Downhill Racer

Opening ceremony tonight at the Olympics Without Snow. Must be global warming. The downhill race winner may turn out to be in a different venue: tonight's STU has the market stacked in the dreaded nested 1-2's at four degrees of scale, which is the set-up for a deep drop next week, maybe as soon as the next trading day on Monday Tuesday next week. They have been on a roll lately, with better predictions than during the Hope Rally. Here is tonight's chart to complete their wave count this week:

 

Let's count up all those 1-2's: the Hope Rally top is a big 2, the Groundhog Day top at Sp1105 is the next 2, the Running Triangle Thrust top of yesterday is the third 2, and the intraday top at Sp1080 is the fourth. It is possible that a fifth 1-2 also developed to end the day. 

There is some contrary opinion. Carl Futia thinks instead we are set up to blast up to Sp1155 on the way to his target of Sp1200. He notes we broke above an upper trendline yesterday and stayed above it today, a breakout indication. We also completed the time and distance (meaning upper right corner) of his box around the corrective plateau of the past week, indicating a break one way or the other is due. Here is his analysis, followed by his chart:

The sideways trading range that has developed during the past week on the upper chart is I think significant. It is bigger than any sideways range we have seen in the past year, and occurs at the bottom of a break in a bull market (still above a rising 200 day moving average). This combination of circumstances generally occurs prior to the start of a new bull market up leg. Counting across this base formation (horizontal green line) yields a target of 1155, a new bull market high.

Comments

[Roger D.]

I think Mr. Futia neds to look at the big picture.

http://www.screencast.com/users/fast996/folders/Default/media/36e9a670-d10f-4a2c-8504-ccc97757df3f

[joe]

I am a big Steeler fan. I don't think too much of Bush - didn't at USC either.

But I do remember that one play - Steelers against Oakland (who was clearly the second best team they played that year) - when Harris caught an impossible tip and ran in for the impossible touchdown to end an inpossible game - do you remember??

I think - Franco Harris is the story of the United States - he did the impossible play - not unlike our ancestors did the impossible history. We shouldn't even be a country now - without such an "impossible play."

Joe

[yelnick]

Joe, the Immaculate Reception! Great moment for the Steelers

[joe]

It was by far the greatest play in football I ever saw.

Like destiny.

Makes you think- everything works out the way it is supposed to in the end.

Joe

[Chris]

Yelnick -

I like the various perspectives that you present on this blog. I find Carl Futia is incorrect too often to follow (particularly in bear markets). For example, at critical points during the last bear market (or the current one depending on your time frame) he thought the market was going to reverse and go higher.

(2007)

"Guesstimates on December 10, 8:45 am ET

...Last week’s 1406 low ended the decline from the October 11 top at 1587. We are in the early stages of a move which will carry above the 1600 level."

(2008)

"Guessimtates on February 4, 8:40 am ET

...In any case I think the January 22 low is going to hold on any test and that in three or four months the average will be above the 1600 level.

Guesstimates on September 19, 2008

...I think that yesterday’s low is a very important one and in all likelihood is the end or very close to the end of this bear market. The rally which started yesterday will probably carry the S&P to 1400 over the next couple of months...

Guesstimates on November 4, 2008

...I still think that the S&P’s are headed into the 1050-1100 range..."

(2009)

"Guesstimates on January 6, 2009

...I still think that that the 1000 level will be reached this month..."

It may be useful information to some, but his perma-bull opinions seem more distracting than anything. Ultimately, what's the point of throwing guesses out there if you can't beat a flip of a coin? Whatever the reasons, is it worth discussing if he is wrong so often?

[Chabazite]

Roger D. Good post, and thank you. It is easy to get so immersed in the detail you miss the obvious! If true, and its a running flat then it could end at any time. Quite possible if you think there is a considerable downwards force. Otherwise if it morphs into an expanded flat then we could see 1105 being taken out and we bears will have to wait a while yet. Best. Chab.

[Douala D]

For the non Steelers fans [ http://www.youtube.com/watch?v=7xMDIcsUMmA ]. I had to listen to it on the radio because all home games back then were blacked out.

Friday Arthur Hill of StockCharts.com who I have great respect for wrote this...

"Even though IWM and QQQQ are making noise with channel breakouts, it seems like the perfect storm is brewing for a stock market correction. First, the Shanghai Composite ($SSEC) broke down over the last few weeks. Second, the Euro broke down over debt concerns in Greece, Spain and Portugal. Third, the Dollar rose in a flight to safety as the risk aversion trade returned. Fourth, chart 4 [ http://www.screencast.com/t/NWI2ZDA5Mz ]shows a long-term resistance-reversal zone in play for the S&P 500. From March to January, the S&P 500 advanced over 70% without a correction greater than 10%. This advance retraced 50% of the decline from October 2007 to March 2009 and 62% of the decline from May 2008 to March 2009. Taken together, we have a Fibonacci retracement cluster that marks a potential resistance zone. There is also resistance from the October 2007 trendline in this area. With resistance hitting in January and the decline over the last few weeks, weekly MACD moved below its signal line for the first time since March 2009. This confluence of events argues for some sort of correction"

[Ben]

Next week we will rally. We have seen an ABC move from 19th january.

The way is up up and up. Always fade the trades of Prechter.

[polonger]

happy lunar new year to everybody
恭喜發財 新年快樂

[DG]

Chris,

Nice post with some actual data. I don't know if you've seen this chart:

http://www.cxoadvisory.com/gurus/

If you scroll down, you'll see Futia at 46%, which, depending on how large his "winning" forecasts are compared to his "losing" forecasts, could be just fine.

Here is more detail on his forecasts:

http://www.cxoadvisory.com/gurus/Futia/

You are right that he tends to be bullish all the way down in bear trends.

[betterdays]

THIS Greece, Spain, Ireland ,EU debt issues remind of the calmness at the end of Lehmann in 2008. Market looks like crap so it may not yet tank for another week. This debt issue is only going to spread
Looks like the Bradley Model is inverting .

[DG]

tonight's STU has the market stacked in the dreaded nested 1-2's at four degrees of scale

This is probably the most bogus wave count I've ever seen. The STU has really outdone themselves this time.

He notes we broke above an upper trendline yesterday and stayed above it today, a breakout indication.

That will depend on whether the market has changed from bullish to bearish. During bull markets, breaks below trendlines get resolved to the upside and the opposite happens in bear markets. So far, the evidence for a change from bull to bear is weak, but it isn't non-existent.

[Mamma Boom Boom]

Same here: 1-2's, pretty funny stuff.

[april]

Thanks for your wonderful perspectives. I totally agree with Chris that the perma-bull opinions (carl) appear to be more distracting than anything. I am not exactly sure what sort of strategies he uses, seem like an improved mix of davos box theory plus, or the inherent weakness in those systems; I do know that anyone flipping a coin often enough will get it right sometime.

[Roger D.]

Hello Chab,

There's a lot of indecision about whether the market goes up or down from here. People become impatient but the market takes it's time for a reason.

This chart clearly shows why Friday the market did not accelerate down. Some stocks have recently topped, MCD a case in point. MCD was completing it's wave 2 Friday along with BIDU.

Looks like Tuesday will resolve downward and the all important moment of "recognition" will be at hand. As they say it is clearly written in the charts.

Roger

http://content.screencast.com/users/fast996/folders/Default/media/9b96164a-d7a9-42de-9300-78974799c0a8/2010-02-13_1028.png

[yelnick]

Chris, pretty damaging to Carl's predictions! Thansk for sharing. Remember the whole theme of Yelnick is that prognosticators will be gloriously wrong a lot of times. You gave us a string of Carl's "yelnicks".

The reason I find his site interesting (besides adding a refreshing counter to the general bearishness of ewavers) is his box approach is a useful direction. Neely uses this type of structure, and Zoran made it sing. Carl's box around the recent plateau, and his watching for a break, is what Zoran did. The current break will be proven false if we fall early next week, and a false break essentially confirms the direction is the other way. If we stay above, the break confirms the direction is in its direction. Either way, a very useful tool.

[Sanjay]

Yelnick the one problem I see here is the side that most of the hedgies are on and they are bullish. This might not mean much but they were bearish going into first of January and have since turned sides. This leaves me personally in a quandry and on the side. I've been watching Goog closely and it seems to be basing.
More on Cot available at http://cotstimer.blogspot.com/

[Roger D.]

Chab,

I will also point out,why there is so much confusion about the different counts. This has been a topping process of supercyle degree. Many stocks have made supercycle V,"B",W2,and Irregular B tops here. This is a hybrid market and the main point is there are 3's and 5's all mixed in with the general charachter of the wave structure.

I gurantee though when the market breaks (Tuesday?) there will be no doubt as to the impulsive nature down. We have reached what I call the unification point in the majoority of stocks and they are "ready" to come down. The gates of hell are about to open on the downside.

Roger

[Canadian Money]

Yelnick,

Do you know how Carl calculates the size of his little boxes? Is it just his guess or something else?

[DG]

Sanjay,

A quick question, which you are obviously free to ignore, is what were the COTS data saying at the following turning points:

September 2000
Feburary 2001
June 2001
March 2002
September 2002
October 2007
September 2008

Those were all major bearish inflection points, on the same wave "Degree" as the current inflection point is (potentially, anyway), so I'd be interested to know what the track record is in those specific instances.

Again, if the data is easily available or if you can point me to a place on your website, that would be great. I want to respect the fact that these people are generally the "smart money", but without validation that is just a term that gets thrown around without any real benefit to those following their lead.

[zygmunt]

@DG &MAMMA
You find that EWI's picture is bogus/funny ? Any fundamental mistakes in this approach 121212 ?

[yelnick]

Canadian, I believe it is simly drawn from high to low points and then extended to encompass the slope (ie diagonal slope of rectangle is slope of high to low). This means the low point is the midpoint of the rectangle. Neely in MEW did this using 45 degrees as the diagonal ie created squares. Zoran used to look at the slope of the prior move to box the correction, believing if it slowed down (meaning exited above the bottom of the box) this meant it was a correction not a change of trend. One a trend break was indicated, he would then draw the box using the the slope of the new trend.

This seems to be what Carl is doing in his second chart, the one I put in the post. He boxed the low point and then the subsequent high point using the slope of the downtrend (the red trendlines) as the diagonal of the rectangle. He then draws the green lines to be the potential new trend at the same angle reflected up. It is interesting to see that the green reflected trendlines also match slope up from the low point to the higher low on Firday, potentially confirming a new uptrend has started.

[Mr. Panic]

COTSTimer writes that his signal has a three week delay and won't be triggered until Feb 22 so the market could still decline in the interim. There is a weekly cycle low due that week for the Nasdaq so his signal helps to confirm my preferred scenario: Decline next week and into the following week followed by a large bounceback rally into early March and collapse afterward into April.
And on a socionomic matter, the sequel to Wall Street,( dir. Oliver Stone,Michael Douglas as Gordon Gecko), Wall Street:Money Never Sleeps (With both Stone and Douglas returning) is due to be released April 23rd. The original Wall Street was released Dec. 11,1987 right around the time the final low of Oct. '87 crash was put in. Deja vu for the sequel? Coincidence?

[Roger D.]

Why have most think the law of gravity has been repeeled as to topping patterns in stocks? Has nothing been learned since October 2007? Everbody has a opinion like ***holes but to not see the "big Picture" I find hilarious.

Roger

[Dave B.]

"Thanks for your wonderful perspectives. I totally agree with Chris that the perma-bull opinions (carl) appear to be more distracting than anything. I am not exactly sure what sort of strategies he uses, seem like an improved mix of davos box theory plus, or the inherent weakness in those systems; I do know that anyone flipping a coin often enough will get it right sometime." - - - Amy

In ALL fairness to Carl Futia, at least he posts his S&P futures trades on his website for everyone to see, instead of all of the "paper-traders" that have blogs, but ZERO skin in the game!

[Dave B.]

"They (STU) have been on a roll lately, with better predictions than during the Hope Rally."

Yelnick, I would suggest that given how horrible Hochberg and the STU was during the Hope Rally, it really isn't that difficult to improve one's predictions... even one's that highlight a "Ski Week".

Next week will be where the "rubber" meets the Road.

:)

[DG]

You find that EWI's picture is bogus/funny ? Any fundamental mistakes in this approach 121212 ?

Yes. "Nested" 1-2 counts need to demonstrate increasing strength or weakness, depending on the direction in which the wave is moving. In this case, the market should be weakening, but ii retraces more of i than (ii) retraced of (i), which shows strength.

Then, if you go down another degree, the initial decline from ii, which presumably is another wave-i, is retraced just as much, if not more, percentage-wise, by the final two bars upward.

There's just no way that count is accurate.

[bob m]

"Hedgies [ ] were bearish going into first of January and have since turned sides."

"I want to respect the fact that these people are generally the "smart money" "

Sanjay & DG
Wouldn't it make sense that the "large" players would be long at this point. They have been right, which is what they are known for. So it would make sense that it is their mass EXIT that will create the "swooh" that will begin the violent descent.

Granted, you don't want to ANTICIPATE the point they ALL change sides, but their being long right now would make sense.

DG - Possibly, it would be interesting to not only see the % long for "smart money" AT those bearish inflection points, but also for the FOLLOWING week or two.

[Roger D.]

There are all kinds of triangles in minor degrees and also of large degree ready to thrust down on Tuesday.

The Hang Seng topped Friday and is in the 1st wave of 3 of 3,the Nikkei topped too.

The commercials ran the futures up in the last 15 minutes yesterday to clear the way for Tuesday's massacre,a classic maneuver to clear the shorts.

I expect after 2 days of decline in Asia and Europe before the U.S. markets open. I will here Mark Haines say. "we don't know how far down this market will open"

And most will ask what the hell happened as usual.

Roger

http://www.screencast.com/users/fast996/folders/Default/media/d97673fb-e8e5-4ec9-ae1f-90bc3454b540

[cloudslicer]

Next week the banks decide bull or bear. Point blank, C, BAC, JPM, WFC, GS are all looking like they are on the verge of a bungee jump off a cliff.

If they rally then, given the relative strength of tech I think we get a move to new highs. If they don't then I think the market should resolve downward to play 'catch up' to them.

There is no wiggle room with C, one down day will break long term support. The same can be said for BAC. JPM is a now solid downtrend and below the 200dma. WFC trapped between its 50 and 200 dma and is coiling up for a big move. GS is on the verge of a bearish 50/200 dma crossover.

All show weak volume patterns and distribution.

This bear market is and has been all about debt and banks. The financial stocks are the alpha and the omega of this market, the beginning and the end.

So far what I see is a split tape in the market with the financial sector threatening a major breakdown and a few leaders in tech that are in late stages of their advance.

Probability and outcome says down not up next week.

[Roger D.]

Everywhere I look and in every degree imaginable I see a triangle ready to thrust down. Tuesday is setup to be a real bullbuster.

This Valueline 30 minute is a perfect example and the AAPL 1 minute I posted above,that is a perfect 5 down from A to B on the chart,wow.

Roger

http://content.screencast.com/users/fast996/folders/Default/media/3a9ccf29-f36c-43d6-a7c7-76de62a859cc/2010-02-13_2111.png

[Roger D.]

Cloudslicer,

If there was hope of a bullish resolution to the U.S. Banking system these charts of the BKX and DJR should dash that possibility. As I said as a comment on the BKX chart. The next time this country installs a academic as our central banker, they should hang this BKX chart in the Senate lavatory. A testament to Ben Bernanke's foolish experiment on how to avoid a depression. Yes, Ben go ahead and blow another carry trade bubble. The China syndrome created with the USD and equities works wonders.

Roger

DJR REIT Index

http://www.screencast.com/users/fast996/folders/Default/media/08b4fba7-4c62-4e18-a58c-4e2db93484e6

BKX

http://www.screencast.com/users/fast996/folders/Default/media/990aa472-e542-41ae-831f-41dd47685953

[Chabazite]

Roger D. - Thanks for your reply and comments, and I am 90% with you. The remaining 10% is simply conditioned by the empirical fact that the markets almost NEVER act in the way in which you expect them to. Would hate to become like the Dickens character 'Mr. Pancks' who backs a near certainty, loses a fortune and spends the rest of his puzzling over whey it didn't happen!

[CarlFutia]

Chris, Yelnick, et. alia:

My motto is "often wrong, never in doubt". I did not see the 2007-09 bear market coming.

However, I do post real time, S&P e-mini trades on my blog and have done so since the top in 2007.

Results:

2008: up 86%
2009: up 89%

Not bad for such a poor forecaster, eh?

I doubt CXOADVISORY or anyone else here can say the same.

Carl

[DG]

Carl,

What % of your portfolio was at-risk on each trade? If you're risking 25% of your capital on each trade, 86% is a terrible return (e.g., my system would have returned 93000% over the past year risking 25% on each trade and would have returned as much as your two year return risking 3.8% on each trade). If you're risking 1%, it's great.

Big difference.

Also, I said above that even if you're forecasting the right direction less than 50% of the time, if your average winner is much larger than your average loser, you'll come out ahead in the end. As you probably know, lots of beginning traders get hung up on accuracy at the expense of understanding the win/loss size ratio. Of course, that kind of specificity isn't captured in the CXO Advisory grade.

[Carl Futia]

Gosh, DG, I'd love to follow your trades! Do you post them real time on your blog? Could you give me the link?

Carl

[barack0]

DG is full of it. I have not followed Carl's trades of the recent past unfortunately, but he has been very good it what I call this B wave chopfest.

Having said that, I think the gamechanger is upon us, a trend trading wave follower will do well in this market. I've got the next two weeks down, a move up thru early April, the the sell in May crowd gets out early b4 3 of 3 of C around May 1.

Note: I have a very good record trading a trending market, not so good in nontrending ones.

[Roger D.]

Cloudslicer,

I haven't checked all the major markets but the Hang Seng,Nikkei,and the U.S. are all in the same position at Friday's close in terms of Elliot count and pattern. I would imagine all major world markets are at the same critical point.

The Hang Seng 5 minute and daily charts

Roger

http://www.screencast.com/users/fast996/folders/Default/media/69aa9f70-7ae3-44ce-b91f-d4ee8268a67d

http://www.screencast.com/users/fast996/folders/Default/media/e98ed488-41f0-4851-bd4d-89eff1989d7c

[DG]

DG is full of it.

Dude, why the hostility? I was only making a point about risk-adjusted returns and that almost any system with a positive edge can return nearly 100% a year with enough riding on each trade. Do you disagree? If so, based on what? Anyone who understands the mechanics of portfolio and risk management would understand the point of my question.

At 25% at-risk, I would have made over 400% in the past month and every one of those trades has been posted in real-time on my blog. Obviously, 25% is a ridiculous number to risk on any specific trade and I don't mean to imply I think Carl is doing so only that without context an 86% return is either great or terrible.

[trendlines]

Yelnick and folks, hope you are havin a nice weekend! Thanks for the timely updates. Here's a general post i did explaining the elliot triangle and what it might mean for the market.
http://trendlines618.blogspot.com/2010/02/elliot-wave-triangle-explained.html

E-wavers, feel free to add or correct if necessary. Thanks!

[barack0]

Dude, why the hostility?

Let's just say you come across a knowitall asshole, but I'm sure you're really a swell guy!

[Roger D.]

Dubai Siuation as reported by Bloomberg this morning.

"Dubai stocks retreated the most in almost three weeks as Zawya Dow Jones said Dubai World, the state-owned holding company seeking to restructure $22 billion of debt, may offer creditors 60 cents on the dollar after seven years."

“The sizable haircut and the length of the deferral” as reported “is a disappointment,” said Julian Bruce, director of equity sales at EFG-Hermes Holding SAE, the biggest publicly traded Arab investment bank.

LMAO

And of course it get's better

Roger

http://www.zerohedge.com/article/sovereign-default-update-spanish-intelligence-agency-probing-cdsfx-speculators

[Roger D.]

Oh and get a load of this nugget from the above Zerohedge link. You don't think they(govs) know deflation is on it's way,to a country near you!

Greek FinMin unveils tax reform, wage policy, outlawing of cash: "From 1. Jan. 2011, every transaction above 1,500 euros between natural persons and businesses, or between businesses, will not be considered legal if it is done in cash. Transactions will have to be done through debit or credit cards" (Reuters)

Roger

[Michael]

Carl,

You must forgive our resident CLOWN here at "Planet Yelnick" who more often than not, does nothing more than get into one defensive "pissing-match" after another.

I have watched you post your S&P trades "real-time" on your blog for the past 6 months and have been very impressed with your performance.

It's too bad that so many "bloggers" and market forecasters (conveniently) shy away from posting their trades, real-time.

Carl doesn't shy away at all, and I have a lot of respect for his work, and his ability to pull the trigger based on his analysis, which I might add is very focused and consistent as opposed to the typical "scattershot" ramblings that one see's over at some other bloggers in which they jump from one indicator to another without even any clue as to the predictability value of the indicator they are highlighting in their "pretty" little charts.

The bottomline is that Carl posts his S&P FUTURES trades real-time. That tells me that he has "skin" in the game, and isn't some guy out there with a huge ego trying to make a name for himself on the Internet calling for the top of P2 for the past 6 months like a broken record.

It's very easy to have a blog on the stock market with all sorts of "pretty" little charts and NOT TRADE. It's entirely another to be pulling the trigger day-in, and day-out, and posting their trades real-time.

Thank You Carl.
I appreciate your work!

[cloudslicer]

I looked at the large cap tech this weekend. Its easy because the top 10 in the Q's make up over 50% of the market cap.

goog can't find a buyer off the Friday lows.
aapl just backtested the 50dma from underneath.
amzn looks spent
msft like amzn has this huge gap to fill if it breaks support.

intc - decent chart, sideways with some upward bias
orcle - slight bullish divergence on rsi

rimm - looks like it wants to break up out of a base. But you can also count the hole base asa corrective wave.

Then there is the canary in the coal mine: KLAC, this is the equipment maker for the semiconductor industry. It tends to lead the semis which in turn leads the tech (look at when it bottomed and topped relative to the Q's). Looking at the chart (OMFG!), its an impulse down and a corrective wave up. 90% chance that is turning lower, they can't even get this thing back to 31.11 to back test the breakdown.

So far CREE has the best chart I've seen so far.

CLNE, something I owed before, is hanging in there.

Bottom line: Tech has decent strength left but some very suspect charts in the mega cap names. This is not the sort of price action one would bet the farm on.

[DG]

Let's just say you come across a knowitall asshole, but I'm sure you're really a swell guy!

No, I'm not a "swell guy", but that doesn't make me a "knowitall asshole", either.

You have something other than attitude to share with the board?

[Wavist]

I'm sure that Carl understands risk management, having said that I can't see how it isn't a fair question to ask how much is being risked per trade. I would also be interested to know Carl Futia's longer-term yearly average as the last two years had abnormally strong trends. There is nothing contradictory in a low accuracy rate and strong overall trading performance as this is determined by the combination of strike rate and risk/reward ratio.

[Roger D.]

Trendlines,

Let me show you what "is" actually taking place in the elliot structure. I guess some would say these are a series of 1,2's,but I call them thrusts.

Out of this supercycle Wave 2 rising wedge,the market is doing what Elliot said it would do "thrust down out of the triangle"

It's is so beautiful and simple,yet most can't see it.

Btw the great bear market in 1929 took the somewhat same stucture a series of descending triangles formed down in the great "C" wave.

Roger

UTX

http://www.screencast.com/users/fast996/folders/Default/media/58947d56-8bd8-4691-99de-4222e910ddde

The Dow

http://content.screencast.com/users/fast996/folders/Default/media/36e9a670-d10f-4a2c-8504-ccc97757df3f/2010-02-12_1523.png

[dc]

I've stated my opinion, as have you. Let it rest before you dig (DG) yourself deeper. You remind me of the prick I tackled in red rover in junior high. He took a swipe at me when I tackled him. I pummeld his a** after that. You get what you give.

[DG]

I'm sure that Carl understands risk management, having said that I can't see how it isn't a fair question to ask how much is being risked per trade.

You are always very reasonable, Wavist. If Carl gave more detail (I'm not saying he should just because I'd like to see it), I wouldn't have had to ask.