Technical Note of Caution

An expectation has built today of a big drop tomorrow. The wave structure would support this, with one important caveat noted in tonight's special STU: the wave down could be interpreted as either a nested 1-2 "coiled spring", meaning a meltdown is right ahead, or a completed minor wave down, in which case a sharp bounce is ahead, at least to Sp1095 and maybe above Sp1110. We should know at the open tomorrow which it is. If a bounce, it will be but a temporary respite. Clearly a bit has flipped in investors minds, and the market has found a new direction: down. 

Markets seek order, but are most often in periods at the edge of chaos searching. When they find order, they move much faster than before, especially when gripped with fear bordering on panic. During such periods they fall hard, then have big bounces, which are always interpreted as the bottom. (This is why bear markets fall down a slope of hope.) The whole period from May 1930 to Sep 1932 was marked by sickening slides interupted by rapid bounces - a saw blade down that sucked the life (and capital) out of the bulls. We may be entering a similar period. 

Do not interpret a sharp bounce as a reversal. We had one the Monday after the Flash Crash, and within four days had reversed back down. We are within spitting distance of the Flash Crash lows, and far from the highs of just a week ago. 

The efficacy of propping the market up with bailouts seems over. Rumor is of a big confab in Europe to try yet again to keep things together. The first Greek bailout flopped, the Euro-TARP failed to stem the panic, and the desperation move by Merkel only dramatized the impotence of bailouts. Germany and France have agreed to coordinate on supporting the Euro, and this leads to hope of a broader Euro intervention plan. More on that as it develops. 

Both the Dow and the S&P broke below their 200 DMA, an arbitrary but widely-watched indicator. This often acts a s a trigger for big funds to unload. We may see an attempt to get back above, and its failure could spark the rout. 

Comments

[da bear]

If stocks hold up at the open I think that Primary 1 is over with and Primary 2 is coming up. The plunge looked like a smaller version of the fall 2008 crash and the Fall 1929 crash with the heart of the crash in the wave 3 down, a rally, then another leg down on lower volume.

I like cash though. Nickels are a good bet too.

da bear

[NeelytheGuru]

WOW!!! That's a Low Price !!!
Did you say low Price
WOW!!! That's a Low Price !!!
I know...

sentiment theme....

[EN]

The Hurst cycles are due to bottom at the end of the month. I am going with an ABC correction into May 28.

[marketman]

I'm a buyer of the coal stocks off the opening... Already a $2.60 bounce in CLF off the opening in the first 7 minutes!

[Steven_737]

The hourly and 15 min ES chart (including European trading hours) appears to have completed minor w3 down at the May 6 low area.
I therefore expect today to be a w4 that could retrace to the 1102 - 1114 area (on ES) before minor w5 drops to cross the May 5 low on its way to 1040 - the Feb 5 low. A w4 is consistent with options expiration.

cheers...

[Michael]

What data-feeds are people using to trade with in this kind of volatility?

Just curious to learn what people are using.

[Ed]

Michael,

I use IB and TradeStation and have not had one bit of disruption the last few weeks.

[Mamma Boom Boom]

Come on fellows, pay attention. I told you yesterday what was shaping up.

[Wave]

What data-feed do you use for trading, Mamma?

[Roger D.]

Good be the biggest bull trap in history.

MCD's kiss goobye to the lower trendline. Looks like we finished a 1 down this morning and completed broadening top formations. This rally is only for short term traders as the collapse wave down will follow. A historic panic will take place after this "sucker" rally runs it's course.

Beware!

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/c4016b4a-579e-4aa9-9735-71c6996216a0

[Wave]

What kind of a trader are you Roger?
Are you not a short-term trader?
How often do you trade per week?
Thanks.

[Roger D.]

Sorry for the mistaken spelling above,too early in the morning.

But here is MCD's chart with the broadening top penciled in. A true BT is a real rare bird and this one is so perfect. Check Magee & Edwards chart on Air research's top in 1929.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/d51e1da0-fa85-453b-902e-b115cfb36679

[Steven_737]

Minor consolidation (10:58 EDT) before attempt to take the daily pivot at 1077.
R1 at 1087.5 R2 at 1104 R3 at 1114

The region from 1094 (yesterday's high) to 1104 (R2) looks like a good target for ES day-traders and pivot traders.

For support look at S1 is at 1060.5, and 62% retracement of wave a of w4 at 1062.

Lets see how the pivots provide guidance for the w4 evolution today.

cheers...

[Mamma Boom Boom]

>What data-feed do you use for trading, Mamma?<

There are some things that a girl just doesn't talk about, in public, if you know what I mean.

[Wave]

Now why would it be so difficult to share what data-feed and trading platform you use? Is it because you are a POSER that does not trade???

Sure seems like it.

[Roger D.]

3M's daily chart. Most will say the trendlines are wrong, but this long advance looks to have ended,there's no more money.

http://content.screencast.com/users/parisgnome/folders/Default/media/56b84f50-42c0-4a0f-9e6e-33e3dd132a57/2010-05-21_0828.png

[Steven_737]

ES reached 1088.75 (R1 1087.5)
It appears that a retracement to 1078~1080 is in order before trying to reach yesterdays high (1094).
Then time for lunch and wave b of w4.

Lets see how it plays out.

cheers...

[marketman]

Roger,

Thank you for "confirming" that NRP was a buy yesterday when I bought 4,000 shares of the 10% dividend yielding coal stock at $20.75 / $20.80

I already have a full point in it.
:)

[Wave Rust]

Hi EN

guess you didnt hear that 313 cycles hits in the first hour. :)

----------------------

i agree with caldaro

it's a 4

this is the d today and probably Monday morning, then the e ,,, thats why i'm long

and, like on Thursday next, you better buy the heck out of waning down energy of wednesday.

trading the 5 profitably will require an early high risk entry. most of the move will be early. watch for a high very late july and a rolling top into late august.

--------------------
to me, the 200 ema or sma is a good indication of where the market makes a correction low. in bull markets, good corrections end there and sometimes hover there late in a bull.

and this is early in the bull ,,,, as in, Primary 1

thats how an imbecile, like me, sees it ,,,, it's always much simpler than you can make it, isn't it.

---------------

but then you can always check mamma ,,, she's the no nonsense - no feed - no trading - Oracle at Delphi. Just ask her.

have a nice weekend

wave rust

[Roger D.]

Marketman,

put a stop loss in, this market is headed lower,as soon as this rally is finished.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/b3c530e1-dd66-4202-8442-21605255972d

[da bear]

Roger D,

Looks like you are right! I will click on that chart in a second, but as I posted earlier I think Primary 1 down is done. Looked like the Fall 1987 crash... and the Fall 1929 crash. I remember posting on here about those two copies when the fall 2008 crash was in progress.

So the top of Primary 2 will be the best time to go short in the history of financial markets.

A Primary 3 target could be DOW 911.

If you have a copy of At The Crest of the Tidal Wave then this bear market is playing out like Figure 5-7 (which ironically is the mother of all alternate counts). So we had a mega orthodox top in 2000. then the 'A' wave low in 2002/2003. then the 'B' rally into 2007. The wave 1 low into March 2009. The wave 2 upside of cycle degree or higher ended last month. So now we have just finished the first i wave down in the biggie WAVE 3. So the heart of WAVE 3 down is coming up. this WAVE 3, according to the THIS IS NOT A FORECAST alternate-of alternate counts would then correct all the progress in stocks since the 1932 low (or something like that). This wave 3 low will be followed by a 1932-1937-style wave 4 rally with a final higher wave 5 low going into 2017 which would market the end of Super Cycle C.

We will then get a Super Cycle D wave bull run for about 16 years (this is a super cycle run that I have invented but has not taken place yet) followed by a Super Cycle Wave E that takes stocks to, uh, zero, or 41 or something like that.

da bear

[Roger D.]

Here's a updated count on a 60 minute Dow chart. One more thrust up and that could finish it. Or could last into the EOD,but I would not want to be long over the weekend as Greece will probably default.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/a9f04398-66a3-4878-9d35-06c257d34a07

[robert]

Yelnick on the subject of the veracity of bounces, no matter how extreme, I recall reading somewhere that after a trend reversal, the bullishness and optimism would remain inordinately strong all the way down into a very deep bottom. Looking back from some future this would chart as a long steady decline reminiscent of 1930-32.

Please see Bob Farrell's Ten Rules For Investing, rule #8. I suspect we might be entering the third phase of this rule.

http://bigpicture.typepad.com/comments/2008/08/bob-farrells-10.html

[marketman]

"but I would not want to be long over the weekend as Greece will probably default." - Roger

Do you even have the faintest idea of what you are talking about???

[Steven_737]

Nice consolidation over Lunch.
ES bounced on 1077.5 daily pivot. price is 1081 at 13:10 EDT
Lets see the final attempt to overcome R1 (1087.5) and reach 1094.
I wonder if this leg is going to be a noisy ending diagonal or a clean 5.
If only the locals play (day traders have left) then a noisy market is expected and ending diagonal is more likely.
Targets are 1091, 1094 and 1100 on the outside.

Support is at the 1077.5 daily pivot.
Now lets see how the locals play.

cheers...

[Mamma Boom Boom]

>but then you can always check mamma ,,, she's the no nonsense - no feed - no trading - Oracle at Delphi. Just ask her.

have a nice weekend

wave rust<

You sly dog! Your just trying to get some extra soup in your cup, aren't you.

[da bear]

the recent crash looks like the initial Fall 1929 crash.
link: http://www.sharelynx.com/chartsfixed/USDJIND1929cr.gif

The big crash down in October 1929 (wave 3) with the panic and volume associated. then a quick bounce to fill the gap (wave 4) followed by a slightly lower low (wave 5).

here is the current chart: http://content.screencast.com/users/parisgnome/folders/Default/media/b3c530e1-dd66-4202-8442-21605255972d/2010-05-21_0925.png

Note the similarities, especially the steady rise on the left, the topping out, then the steady slide lower right before the great spill. The current chart has the nominal DOW high, then a sell off (Wave 1 down) then two lower highs (wave 2) then the big drop (wave 3), the reflexive rally that followed (wave 4) which was marked on this chart as (2). From the wave 4 top the initial big drop was a i. followed by a wave ii bounce. wave iii which started at DOW 10,700 did the majority of the damage in a three wave move (iii), then a small bounce (iv) followed by new lows (v) to complete Wave 5 of PRIMARY 1 down.

PRIMARY 2 will serve mainly to frustrate the bears.
today's DJIA is looking impulsive to me. but it needs a strong finish to the day.

da bear

[Steven_737]

Both ES and NQ hovering at daily pivot.
1077.5 and 1811 respectively.
hehe this is going to be interesting.

[Account Deleted]

We could see this pullback topping anywhere between 1127-1143 and should take around 8-10 days for that to happen.This probable 2nd wave down is taking the shape of a ABC Flat since 1065 Crash bottom.
Post this correction once we break 1055 on downside we could see a major Wave 3 down which could touch somewhere around 890 minimum or 740 (stretched) on downside.It could be one hell of a fall.A godsend oppurtunity for die hard BEARS.

[Account Deleted]

Also this entire rise (C of the ABC from 1065 bot bottom) from todays bottom of 1055 could take the shape of a Terminal Impulse,thereby leading to a rapid fall post terminal.

[Steven_737]

The task for NQ's w4 is to reach the price area 1838.75 (yesterday's high). Higher targets are: Fibonacci projections 1843 and 1855 (although "Assumed w1" low is at 1849.5)
R2 is at 1855.5

In any event, a failed 5th is also plausible, ES failing at 1088~1089 and NQ failing at 1833~1834.

On a 5 min chart, you can see that today's action is abc-x-abc-x -1-2-i-ii-iii-iv-v i.e. 3-abc i.e. 4-i-ii, now expecting to see iii of final move for A of w4 or BUST below the daily pivots.

cheers

[marketman]

Thanks Steve!
I always appreciate your insight.

[Roger D.]

Here's a email from a friend with ties to Europe and Asia. I asked him about the Greece situation and here was his response.

"Basically Greece was the originating point, as the weakest link. However they can’t technically default. That WAS taken care of in the near term. Nothing has been done to CORRECT the underlying causes, BAD Fiscal Policies for decades. EU reacted way too late, and now the Rich are really feeling the reality that these sloppy weak EU players CAN take everybody down, as the populations that ran themselves into the dirt???They don’t want to CHANGE. They’ll just STRIKE and screw the world. Underperformers? No they’ve never REALLY performed in modern times, certainly since WWII.

How the EU went away from all those great formulas everybody guaranteed in membership? Now the T-shirts say “EU Happens”. But embarrassing themselves this openly, a bunch of serious EU players are considering options only previously whispered. I work in the Int’l Community everyday. From Asia to Europe…they’re really worried……EU stops, China recovery stops. Even the Aussies and Kiwis are taking hits after totally side stepping the global down turn."

So yes marketman I probably over dramatised the situation. But that doesn't change the current negative sentiment around the world.

Roger D.

[da bear]

What is Robert McHugh saying?
Sometimes he is really on the money.

What is the preferred EWI count? I see a five wave move down similar to the major crashes I talked off before.
A PRIMARY 2 to frustrate the shorts and burn through options premiums will set up a PANCAKE PRIMARY 3 collapse.

What do I mean by that?
Well, let me say this.
WTC #1 equals the DOW.
WTC #2 equals the S&P 500.
WTC #3 equals the Nasdaq.

da bear

[Roger D.]

Speaking of Euroland,maybe this is why todays bounce is so far uninspiring.

http://www.screencast.com/users/parisgnome/folders/Default/media/3805bb8b-fca8-4212-bb06-b00397f616d8

[Steven_737]

It looks like it was a failed 5th.
Now in wave B of w4.

38% retracement at 1074.5
62% retracement at 1065.5

Preliminary Fibonacci projections for C of w4 are in the range 1098 to 1112.

Wave C of w4 is expected to last 3 to 5 hours (in Fibonacci relation to 3 hours of wave A )
Wave c price action will take place on Monday, the question being how much of it will it occur pre-market.

cheers

[Mamma Boom Boom]

That little pop at the end looked like a piece of swiss cheese. But, I still think next week is big

[upstart]

You pros would have to tell me if that last pop had any volume on it, but it sure smells like a late short-covering/fakeout that will go higher into some gaps Monday a.m., then lead to another drop, per EN's call.

[Roger D.]

Better tie a bungy cord to this thing next week.

http://www.screencast.com/users/parisgnome/folders/Default/media/7f6e0d5c-2acc-46e7-ba22-422bc5f62c39

[da bear]

upstart,

why would shorts cover if they thought that the market would go lower?
A bad close on the DOW would mean that the stock market would close around noon on Monday.

The May 2010 crash had the intense sell-off in it's wave 3. With a secondary wave 5 low coming a little later but with not the level of selling (less volume).
Just like 1929.
just like 1987.
Just like 2008.

Prechter coming out with a "CRASHY McCRASH" type call at the bottom of PRIMARY 1. That would be par for the course... A PRIMARY 2 here would get the bulls all in, but that is not the point, it will suck in all the put options premiums for June for those MEGA DEATH MEGA BEARS. It would also get all the gold bugs all-in on margin. Then they both go down. The dollar could then rally especially if we invade Mexico. If Europe invades Mexico then the Euro will rise. If I go to Cancun for the summer then my DA BEAR BUCKS will rise.

da bear

[Steven_737]

"That little pop at the end looked like a piece of swiss cheese"

How do you mean that?
as in "sweet"
OR
as in "full of holes" i.e. weak?

what is big in your dictionary?

Regarding next week, I think that after w4 concludes, w5 will reach and test, most likely breach, Feb 5th lows at ES 1040.
Preliminary Fibonacci projections regarding the w5 bottom point to 1018~1024;
Then a rebound.

976~990 is not out of the question.
But that is a different ball game;

THAT move is BIG.

on the upside: market will have to stabilize above the 1135~1170 range AND not look wimpy, if one is to become bullish.

My take is that Price action, wave structure and market internals, after the bounce north from the 1020~1040 low area will tell the next market move.

In other words, if price manages to go back to the 1050 area and the subsequent price action through the 1135~1170 range is not an "exhausted" final wave up but a good thrust on high momentum, that would make me consider a bullish scenario.

cheers

[Steven_737]

In other words, if price manages to go back to the
1150

area and the subsequent price action through the 1135~1170 range is not an "exhausted" final wave up but a good thrust on high momentum, that would make me consider a bullish scenario.

[Roger D.]

The chart of McDonalds shows the burden is on the bulls. Monday is probably going to be key, will the gap get filled in a further pop up or do we gap down in a 3rd wave. The put call is extremely high here,so it should be interesting.

The Euro yet again is the driving force and 1.20 and par look to be next.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/59295729-d97d-4ceb-8ffa-8bd92d4f895d

[anonymous]

why would shorts cover if they thought that the market would go lower? A bad close on the DOW would mean that the stock market would close around noon on Monday." - da bear

You can't be serious.
And if you have no clue why shorts would want to cover BEFORE the weekend, let alone a potential 3-day weekend in Germany... then I can't help you. EU coordinated effort??? Nahhh, that couldn't be a good reason. Duh.

[Wave Rust]

Roger,
Traders BUY negative sentiment, not sell into.

This is so bullish, I can't wait till Monday's open.
------------------------------------------

This ""going to hell in a handbasket"" chatter is exactly what somebody like me BUYS ! ! ! ! !

The traders buy while the chatters are predicting and projecting how low it will go, or how similar it is to 1929 etc.

So why is Eliades predicting a minimum of SPX 1022, before going to 900 something ,,,, while Doug Kass is buying with both hands? (me too)

spx 1022 ,,, big whoops

It Is Bullish. Period !

Do not sell/or short now, if you're bearish ,,, just run to cash ,,,, and wait to see if your price reaches higher at a point where you would become bullish.

All these bearish chatters pop up with a minor pullback ,,,, just a 38% pullback from the July low to April run. ((( it's another 4th wave ))))

c'mon, you have to think clearly and objectively.

I'm long the bull and short the crap.

Caveat: I'm always ready to be wrong and reverse. ( but go back and read the comments in early Feb.'10, July'09, March '09)

:))

wave rust

[Wavist]

I'm inclined to see today's low as a bottom of sorts, perhaps just the penultimate but certainly not a place to go short by any means. Expected 5th waves and the like are to me occasions to stay well out of the market rather than trying to squeeze every last point out. Having said that the question is whether the market can break 10300 to the upside. Until then the burden of proof rests on the bulls as we remain in a medium-term downtrend, albeit one on the edge. And lay off MBB no one has to tell you anything. For all the relevance you might as well demand her magazine subscriptions. Stick your data feeds Mamma rocks.

[JT]

Mamma has no clue what she/he is talking about. The "guy" doesn't trade and is most likely some college kid playing on Yelnick's blog ... acting like he's some kind of big time trader.

Get real.
He can't even asnwer a simple question.

[barack0]

lol!! Cogent remarks nonetheless.

[usdollar]

It looks like an abc wave A completed.
Flat b and sharp. Wave B should last to about mid July. Then down to test earlier lows. Sideways to beginning of November when we go for Dow 750-2000.

[Mr. Panic]

Considering the McClellan Oscillator made a new low reading and yesterday registered as a severe 90% down day with breadth and volume, there was very little panic yesterday or this morning. The fact that I and every bear and bull expects a monster up day on Monday has me worried that the downleg has not achieved its momentum low. Of course if the bull is to resume Monday or Tuesday needs to be a monster up day. But the 200 day average as well as yesterday's gap zone should provide major resistance. Those (and there were many including a certain contingent of E-Wavers) who went long at Wednesday's level are stuck there and I don't think the stock market will be bailing them out.
The momentum low downleg of the Nasdaq in April 2000 did not drop below the 200 day average but DJIA and SP did accelerate lower when they breached the 200 day average off another certain major high.
We are three or four days from reaching a major milestone unless the stock market blasts off from here. Today was a very strong breadth day. The bottoms on Feb 5 and October 10,2008 did not feature this type of positive breadth. But today's strong breath helped to alleviate the McOscillator's severe oversold condition and wasted it on an only 100+ day rally.