Market Update - 9/30/2010

On Tuesday I had said that there was a possibility to make it to 1155. We hit 1157 today. The primary count is that Minor wave 2 has ended and we should be starting another meaningful down move. However, to fully confirm this we still need to break a few more key pivots.

Breaking below this triangle was a start. I am going to label this as a top, but there is still a possibility that we could take out the current highs. I wouldn't count on it unless we can break 1150 again.

The next key number to break is 1134.

On the smaller time frame, we had a pretty nice looking impulse down from our high today. It really looks like a "perfect" 5 waves down, followed by 3 corrective waves up.

Wave C of (2) looks a bit small, so we could get a quick pop tomorrow morning, but it is not required. The only thing required for this wave count to be valid is that we do not break today's high AND we need to close below today's low of 1136.

The daily charts had a perfect looking reversal candle today. First, here is the broad view of the daily chart:

The wave structure looks "complete" and it looks like it is ready to drop.

I want to highlight the previous key tops from our all time high 3 years ago. I know it is hard to see, but take a look at those candles.

Each one of them has a big shadow at the top, most of them were either a shooting star or a spinning top.

Market Update - 9/29/2010

We continue to bounce around the 2 pivots that I mentioned yesterday. 1140 to the downside and 1150 to the upside. Our low today was 1140 and the high was 1148. Until we break one of them, we should be stuck here.

However the market is starting to show some weakness.

It is also running out of room in this triangle, so it has to break one way or the other real soon.

I have mentioned this before, but choppy action like this, especially when it's big swings usually mean there is some sort of top coming into play.

As you can see from those highlighed points, most tops have that volatile and choppy look to them. Most bottoms are V shaped, but there are some exceptions. Either way, the point is that choppy action usually points to a reversal coming soon. This is a sign of classic distribution. Strong money handing off to weak money.

We also have some big economic data in the next 2 days. I believe GDP is tomorrow and ISM is on Friday, along with some other key indicators, so expect a wild ride into the weekend. I think the action in the last hour was just a taste of what is to come.

The Euro also continues its upward retracement.

The economic data coming out should impact the Dollar, thus impacting the Euro.

Market Update - 9/28/2010

We made another new high today, but only by 8 cents. We hit 1150.00 on the SPX. Couldn't ask for a better touch of resistance. Right to the penny. However, we may have one more choppy day to come and we might squeak out a new high.

We may bounce between 1140 and 1150 for the next day or so, and perhaps could make it as high as 1155, anything over that could be a problem for the bears.

Breaking below today's low of 1132 could get us to 1120 or lower. But until those pivots are broken, expect a choppy trading range.

The Euro looks like it is not yet done tracing out Intermediate wave (2). I have given a target of somewhere between 1.38 and 1.40 for now, however this may change.

Just around 1.40 is where Minor wave C would equal Minor wave A. We have already crossed the .618 extension, and the .786 extension is around 1.37. The 61.8% retracement of the entire wave (1) is around 1.3886.

If the Euro is going to further retrace up, that can't be good news for the USD. The USD may also head down a little further to finish tracing out it's Intermediate wave 2. My USD charts are still not loading because my ToS grids are still down.

Market Update - 9/27/2010

With the new high today and the reversal back down, it can now be possible that Minor wave 2 has ended. We were just 8 cents away from 1150 on the SPX today. We got into that area and then sold off nicely into the close. It wasn't a big down move, but it could be enough to call a top.

There are also enough waves now to complete this structure. The main thing now is to get some follow through to the down side. We need to continue to sell off and start breaking some key pivots.

 1130 is the next big one, followed by 1121. Breaking back over 1150 will be bullish.

The wave structure also looks good on the daily charts.

Watch for those pivots tomorrow!

Weekend Update - 2000 NDX vs. 2010 SPX

Edit: A pretty lengthy post today... didn't realize how long it was until I actually finished. Goes down to about half way down the page... have fun scrolling down. :)

Today's chart should speak for themselves. I guess a picture is worth a 1000 words.

Just over 10 years ago, we experienced one of the biggest bubbles followed by one of the biggest crashes in stock market history, lead by the Nasdaq of course. Today, we hear and see a lot of comparision to the period of 1929-1932, and how the charts look so familiar and how we seem to be following a very eerie and similar pattern. While that may be true, I find it shocking that we have not seen too much comparision to the Great Tech Bubble. I don't know how many traders who trade today actually traded in 1929, but I am sure a majority of them were around in 2000-2003. But how soon we forget the horror of that time period, despite it being just a mere 10 years ago.

The point I am trying to make is that the pattern we have experienced since the highs this April is almost a mirror image of the pattern that the Nasdaq experienced in the Spring/Summer of 2000, almost the same time of year as this recent move. My first couple of charts show the similarity between the two patterns in a "zoomed in" view so we can see the wave patterns more clearly.

Here is the SPX today:

Pretty straight forward if you ask me. A leading diagonal down from our highs, followed by an a-b-c correction that is getting pretty extended and starting to look toppy.

Here is the Nasdaq is Spring 2000:

Look familiar? Well, it should... it's the same pattern. Leading diagonal down from the highs, followed by a pretty lenghty and extended a-b-c corrective pattern. I have labeled the trading days between each high and low to give a time perspective on impulse vs. corrective waves. Sometimes markets correct via time and some times via price... and sometimes it needs to do both.

Anyways, it takes a couple of looks at those charts to actually comprehend how similar those patterns are. Obviously not every bar looks the same, and that is not what we are looking for. But the overall pattern looks like a mirror image. The time that each wave has taken is just about the same too. Sometimes I think we are now following a more similar pattern to 2000-2003 than we are to 1929-1932.

Now for the more scary part. The bigger picture, zoomed out to see the full pattern. I will first show you the Nasdaq.

Here is the Nasdaq from 2000-2003:

At the top left, that is the same pattern I showed you earlier, just zoomed out to see the entire Tech Bubble collapse.

Now here is the SPX today:

Again, the pattern at the top left looks almost the same. The only difference between the 2 charts is that the data for the next 3 years of the SPX isn't out, yet. However, if this pattern does continue to play out like the Nasdaq did in 2000, then we can make a pretty valid prediction for what is to come.

Again, I had to look at those 2 charts a few times to actually understand the similarity of what is going on. Honestly, it is very rare to see patterns repeat like this. I know history does repeat in some way or the other, but it being this similar? Not often does it happen.

These are just my thoughts, it may or may not happen... but it is good to be aware of possible scenarios that could happen. Also, the way things seem to be going, I have a feeling that this may happen. Bullishness is again getting to an extreme point. Have you seen charts for AAPL, AMZN, NFLX or PCLN? Absolutely insane. AMZN was trading in the lower 100's just about 2 months ago, after it sold off hard on earnings. 2 months later, it's trading over 160. A 60% move in 2 months backed by NOTHING. Don't even get me started on AAPL. The bottom line is that some of these stocks are again experiencing bubble like moves. 50, 60, 70% moves in a matter of weeks, backed by nothing but speculation. No news, no earnings... nothing.

Here is a quick chart on the SPX. We can see some key trendlines and price points converging here. There is some pretty heavy resistance in the 1150 area. That will be they key pivot point for this coming week. 1115-1120 is the key area to the downside.

The Dow looks nearly identical to the SPX, however it has already tagged some key resistance.

On the smaller time frame, I have gone back to the expanding ending diagonal I posted about a few days ago. 1150 could be tested.

We are in historic times, and this will produce historic moves in the markets. Just be prepared for whatever is to come. For next week, it will be key to watch the futures when they open on Sunday night as they could tell us a lot for possible action on Monday. Watch those pivots and those trendlines. Good luck!

Market Update - 9/23/2010

The sell off late in the day was a bit impulsive, yet the internals didn't really support it too much. We closed the day just about 3:1 down on market breadth.

If we do continue this down move and break 1115 with some strong internals and volume, there is a good chance that the top may be in. But until then, the benefit of the doubt goes to the bulls.

1115 and 1105 are the key pivots for tomorrow. Breaking back above the 1135 area will be bullish.

Market Update - 9/22/2010

There is a good chance that the market has in fact topped, but I don't see too many impulse waves so I am not going to label a top yet.

My primary count is that we still have 1 more small high coming sometime this week, and then a possible reversal down.

As you can see, there is a possible extenstion for wave iii, which means this recent down move is just a wave iv, with v to stil lcome. For me, this count will remain until we break below 1115. The key pivots are 1145-1150 and 1115-1110.

Market Update - 9/20/2010

To me, today was a classic blow off top. I really feel that the market is close to a top. We have had a few weeks of continuous up side, with very little pull backs. Bullishness is once again reaching very extreme levels, the news is bullish... everyone is buying like crazy. On top of all of this, a lot of select stocks are having short squeezes on low volume. Too add to that, there are some key divergences in the indices.

The up move today was on decent volume, but it was backed by "news." With the diagonal wave count, today was a slight break over... a blow off top.

We have also broken the 61.8% retracement on the SPX. 1150 is the next real big support. We could make it there, but I feel that market doesn't have much left. Breaking 1150 will be tough, but if we do... well, then everything is wrong.

Here is a quick snap shot off all the indices. Take a look at the divergence and how much they have retraced.

SPX:

Dow:

Nasdaq:

Dow Transports:

Russell:

The VIX has also been hammered the past few weeks. I think the VIX will have a huge spike in the next few days.

Market Update - 9/16/2010

The choppy action over the past few days could be a slow topping process, similar to the ones we have had in the past. But at the same time, I think we do have one more squeeze possibly coming.

Holding the current high is key, but breaking over 1130 could push us higher another 10-13 points.

Breaking below 1100 will most likely start the new downtrend.

As you can see with this chart below, all the topping processes since the April top have been very choppy.

We may get a pop or two breaking above, but I think on a closing basis we are in this range for a few more days.

Market Update - 9/15/2010

1130 remains the key pivot to the upside, while 1115 is the key downside pivot.

I have a feeling that we may get to 1130 very soon. A break above will be bullish and could take us to the 1143 area. This would be an ideal target for my current primary count.

I am still looking for wave (v) of [c] of 2 to complete in the next few days. Breaking below 1115 will be bearish, but I feel no downtrend can be confirmed until we get a solid break below 1100.

The daily charts also keep on pushing higher. It is starting to look extended, and we have seen patterns like this not too long ago.

It looks similar to the move from our June lows into our August highs. The top could be nearer than we think.

Market Update - 9/13/2010

Technically speaking, this can still be wave [ii]. However the probability seems pretty low given the strength we are seeing. There is a very good chance that we may in fact break 1130. The overall count has most likely changed.

The new count says that we have been in Minor wave 2 since the bottom in early July. Since then, we have had wave [a] which took us to 1129, wave [b] which took us back down to 1040, which was also our most recent low and now we are in the midst of wave [c].

Minor wave 2 does look lengthy in terms of the size of wave 1, but the count is not wrong. A break above 1130 could take us to 1145. It will be very key to see how the market reacts if it is to make it to that pivot.

The alternate is still right, but I am not in favor of it. The alternate is that this is wave [ii] and wave [iii] down should start now. There is no evidence of this, yet.

The daily charts show a better picture.

Market Update - 9/9/2010

Nothing much has changed over the past 2 days. We did however get to the very important pivot of 1110 on the SPX. We did turn down from it, but it was not a hard reversal.

I am going to mark today's high as the end of wave [ii], but we could get one more submicro wave high before it is over. If we blow through 1115, this count might be wrong.

1110 and 1115 are the very key pivots for tomorrow. If we do break below 1090, there is a good chance that we have topped.

Market Update - 9/7/2010

Today did not feel impulsive to the downside, but we did back down from a zone of heavy resistance. For now, the trend may still be up until we break below 1080.

1080 should be some decent support if the trend is still in fact up. If we can get some impulsive selling, we could make it back down to 1065. Breaking back above 1100 will be extremely bullish.

The daily charts have also had another explosive up move, it does look strong but at the same time it has been too much too soon.

If this is still Minor wave 3, the market needs to start heading down soon.

Sorry for not posting much, but my ToS grids are still not opening. I have been told it is because of the recent rollback, and ToS is working on it. Until then I can only post a limited amount of charts.

Weekend Update - 9/6/2010

The shorter term counts suggest that we may get a quick pop early tomorrow to complete wave [5] of v of (c). The wave structure doesn't look complete. It is not necessary, but the count would look more complete if it is to happen.

However, I feel that the 1110 area must hold in order for this count to hold. Any higher may cause another short squeeze. A sharp reversal is possible from 1110.

As for the daily charts, all the indices post a similar picture except for the Dow. The Dow daily chart seems a little more bullish than the others. Here are all the indices:

SPX: Heavy resistance in this area, and this is also the primary down trend line from our highs. Breaking will be bullish.

Dow: The Dow did not drop as much during this recent leg down, so it has not rallied all the way back up to the downward trendline. If it does, it could cause the SPX to break up and out.

Nasdaq: The Nasdaq did fall pretty hard like the SPX did, but the Nasdaq has shown more weakness on the bounce, this is good news for the bears.

Russell: The Russell has fallen the most. It made a double bottom and it has made it all the way back to it's downward trendline. However, the slope is stronger on the Russell.

Dow Transports: The Transports have a similar picture to the SPX, however the Transports did not close at the highs like the other indices. However, the Transports did retrace the furthest.

Market Update - 9/3/2010

We have seen a lot of strength to the upside this week. Yesterday I said to watch for the 1100-1105 area. We close right in it. It is a tough call right now. But the way it is going up, we could get a slight break.

The line in the sand for me however is 1110. That is the 78.6% retracement. If that is broken, it is a good chance that this count is wrong.

There is not much room to the upside for this count. But volume has been dead lately, and markets tend to go up before holiday weekends. We'll see how the futures react over Labor Day.

I will try to have more over the weekend.

Market Update - 9/2/2010

Sorry for not posting over the past 2 days, I had some things come up.

Now the past few days have erased a lot of the down move we had over the month of August. The counts are now that Minute wave [i] ended at the 1039 low last week, and we are now in a corrective wave [ii]. A very sharp one. It may not seem corrective, but that is the nature of wave 2's. We need to closely track the movement over the next few days.

On the smaller time frames, I see a possible 5 wave move up from our lows on 8/31. This is probably wave (c) of [ii].

The target is set for some where around 1100, but we are approaching that level fairly quickly, considering the fact that wave iv and v still need to play out. If we blow right through 1100-1105 it could be a problem for the bears.

The overall count from our April 2010 highs still looks a little messy on the SPX. You can see the chart on my Chart of the Day feature. On the other hand, the RUT looks like a much cleaner pattern.

We have a series of 5 waves down followed by 3 up. This is a bearish pattern.