Where Markets Go From Here

I am hearing a lot of folk ask whether they stay in or get out right now.  We had about as clear a signal on Jun11 that a top was in: we came out of a trading range (triangle) with a false break and almost immediately fell below the prior trading range.  This is a clear Bifurcation Point.  Since then the market has dropped in a zigzag (535) down, confirming the change of trend from up to down.  It was about at the bottom of that pattern that I began to get the questions.  Of course, almost at that time the market bounced.  

That bounce has left us in an ambiguous situation: the S&P failed to confirm the Dow's new low, and the bounce was larger than the corrective wave b in the zigzag down.  Both are signs that a near term low is in place.  But as Friday's STU makes clear, the trading volume on up days has been "anemic." (They also give additional indicators.)  So watch the Dow Monday to see if it has a jink down to complete the down move, or joins the S&P and Naz in a bounce.  Futures are down right now, but that often is not indicative of how it will perform during the trading day.  

Could Jun11 be THE top?  Possible, but the EWFF thinks not.  (For those of you who don't want to sport for the thrice-weekly STU, the EWFF is an informative and much cheaper alternative.  This month's issue has a lot of good stuff in it.)  Their primary reason is that a typical wave 2 reversal should go more than this one has; more likely to at least 38% retrace of the whole drop, if not 50%, which targets between 9K and 10K on the Dow and 1000 to 1100 on the S&P.  In contrast, Neely has called Jun11 as the top.   Yet he too has expressed concern that the down move has stalled. 

One useful tool that leads to Neely's concern is to draw the up slope from Mar6 to Jun11, and then draw a same-angle downslope off Jun11.  If Jun11 were THE top, we would expect a sharper drop down than the rise up, and be inside that same-angle down line.  We have been below and above that line. As the down movement stalls, the odds increase that a Final Surge up is still ahead.  

The next two days are end of month & end of quarter.  And a pretty good quarter it has been!  We have seen a pattern of sharp rises on the last couple of trading days in a month and the first few of the next month.  This time, however, money managers may want to lock in their quarterly profits and lighten up for a few days.  If the market trends up, I expect them to stay with the trend, but on a downtick they bail. So be prepared for a downish end of June and then a sharp run up in early July.

A possible head & shoulders pattern is forming in the S&P. if the right shoulder forms (an up market) then fades, look out.  I hope that Yves will comment if this is what occurs.  

The USD seemed about to make a run, and then faded.  It might retest the recent lows first, and this may come with the Final Surge.  Weak Dollar, strong Dow pattern.

If we do run up in July and exceed the Jun11 high, a lot of bulls will come out of the woods and proclaim a new bull market!  In another clear insight from the EWFF this month, we can summarily dismiss that scenario.  Volume has decreased as stock prices have increased, a classic bear market rally pattern. If this were a new bull, volume would increase on the rise in stocks.  

Comments

[Forkoholic Serge]

Are you ready for the crash?
Some similarities with 1987
http://forkoholic.spaces.live.com

[vipul garg]

serge,
went through your homepage ..interestingly you write , 'its time to short india'
can you explain that?why do you think a top has been made or is near ?
i donot understand the technique (fork) you use ,so you ll have to explain , if posiible in someother way!

[Mamma Boom Boom]

>>Ned, Sad to hear Whipsaw is no more.I liked him for his cool Temprament and his ability to count waves.His fellow boarders Wally and Slarti will always remember him. Posted by: Mark | Sunday, June 28, 2009 at 06:57 AM

Yes, it is sad he's gone. He and I had many a converstion over the years. Wally and Slarti, what a pair.
-----------------------------
>>Ned,Sad to hear that Whipsaw died last year. How did you know that?
I recalled he went through a major surgery of some cancer last year.
Even though we never met but merely talked over the net, it is really sad to hear that. davidantony

He never had the surgery, it had gotten too big to be operated on. He finally died from the cancer. I knew he was getting very weak, then one day I get an email from his wife. She said he wanted her to stay in touch with me. I could probably find the obituary if your interested.

[george]

yelnick,
is there anyway to set
this page so that when
a link is clicked on
it opens into a new
window? i have seen
other sites set their
pages that way.
george

[george]

joe granville did extensive
work on stock prices and
volume. he is the creator
of on balance volume (OBV).
what he found was that in
a bull market rally
the volume on
a daily or weekly bar chart
increased and during the
corrections it decreased.
the opposite occured in bear
markets. this is what has
occured since the march
lows the volume is decreasing
as granville said it would
in a correction during a
bear market rally. as granville
said on many occasions
volume precedes price.
george

[polonger]

Ned,Sad to hear that Whipsaw died last year.I missed those guys in eliottwave analysis forum and your site.

[davidantony]

Ned,

Thanks for the info.

It just reminds me one more time that life is really short and unpredictable... that while we all try hard to make money, count waves etc., it is GOOD HEALTH that counts the most in the end for everybody, rich or poor!

Apple CEO?

[Watcher]

With the exception of the few out and out bulls, who don't appear to articulate a reason in terms of Wave Theory as to why they are bulls, most of the folks commenting here seem to agree that the current uptrend from the March lows is corrective. However, there seems to be significant uncertainty if the June 11 top is it, or not.

Even if the top is in, can't a further "irregular" high occur, or not at this juncture?

It would seem that there ought to be, but maybe just isn't, a tandem approach to Elliott's rules that answers the question WHEN. McHugh's phi mate signals are suggestive of something like this, but they don't appear to tell the end of a particular trend. From a straight timing perspective, I am under the impression that tradable turns often occur at either .618, 1.0 or 1.618 in time from a clear impulse wave, suggesting some sort of rule of alternation at work. More subtlely, the end of a swing seems to be related via fibonacci ratios (and some lesser known ratios) to the time of the prior trend. But it is a surprisingly complex study. For example, 1.618 of the Dow's 2000 to 2002 trend projects near to the March 2007 low. I think that this was a pre-signal to the pending top, even though it hit a preceeding correction on the next scale down rather than the final high.

I don't know Neely's work well enough to know whether he covers this territory, but given the current uncertainty as to where we are just now, there must be more to be understood.

[Mamma Boom Boom]

>>Ned,Sad to hear that Whipsaw died last year.I missed those guys in eliottwave analysis forum and your site.<<

There was many a heavy duty discussion, wasn't there.

It's interesting to see all these folks coming out and conveying sympathy.

[Account Deleted]

Where is NEELY ...it seems his PANTS GEELY(WET) !! and some here on the BLOG are busy drying it

[Account Deleted]

One more case of stoplosses getting triggered.Shameless Fellow still isnt ashamed of calling himself the master of ELLIOT WAVE.

[MHD]

One way or another, Neely is going to look like a genius or a big fool. The golden crosses that are occuring in most indexes, should give the bears reason to worry. Bob P. was predicting lows to 3000 or lower in 2003 right when the golden crosses were getting close. When they did confirm, the market just continued to move up in wave 5 as Bob P. continued his bearish stand.
I certainly can't say I'm bullish at this point, but both the bulls and bears should be careful at this juncture. One of them is going to get burned badly, with 1100 in sight or a break to new lows by the end of the year!!!

[vipul garg]

i expect markets to make a top today /tomorrow price wise (which will not be exceeded for long time) and meander for a few days and then produce a confirmation decline .(hopefully!)
in all cases we should be heading to 825 or lower levels.
VB, neely is very much kicking.unmarried to a position . and very much short.

[Forkoholic Serge]

>i donot understand the technique (fork) you use ,so you ll have to explain , if posiible in someother way!

Forks are built based on Elliott Wave pivots yet EW pivots identified using forks. It's kinda chicken-egg paradox. there are trend forks and countertrend forks. They help identify fractal patterns. Fork takes notion of support & resistance from 1-dimentional horizontal level to its true 2-dimentional level. also in most cases you replace Fibonacci targets with fork targets(median line & other 2 channel lines).

[vipul garg]

serge, so you are saying that indian index is above the median line and close to the topping zone-channel line.?
also how do you draw the median line..from the lows or?
tks

[Forkoholic Serge]

>Where is NEELY
He's with Willy, willynilly ;-)

[Forkoholic Serge]

$SPX & Indicators update
Possible complex Head & Shoulders on $SPX. With upcoming Lunar & Solar eclipses we sure could see some fireworks. Our NYMOlogyst indicator looks like set a cycle low. It is remotely possible it is doing another "hump&dump" but as far as I remember there was no more than 2 "hump&dumps" per cycle and we already had 2. Original $NYMO is also rising above 0 and today rests against downtrend resistance. There is an interesting divergence between $TCP & $ECP (Total Call/Put & Equities Call/Put) Ratios. Total is already up while equity is still hanging at recent low. NYSI looks like trying to reverse, there was no cross on MACD yet, so keeping an eye on this one. Our tops\bottoms indicator set very interesting pattern - it looks like late August 2008 spike top on STO (highlighted in yellow). Our No 1 tops indicator still looks good, the only reservations I have it's not as smooth going down as previous instances in May 2008 or January 2009. $BPSPX went flat, no cross on MACD yet. It look like we're at around January 21, 09 lows.
http://forkoholic.blogspot.com/2009/06/spx-indicators-update.html

July 4th SPECIAL: Receive $15 off our Autumn 2009 forecast
by signing up for Forkoholics Club 1000.
http://forkoholic.com

[TC]

Do not agree with EWFF's wave count. As usual, theirs is a very rigid Elliott Wave view.

You say, if 6/11 is exceeded, "a lot of bulls will come out of the woods and proclaim a new bull market?"

Looks to me they're out in force already. Now, they've got this 'Golden Cross' on the S&P 500 (http://tinyurl.com/ndwjfg). Their bullish outlook hinges on past instances of the GC when we were likewise in recession.

Trouble is we're not in recession. Physical reality (as opposed to delusional fantasy) finds economic activity continuing to collapse, while faith is waning big time (isn't that right, Mr. Issa?) in the buyer of last resort. This is no recession. It is a death march.

[anon_aka_TERA BAAP]

i enjoyed another GREEN UP Day..while you bears continue being FORCED to cover their Painful SHORTS...or get STOPPED out REPEATEDLY like NEELY!!

HAHAHAHAHA

now you bear clowns please take a look at the VIX making NEW LOW today...now touching LOWEST level since Septmeber 2008 !!

Bears are completely finished..the BULL is in Complete control..

DG -- HOW is your repeated Shorting attempts following your HERO NEELY working out for you?

YVES are u still expecting BIG Crash because of LIQUID index??

HAHAHAHAHAHA

[anon. Shut your mouth, idiot. Shit comes out.]

anon_aka_TERA BAAP

enjoy your DUMB luck while it lasts.

Shut your mouth, idiot. Shit comes out.

[george]

prechter was on the cnbc show
the kudlow report this
evening. i am sure they have
the video on the cnbc website
if you would like to watch a
rebroadcast of this.
prechter said after a small
pull back he expects the dow
industrial average to go to
10000. he mentioned this was
a bear market rally because
of the weak volume since
the march bottom. he made
his case for deflation and
gold not performing well.
it should be interesting to
see if neeley or prechter
is correct in the coming months.
george

[Mike McQuaid]

S&P500 trend is up. My model outlines wave 3 should traverse 1000 near July 9. Wave 2 was labeled June 23 off of the March 6 reversal.

[Mike McQuaid]

XLF Financials are uptrending too. XLF tagged a 25% retracement of the March - May rally and is moving up. Resistance at 12.67 and 13.08 are only a matter of time until wave 3 claims them and puts them in the rear view mirror.

[yelnick]

TC, your tinyurl didn't work .. yes the bulls never really went away did they?

In the near term the market is still ambiguous; STU tonight noted that although Dow went up, Naz faded a bit, and hence we still have a divergence among major indexes. Hence a pullback is still likely before the Final Surge to Dow10K.

But it is clear we are not in a recession but a depression. John Mauldin's recent newsletter highlighted an analysis which showed we are dropping in global markets (trade, GDP, stocks) about what we did in 1930. One thing to watch for is a W shaped depression, where the stimulus pops a small GDP positive quarter in Q4 or Q1.

This is one reason I believe we have a rally into late August, followed by a sharp drop, but then another rally in the Spring of 2010 before we truly hit the wall in late 2010.

[DG]

DG -- HOW is your repeated Shorting attempts following your HERO NEELY working out for you?

I have to admit that it isn't as fun as the pretend trading you appear to do.

As I have said repeatedly, risk management is the long-term key to trading success. I see nothing in any of your posts to indicate that you understand this or practice it, so I wouldn't expect you to understand why getting stopped out with small losses is something that professional traders have happen all the time.

As I said to VB the other day, unless and until the June 11th top is surpassed, Neely is technically correct that the market has topped and that until that happens all bullish statements are just noise.

[DG]

yelnick,

I don't know if this is happening to everyone, but the blog's formatting is all messed up. HTML tags appear to be disabled and the order of the comments is reversed, with the newest ones now first. Just an FYI, in case you hadn't noticed.

[yelnick]

DG, html urls in comments work for me, which browser are you using?

As to order, yes it is reversed due to some private requests. I can switch it back. Is this easier to follow (newest on top) or the old way?

[DG]

yelnick,

I do find reading the posts scrolling down more intuitive, but, hey, if others have asked for the new format, I don't mind.

I use Firefox. What I have not been able to do lately is use the tags to italicize someone else's words and set them off from my reply. That's what I mean by HTML tags not working.

[da bear]

Forkoholic,

are you expecting a top soon, say within the next few weeks?

da bear

[Forkoholic Serge]

da bear,
I think 6/11 top should hold for now.
yet cycle low on NYMO suggests we may hit low
and comparison with 87 also may suggest top is in
also found this cycle projection - looks like from the Foundation of cycles.
http://markettimingcycles.files.wordpress.com/2009/06/prview-wk-june-comp-1509.png

Also check this BPSPX pattern comparison http://1.bp.blogspot.com/_qTcELM61AcE/SklVT6PS33I/AAAAAAAAAEQ/45c2UDH6sU0/s1600-h/bpspx062909.jpg

It is also a perfect spot for W4 to end on monthly $SPX
http://forkoholic.com/images/perfectW4.jpg

[Tom CZ]

yelnick,

I would also appreciate switch back to former page format as I read from orginal start of the ideas and then comments which follow them.

app Tom