What's So Special About This Chart?

Guestblog [& Service Tout] from David Grandey at All About Trends showing a fractal setup from 2008 that seems to point to the markets direction in 2010. From an FTC point of view, I have no financial relationship with this service, nor have I used it, so no endorsement is intended. Enjoy!

It's the NDX 100 Index off the 2007 peak. Does anything jump out at you? It should! Take a good look:

 

We've talked about ABC's. 
We've talked about Fibonacci levels. 
We've talked about trend channels.

That's a big picture chart. Now let's zoom in and look a little closer at the chart above.

 

We've talked about ABC's.
We've talked about Fibonacci levels.
We've talked about trend channels.

We've talked about the 50 day average.

Now take a look at the chart below, see anything?

 

If the similarities of the two charts above don't make you go whoa? We don't know what will. Those who are long only? You better be prepared!

Those who are wise enough to take control of their own destiny vs. allowing a traditional wall streeter to do so? Better start to think about hedging the long side of your account. Those who have 401k plans investing heavily into equities, you might want to think about raising some cash. Those who have IRAs and can't short? Better be looking at inverse ETFs.

Those who see it for what it really is? Yep get ready to have some fun on the short side.

Look at the current chart of the S&P 500. Look familiar? It should, its' setting up the same way the NDX 100 did back in 2007 JUST BEFORE The Markets gave back 10+ years worth of gains. You don't want to potentially have to go through that again do you? After all those who fail to learn from history are doomed to repeat it right?

Right now there are two things missing.

1. The C Wave of the ABC down we've been talking about for weeks here. By the time that wave is clear the damage will already have been underway and as we've always said you're late to the party

2. And of course YOU!

So the big question at this point is? If this breaks are you going to be prepared to take action or be a deer in the headlights?

We've got a list of short sell set ups that have been triggering every day for the last few days.

Hopefully you have been paying attention.

Want to know when the market is going to turn? We know, and it has nothing to do with the stock market and everything to do with psychology.

Week after week we've been laying out the most likely outcome here based upon Technical Analysis and it's ALL been in advance of it happening too. Now we are not saying that what happens next is exactly what is going to happen as we are not one to tell the market what it should do because the market doesn’t care what you or us think -- it does what IT wants to do.

NOTE: Those who rode the whole market all the way down off the 2007 highs via a traditional Wall St. style of account PLEASE PAY EXTRA ATTENTION.

If you continue to think the way you've always thought you are going to get the results you've always got. If you are getting the results you want? Just keep thinking the way you've always thought. If you haven't been getting the results you want? Then you need to change your thinking.

To learn more, sign up for our free newsletter and receive our free report -- "How To Outperform 90% Of Wall Street With Just $500 A Week."

Comments

[Patrick]

The full year run up to 1987 matches up pretty good with the last year.

[Mamma Boom Boom]

You need to get Hank to comment on this.

[Roger D.]

I'll post this chart of the ES futures 60 minute.

Does that triangular top look familiar???? You betcha it does and a larger one was at the top of wave "B P2" and now it repeats. Many stocks are still in their wedges or EDT's that's the reason for these formations.

Tomorrow is the 28th day and we shall see if deja vu is the du jour.

Roger

http://www.screencast.com/users/fast996/folders/Default/media/948910c0-f6ac-4820-a178-e2bf8e91bf3f

[Bird]

Nice comparison.

DG, Taz, here is where I am. First, I woke up to a beautiful open when my several short positions, based mostly on the 60 minute scale, were way good. Then as the day wore on I was psychologically unprepared for the degree of upward recovery. The 60 minute scenarios are still intact, but even if everything ends up going perfectly, this is NO easy thing.

One thing gives me some late in the day encouragement. A number of the individual positions (aapl, BKX, INTC) have fabulous set-ups for the last bar of the day, for an immediate move south. Now none of these are yet proven via an entry signal like a bar break, but they are structurally strong, suggesting at least that the markets are "looking" for the top of the retracement swing. We'll see but I will be thrilled to see an immediate resumption to the downside.

If we don't see it, I'll do a little less chatting for a while and just focus on my trades.

[Michael]

SPX retracements are 1104.69 and 1108.09
If you are a Bear, you really don't want to see the market get above those levels. In similar vein, I believe that Dow, 10,420 is key as well.

By the way, March 1st is a Bradley Siderograph date. There hasn't been much of a correlation between the Bradley indicator and the S&P in regards to "turning-points" over the past year and a half ( In fact, there has been a much stronger correlation between the Bradley and Crude Oil ), but it's still worth keeping an eye on, especially given that Sunday Feb. 28th is another Full Moon, and the equity market has shown a pretty strong correlation with that since Labor Day of last year.

Since 1930, Decennial Pattern years ending in "O" usually see a peak in the month of mid-March, which gives way to an average decline of 4.40% into June.

[DG]

Bird,

Things are starting to set up for a sell signal from my view as well. My ideal would be a flattish open so I could get short and then a nice drop to give my position some breathing room. We'll see.

"The 60 minute scenarios are still intact, but even if everything ends up going perfectly, this is NO easy thing."

Any scenario that lasts more than 60 minutes is a good one in this week's markets!

If it were easy, everyone would do it, right?

[David]

have posted an updated count for the SPX if anyone is interested :-)

http://www.tradeyourwayout.com/2010/02/sp-500-elliott-wave-update-60-min-chart.html

[David]

have also posted an updated count for the EUR/USD if anyone is interested...

http://www.tradeyourwayout.com/2010/02/elliott-wave-update-for-eurusd-pair.html

[Roger D.]

The S&P 500 cash 60 minute chart

http://www.screencast.com/users/fast996/folders/Default/media/579ea5be-485e-47cd-8674-3fe756e8b222

[Webber]

This market has been trading sideways for 4 months since it ran into resistance from the Oct 07 declining trendline. After popping above the line in Jan $SPX is now wedged against it on this countertrend rally support line. Today's opening fell below that and then closed back above with help from the PPT (massive ES bid volume midday). Since Nov volume has dropped dramatically except for the sell-off in Jan.

Meanwhile, the PPT has been pumping and dumping just enough to delay the inevitable collapse. There's nowhere else to go in this wedge. The drop this morning finished the first 5 wave move to the downside and was retraced 66% by the close. The bear is alive and ready to growl. Roger's 28 day timer will help--expect another drop at the open tomorrow on bad news.

[Roger D.]

The H&S Top In Goldman Sachs. Now ready to fall away.

I hadn't looked at in a while and the banks have moved up sharply here of late.
But GS still has this large H&S in place and looks to have backtested the neckline twice in the last month. It appears to have put a minor 1 down and now in the process of a 2 up,which I expect finished at todays close.

It has a downside target initially of below 130.

Roger

http://www.screencast.com/users/fast996/folders/Default/media/98a04c91-b129-486f-8550-b94ab17e16e0

[Roger D.]

Last one. 3M has a real nice pattern.

http://www.screencast.com/users/fast996/folders/Default/media/651cc3ea-45f9-444b-b304-b9204b9d4863

[robert]

I'd like to see a mirror image of today's action - pop at the open to achieve a higher high (1112.42+) and then a steady fade to the mid to low 900s by sometime in April. And I am itching to short crude oil which is looking really shaky at these levels imho. Just look at the TSX which is one big play in oil and gold. If that wasn't primarily a short squeeze by the pros today the supply of greater fools is much bigger than I thought.

[Hank Wernicki]

Fractals iterate ( base and copy ) while "Patterns" do not enjoy that particular function.

How many time have you seen a diamond "pattern," EW "pattern" or a head and shoulders "pattern" fail ?

I'll add more later, I hope Yelnick enjoys the Gold Fractal

Hank Wernicki

[DG]

"How many time have you seen a diamond "pattern," EW "pattern" or a head and shoulders "pattern" fail ?"

Hank, come on, you've made some good calls and some bad calls right here, so it's not as if fractals have a 100% success rate. I remember you calling for a 400 point down day the Monday after Thanksgiving, based on a fractal from the Friday before. If that's not a "failure", what is? You always seem to have a risk management plan to go with your forecasts, which is good, but that's not something unique to fractal-based trading.

[Anon]

A day like today makes a good case for the hyper-inflation argument. Bad news leads to people dumping currency. There is no will to defend the currencies as everyone is still trying to recover (or defend their recovery versus their neighbor). In fact the US dollar would fair well in that environment, because it's the key currency for asset purchases. Junk, both bond and equity, is worth more than dividend paying, cash on balance sheet types.

Example, even stock like GOOG or RIMM should under-perform against the RUT. Why? Who needs advertising in hyper-inflation and how do you escalate wages in that environment i.e. little incremental money in but having to raise wages to keep pace. RIMM has a bunch of fixed price contracts.

Utilities should under-perform and the RUT should outperform. The reasons are obvious. A chart is instructive. Chart a utilities index relative to the RUT and you'll see a large diamond topping formation.

Gold may under-perform until near the end since you can't squeeze people with something they don't really need. Food, oil, and hats (or at least according to one source about the Wiemar Republic). Short rates should start to rise quicker than longer rates. Why? Because the smart money will know that the game can't be played forever. So at the height of the currency deflation bubble, the yield curve will likely be severely inverted. The VIX should expand, not contract, which will lead folks to believe it is forecasting the next down-leg, when in fact is will start forecasting the next up-leg.

Does anyone really believe that those who found themselves in hyper-inflation thought: "Let's try this hyper-inflation thing and see how it works out and let's start it on Thursday". At the end of it they were just hamsters on a wheel.

Hyper-inflation isn't about leverage. It's about the velocity of money. In the electronic society where you can put your wage bi-weekly into a triple bull oil ETF, it doesn't take a worker more than a few seconds to push a button rather than having to wheel his barrow to the local haberdashery. It could come a lot faster than most appreciate and you have every central bank in the world stoking the fire and every government happy to see their citizens distracted, their tax revenues soaring, and their debt melting away.

Bernanke says deflation is still the primary concern. Greenspan says the recovery will be slow and halting. Since when have these guys had any clue what comes next in the petri dish experiment as Yelnick so eloquently puts it. Since when has the Fed been out in front of the next crisis rather than pushing the string (only to realize too late the thread is now pointed in the opposite direction).

I'm not saying that's what we are at the cusp of, but on days when it walks like a duck and talks like a duck it certainly builds the case. Actually I AM saying we are at the cusp - it just depends on the perspective of time (when) and price (where). The government's who are the most in debt (US and Japan) simply have no way to deal with their debt, no way to defend their respective currencies, and no political will for either. Eventually the inevitable will come to pass.

[DG]

Anon,

I think the problem is that hyperinflation is ultimately limited by the fact that the dollar is the international unit of choice for commodity pricing, especially oil. Any attempt at hyperinflating will be met by increases in commodity prices, which will slow economic activity to a point where it's just a constant boom and bust on an even quicker cycle than the current one.

The world may not be on a gold standard, but it is on an oil standard.

[Hockthefarm]

Fractals aside, wouldn't most technicians agree that a trip down to support in this inflation adjusted picture of the Dow appear to be a reasonable outcome??

http://www.chartoftheday.com/20100226.htm?T

Hock

[Anon]

DG, I'm not saying oil will be the lead asset bubble just as it wasn't in the housing bubble. It did get to $145/bbl last time though. Oil is too obvious. Who in 2002 said there would be a housing bubble in 4 years? Get your cabbage patch dolls out of storage just in case ;^) Perhaps salting a gold mine in California would be the best investment a guy could make.

On that point, I'll just add that I suspect that central banks aren't bidding up gold as a hedge against inflation. It is in fact a tool of inflation for governments, in a similar way to how the US Congress revalued gold in 1933. To explain: they took gold from the citizens at $20 approx. and then gave the citizens the choise - buy gold at $35 or perhaps buy land or cattle or hats. Apparently the people said gold wasn't worth $35 and the Great Depression ended.

Now the central bank says 'I'm bid $X for gold' and you decide if you want to bid against them or if you want to own land or cattle or hats.

[Mike McQuaid]

It's risky to go short this market until the NDX hammer on Feb 5 gets breached.
Find the golden mean retrace of the '07 high to the late '08 low to get broken, as support first, too. Getting trigger-happy on the short side can turn into a regret.

[Mike McQuaid]

SPX had a hammer Feb 5 too, serving as support. I give away the first few points until a confirmation arrives before I take a position on a trend reversal position trade.
Feb 5 is in a parade of higher lows off the March reversal.

[DG]

"DG, I'm not saying oil will be the lead asset bubble just as it wasn't in the housing bubble."

It's not even that oil was ever or could ever be in a bubble, it's that the cost of it, as a component of production, would be prohibitive of continued economic activity in a hyperinflationary situation. This would cause the economy to slow and inflation to recede.

I also doubt that in a hyperinflation any of the products manufactured with oil as an input, i.e. every product in the world, would serve as the vehicle to transmit that hyperinflation through the rest of the economy. The Cabbage Patch Kids factory will be shut down so that the tractors planting real cabbage can still run.

I think that in the final analysis, oil prices caused the housing bubble to collapse by pushing the marginal subprime borrower into default, which goes to my point that oil is the single most important price in the economy. We can't inflate our way around that fact.

http://theburningplatform.com/groups/honest-money/discussions/the-oil-dollar-peg-and-the-hard-dollar-hypothesis

"Right now economic policy makers don't recognize the new, hard, crude- swapping dollar. Most economists don't consider energy, it is to them simply another input, a commodity. What they don't realize is that economists can disappear tomorrow and no one will miss them, but oil disappearing tomorrow and the entire world comes to a screeching halt."

" As the more astute traders begin to see the dynamic in action - the rise to $80 then retreat, then stock market retreat - they will realize as I do that the dollar is now a hard currency. A dollar that is worth something is not a candidate for carry- trading or shorting against. Hoarding dollars will become an obsession. Who knows when anyone will see another dollar? If one appears, some oil- hungry trader will snatch it!

Each dollar worth something real; one- half gallon of crude oil. Since oil is the one thing that industrial economies cannot function without, pegging the dollar - a proxy for crude - becomes the second thing that industrial economies cannot function without."

" This is why the dollar/oil peg cannot be broken by flooding the economy with dollars. The oil price in dollars will rise then crash. After demand is destroyed, the price will stabilize then rise again ... until the peg is reestablished. There is no escaping the peg. The peg makes the dollar king and all the other currencies vassals."

"Let's see what happens now that oil is @ $80 a barrel. If the past is prologue, the price will retreat shortly, followed in a few days by stocks. "

[Canadian Money]

SP500

Anyone else see the current rally as a possible second wave, one with an upper limit at the Feb. 19th high of 1112? The downward moving impulse wave appears to include an expanding 4th wave triangle that overlapped wave 1. Seems a reasonable fit.

The Canadian TSX Composite Index also appears to be in a second wave correction but in that case there was no triangle in wave 1 down.

[Roger D.]

Fractals??

http://www.screencast.com/users/fast996/folders/Default/media/e3f63c60-4d39-4639-a1ac-f103b6fbf49c

[trendlines]

Hello chaps, here's a bullish interpretation to recent action on the SPX:

http://trendlines618.blogspot.com/2010/02/s-short-term-back-at-fork.html

[trendlines]

Roger D, i really like your fractal view. You have a good eye for them :) I've added a link to your chart on my post - I hope you don'd mind

[Chabazite]

Well, I think Gordon is to be congratulated. http://news.bbc.co.uk/1/hi/business/8538293.stm The UK economy is growing three times faster than predicted earlier, so the recession now appears to be well and truly over. No doubt he will make great capital out of this and use it as a main plank for his election campaign. Lets hope he can maintain this breakneck speed of recovery, in the face of collapsing consumer confidence, reducing money supply, reduced lending, increasing nervousness about sovereign debt, the end of stimulus programs, increasing interest rates in certain parts of the world, falling house prices, huge unemployment ..... Oh - and have the markets shot up as a result of this truly magnificent performance?? Na - didn't think so!

[Hank Wernicki]

YGH10 UP + 7.60 points Yelnick .. the copy fractal iterates from it's base

No I don't mind .. trendlines ok

Hank

I'll add some charts over the weekend

[Roger D.]

Trendlines that's fine.

Updated this morning

The possible extremely bearish pattern in the Dow

http://www.screencast.com/users/fast996/folders/Default/media/b5b26f56-7523-46df-b71e-e81352011039

[Ed]

Something tells me that Greece gets a loan and shorts get run over with a squeeze to new highs and beyond...Just the ticket to suck in the last stubborn retail, buries the shorts and sets the vampire squid up to lay out a lot of shorts across the board...then the rug gets pulled...Is there a count that matches that scenario? New highs must be ahead, I have way too many puts for a break to transpire.....

[Michael]

Only 420 Million shares after 3 hours and 15 minutes of trading today because of the Noreaster . . . Clearly, yesterday was MONTH END and portfolio managers were positioning themselves ahead of this storm.

[Shawn Tong]

Yelnick, have you verified the performance of "http://www.allabouttrends.net/"

And they are only in business 1.5 years? And I looked at a few of their samples on the site, seems pretty Traditional TA stuff. And the advertisement kind of showing "mind boggling" returns to attract newbies.

I don't know .... just does not seem like a real expert to me. Or do you know them personally? Thanks

[yelnick]

Shawn, just got introduced to them

[anonymous]

Another week goes by... And another month comes to an end . . . and still no P3.

Prechter has been short for nearly 7 months now since his "Special Alert" last August 5th with the SPX at 1000.

Meanwhile, several stock sectors have gone absolutely ballistic with huge trading moves.

What will EWI and the STU say again today? A broken clock is right every once in awhile!

:)

[Mamma Boom Boom]

Holy Government Health Care, it's so quiet you'd think it was Christmas, or something.

Ok, I've got a joke: An airliner is flying accross country, when the pilot comes on the PA to announce, "we have some bad news. One of the engines just failed and as a result, we will be delayed by 30 minutes."

A bit later, the pilot returns, "we have some more bad news. Another engine just failed, and we will be delayed an additional hour."

Another bit later, "Sorry folks, more bad news. A third engine just failed, and so, since we will be running only on the one remaining engine, the flight will be delayed by another two hours."

At this point, Michael turns to Dave D. and says, "I sure hope that last engine keeps working or else we'll be up here all night!"

(gik..gik..gik..gik,..... whew)

[NeelyIsALoser]

Yawn . . .
More drivel from the resident CLOWN.

[twitter.com/DrBubb]

DG's:
"I think that in the final analysis, oil prices caused the housing bubble to collapse by pushing the marginal subprime borrower into default, which goes to my point that oil is the single most important price in the economy. We can't inflate our way around that fact."

I Agree.
The subprime crisis was really an oil crisis. Stockton CA was "ground zero" in the crisis, with the city being 45 minutes drive from SF, 45 minutes from San Jose, and 45 minutes from Sacramento (have I got that right?) As oil shot thru $3 on its way to $4, peoole woke up and realised that they were not going to be able to afford to live there and drive 45 minutes each way to their jobs. The "cheap" homes they thought they had bought, were unaffordable. Those who planned to flip them, and make a profit they could use to buy somewhere closer saw it wasnt going to happen. So 1/3 of the buyers all defaulted at once, and the game was over.

Similar things happened in Phoenix and in ex-urban communities all over America. This end of the commuters suburban dream, was the final end of America's suburban project. But it will take a decade or so before everyone really understands that.

The suburban bust will reduce US oil consumption, as Chindia is growing theirs. And this little shift will turn into a much bigger shift as the dollar slides and really finishes off the suburbs.

Some think that a weaker dollar will be America's salvation. And, yes, that will bring back manufacturing in America. But at the same time, it will put up the dollar oil price - up to the moon. So as manufacturing comes back, ex-urban McMansion living will finally die. Very few will be able to afford the long commutes.

+++

I just had dinner here in Hong Kong, with a guy called Jack Lifton. He lives in Detroit and travels the word giving talks about Rare Earths, and how vital they will be in the future. The Japanese "get it", and are looking from sources of supply outside China. The US is only slowly waking up.

The high tech future that Duncan imagines relies on some vital inputs like that. Foreigners will not be keen to surrender vital metals and get paid in a sliding dollar. The US (and Canada too) need to realise that the global trade we have been seeing will be totally changed as the Dollar slides.

It will he a hard wake up call to take.