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« Mother of All Margin Calls | Main | Spike! Watch for the hangover to follow ... »

Wednesday, June 27, 2007

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EN

A sharp decline into the fall of 2007 I can see but not a major top. 2000 was a major top. During the fall of 1999, I had friends phoning me everyday to "get into the stock market; it is going crazy!". The public was pooring all their money into the market in a euphoric frenzy.

While most long term bears seem to have thrown in the towel on a major bear market, the public still seems pretty lukewarm about stocks. No greed stage as of yet. That should kick in by late 2008. For now, I will play the shorter term swings. Still looks bullish for the next 2-3 weeks with the tech markets leading to the upside. Once this week's lows go, we can probably say goodbye to the highs for the year.

For the major top to occur, we need complete public forgiveness for what the 2000-2002 bear did to the public's Worldcoms, Enrons and Pets.com. We'll know it when we see it. Until then, the long-term trend is up up and up.

Did EWI just turn bullish short-term? I hope not. What is Neely up to? His C wave to the downside is taking too long.

aa

Neely's count is bullish - he has us in a Wave (C) to the upside.

Werner Merthens

Every one in the mainstream and not so mainstream media is blathering on about the terrible debt crisis. Concerns about dollar weakness and rising public and private debt have been in the minds of the chronic bears since the 1970's.
The funny thing is, the world has not come apart yet. Even global warming is lukewarm at best, despite all the hysterics blathering about it.

For an alternative view about the markets follow this link:
http://www.musingsofaspeculator.blogspot.com/

EN

Hi AA:

Last time I saw Neely's count, he had an A starting at the Feb highs and a B ending at the most recent 1540 SPX high. He then projected an end to wave C in a strong flat to around 1450. So this would mean he thinks that this wave C down ended recently and we are up up and away in another wave WAY above and beyond the most recent June highs? I just don't see it.

This would mean a rally right up into the fall which is the exact opposite of what most cycle analysts are thinking. Well, I learned the hard way to keep an open mind . . . but the internals of this stock market have been crummy for months so we'll see . . . anything can happen . . . but something bad to the downside is likely before November. Just a question of when it will finally start. The 39 week cycle is due to crest by the end of July. IMHO, if this past week's low at 1484 is broken, we are headed into the abyss. Friday's 1505 ES retracement was a low risk entry if you are bullish. I just watched it hit and zoom back up . . .

Walter_Hutchison

EN

Thanks for your excellent analysis. I appreciated you continuting to post here.

Walter_Hutchison

EN

You might also consider posting on
www.traders-talk.com as well as Yelnick.

There is a lot more activity there and I think your analysis/commentary would also be appreciated by their readers.

They have a Fearless Forecasters area where people such as yourself post some interesting items.

Walter_Hutchison

EN

I forgot to mention that on traders-talk.com Neely post something there every week or so in their New Analysis Area.

DG

EN,

Neely isn't really pounding the table with his count and has been hedging his bets. He's been off for a few months now, unfortunately. For short-term trading purposes, he went short on Friday.

EN

DG:

Thanks.

Yes for trading, I don't think Neely bases trades on wave forecasts anymore, or at least they are a secondary consideration. I took his trading course when it was 3 times cheaper and he was using an original variation of the Gann Swing trading method, with certain rules for channeling, trend analysis, stop placement, etc. He waits for the trend to change and then gets in on a countertrend move with a stop at the point where the trend would reverse back. The problem I ran into using this method was that sometimes one stock index would be bearish and one would be bullish so it was a 50/50 toss as to which one would work out as one tends to catch up to the other (the situation we have now). I found I could trade less and more accurately by screening this method with bar counts from high to high, high to low, low to low and low to high so that the market should be hitting a channel or approaching a stop level at a certain fibonacci or lucas number of bars up or down and you could fade it with a tight stop. There have been a few times in the past four months when you could have gone long or short with a massive position and a 3-4 point NQ or ES stop and caught a monster move, e.g., when the ES rallied back up to 1554, you could have sold it with a 4 point stop and caught the entire sell-off back to 1494.

Right now this method will have you shorting the ES and buying the NQ. If the ES can stay under 1554, then he is right to be bearish on it, according to this method. There is a gap to be filled up at around 1539. It should get back up there at least. This coming week is seasonally stong.

vimsin

Fridays trading range for the SPX is amazing. Up 12 and then down 12 at its lowest. Effectively a 24 point day from high to low.In fact over the last month we have some some fairly large daily swings on the SPX. To my untrained and distant eye - the gyrations look larger than normal. Is it a bearish set-up? I don't know but its certainly unusual and suggests that emotions are running fairly high which could cause a sharp swift trended move sometime soon.

cstradingman

The recent selloff in treasuries was a blessing. It has given us clear cut price points to define the secular trend in treasury bonds. On the 30 year note, If we close above 5.60% on the 30 year yield we are in a secular bear market. If we close below 4.75% we are in a secular bull market. The recent rally in bonds has been significant. We are much closer to comfirming a secular bull market in bonds, right under everybodys nose! The selloff did mess up the short term picture alot. It is now hard to tell where they will head before one of these 2 levels are breached. I believe , this rapid selloff was just an effort the shake out the bulls. The treasury bond bears are so sure the selloff will resume (that its only a matter of time). The next major rally will catch them off guard just as this recent selloff did the bulls. The 30 year note is eventually headed to 4% in yield. Will we see another selloff to near 5.45% before the bull resumes? I really don't know, but probably not. I hope so because would be a awesome entry point will such a clear cut stop point.

blog roll

only 31% of the bloggers are in

http://tickersense.typepad.com/ticker_sense/blogger_sentiment_poll/index.html

should see nice rally continue

Ted Gruenfield

only 31% Bloggers are bullish? Its possible the Dow might see a 100+ point rally on Monday.

cstradingman

Nice rally in stocks! finally! With treasury bonds continuing their strong rally and the dollar getting pounded its about time stocks rally hard.

cstradingman

Below 5% on the ten year, 5.10% on the 30 year. Nice rally! Either we rally hard from here in the next couple days and yields fall rapidly or we have a multiday pullback from near this area. We Will know by the end of the week after the job numbers!

rdneu56

The chronically bearish herd is again worried about CDO's and the subprime mortgage defaults now that long bond interest rates have receded.
I wonder what event is to presage the certain deflationary disaster next.

cstradingman

rdneu56 -- The false long term breakout in treasury yields and receding rates should reduce the risk of defaults and be 'bullish' for stocks. Is that what you mean? The equity bears have a weak argument if rates are headed lower like I think they are. If the yield curve deeply inverts and and the fed refuses to cut, that would be something to be worried about, but not currently. Even then, the Fed is likly to cut rates.

ceg

Why would US bonds (iou's payable in US currency) rally (pay even less interest) while the US currency is getting "pounded"? Why would any sane foreigner (or anyone) buy more US debt on top of the mountain of debt already owed at a low risk premium? Because Dems may sweep the White House and Congress and fix things ;)? Isn't it premature to call the long-term breakout in treasury's "false" as the trendline (in yields) has become support? It would seem to make more sense for yields to rise along w/ the risk of out-of-control debt resulting in a currency crash -- or continued depreciation. If that long-term trendline does resume, then yields based on the lower channel line would approach 0% (what fundamentals would be implied by this?); if broken, then the sky is the limit (and what fundamentals for this?).

And on what fundamentals are stocks rallying? M&A? Stocks eating their own young? The iPhone? Because Cramer said we'd hit 14,000?

vimsin

Looking at the 10 year (yield )chart it would appear that the rally to 5.32% was impulsive and the current pullback looks like a wedge (diagonal triangle) with the e wave complete at 4.98% on 2'nd July. If that's right then we should see a high above 5.3% early next week. A break above 5.3% might thus end up confirming that a bear market in bonds is well underway.

EN

Well, it took almost 5 years but the Nasdaq finally made it to the .382 retracement of the entire bear market. I shorted a bit just to commemorate the event. If it turns down here with a vengence, it can only mean that we are getting a classic 5 point reversal in the SPX and DOW. This would fool all those thinking that the recent low at 1484 SPX was the bottom of a fourth wave when, in fact, it was the bottom of a D and we are about to end E . . . a triangle that breaks DOWN. We'll see . . . we'll see . . . this thing is sure to make fools of most market prognosticators for a time to come, myself included.

vimsin

If you put together the forecast for higher yields with wave E for SPX and CCMP at .382 it sounds bearishly simple. Too good to be true?

EN

Yep too good indeed. I took my loss today on the Nasdaq short. Now it can collapse because I am out of the trade!

It should gap hard one way or the other tomorrow morning. I am done trying to pick off tops.

ed greene

Fibonacci Projections for 2008

Dow Jones to 16,482
S+P 500 to 1683


STALLIONEX

BREAKOUT IN THE NDX!!!!!!

BULL MARKET IS SSHHHHHHHHMMMOKINNNNNN!!!!! NEW HIGHS ARE SSHHHHHHHHMMMOKINNNNNN!!!

aa

EN,
Sorry, been on vacation the last week.
Neely says that the count is very nebulous right now, but the best one is that we finished (B) already and are in (C) up.
Contact me directly for more info.

CS - i was surprised to see the low tick in yields as 4.998. We didn't even hit 4.99! My guess, we see 5.45 soon.

aa

Sorry, CS, bad data. We *did* hit 4.99 on the downside. This means we might not necessarily scream higher in yields. Possibly in a trading range for now.

cstradingman

Yeah I believe this is a great time to get long treasuries. I am still watching the 30 year bond. If it closes above 5.60% (unlikely) I am done trading treasuries on the long side and I will ride the bear market down. I think we will see a close below 4% before we see a close above 5.60%. So bonds are cheap.
But AA you are right for now. We probaly wont see any substantial rally till the end of August at the earliest. I am using this weakness to load up on my positions. I will be taking a pretty hefty loss if I am wrong. My stop is quite wide. Hoping for more weakness to increase my position. This is a 3 to 6 month trade. The short term picture is way to cloudy for me.

EN

AA:

Thanks. Okay. I see Neely's current count. It calls for a D wave DOWN to end later this year and a massive final E wave blow-off up into late 2008 to end an expanding triangle which starts at last summer's lows and thus the second phase of the bull market which started in early 2003. This is more consistent with the cresting of the 39 week cycle at the end of July/early August. Also, accords with 55 weeks up off last summer's July lows in the DOW. So we should top at the end of the month or so and then fall in to October. I am waiting to catch that move.

Pretty consistent with Yelick's notion of a post Olympic top in equities at the end of 2008 as the new President takes the reins from Captain Bozo.

aa

EN, you have it in a nutshell. Be sure to follow along Tony Caldaro's work as well - he arrives at similar conclusions (absent the timing element), using more standard Elliott Wave techniques.

cstradingman

Seeing todays action is showing we have seen the highs in treasury yields. The secular bull market in treasuries has resumed. The 30 year bond is head to 4%.
We will see a fed rate cut in September.

aa

Sorry, CS, I disagree - the 4% call is premature. I think we see 5.45% at a MINIMUM, before we see a 4% (if at all).
From a pure trend following perspective, the trend is higher in yields (in my opinion)

cstradingman

This is the treasury rally I have been waiting for! We hit resistence today and the bond bears will be out in full force thinking we will sell off from here. We will gap up across this resistence in the next couple of days and catch the shorts off guard bigtime. bond bull market is certianly back. It's time to get on board before it too late. I wonder how stocks will react to a huge unexpected drop in rates?

ceg

Dollar hit record lows against the Euro; rates in Britain are higher and due to rise again; Treasuries busted up through a 20 year down trend in yields; the Fed _can't_ lower rates or the dollar will further collapse and no one will buy our debt; they'll have to raise them to compete against other rising currencies and better rates of return. Technicals and fundamentals are bearish for bonds.

cstradingman

The bond bears have been making that argument for 5 years now. Yields are still near historical lows! When we gap up over this resistence in the next couple of days, the technical case begins to lean a lot more bullish. Foreigners have no choice but to buy are debt no matter what happens. They NEED the U.S. to consume! The dollar has already declined so much yet no one is scared of buying our debt. There is no conundrum! Bonds are in a secular bull market! The cyclical bear market in bonds just completed. Rates are going to be headed a lot lower! 4% is the next stop in the 30 year. I agree, the fed at this point is trapped, but as bonds rally they will eventually cave in and cuts short rates. Japan will defend the dollar if it starts to get ugly, but I think the dollar only has a bit more downside before we see a big rally.

shawn

Yeap, look at the dollar cash index at http://quotes.ino.com/chart/?s=NYBOT_DX&v=dmax

There is a clear descending triangle starting from Nov 2005. I told a few others that this is a bullish sign for dollar to rebound sharply, probably anytime now to within 3 months.

Voice of Reason

Wow! This looks like topping behavior to me.

What does Bob Prechter say about today's excitement?

EN

This thing has a little further to go in the short-term. I think it will not top until the end of the month and then we will get a real slaughter into October, then a new bull market. This year has been wilder than any other in recent memory. Big crazy moves up and down. It should only get more volative when we do head down and break 1492 in Sept. futures contract. What a sight to behold.

aa

EN,
Don't think we top this month. Even if we top, we need to create the A and B waves before the slaughter - i think its likelier that the C starts in Oct-Nov, not finishes by then, and thats assuming a top happens to start with.
Tony thinks there's a shot at getting to 1620.

ceg

cs - 10 year yields have bounced off the 20-year trendline which is now support. In 2003, short rates were cut almost to zero -- that was the bottom for short and long rates (and housing boom inflection point). The dollar is continuing to lose value -- it's almost 1.4 to the Euro now. Foreigners are certainly propping up the dollar and keeping rates low by buying our debt, but the unsustainable strain is showing in the technicals. Approaching nearly 1 Trillion trade deficits can't continue -- the dollar has no where to go but way down as it's the only adjustable factor for bringing about equilibrium.

aa

ceg,
Correct, in the long term. In the short term, though, anything can happen. In fact, after touching 78 (break of the long term bottom in the DXY at 80), I think there's a decent shot at a large, short term rally.
What could precipitate it? Crisis in the global equity markets, precipitating a) unwind of the short dollar carry trade vs. risky assets b) flight to quality (i.e. US bonds).
Depending on the catalysts, treasuries may or may not rally.
I think bonds are headed down to 5.45%, maybe even lower, before this outlook possibly materializes.

cstradingman

ceg - I will take your view if we don't gap up above the 20 year trendline next week. I am very confident we will. If we don't, then I agree, the 30 year note is heading to 5.45% at a MINIMUM, probably higher. The inflation numbers will point to a fed cut.

President D. Svaselinovic

We we soon be able to sing (with apoligies to The Beatles):

"It was 20 years ago today, Sgt Prechter called the Dow to fade,
He's been going in and out of style
But he's guaranteed to raise a smile
So may I introduce to you
the bear you've known for all these years
Sgt Prechter's lonely wave-count band"

etc. etc.

Ron

Yes, 20 years later and still no calamity. 20 years is a long time to be off by. There is not much utility to that call. I think there is certainly value to at least entertaining calamitous scenarios in one's mind because they do and will happen, but there is not much more to be gleamed from the mountains of less-than-mediocre advice Prechter has churned out. He's got bills to pay like anyone, and there are certainly worse ways of making a buck than preying on the anxious and pretending you have insights you do not, but there are certainly more decent ways of making a buck, too.

cstradingman

Looks like the long bond is setting itself up for a gap up this week as predicted. So much for the fundamentals. Yields should drop fairly significantly in the next couple of weeks.

Andy James

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