Weekend Update - SPX, XLF and US Dollar

The Equity markets continued their down move this week. We broke through a lot of key support. For the week, the SPX was down 1.64% and for the month, it was down 3.70%

This is also the first time we have had 3 down weeks in a row since the start of this rally back in March of 2009.

This is also the first time we have broken below the 100 day moving average since we first crossed above it in April of 2009. This was the first backtest of it, and it failed to hold. The 200 day moving average is currently around 1013.

On the shorter time frame, we may have 1 more new low coming early on Monday, before we bounce for Minute wave [ii]. For now, I'm expecting this low to be somewhere around 1063-1065. We'll find out Monday morning.

The yellow box on that chart is where I expect Minute wave [ii] to hit. But I will not be surprised if we go a little higher than that, to perhaps 1121.

The previous Minute wave [ii]'s have retraced over 61.8%

As you can see, Minute wave [ii]'s have a tendency to be sharp and quick. The wave [ii]'s of October/November of 2007, September of 2008 and September of 2009 were all deep retraces. I have a feeling that this one might do the same thing.

Aside from the major indices, the sub-indices, such as the XLF, are also in a bearish pattern.

XLF currently has a decending triangle on the Daily chart.

But, the big player in the Financial sector, GS, also has a very bearish pattern in play.

The target for this Head and Shoulders pattern is 125. As you can see, it has already broken it's neckline, and has started making its way down. Watch for GS to lead down the XLF and the SPX.

Also, here is a rough count on the US Dollar ETF, UUP.

We should be continuing our up move on the Dollar.

Market Update - 1/29/2010

Yesterday, I warned saying don't be surprised if we broke 1078 today. And we did. It seems that that this market is stronger to the downside than we expected. Just like in the rally, we kept making new highs just when we thought it couldn't go any higher.

But we are approaching a level were it is pretty oversold on the smaller time frames, and the divergences are pretty visible. I still expect a bounce, but now those targets get lowered, since the SPX made a new low. But a bounce will be good, a better shorting opportunity.

In terms of Elliott Wave, we may get a small lower low Monday morning, perhaps closing the gap at 1069. If we break through 1069, 1061 should serve as good support.

If this wave structure does not play out, watch for a break back above 1083. If we break back above 1083, we have most likely started Minute wave [ii]. The target for Minuette wave [ii] now moves to 1110.

I posted some charts on Apple this week, and so far, it has played out quite well. I currently have us in Minuette wave (iii).

For now, I have a modest target of 185. But we could easily break right through it, but I think it should hold on the first bounce.

I will have more charts over the weekend, so please check back for those! Thank you!

Market Update - 1/28/2010

We broke the important pivot of 1083 today. We made our low at 1078, just barely breaking through 1080. We bounced sharply after, but came back down into the close. The waves are now getting very choppy. This indicates that we are close to the end of wave [i], if not already in wave [ii].

Our confirmation, in my opinion, of being in Minute wave [ii] will be breaking the downward channel shown on this chart.

It's hard to determine the break out price, since the channel is sloping downward, but basically break 1090 will do it. If we can manage to break out of that channel, our next big tests will be 1100, 1103 and 1105. Breaking these will probably get us up to 1115, which is roughly the 50% retracement of this move down.

Today's new low was some what of a surprise. But remember, during the rally we had so many new highs when we didn't expect them. So don't be surprised if we break 1078 tomorrow.

The US Dollar is now in a confirmed uptrend in terms of EW. Watch for the Dollar to explode higher once the SPX and Dow start moving lower.

The Four Horsemen

Apple, Google, Amazon and RIM are 4 of the highest weighted stocks on the Nasdaq. They lead the Nasdaq day in and day out. Overall, the Nasdaq follows these 4 stocks more than any others. These are the leaders. So what better way to analyze the markets than to look at it's leaders?

Apple.

Apple is probably one of the most favorited stocks out there. You can't blame people for loving Apple. It is a good company. It's just that the run up that it has had has been unbelievable. It would only be natural that it comes down.

Here is an Elliott Wave look at Apple:

Pretty nice looking wave structure. It looks complete. The next Intermediate wave should be down.

Apple has also broken some minor support, but it has yet to break it's major support lines.

As you can see from that chart, the 100 day MA is currently around 196. Breaking this will be exteremly bearish. If we break that, then the next major pivot is 186.50. Breaking this will also be very bearish. I expect a test of these levels soon. It also have big resistance at 215. As you can see, it had a nearly perfect double top in that area. If we break above, we could get a run to 220.

Google.

Another big player in the Nasdaq. Google is a very trendy stock. Once it finds a direction, it likes to stick with it.

As you can see from that chart, it has also completed a very nice looking Elliott Wave pattern. It looks like it also has started a new down trend. Here is another chart:

As you can see, the RSI is currently a little oversold. We also broke below the 100 day MA. The MA's are also in the process of a bearish alignment. I expect a quick to 550-560 before heading down.

We also have a potential Head and Shoulders on the GOOG Daily chart. It coincides well with the EW count. The Wave 2 bounce will be the right shoulder, then the break of the neckline will be the Wave 3 down move.

Amazon.

The largest online retailer. Even this stock has had an amazing run up. Here is the Elliott Wave count on it:

It seems that AMZN is already in a downtrend. Watch for earnings tomorrow. It could potentially have a big move.

Amazon is giving some bearish signals. The moving averages are having a bearish cross, and it appears to be in a very tight downward channel. The 100 day MA is at 116, so watch for support in that area.

RIM.

RIMM was the lagger out of the four, or so it seems... Although it did nearly triple in price, you still heard more people talking about Apple, Google, etc. But in terms of Elliott Wave, RIMM may be the furthest into it's new downtrend.

That Elliott Wave pattern also looks very good. Let's see what happens.

RIMM also seems to be in this downward channel.

All 4 of these stocks are starting to give bearish signals. Chances are, most of them will play out. But for now, the best thing to do is watch for the key pivot points. Breaking these points gives us the direction in which the stock will go.

Here is a quick chart of the Nasdaq.

It is sitting in a zone of very high resistance. Breaking below that range, 2160 area, is bearish. And breaking above the 2330 area is bullish.

Market Update - 1/27/2010

First of all, sorry I didn't get around to posting my Nasdaq update yesterday. But I will get to it today for sure. So check back later for that.

We finally hit my target of 1085 today. We slightly broke it, but 1083 was also another key pivot point from the Thanksgiving low. The way we bounced up quickly from that was expected. I believe that Minute wave [i] has now ended, and we are in Minute wave [ii]. The 50% retracement for that is now around 1116.My expectated range for wave [ii] is 1115-1120 for now. The expected time for wave [ii] is probably by the end of the week, if not, early Monday. But the first test of this mini-rally is to break 1100-1105.

I really think that 1083 should hold for now, at least until we bounce up a little. But if infact we do break 1083 tomorrow, watch for 1080 then 1075.

So once again, please check back later tonight, as I will have more charts on some key Nasdaq stocks that could potentially lead the market. Thanks!

Market Update - 1/26/2010

Dow Jones Industrial Average: -2.57 or 0.03% at 10194.29
S&P 500 Index: -4.61 or 0.42% at 1092.17
NASDAQ Composite Index: -7.07 or 0.32% at 2203.73
CBOE Volatility Index: -0.91 or 3.84% at 24.50
NYSE Internals: 1094 Advance. 1952 Decline.

Markets bounce around after Consumer Confidence numbers.

Very interesting day today. We spent most of the day testing both of my pivot points that I had listed yesterday. We fell a bit short of my target of 1085, making our low today at 1089, but then we didn't break 1105 either, the high was 1103.

What I can conclude from today's move is that we completed some sort of wave 4. Now was it subminuette wave iv or minuette wave (iv)? Here are a few options.

The first count suggests that today's low was the end of minuette wave (iii) and then the bounce was minuette wave (iv) and we are currently in wave (v). The target for wave (v) is anywhere between 1080 and today's low of 1089.

The second count is really bearish. It suggests that tomorrow we make a new low around or beneath 1085. But this low will end minuette wave (iii), not wave (v). After that low, we should bounce a little bit before going back down.

The last count, which is the bullish of them all, suggests that today's low was the end of minute wave [i]. And we should now bounce all the way back up to 1115-1120.

This count seemed to be in play all day, until we started to sell off at the end. But regardless, this count will come into play very soon. If we make a new low at 1085 tomorrow, and bounce up sharply, this count will be in play, and we could head back to ~1120.

The last scenario is that we are tracing out a wave (iv) flat. This is where wave b retraces 100% of a, and wave c retraces 100% of b. So in net, the move becomes "flat." If this is the case, we should test and hold 1103 tomorrow.

So once again, watch for the key pivot points. 1103 and 1105 on the upside, and 1089 and 1085 on the downside.

I will be posting an update later tonight on the Nasdaq and some key stocks in it that could lead the market down. So please check back for that!

Market Update - 1/25/2010

Dow Jones Industrial Average: +23.88 or 0.23% at 10196.89

S&P 500 Index: +5.02 or 0.46% at 1096.78
NASDAQ Composite Index: +5.51 or 0.25% at 2210.80
CBOE Volatility Index: -1.97 or 7.19% at 25.42
NYSE Internals: 1752 Advance. 1295 Decline.

Markets rise on earnings expectations.

As I said in my weekend update, we could potentially bounce in a wave 4. We certainly did bounce today. A few of my counts get taken out of play now, but one of them has certainly played out well.

For most of the day, we were bouncing around in a defined range. Once we tested resistance in the 1100 area, we seemed to back off each time. We did not break out of the channel either. So as this count suggests, subminuette wave iv most likely ended at today's high of 1102.

According to that chart, we should continue down to 1080. If 1080 holds, and we bounce up, we could start Minute wave (iv). But for now, 1080 is my target. If we break 1080, wave (iii) could continue to extend.

Here is the count on the extension.

It suggests that tomorrow, we hit 1080, but that will be the end of Micro wave [5], which would end subimuette wave iii. This count is more bearish than the first, but could still play out. If we break 1105 tomorrow, then this count is out of play.

The bounce today was on much lower volume also. This is a good sign for the bears.

The market internals were also not very bullish, like they previously have been on up days following big down days.

Also, here is a rough count on the VIX. The degrees may not be right.

With Apple's earnings after the close today, tomorrow will be an interesting day. The previous big cap tech companies to report have sold off on good earnings, i.e. Intel, IBM and Google. I think Apple will follow, and bring down the market.

The key numbers to watch for tomorrow are 1105 to the upside, and 1091 and 1080 to the downside.

Weekend Update

Quite an interesting week we just had. Big up open on Tuesday to start the week, then a hard reversal down for the rest of the week.

We have dropped nearly 60 SPX points in a matter of days. This is a pretty bearish reversal. In terms of Elliott Wave, there is a very good chance that this rally is over. But there are still somethings that I want to point out before I myself confirm a top.

First off all, the 100 day moving average. We have not broken below the 100dMA since the start of this rally. Currently, it is sitting right at 1085. For those of you reading my blog for a long time, you know that 1085 has been a number that has popped up a lot. It has served has big support for a long time now. If we manage to break below it, we could drop big.

So as you can see by that chart, we are at a critical level in the SPX right now. We are sitting on a trendline coming from the August 2009 lows. The horizontal resistance from November and December is at 1083-1085, and the 100dMA(pink line) is at 1085.38. It would only be natural that the down move would stall here, before moving lower. Perhaps a bounce back to 1115? 1120?

Now to the interesting stuff, Elliott Wave.

First off, here is the daily count on the SPX, coming from our highs in October of 2007.

As you can see, the recent down move has been pretty sharp. The sharpest we have seen in a long time.

Now, I'm just going to throw some counts out there.

First, the Dow 1 minute chart.

So far, so good. The count looks pretty good. For now, I have labeled Friday's close the low of Micro wave [3]. If this is the case, expect a quick and small little bounce for wave [4] tomorrow, then a final flush down to complete subminuette wave iii.

Here is a similar count on the SPX. Except, this count suggests that subminuette wave iii is already complete.

If this is the case, we could bounce back to 1097-1100 early on Monday for subminuette wave iv, then move down to 1080 for wave v. This could complete Minuette wave (iii).

Here is a more "bullish" count. This count says that Minute wave [i] has already ended, and we are starting wave [ii] now.

If this is the case, we could bounce back to 1120 in the next few days. But as I said on the chart, I don't really like this count. Wave (iii) just doesn't fit well. But either way, it is still a possible count.

Here is another alternate, that is not as bullish or bearish as the others. I probably favor this count the most.

As you can see, this count shows wave (iii) as complete. It suggests that we perhaps bounce back to 1110 or so for wave (iv), before moving down to 1075 for wave (v), which completes Minute wave [i].

Basically, a lot of the counts are now suggesting that perhaps we move a lot lower. But there is no need to be bearish until we break 1085 on the SPX. Breaking and closing beneath this level will most likely confirm a chance in trend. Until then, it's best to stay cautious.

Here are a few charts for the VIX.

Pretty self explanatory. But really, this thing can continue to go up. But expect it to diverge soon.

Next week will be very interesting!

Market Update - 1/22/2010

Dow Jones Industrial Average: -219.90 or 2.09% at 10172.98
S&P 500 Index: -24.72 or 2.21% at 1091.76
NASDAQ Composite Index: -60.41 or 2.67% at 2205.29
CBOE Volatility Index: +5.04 or 22.63% at 27.31
NYSE Internals: 557 Advance. 2525 Decline.

Markets continue to sell off.

Alright, yesterday, I said that if we broke 1100, I would most likely call a top to this rally. We certainly broke it today, and broke it hard. However, we did find support at 1090.

So now the big question is that do we bounce a little before going down more? We are pretty oversold on the smaller time frames. Another big question is that did we complete Minute wave [i]? Or did we complete Minuette wave (iii) of [i]? I think it's wave (iii). If this is the case, we should still bounce a little bit, perhaps back test 1100, then move down to 1075-1083 on the SPX. Here is a chart of what I think may happen...

The daily charts on both the Dow and the SPX look fractured. It's a very bearish looking chart. The SPX is still sitting on major support, but the Dow has broken below it.

The SPX also broke below the 50 day moving average. The 100 day moving average is at 1085. So that 1083-1085 level is very important. If we break below it, we could go a lot lower.

The US Dollar was actually down today. Crude Oil and Gold continued to go down as well. VIX had another huge move up today. Volume was 8:1 down.

I will post more charts and analysis over the weekend, so keep checking back for that.

Market Update - 1/21/2010

Dow Jones Industrial Average: -213.27 or 2.01% at 10389.88
S&P 500 Index: -21.56 or 1.89% at 1116.48
NASDAQ Composite Index: -28.55 or 1.12% at 2265.70
CBOE Volatility Index: +3.59 or 19.22% at 22.27
NYSE Internals: 651 Advance. 2410 Decline.

Markets sell off as Financials drop.

The bearish count is now certainly in play. We broke a lot of support today. Here is what I said yesterday, "If wave (ii) is not over, watch for an up open, then a quick reversal down." This is what exactly happened. We gapped up slightly today, then immediately sold off hard. It was a pretty big reversal down, and we stayed down for the entire day. No end of day rally today.

So now the big question is, have we topped for now? Well, that still really isn't confirmed. We held some major support at 1114 today, which also happened to be the low on New Years Eve. We need to break this low to continue lower. If we break 1110-1114 on the SPX, we may break down to 1100 or lower.

Here is the count so far on the Dow. The degreee of today's waves may not be accurate, but nevertheless, it's still bearish either way.

As you can see, we were in a sideways parallel channel for the second half of the day. If we break today's lows, we may see some continued downside before we bounce. Tomorrow, if we make a lower low, then bounce, we can label the move down as subminuette wave i, and the bounce back up as subminuette wave ii. If we bounce back tomorrow for wave ii, expect the bounce to go somewhere around 10450-10475 on the Dow.

Finally, after over 10 months, we have broken below the Primary degree trendline coming from the March lows on the Dow. No matter which way you draw it, this line is broken. If we are going to back test, it needs to happen soon, other wise we may not get a back test. But we may attempt to do it.

However, like I said, we are also sitting on some key support levels. We are literally sitting right on top of the 50 day simple moving average on the SPY.

If we break below it, we will probably continue a lot lower. We also sold off on higher volume today.

The bullish count is that we held some major support today at 1114. This could produce a big bounce back up like it did the last time.

I don't want to call a top yet, but I'm getting close to it. If we break down below 1100, I may be forced to call a top in terms of Elliott Wave. Whether it is the top of Primary Wave 2, or just a start of a normal healthy pullback doesn't matter to me. We will take the down move one step at a time, labeling the waves as we go along. No need to jump ahead of the curve and call it the start of a new crash, yet.

The US Dollar was flat today, and Crude Oil and Gold sold off once again. VIX jumped nearly 20% and Financials led to the downside after GS reported better than expected earnings.