Vexed by the VIX

The VIX broke below a triangle several weeks ago, a bullish sign; but today broke below by two standard deviations of a 20 day average, then closed back above that line, a bearish signal. Tonight's STU explains this signal and discusses other indicators that say a top is in for the near term. Key is a bearish divergence in the major indexes; the Dow broke above the May8 high, unconfirmed by the S&P and Naz.

Should Yasi worry? The STU still expects higher highs after this pullback. In contrast, Neely sent out a bulletin that his expected "final surge" may have ended. More as this week develops.

Comments

[Glenn Loser Neely.]

EMERGENCY UPDATE FOR ALL MY LOSERS...

I ATE AT MC DONALD'S YESTERDAY AND THEN I HAD AN URGENT STOMACH PROBLEM SO I WENT TO THE BATHROOM AND THE WAVES SPOKE TO ME IN AN EMERGENCY UPDATE, HERE IS WHAT MY TOILET TOLD ME:

HOURLY LOSERS:

We were stopped out of our Long position today, at a profit, making about 26 points!. I was expexting 50 to 100 more points to the upside, but since I am a LOSER I got it wrong (again!). Also take into consideration that the entry level at 876 was NEVER hit during the open session. So we actually made like 12 points!!, but since I am a liar....lets say we made 26!! so I can keep selling my NEO GARBAGE SERVICE to all you idiots!

ALL TRADERS:

Today's sell-off is the first warning that the S&P may have topped. Enter Short immediately (risk 1%) with a stop at today's high. That stop may change later after I have time to review my next cheat.

More details as soon as I go to the bathroom again!

Glenn Loser Neely
NEoGarbage, Inc.

[beau]

Neo Wave and Elliott Wavers have been waiting 15 years for this big depression to occur. Its funny, if they are that bearish I hope they have been saving money all those years because if the Dow goes down 90% there will be no one left with money for their services.

[Glenn Loser Neely.]

EMERGENCY UPDATE # 2 FOR ALL MY LOSER TRADERS,

I am sorry I am wrong AGAIN, but this is my normal style.

Gold has not followed through as required IF it had just begun a major, new downtrend. For that reason, ALL losers should immediately exit all Short positions "at the market" and stand aside.

Currently trading around $925.70 as I write this, so our loss will only be $2.5 or so. Please do not take this loss for the record, remember that at the Neo Garbage Institute we only count the winning trades (if there is any of course)

We may attempt a new Short position soon if I speak to the waves again in my toilet tonight, or in the next week or two, but best to be out while the market is not doing what it needs to in order to confirm suspected structure.

Glenn Loser Neely
NEoGarbage, Inc.

[Glenn Loser Neely.]

2 wrong calls in less than 1 week.
I am sorry I am a Loser!

But please do not cancel your subscription, because I need the money to keep gambling... I mean trading...

Sincerely,

Glenn Loser Neely
Neogarbage Inc.

[DG]

Neely is assuming that people trading his recommendations can trade futures after-hours.

Anyway, I also got a short signal when we broke 91.02 this afternoon. We need a serious down day tomorrow, though, to maintain it. The downturn to "beat" to maintain the integrity of the count and the post-constructive rules of logic is the downturn from April 17th to April 21st, which took up 7 cash session "hourly" time periods to go down 5.6%. The current equivalent would be that we need to be below 87.61 SPY by 12:06 Eastern Time tomorrow.

[DG]

At today's highs we had popped above the mid-line of the channel on the daily chart that connects the April highs and lows in the SPY. We got decisively rejected from that mid-line and headed toward the lower line, which will be at around 90 SPY tomorrow.

[vipul garg]

gold above 948 will confirm that the bottom is in.. it will be an extrmely strong buy on any decline to 915-900 levels.
are we going to see inverse correlation of safe heaven buying in gold and sp500 ?

[Wavist]

DG pleeeeeeeeease could you use the actual index values in your analysis rather than the etfs? It just makes it easier to compare analysts price levels if everyone's using the same values. Thanks Wavist

[DG]

Wavist,

Just this past week, I started plotting the SPX, so soon I will use those values in any . While not as exact as the ETF price I put in that prior post, on the SPX we need to be under 873 to have an equivalent move.

[Tartan]

DG,
Can you help me understand the requirement to have this current downturn "beat" the April 17-21 downturn? As I understand it, the April 17-21 downturn was the initial section of wave d of the diametric that you called. I probably should be able to figure this out myself by looking through the MEW book or Neely's questions of the week.

By the way, I have read your May 14 post that explains this diametric many times over. That was a tremendously helpful post in helping me to get my head around diametric formations. I have actually printed it out and placed it in my NeoWave binder for future reference.

[gambler]

Wavist,

I have found the ETF SPY to be a more accurate proxy for the S&P 500 for the following reasons: First, it is easy to factor in dividends since the time series can be back adjusted. Second, the S&P 500 Cash open prices are bogus and are often calculated on the basis of the stocks that open at 9:30 am. Thomas DeMark pointed this out in the context of his TD Sequential indicator. If the published open price also happens to be the high of the day, that introduces a distortion in Elliott Wave analysis. In contrast, SPY trades like a stock on an exchange and has reliable open prices. Third, SPY is very liquid; so, mass participation is not an issue. The only rub is that you can't use SPY for long term analysis because it has been around only since 1993.

[Mamma Boom Boom]

>>Neely sent out a bulletin that his expected "final surge" may have ended.<<

My 'in-dick-ators' told me to be skeptical that this puppy has rolled over, just yet. And I didn't have to go to the Smitt House to get that info.

[DG]

Tartan,

Thanks, the analysis I've been doing on this Diametric has also helped me to better understand the formation. I hope I've conformed to all of the rules. Behavior has been nearly exactly what I would have wanted to see since the May 8th top.

As far as having to go down further and faster than the April 17-21 turn down, that is just part of my understanding of the "Post-constructive Rules of Logic" from MEW Chapter 6, as well as discussions in the Question of the Week section of the website. Even though that move down was only one part of a triangle in my analysis and not a whole complete pattern, it still serves as a "benchmark" for any subsequent reversal that marks the beginning of a new trend, in this case, a reversal from an uptrend to a downtrend. Some of the other NeoWave guys here might have some information on why that is not the correct way to conform to those post-constructive rules and I'd be happy to amend my requirements if that's the case.

If I do need to change my interpretation of the rules, the new benchmark would be the move down from 93.22 on the SPY to 88.15, which took 26 78-minute periods. It actually took 1957 minutes, to be precise. So, we'd need to move down that far, on a % basis, in that amount of time, from yesterday's high.

[Upstart]

Beginning the 5th wave down out of a little triangle. Final drop of the correction. Harkening back to my comparison of the move off the March lows as a mini version of the move of the Nikkei off the 2003 low - a rally then triangle then rally - we have a big pullback just as the rally out of the triangle in the Nikkei had...very deep. Rally not over unless 7938 is broken. The end of the rally comes in June. Carl Futia also still looking for 952 in the weeks ahead. There is an interesting time symmetry if we top in June. There were 20 months from the Jan. 2000 high to the 2001 low (It was 89 weeks. That's why 20 works.) From the 2001 low to 2007 high was 73 months, one of my pet numbers that marks lots of turns (55+Lucas 18). From the 2007 high to June,'09 would be another 20 months, and if it's 89 weeks again it would be the last week of June.

[Mamma Boom Boom]

--Long at the close?
--Low risk?
--I think so!

[Martin]

DG,
Looks like the sell off moreless matched the target 876/7, but bounced strong.
On an hourly chart looks like a nice set up, at present I just follow Neely to the t, he spotted the trade but is slow in advising the moving of stop losses, which at present is at 924, what are your thoughts in bringing the stop loss closer to the current level.
I am highly educated in science and reading MEW is not bed time reading!
Martin

[Mike McQuaid]

S&P500 completed a second pattern off of the March 6 reversal. The first impulsive pattern to April 28 featured a strong b. The second impulsive pattern April 28 to May 21 featured a flat correction that bounced off of the golden mean which contributes to the bullish bias. A continued uptrend will confirm the latest pattern.

[Upstart]

Futia still expects more downside to the correction. The late surge could be a 4th wave. Regardless, I'll call the latest decline c of a flat unless 7938 is broken, which will void the idea of continued uptrend. I'll expect the top in June as long as 7938 isn't taken out.

[DG]

Martin,

Yes, support came in where it should have. I got out of my short trade earlier today when the price/time target I had set wasn't met. Had a nice little profit by then, but was hoping for a bigger sell-off to really confirm the change in psychology. Looks like people are still buying the "green shoots" theory.

As far as stop movement once a trade is entered, what I like to see is a correction that moves at a slower pace than the trend I'm trying to trade, using some sort of minimal threshold to consider the correction of the same degree as the initial wave. I like the 38.2% Fib level for that. If you don't want to bother with the time aspect, you could also use a Fib 61.8% retracement level as your stop, although sometimes when a correction takes on polywave or multiwave forms, the first wave of the pattern will go more than 61.8% retracement, but the end of the pattern will be below that retracement level and the trend will then continue.

Using the first method, you want to put your stop at 90 SPY (or the equivalent in the futures or whatever you're watching), but only if we get there before 12:39 PM Eastern Time, which will mean the move up is advancing faster than the move down, which is the exact opposite of what you want to see if you're short. If you're trading futures, it's your call on whether you want to set that stop to include the overnight session. Neely usually does.

Using the 61.8% retrace method, the stop would be at 91.07 SPY. I usually won't worry about time with that method because I just don't want to be part of any formation where the intial trend I'm trying to catch gets retraced more than 61.8%. That just opens up the door to a whole bunch of corrective patterns with way too much overlap and I don't really want to be in the market then.

I have no doubt that to really "get" MEW takes multiple readings. I've read it in its entirety 9 or 10 times and I refer to it every day. In fact, I carry a print out of Chapter 3 with me, so I can refer to the rules without having to carry the whole book. Once you "get" it, you won't need any other trading methods or tools, in my opinion. It's really the only method that truly takes into account the fact that the market is continuously evolving. Plus, I can do all of my trading from a relatively straightforward Excel workbook that let's me plot charts and calculate time/price retracements. No bells and whistles for me.

[EN]

I will watch 90.63 SPY for restistance on a rally attempt tomorrow.