Market is Turning Into a Goat Rodeo

First we got the mark-to-close tease up on Friday, then the mark-to-close tease down on Monday, then head-fake down/up Tuesday, and now a mark-to-close drop Wednesday. The wave pundits seem equally divided on which door to pick, so many are hedging their bets hoping not to be the goat at the dance. Will the real market please stand up? 

EvilSpeculator put out their three pigs post to add to this dog & pony show. They narrowed it after the close to a two-pig contest with the odds at 50-50 tomorrow that the correction is over (and we drop) or that one of the greased pigs jumps through the hoops, sending the goats above Sp1100. 

Kenny may get the prize, again. (Maybe Evil could send Kenny one of those greased pigs?) He picked up on a thread of discussion meandering through various sites today of a reverse head & shoulders pattern in the e-mini, which became the top point in today's STU. The pattern also shows up clearly in the S&P, with a very flat neckline at Sp1090. The pattern suggests we continue down tomorrow but stay above the Sp1056 level of the left shoulder, then head back up. 

Futures are slightly up in the after market. A reader (Roger D) gave a nice chart showing the e-mini in a rising wedge. This suggests a break-down tomorrow to complete the right shoulder, then the rebound above Sp1100.

This would set the stage over the next two to three trading days to close the gap at 1115 and get to the 1122 area. This may get the bulls feeling their oats, but the rise from the bottom broke in three waves, and then we had the drop today, which means that this wave is merely corrective, not the start of a new bull. Many ewavers count it as a "3" up followed by an X wave back, with a second "3" up to go. If the bulls pile on, the subsequent drop will get their goat. 

We might be getting guidance from other markets. Treasuries had a big rise (drop in rates) as the Euro crisis drove money to safety over here, but rates are now rising, and the Euro has risen then fallen back. It may be the USD and the Euro are in a sideways dance for a few more days while Treasuries are falling, and this might encourage the stock market goats to dance their way back up. The whole goat rodeo may suddenly come to an end as Euroland problems re-emerge next week. 

Comments

[Roger D.]

The Euro tonight, looks like it could go either way. The last wave ended in a small EDT down. Should get a further bounce,but the overall pattern looks terribly bearish and the sharo rallys soon give way to more selling.

http://www.screencast.com/users/parisgnome/folders/Default/media/19f407f2-d281-4d36-9766-36ed2959c6a7

[Roger D.]

Maybe the USD is clearer....possible ascending triangle,if so "c" would need to hold at the trendline and complete legs D & E. A breakout would propel the USD possibly above 90 or no mans land.

http://www.screencast.com/users/parisgnome/folders/Default/media/893c8060-336d-4348-915f-246fd18c6eda

[Roger D.]

Hmmmmm............

http://www.screencast.com/users/parisgnome/folders/Default/media/d60afdcf-bdc0-48fa-8ac9-c61038a7dc82

Roger D.

[OracleLurker]

Hmmmmm............

http://www.screencast.com/users/parisgnome/folders/Default/media/d60afdcf-bdc0-48fa-8ac9-c61038a7dc82

Roger D.

- looks like a completed 5 waves down to me!

[Gibbs]

Ya think NeNozo!, Ya Think?

[Account Deleted]

E*TRADE FINANCIAL INC WEEKLY CHANNEL

http://niftychartsandpatterns.blogspot.com/2010/05/etrade-financial-inc-weekly.html

Thank you

[Roger D.]

"- looks like a completed 5 waves down to me!"

Granted, but this kind of wild moves(futures driven) is the mark of a market prior to a crash. If that USD chart breaks to the upside,watch out.

Roger D.

[Roger D.]

Now this chart blows my mind, if the market can break the 10200 and 1090ish SPX and complete the so called bottom H&S pattern, my hat's off to the bulls. I don't think so as there is major distribution taking place.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/c6f1fff2-b0a2-4032-9e8c-1996d195c4a6

[Michael]

Commodity and Energy stocks flying once again this morning . . . ACI, ANR, BTU, CLF, NRP, WLT, FCX, APA, X, and RIG. This is the greatest trading sector bar none. Hope everyone's having a great day!

[marketman]

"I don't think so as there is major distribution taking place." - - - Roger D.

Can you please tell us how you determine whether or not distribution is taking place? How do you quantify and identify that?

Thanks.

[Mamma Boom Boom]

>Thursday :

http://www.elliottfractals.com/Fractal___closing_5_26_10_email-1605867_24.jpg

Hank

Posted by: Hank Wernicki | Wednesday, May 26, 2010 at 12:34 PM<

Mamma (1)

Hank (0)

[Michael]

There is some VERY strong BUYING going on this morning with a more "stable" euro. This is not just a short-covering move in my opinion. Probably time for a rest, but we just printed SPX 1095. Very impressive rally by the BULLS!

[Roger D.]

"I don't think so as there is major distribution taking place." - - - Roger D.

Can you please tell us how you determine whether or not distribution is taking place? How do you quantify and identify that?

Thanks.

Marketman,

Look at the trendline and resistance line on my Dow chart,doesn't look very bullish does it. Bottom line the market is testing the 200dma a failure and the market will drop. Since this is the last gasp I expect we might try to get above it for most of the day.

The thing that makes this market dangerous is the wave V position in some Dow stocks and the EDT pattern in general.

We will see.

Roger D.

[marketman]

The TRIN was 0.14 on the opening.
That says a lot right there.

[marketman]

Roger,

Thanks for the explanation.

But I still don't understand how you would be able to quantify "distribution". As for your down trend line, I think that it is not all that meaningful. What looks to be more meaningful is the fact that many of the commodity stocks that lead the market off the February low, have now completed 5-waves down and have already turned back up in dramatic fashion.

Take a look at the chart of Michael's beloved CLF. Does that not look like 5-waves down completed down at $46?

It's now trading $56.

[poser formerly known as GLN]

I say markets effluviate higher like a nicely popped zit or something else then we go down hard on June 1st since it will be 1930 by then.

[marketman]

To Julie's point of yesterday, the NYSE A/D line did not show any negative divergences at the market high last month. As a result, that would imply that there was no distribution going on before the market "break".

http://stockcharts.com/h-sc/ui

The Bears conveniently ignore this classic point.

[Roger D.]

Marketman let's look at the big picture.....

http://www.screencast.com/users/parisgnome/folders/Default/media/9369d081-bfc0-45ad-86a4-0be99f4c25e0

http://www.screencast.com/users/parisgnome/folders/Default/media/1cb50875-7120-48a7-8353-3f4a68bbb048

Roger D.

[Roger D.]

A closer look at MCD.

Marketman,

Might MCD regain the bottom trendline and reverse the pattern in general? Anything is possible,but usually this pattern never breaks the lower boundry if it is a LDT.

So I am bearish overall...but you know that

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/3642bb8c-f2de-4b59-a37b-047335d16e89

[marketman]

Roger,

With all due respect, the trendline that you have drawn in your IBM chart is meaningless. I think that you need to reference Trader Victor Sperandeo's book and in it he explains how to draw a true, accurate, trend line.

[poser formerly known as GLN]

OOOuu!!

left hook to the right side of the head

[Edwin]

No one is talking about this contingent. If North Koreans open fire in the coming weekend than animals of all sorts would scramble like hell.

[Roger D.]

Roger,

With all due respect, the trendline that you have drawn in your IBM chart is meaningless. I think that you need to reference Trader Victor Sperandeo's book and in it he explains how to draw a true, accurate, trend line.

LOL, Don't be an ass!

In that chart pattern where a line is drawn exactly is meaningless.

Roger D.

[Roger D.]

MCD at retracement

http://www.screencast.com/users/parisgnome/folders/Default/media/649f5f72-9fe9-43d8-ad77-937179a221e9

[upstart]

Yelnick,

In the Monte Hall problem, you're misusing the math of the initial problem, where the probabilities are in thirds, on the new problem with one less door and one less goat. You cannot do that. Monte changed the situation from one where the contestant's odds of winning were 1/3 to one where his odds are 1/2. The chance that he already has the door with the prize is the same as the chance that the other door has the prize. It's self-evident. Nothing Monte has done would affect or indicate in any mathematical way or otherwise that the door the contestant didn't pick is more likely to conceal the prize. It couldn't. C'mon!

EN mentioned Marilyn vos Savant. She covered this problem about 15 years ago when she had a weekly column in the magazine that comes in the Sunday paper. She had the same interpretation as you. I thought she was wrong. Some readers called her on it. She stuck to her interpretation and invited more comment from everyone with intention of discussing it further. About four months later was just a blurb at the end of her column saying essentially, "Thanks for all the responses... This was a popular subject." Then I knew for sure she was wrong.

[Ed]

Edwin,

North Korea isn't going to do squat other than bluff...As stupid as they sound, they do understand that a strike against S. Korea will mean complete and utter destruction and the end of thier regime....China might get a little pissed, but we have a navy Mr. China man.

[yelnick]

Upstart, this is beginning to feel like three-card Monte. Monty's pick of the goat door is not random. He has two chances to pick, not one. He skews the odds away from 50-50 because of that. He eliminates the situation where the prize is revealed.

This problem is a real puzzle for people, and even has its own web page: http://montyhallproblem.com/

Suffice to say the odds the first pick are right does not change - it stays 1/3. The odds the prize is in the other two doors does not change - it remains 2/3. It is just the open door narrows the 2/3 doors down to one choice. Monty himself said:

"after one [box] is seen to be empty, his chances are no longer 50/50 but remain what they were in the first place, one out of three. It just seems to the contestant that one box having been eliminated, he stands a better chance. Not so."

[upstart]

Yelnick, submitted respectfully.

[yelnick]

Upstart, no worries. The Monty Hall problem has spawned a whole industry of debate. If the answer were obvious it wouldn't be so interesting. If you run simulations at home, you will quickly discover the odds are 2:1 if you switch, not 50:50.

[Roger D.]

MCD Update

Either way the end is near.

http://www.screencast.com/users/parisgnome/folders/Default/media/f54a6cc6-6aaa-47eb-9df2-b65747b2b1b3

[guido]

If the goat is a normal size goat, with four legs, His rear end is behind door #2 -pretty obvious.

So the only unknown is door #1

[Steven_737]

Ugly looking ending diagonal on 15min chart.
4 out of 5 legs complete.
Momentum shift and possible divergence (15min).
Upon Failure to Rally from here, retracement is in order.
If it fails, it may look like a spike north, a last gasp up and then down.
pattern from lows looks like a-b-c-x-1-2-i-ii-iii-iv-v(3)-4-i-ii-iii-iv-v?5
Divergence setting up on H1.

Lets see how this evolves.

[upstart]

Yelnick, alas, I'll have to agree to disagree with you and Monte. When a door and a goat are removed, the contestant's chances have not just seemingly changed but are mathematically changed to 50/50 and analysis in thirds is no longer applicable. Thanks for the fun discussion. Now I'll return to the headache of the market...and work.

Regards,
upstart

[Steven_737]

Treasuries stay down sharply after 7-year auction

marketwatch.com 13:05 EDT

[Michael]

Anyone short RIG this morning?

[Steven_737]

sharply??

haha

[Chico]

Mamma (1)

Hank (0)

Good call mamma!

[jz]

This is a typical problem in bridge. Suppose you cash Ace from AK1098, your partner
(the dummy) holds 7654, your left hand opponent drops Q, should you play him for QJ doubleton or play him for stiff Q. The chance for QJ doubleton is roughtly about 1/2 of the chance for stiff Q, because with QJ, your LHO can choose either Q or J to play, with stiff Q, he has no choice. This is so called "restricted choice theory" in bridge.

[Roger D.]

"If the goat is a normal size goat, with four legs, His rear end is behind door #2 -pretty obvious.

So the only unknown is door #1"

Nope, looks like a pygmy goat to me, and Monte don't let the little guy shit on ya, they like to do that.

[Account Deleted]

NASDAQ 100 APPROACHING RESISTANCE LINE.

http://niftychartsandpatterns.blogspot.com/2010/05/nasdaq-100-running-into-resistance.html

Thank you

[Steven_737]

and 5 min chart bearish engulfing candle

[Steven_737]

Ending diagonal Pattern is clearer on NQ 15 min chart;
ES 15 min chart has not decided yet what it wants to look like!

[Steven_737]

Of course if the bearish setup does not form properly;
or if there is no follow through on the bear side
and the market despite the divergence rallies, it will produce a strong rally.

[upstart]

Yelnick, no need to respond. But, let me try one last tact. Monte is revealing to the contestant that at least he didn't choose ONE of the goats...That's all it is. That has no meaning with regard to the probability of how the two remaining objects are placed behind two doors.

Now staring at only two doors, it doesn't even make physical sense to say that the contestant has a 1 in 3 chance of winning, or if he switches he has a 2 in 3 chance. We're down to two chances.

[Steven_737]

decision moment
ES forms double top or rallies?

[Steven_737]

the "last gasp" is in
either it forms a flag and trades north
or it breaks the trendline on the 5 min chart
and trades south
:) :)

[waver]

Sounds like could go up . . . could go down.
How do you trade off that?

[vipul garg]

Steven_737,
it is not possible to countwaves on 5mn, 15 mn charts.
you simply have to resort to someother analytical tool.

[marketman]

C = A at 110.37 SPY from the 1:06PM Eastern low.

[Steven_737]

"How do you trade off that?"

The way one uses flags - trend continuations
and finding support at the trendline
or piercing through the trendline

ps I am looking at a 24 hour globex chart