
The prediction called for 1) a 3 day T and 2) a peak in MFI at the midpoint of this 3 day span. Both came true. (In a post following my original analysis, I erroneously anticipated that there would be no peak in MFI at the midpoint.) This validates the theorem that the right arm of a T will/should? have a peak in MFI at its midpoint. The practical application of this theorem is that it can be used to verify a T construction.

Some quick notes: MFI shown in the follow up chart has parts of its graph removed. This was to make viewing clearer because the MFI before the right arm of the T is irrelevant and the MFI after the midpoint would not be known in real time. One odd thing is that later on in the T, there were two new peaks in MFI. I circled those in pink. I am not certain of their significance, if any.

These T Theory™ based posts are dedicated to John C. for his encouragement of my development of shorter term T analysis and forecasts.

S&P 500 Intraday Bias, 10:00 AM

Positive but Overbought

As such, as I interpret it as neutral to negative. (For what it's worth, yesterday's, which was not published, was positive, lending to the overbought.)

Tuesday, May 10, 2011


won't be available this morning to post intraday bias

I "invalidated" the T too soon. The midpoint was 12:45 AM. By 11:30 AM, MFI was near a low, so I assumed an hour was not enough for MFI to make a new high. Within an hour, the market staged a powerful, unusually high volume rally that brought MFI to a new high! Boy did I feel foolish. I'll show a chart and explanation later.

Monday, May 9, 2011

3 Day T Invalidated

For the T presented in Friday's post to be valid, a peak in MFI should have occurred at its midpoint. We are in the vicinity of the midpoint and MFI is far from being near a peak. Also, the downward sloping OBV line was never broken to the upside. From this, I conclude that the S&P 500 is in the structure shown below. (The rally stopped at the .618 retracement.)

S&P 500 Intraday Bias, 10:00 AM


Saturday, May 7, 2011

S&P 500 P&F Price Target - 1640

The Point & Figure "count" above is so obvious that I am sure I may have been the last person to have done this analysis, but I also presume that a price target as audacious as 1640 has inhibited its wide publication.

Doing a count and price target on a P&F chart is relatively simple once you learn the rules. First, count the number of columns spanning the consolidation-breakout area, shown in a horizontal blue bar above. There are 21. Then, multiply that count by the box size and the reversal size: 21 x 10 x 3 = 630. Add this to the July 2010 low of 1010 on the S&P yields the target of 1640.

The consolidation phase, which began in February 2011 and has yet to be resolved to the up or downside, will also allow a count and a target. An upside breakout on the next column of Xs would yield a 1490 target, 8 x 10 x 3 + 1250. The target on a downside breakout would be 1160. To repeat, these targets are tentative since the pattern has yet to complete.

"The only true global macro play is the price of money, set by the US Central Bank."

Friday, May 6, 2011

Potential Three Day T

The chart above is a 15-min bar chart of the S&P emini futures over the last week. I have drawn a possible T construction whose right arm spans 3 days.

Two studies shown below the chart are of OBV and MFI. I am treating OBV as a proxy for the cash build up period. It has yet to break above the descending trendline but may do so.

To confirm this T, I am applying the Theorem I introduced last week. If the T is correctly constructed and viable, a peak in MFI should occur around the midpoint of the right arm of this 3 day T. I have marked this midpoint with a pink arrow. I am also taking this opportunity to test my Theorem in real time.

S&P 500 Intraday Bias, 10:00 AM


Thursday, May 5, 2011

Gold Correction Update II

In the chart above, GLD, the ETF for gold, briefly penetrated its trend line only to fall back below. I had given my reasons for predicting this behavior here. This brief penetration often happens in the terminal stages of an uptrend. This price structure therefore suggests that gold will correct.

As the anticipated correction develops, more clues will be given towards the area in which the correction will end. Tentatively, one possible target is the 50 week moving average, which is about 130 on GLD.

S&P 500 Intraday Bias, 10:00 AM


Wednesday, May 4, 2011

S&P 500 Intraday Bias, 10:10 AM

Negative but oversold

The S&P has already been down today as much as 12 points. My analysis suggests that the market will soon stage a sizable rally before this correction continues.