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« Obama Declares Mission Accomplished! UPDATED | Main | Rate Hike Skewers Options Friday and Starts its Exit Strategy »

Wednesday, February 17, 2010

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Glenn Loser Neely

Lets use the same technique to handle DG and his master Glenn Neely!!


Mamma Boom Boom

One week ago I said, "Technically, the see-saw pattern could terminate, right here, with this rally high. But, I doubt the bulls give up that easy, meaning another day or two". Well, the bulls have kicked, and scratched, and clawed, but I think they are out of energy. It's time to look south, again.

DG

Above 111 SPY, I think bears need to be VERY careful. Unreal.

TC

1106.71 SPX with a little over an hour to go in the session. I can only imagine how the STU will "rationalize" this latest move that took out the recent highs at 1104.73

In fact, we are now trading above several significant MA's in the SPX as of YESTERDAY's close!

I guess the STU will say that we are now in a (v) coming out of a wave (iv) flat.

:)

Mamma Boom Boom

Much further than this and it's propaby indicating a change of direction.

Bird

DG and Taz,

On IWM, the upmove has limited places where it can end and be geometrically harmonious, which markets very often are. The near term time targets are, give or take an hour on the 60 minute scale, 2/22 1:30 p.m., 2/26 11:30 a.m., and 3/12 12:30 p.m. NY time. To a lesser degree, but still possible, are price lock-outs in lieu of time at 63.05 and 63.58. If prices go above 63.58, the price scale squeezes as it gets closer to the January high, so it makes precision via price more difficult.

Taz, I saw your comment re BKX. So far the 2/17 time target has held, but you may be right about the 22nd.

Hungry Hal

I went 300% short after hearing about EWI call last August. Thank god I did not go 400% short. I wish I had only gone 100% short.

Next time I will buy puts so the extreme pain will be over sooner.

I am beginning to wonder if EWI doesn't really have a crystal ball. Maybe they are full of beans. Which is what I am now because I can't afford meat.

I am thinking of starting an investment newsletter called The Coin. I think it will dovetail nicely with EWI and EWI seems to have reliable followers.

yelnick

TC, yes. When the count changed to make the 1145 bottom the end of 1 down, the importance of 1105 went away. Now 1110 looms large, since waves 2 seldom go more than 62% according to Neely. Theoretically that can go 99% back, and STU believes they can go back 78% before the odds shift to a different count, but in general they shouldn't bounce more than 62%. Right now this counts as a wave 4 triangle that may have ended and flipped into a final wave 5. I am waiting to get past tomorrow, options expiration, where funky things can happen. I would recommend less focus on intraday tomorrow and more on end of day if not end of after-market for a decent count.

Taz

Thx Bird

Your approach seems very intruiging.

I am looking to short so I will pay a little extra attention on those times/dates.

What are u seeing DG. Are you counting from a higher low? I still think the move off our low is too slow to be a legimiate strong move and our breadth suggests the same outcome here.

DG

Bird,

Thanks for the update. I'll make a note of those dates and times on my chart. The way the IWM is set up right now, the only way for a sell to trigger would be an extremely fast dump of over 1%. We're also right at about the limit for retracement of the wave structure I think is playing out on the major indices, so I guess if the bearish scenario is going to happen, it will happen with a large gap down which doesn't get filled.

However, as I said, above 111 SPY requires major caution from the bears.

Michael

FED RAISES DISCOUNT RATE!

Michael

1/4 point to 0.75%
Largely symbolic in my opinion.

DG

"What are u seeing DG. Are you counting from a higher low? I still think the move off our low is too slow to be a legimiate strong move and our breadth suggests the same outcome here.

Posted by: Taz | Thursday, February 18, 2010 at 01:25 PM"

Taz,

I was watching 111 SPY because even that was where the rally from the higher low I was looking at would qualify as a potential start to a new leg up. My experience has been that sometimes the amount of time taken to cover a specific distance can be longer than expected, but the outcome of the trade still be favorable and I think I know why (it relates to "running" formations). In this case, it would have been a long trade above 111.

Of course, now that we're seeing this after hours news, it may turn out that the move above 111 was not a legit start to a new leg up, but was a bull trap and the fact that it took so much time to get hit was a subtle warning of that. I'd like to get more data on that specific configuration of price/time relationships, but as of now I'm just judging by a few occurrences I've directly experienced.

Are you still unable to reach the blog?

DG

"The way the IWM is set up right now, the only way for a sell to trigger would be an extremely fast dump of over 1%. We're also right at about the limit for retracement of the wave structure I think is playing out on the major indices, so I guess if the bearish scenario is going to happen, it will happen with a large gap down which doesn't get filled."

We'll see if we get the trigger tomorrow morning. I hope bulls have a nice, sleepless night tonight!

JT

Spoken like a true PERMA-BEAR.

DG

Spoken like a true PERMA-BEAR.

Posted by: JT | Thursday, February 18, 2010 at 02:02 PM

If you're referring to me, you should check my post above where I said that above 111 was potentially damaging to any bear case and why.

Hey, the bulls had nearly a 1-year run on basically ZERO economic logic, as Yelnick has been chronicling here the entire time. If the markets have started another leg down of equal or greater size to the first one, bulls will get no sympathy from me. If Neely is right and we are embarking on a nearly full retracement of the rally of the entire past year, good. Serves idiots right for buying into the hype in the first place.

Taz

Hey DG

still unable from work though I can access it from home. I think the problem is our web nanny senses the involvement of www.blogger.com, so it is not your website per se that is the problem.

Wave Rust

To the Fed:

"We, the puts about to expire worthless, salute you."

Is there ever a good time to raise interest rates?

The Fed probably sees or smells a bubble. maybe in the robust banking community?

What a game!

Everything in my soup said to be short from yesterday morning. I felt a bit stupid all day. But expiration week is voodoo week and shadows become real.

Still short ,,, now with a chuckle.

I see SPX drifting down through next week or more.

Think: protfolio adjustment but pooh poohed in the media.

wave rust

JT

"Hey, the bulls had nearly a 1-year run on basically ZERO economic logic, as Yelnick has been chronicling here the entire time. If the markets have started another leg down of equal or greater size to the first one, bulls will get no sympathy from me. If Neely is right and we are embarking on a nearly full retracement of the rally of the entire past year, good. Serves idiots right for buying into the hype in the first place." --- DG

You make one of the biggest mistakes that someone just starting out in the markets makes . . . by assuming that there is a very high correlation between what is going on in the Economy, and that of stock prices.

It's a rookie mistake.
And it can be quite a costly "lesson" to learn.

DG

"Hey DG

still unable from work though I can access it from home. I think the problem is our web nanny senses the involvement of www.blogger.com, so it is not your website per se that is the problem.

Posted by: Taz | Thursday, February 18, 2010 at 02:18 PM"

OK, sounds like it's out of our hands, then.

Just today I posted something about that 111 SPY level and said I hope I was wrong and that it was a bull trap. Under 110.20 SPY looks like the key level for tomorrow's cash session.

DG

"You make one of the biggest mistakes that someone just starting out in the markets makes . . . by assuming that there is a very high correlation between what is going on in the Economy, and that of stock prices."

Oh, just shut your piehole, already. I worked in Corporate Strategy groups for many years and I know all about how to do equity valuations under various financial models and can do a discounted cash flow valuation of any stock in my sleep.

One of the strongest correlations out there is between equity values and the discounted stream of "economic profits" of any given corporation. Economic profits are a function of a number of factors, but one of the key variables is the cost of equity capital, which is a function of the riskiness of the company's equity and its beta relative to "the market". As interest rates fall, cost of equity goes down, which means the discounted economic profit stream is worth more. Most of the increased valuation over the past year came from lower interest rates feeding into a lower cost of equity capital.

The other two factors in economic profit increases are increases in revenues and decreases in costs. The first is minimal in the current environment and the second is typically less sustainable because you can't cut costs forever and there are also limits to productivity growth in the short-term. If you read Rosenberg's stuff, you'll see that revenues for the S&P 500 are basically flat (ex-financials) and they are also up against the limits of what they can do in terms of cost-cutting, unless management believes that even more shrinkage of the workforce is necessary due to more forecasted declines in demand.

So, no, there is no direct correlation between what is going on in the economy and what goes on in the market, to an extent, BUT that is only true when interest rates are fluctuating. When interest rates are stable, the correlation between equity values and the economy is actually quite strong, since in those environments, ONLY economic factors like increased sales or increased productivity stemming from innovation can impact the discounted economic profit stream.

So, as you can see, again, I don't need your help figuring any of this stuff out. There was no "economic" reason for the rally, it was all based on declining cost of equity making companies more valuable due to the decline in the denominator of the various valuation equations.

JT

Yet another 1200 word "essay" by the man with the frail ego who can't ever admit to being the slightest bit wrong.

Yes, I've read Rosenberg's stuff.

But he's also been WRONG for the last 300+ S&P points, which makes my case even further! You can rationalize the "fundamentals" any way that you want DG, but at the end of the day people like you and Rosenberg have been so utterly WRONG that it does nothing else but support what I said above.

By the way, if you think that a 1/4 point increase in the Discount Rate to 0.75% will have an impact on Corporate earnings, you are sadly mistaken.

Good Luck with that frail Ego of yours.


Bird

DG and Taz,

I looked again at the IWM, Dow and SPX to see if the FED move tonight could result in a turn. I think the answer is yes. The only part that is a little imperfect, if we drop tomorrow morning, is that the IWM is just shy of 63.05 per my post. But it was at 63.00, so this could be close enuf and would not look stupid if I were looking back on it.

That IWM calculation is a "lock out" of a prior lock-in of a low. Part of what is going on, but only a part, is the straight fibonacci time of the prior swing. Look at the move of IWM up from the 11/30 low to the January high and you will see that 1.382 hits the Feb 5 low. Now look at the time from the Jan high to the Feb low x 1.618 and, within a little tolerance, today's high would hit. That could constitute the new "lock in" for the next move down. I caution that this is the "visible" part of what I'm trying to do. Fibonacci time and price relationships are actually much more complex than what are usually seen, but the part that can be seen, in my view, is real.

The Dow and SPX have the same fib time relationship to the current high for a lock-in.

If we get a move down from here, DG, I'd like to resume the quest for a good entry point via a price and time squared retracement, via maybe the 10 min scale.

DG

"By the way, if you think that a 1/4 point increase in the Discount Rate to 0.75% will have an impact on Corporate earnings, you are sadly mistaken."


Whatever, dude. If you've ever done a DCF valuation, you'll know that depending on the discount rate you're using for your terminal value, 25 basis points can matter or not matter. If your starting interest rate is 2.5%, a 25 basis point increase will cut your company's valuation by 10%, if it's 5%, the valuation goes down 5%. What are the terminal discount rates being used in current valuation models? Pretty low, given where corporate bond yields are. It's less about earnings than it is about the discount rate applied to the cash flows, idiot.

Have you ever opened your mouth and NOT said something stupid?

yelnick

Bird et al. - good discussion you guys have going. I haven't posted a count since I think the last one holds: we are in a final 5-wave C and the congestion yesterday and this morning was wave 4. Wave 5 seems to have happened today, and may continue tomorrow. One of the traders who comments often (and gets in various fights at times) pinged me to say the discount hike is mostly window dressing. I think he is on to something. Market may drop tomorrow in initial reaction, but the pros may not take it seriously. Options days are always a bit funky, so I would not be surprised with a drop then a rise to Sp1111 +/-, a drop, and a rise into the close that continues on Monday am. Next week seems a better period to test whether this is a wave 2 that has ended, or the run up to Sp1200 and a continuation of the Hope Rally.

DG

"You can rationalize the "fundamentals" any way that you want DG, but at the end of the day people like you and Rosenberg have been so utterly WRONG that it does nothing else but support what I said above."

Can I just ask, were you this much of a frothing at the mouth bulltard at the top in 2000? You seem like EXACTLY the kind of person who'd believe "this time it's different". Seriously, it's amazing that you even manage to use the Internet.

I normally don't wish bad things on other traders, but I hope you buy every f-ing dip from here to 800, on margin. Please just stop responding to things I write, OK.

DG

"One of the traders who comments often (and gets in various fights at times) pinged me to say the discount hike is mostly window dressing."

It can be 'window dressing' or it can be anything. The question is what do the charts say. If we go below 110.2 SPY, especially if it's within the first hour tomorrow, the charts say down. That doesn't mean that today's high couldn't be exceeded, just that upside is limited and new highs less likely.

DG

"I looked again at the IWM, Dow and SPX to see if the FED move tonight could result in a turn. I think the answer is yes. The only part that is a little imperfect, if we drop tomorrow morning, is that the IWM is just shy of 63.05 per my post. But it was at 63.00, so this could be close enuf and would not look stupid if I were looking back on it."

I think that the discrepancy between 63.05 and 63 even is within any realistic margin of error for Fib relationships and it's more prudent to take a risk on a trade with that close a hit than to sit on the sidelines because of a small discrepancy between the ideal Fib and the actual. I think there are ways in which you can get 'down to the penny' levels of precision, but I wouldn't expect that from Fibs, in either time or price.

Steven_737

"I am waiting to get past tomorrow, options expiration, where funky things can happen. I would recommend less focus on intraday tomorrow and more on end of day if not end of after-market for a decent count."

Excellent point, Duncan.

By the way, wave (2) appears to be complete.

https://steven737.typepad.com/blog/2010/02/es-wave-2-appears-to-be-complete.html

https://steven737.typepad.com/blog/2010/02/nq.html

cheers.

Virginia Jim

Hochberg alert. I had to go back and re read Hochberg's Wednesday STU. I cannot believe he has been able to string together three of the worst calls I can recall. And with such incredible arrogance. Thursday, emergency special edition of STU, market has peaked and will likely roll over. He was all over himself with the 'clarity' the market had afforded him. Friday, the market hit his downside target and had rolled over to P3 minuette iii and subminuette iii. No equivocation, no 'if's' no 'maybes', no alternates. Hochberg even mocked the stupid money that came in at the last hour of Friday to bid the market up. Without any humility he said they'd be sorry come Monday as the market melts down.

Nice call as Monday wiped out all minuette and subminuette wave 1's, summarily invalidating his count and 'clarity.' Monday, he stood aside. Wednesday, he has a new "grasp" on the market. It's a triangle with a horizontal upper trendline. So how'd that work for him today? Huge blowoff...hardly a triangle.

For someone who's supported EWI for a long time, I find this string of error to be incredible. I'm sure it was complicated and it sucked me in too but its not my life's work. But one's got to wonder if its the EW methodology or Hochberg's 'insight?'

Or maybe its the Lord's way of teaching a lesson to someone, obviously, lacking in humility.

Jim

Bird

DG, now that I've downed my carefully (somewhat) meted out share...

First, my read of the exchange from late afternoon is that you got an unwarranted pot shot. I'm too chicken to mess with you, but generally I have no reason to. I think you bring a lot to this forum. I don't know if there is a better Neowave guy out there. Personal attacks should be toned down because they don't really help anyone. (Except sometimes they are fun.)

I don't disagree with you about fib tolerances. With the time objectives I have been citing, I am suspect if it is not within one bar of the mark, with more tolerance for after the mark than before. But there is a little play in market geometry. How could there not be?

I feel a little stressed by the recent market activity; the methods I am using are probably better than the guy who is trying to apply them. It has been my experience that they will almost always true out, an amazing thing to me. It requires a great mind to comprehend more than a small corner of what is going on.

I'm on to the small corner. Something new has been discovered. I get something about the alpha and omega of a trend that has been elusive to me for years. I started this study when I was in law school in the 1980s. (Thank God for a real job in the interim.) Many years later, I think I maybe know something I didn't know before and maybe nobody else has seen either, but still must prove this out. The experts notwithstanding, the story of the discovery of order in the markets is just not yet fully written.

The last couple days have been more ambiguous than I expected (typical), but when this happens, I think the thing to do is not to enter on THE projected top or bottom, but to wait for the market to prove itself, one way or the other. There are equally compelling, and perhaps safer entry points on retracements against the basic trend, because then you already have a sense of direction. That's why I was cautious on IWM yesterday.

I'm not sure others know or care about these exchanges, but they are so far good for me, for the reason that I am out there putting my ideas on the line beyond my own trading account (which is also on the line). It's one thing to make or lose something on a trade. Easily rationalized. But what if lots of people know that you totally blew it on a call? Some credit to the pundits is due. Their job is not easy.

DG

"I'm on to the small corner. Something new has been discovered. I get something about the alpha and omega of a trend that has been elusive to me for years. I started this study when I was in law school in the 1980s. (Thank God for a real job in the interim.) Many years later, I think I maybe know something I didn't know before and maybe nobody else has seen either, but still must prove this out. The experts notwithstanding, the story of the discovery of order in the markets is just not yet fully written."

I'm very glad you are finding a way to make progress with your concepts. When a constellation of ideas and methods comes together, it's a very powerful feeling. I hope your proofs turn out to be conducive to a continued use of what you've discovered for day-to-day trading.

"I'm not sure others know or care about these exchanges, but they are so far good for me, for the reason that I am out there putting my ideas on the line beyond my own trading account (which is also on the line). It's one thing to make or lose something on a trade. Easily rationalized. But what if lots of people know that you totally blew it on a call? Some credit to the pundits is due. Their job is not easy."

I'm definitely interested in hearing what you've got to say. I like hearing what people think is going to happen and their reasoning behind it. To me, the worst kind of post is either "Market's going down, short all rallies" or "Market's going up, buy all dips".

"The last couple days have been more ambiguous than I expected (typical), but when this happens, I think the thing to do is not to enter on THE projected top or bottom, but to wait for the market to prove itself, one way or the other."

When I read accounts of some of the best traders in history, they all agree that catching the middle 75% of a trend is all they care to try doing, because catching the other 25% is too difficult. Livermore says "The first and last 1/8th are always the most expensive". I'd rather short the SPY tomorrow under 110.2 or the IWM after a big gap down to trigger a sell signal than have taken a short at today's close.

DG

Bird,

I got a sell on the IWM, using a lower-level timeframe. There's no metric which says whether it will cascade upward to the higher timeframes, though. The stop would be around 63.75.

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