Three Scenarios and a Wildcard

The WSJ led this morning with The Dow's Worst May Since '40, but finished with a ray of hope: "a big drop in May has often been followed by double-digit gains over the next three months." After the deepest devastation in seventy years, optimism! Such is the slippery Slope of Hope that bear markets ride down. Be careful not to risk your capital over aphorisms like "sell in May" or "Summer Rally." Instead, let's take a look at the underlying wave structure.

For those of you who read the comments to this blog, I recommend the prior post, as it has a good discussion in the comments of the possibilities. In my recent goat rodeo post, a reader had noticed a rising wedge on the e-mini overnight. As the wedge predicted, in the morning the e-mini broke down and touched Sp1056, completing the head & shoulders pattern and signaling a bounce was on, as it was. Good advanced warning! 

Right now many of the comments are riffing off this month's EWFF and last night's STU, which together provide three scenarios, listed in order of increasing odds:

1. Summer Rally: new highs by August!
2. Big Tease: a rise to Sp1150, creating a triple top with January plus a large head & shoulders
3. June Swoon: not much more than Sp1120 (if that) and the big drop comes

Before I dive in, note that I have found (as have a lot of my readers) that the STU alt count often is the better count. EWI is an über-bearish group, and all the way up in the Hope Rally the alt count has given better guidance. Usually when the prime count is going awry, Prechter provides perspective in his mid-month EWT. Since the prime count (#3) and the alt count (#2) may start off about the same (sideways to somewhat up), I expect an important EWT mid-June. Given such a spread of outcomes, it might be prudent to wait. At the same time, the EWFF came out in the morning, and the STU came out after Friday's close, and was much more emphatic about the June Swoon. With all that in mind, here goes.

Summer Rally

This counts an ABC correction off the Apr26 top with the expectation of a five-wave rise to new highs to complete the Hope Rally. The Flash Crash is an A, the Flash Bounce is B, and the Double-Bottom is C. I think the strongest part of this view is the Flash Crash, which can count as a "3" if you take it off the orthodox top. Flat correction, or zigzag with an unusual B wave. The red count in this chart from WavePrinciple shows the Summer Rally count:

 

A major supporting factoid for this count is the strong breadth to the upside - it hit an all-time high. Thursday was also a 97% upside day. Tony Caldaro uses this to support his bullish case:

Market breadth, in the US, recently hit an all time high during the latest uptrend. Bull market tops are usually accompanied by a negative divergence in market breadth, i.e. 1987, 2000 and 2007, not new highs. Some of the six economically sensitive SPX sectors start to display negative divergences, versus the SPX, prior to impending bull market tops. Currently only the XLU (utilites) failed to make a new high during the latest uptrend. Therefore we have to conclude that equities are in a bull market, they have not topped, and they currently display no signs of topping in the near future.

The EWFF pre-emptively dealt Tony's argument. The Flash Bounce open on May10 was the third largest in S&P history. Looked at in isolation, the strong breadth seems bullish. But the other two even stronger opens were on Sep19 and Oct13, 2008, right in the middle of the huge crash down. Those days were retraced within one or two days; the recent Flash Bounce was completely retraced in seven days. This is what also happened in 1930-32: big exuberant rallies within a sickening slide down that Slope of Hope. 

Another version of the bullish case comes from PUGridiron, which gives a view from Purdue of what the really bullish count could look like. As their chart below shows, they count the Mar09 bottom as a major bottom, fitting the four-year cycle low (a year early) and targeting a top at the peak of the next Presidential election in 2012. Under the PUG count, this Flash Crash would be a major wave 2 (P2 in their count) before a rip-roarin' P3 up to new highs: 

They give the Hope Rally a five-wave impulsive count, which we have discussed before in the context of Tony Caldaro's bullish count. This count is problematic since there is no alternation in the two corrections on the way up (Jun and Jan). Tony recognized the problem of simply calling Mar09 to Apr26 as five waves, and had a more complex count to overcome that weakness. That count too had problems, as many waves were disproportionate (higher degree waves smaller than inside waves). For a variety of reasons Tony has changed his count to match the PUG simple five-waves up from Mar09 to Apr26. He still has the problem of a lack of alternation but he is looking across a lot of global markets to create a unified count. Read his posts to draw your own conclusion. 

The bullish count is highly dependent on the Flash Crash being a corrective wave down. a "3" not a "5". One way to correct this "3" to a "5" is to consider the Flash Crash bottom as a wave iii with a truncated wave v to complete the pattern. I commented on this previously. Alternatively, the Flash Crash could be considered a 'botware bottom, with wetware (humans) having stopped well above, leading to the same fifth wave bottom on the day after. Here is a chart that shows the truncated fifth:

If you follow Neely or Zoran Bifurcation Theory, you would mark the top not at the high point but at the last peak before we broke down out of a trading range. This also gives the Flash Crash a proper count as an impulse down. 

If you peruse this next chart, you can see how the thrust up off Feb5 ended at Sp1213, before the peak (marked with a blue 3), had a second top at the peak; and then had a final top on May4 before the plunge. That final top at ~Sp1205 is the Bifurcation Point, where the market ran out of the prior two-week trading range between 1182 (hit three times) and 1209 (hit also three times):

 

A bifurcation of this magnitude makes it unlikely that we have the bullish case. We also broke below the Feb5 low (Sp1045) as well as below the Feb16 Bifurcation Point that broke out of the trading range around Feb5 of Sp1060 to 1080. These breaks indicate that the current correction is correcting at least back to the Jul09 low. 

Of course, the optimist would say that support at the Fed5 level has held! Consider the optimist case, that this is a normal wave 2 correction after a wave 1 up from Sp667 to the top at Sp1220, or 553 pts. The minimum correction expected would be 38%, which would be 211 pts, or Sp1009. Instead we have only corrected 33%. The normal wave 2 would go back 50-62%, or to Sp943 - 878. Thus, even if the fabled Summer Rally is ahead, we have more downside to take care of first. 

Under the category that Mother Market is a mischievous maiden, this means the Summer Rally case should start with a June Swoon! 

Big Tease

The tease is a rise to Sp1150, which might take most of June and even meander into July to complete. The wave count would make the Flash Crash a wave [iii] down, the Flash Bounce wave [iv], and the Tuesday May25 bottom at Sp1041 the end of the first wave down off the top. Interesting for contrarians is that among the many wave sites, this count is a rarity. It was discussed in some detail in Friday's STU. 

With all the ink spilled about the Summer Rally, you might expect similar length on this count, which I tend to prefer, but no need. The Big Tease count is more straightforward than making the Flash Crash the end of wave 1 down. In it the Flash Bounce would become a wave [iv], and it goes back into the range of the fourth of the prior third, a normal relationship. 

The Big Tease implies that we are in a wave 2 back up which should retrace the whole drop from 1220 to 1041, suggesting a bounce to the Sp1130-1151 range. This is consistent with the head & shoulders, since normally that would go to at least Sp1140, smack dab in the middle of that range. Rather than pick and choose among indicators, follow their logic until it breaks. 

June Swoon

The Swoon counts wave 1 to the Flash Crash, wave 2 to the Flash Bounce, and Tuesday's low as an inside wave [i] down of wave 3. The last three days have been a normal 50% retracement (very clear in the e-mini) and took 38% of the time of wave [i]. This is enough for it to be finished and the June Swoon to start right away. A lot of blog sites have this count. Here is Daneric's chart: 

 

He has a fine discussion of the minute behavior we might expect on Monday Tuesday, including a head-fake down (maybe before the open in the e-mini futures) and then a run up to the next level of Sp1122, closing the gap at Sp1115. 

Interesting as well is this Three Drives pattern, which suggests a run back to 1120 is in order before a drop to Sp990:

If we drop, a key item to watch is the Death Cross of the 50 DMA over the 200 DMA. The 50 DMA is now providing resistance, not support, and a cross of it with the 200 DMA would be a sell signal for many funds:

 

The 200 DMA is widely watched, and we recently went below it and came back to test it from below. Down volume increases as we approach from below. Not being able to cross it is a very bearish sign. More on moving averages here. 

A final topic to note is some wavists found a leading diagonal in the drop to the recent low. Blankfiend led the discussion and later repudiated the LD (since wave 3 was larger than wave 1). Wavists saw both a small LD and a large LD. The implication of both is rapid downside next week. Here is the large LD chart:

 

The LD folk should step back a bit. This pattern enlarged beyond the small LD or big LD all the way back to Apr26 can be considered a bullish descending wedge:

 

Conclusion to this scenario: we could just drop Monday, but more likely have a little more retrace to go (1120 area) before we truly drop. 

Wildcard

A reader with the handle DG has posted a comment of an interesting variant on a Neely count: that we are in a diametric pattern. Neely counts us in a contracting triangle with the Flash Crash as leg A, the Flash Bounce leg B, and the recent dive leg C. This suggests a trading range that narrows into the late summer.  

What to Watch Next Week

As the STU puts well, Mother Market should tip her hand early:

• A drop below Es1065 (futures) / Sp1065 (cash) / Dow9953 means big drop commencing. The break below the low last week is as clear an indication as one gets that more downside is ahead
• A rise above recent intraday highs of Es1107/Sp1104/Dow10264 means we at least head above 1115 or to 1140 first

For a view into broader market participants, watch the 200 DMA and the possible Death Cross closely, as a lot of funds watch those indicators. A sideways move which bounces up against the 200 DMA will bring the 50 DMA rapidly down. A Big Tease rise to 1140 in short order would come right into the 50 DMA (see chart above). A drop off that would also pull the 50 into the Death Cross with the 200. 

This Big Tease to Sp1140 and the 50 DMA line of resistance, then the drop which pulls the 50 into the Death Cross, would be the most disconcerting scenario, since it would disappoint the bears who want the immediate drop, and turn into a huge trap for the bulls who would relish piling on. The Summer Rally turns into a Summer Valley. 

Comments

[robert]

I'd be curious to know the Vegas odds on these scenarios. Wave theory aside the coin toss has been coming up bullish for how many months now? The fact that so many interpretations are still colored in some shade of bull despite a not insignificant trip to the woodshed and the absolutely pathetic and deteriorating fundamentals has this bear totally unmoved. I choose door #3.

[Account Deleted]

Ascending Triangle in 30 minutes chart of DOW JONES

http://niftychartsandpatterns.blogspot.com/2010/05/dow-jones-30-minutes-chart-ascending.html

Thank you

[Roger D.]

This market lives and dies by the action of the USD/EUR, if the banks turned their computers of maybe things would be clearer. Looking at the rate of change since the March lows, the markets were pushing 40 pct. Like 1929,1987, and the April top such a rise has a high probability of a panic. I can't find a bullish chart in the Dow,most have broken down and some look to accelerate down early next week. Also the RSI has reset back to 50 so the next leg is ready to start. I expect the ascending triangle in the USD to break upwards and the same mirror pattern to break down in the Dow. A 3 of 3 is allready in progess, so fasten your seat belts Tuesday.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/fa1260e6-c061-4e0b-bd00-057182ce3445

[Hockthefarm]

Tim Wood comments on our progress in the K-Winter:

It has been a while since I have shown you the checklist associated with K-wave winter. We can all tend to forget things so I have again included this checklist from David Knox Barker's book The K- Wave.

"Global Stock Markets Enter Extended Bear Markets"

I have said since 2007 that this is where we are and ever since the 2009 low I have explained that we have been in a bear market rally. The Phase II decline is out there and it will be global in nature.

"Trends During Winter: Stocks Down, Bonds Up, Commodities Down"

I believe that the bust in commodities in 2008 was associated with this trend change and that since the 2009 lows, commodities have also been in bear market rallies.

"Interest Rates Spike In Early Winter Then Decline Throughout"

In June 2004 the Discount rate was at 2.00%. By June 2006 it was at 6.25%, and in August 2007 the Fed once again began to cut the Discount rate. This too fits.

"Economic Growth Slow or Negative During Much of Winter"

I doubt that many will argue this point at this time.

"Commercial and Residential Real Estate Prices Fall"

This obviously began back in 2006 and is still ongoing.

"Bankruptcies Accelerate and High Debt Eliminated by Bankruptcy"

This has obviously begun and was no doubt been related to the housing and credit bubbles. But, I suspect it will worsen as the Phase II decline and the deflationary forces take hold once again.

"Social Upheaval and Society Becomes Negative"

Just wait!

"Banking System Shaken and New One Introduced"

The banking system was shaken in 2008, but there should still be more to come.

"Free Market System Blamed and Socialist Solutions Offered"

Just wait, we have only seen the beginning!

"National Fascist Political Tendencies"

More to come.

"Debt Level Very Low After Defaults and Bankruptcy"

This has not happened.

"Trade Conflict Worsen"

It's coming.

"View of the Future at a Low Ebb"

When the cheerleading on CNBS stops, we will be there.

"New Work Ethics Develop Since Jobs are Scarce"

If I can assure you of one thing, it is that this has not happened.

"Greed is Purged from the System"

I can absolutely assure you that this has not happened yet.

"Real Estate Prices Find Bottom"

This has not happened.

"There is a Clean Economic Slate to Build On"

Not happened yet.

"Investors are Very Conservative and Risk Averse"

Again, this has absolutely not occurred.

"Interest Rates and Prices Bottom"

Not happened.

"A New Economy Begins to Emerge"

Has not happened

"Stock Markets Reach Bottom and Begin New Bull Markets"

Again, we aren't there yet.
///
Hock

[Hockthefarm]

Great summary Y. I'm glad we have an extra day to soak it all in. Dent has not issued a buy yet, but expects a summer rally to start soon.

Here are Bill McLaren's thoughts on the spx:

http://www.safehaven.com/article/16963/cnbc-squawkbox-europe

Hock

[Hockthefarm]

Bad news from BP. When they started extending the time frame for completion, doubt started to creep in:

http://www.nytimes.com/2010/05/30/us/30spill.html?hp

Sad day.
H

[nspolar]

Does Hock work here?

http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/A/abp_wwd_us_carson_city_fact_sheet.pdf

ns

[twitter.com/DrBubb]

Can we have a Swoon without a Swan?

Perhaps not. But I see many things that can morph into "Black Swan events", like:

+ Aggressive actions by the North Koreans,
+ More evidence of a coming default by Spain, or one of the other PIIGS,
+ A surge in Libor, as bank credit concerns rise,
+ The US tries to "bomb-out" the BP well, and "something goes wrong."

...And these are only a few.

Larry Pesavento was interviewed by my friend Dominic Frisby here: http://commoditywatch.podbean.com/2010/05/27/larry-pesavento-beware-june-2nd/

...And Larry speaks about some very negative Astro-cycles between June 2nd, and June 23rd, with worse to come in August. Harry Dent is also pessimistic for the Augusr-September speriod, but for different reasons.

[Molecool]

May I point out that Evil Speculator has been pimping Hochberg's new alt count for at least a week now? ;-)

[Account Deleted]

APPLE INC shows resistance and negative divergence

http://niftychartsandpatterns.blogspot.com/2010/05/apple-divergence-and-resistance-in.html

Thank you

[Molecool]

As much as I respect Mr. Yelnick this post does a fantastic job of proving my point that Elliott Wave Theory in its current incarnation has very little predictive value. Here we are at the cusp of big moves in either direction and wave counting pundits are in complete disagreement with each other. After perusing all those sites Mr. Yelnick quotes how is someone with even advanced knowledge of wave theory or basic technical analysis at minimum arrive at a decision.

That's right - one cannot! Which is why I employ a growing list of correlating momentum /sentiment measures, which in combination have much higher predictive value. And which also pointed toward a potential of a bullish ramp higher in advance of any of the other sites listed here.

Mind you - I cannot say for *sure* that we are going to 1150 or higher either, but at least my readers were not informed that a bullish scenario may be in the works all the way up at 1100. After Mr. VIX dropped from 48 to 32 I may add - LOL. No, my stainless steel rats were made aware of this potential at least 40 handles ahead of time. This game is not an exercise in academic wave theory, guys! My readers and myself have real skin in the game - and such whipsaws prove to be devastating to our accounts! Which is why early alert systems are in place which take some of the mental masturbation out of the game.

The one expert Mr. Yelnick continues to fade is Chris Carolan, who has an excellent lock on time cycles and is one of the most talented analysts alive today.

[Min]

Molecool;

I used E-Waves, along with some of the Technical Tools you mentioned, as well as others you didn't mention, and went long Wednesday at the close (before the gap-up). For me it worked just fine now and has worked out countless times in the past.

E-Waves is another tool, not "magical dust" or something. If you stripped all but one tool from your array and tried to use just the ONE it would be a mess and you've learned not to do that. It's no different with E-Waves.

It's not the tool that is faulty, it's usually the weilder of the tool that needs a bit more polishing up. No matter what Technical tools we use we need to be part McGyver with them to get the best out of them.

Like trying to do a home project using ONLY a hammer; or ONLY a scredriver; or ONLY a pipe wrench. It's possible but it's really hard and the results are not as good.

That's how I keep things in perspective.

E-Waves is a good TOOL that can ADD to making good market calls but it's definitely not the key to the "trading universe" or something like that.

Submitted respectfully hopefully if it helps

[DG]

Mind you - I cannot say for *sure* that we are going to 1150 or higher either, but at least my readers were not informed that a bullish scenario may be in the works all the way up at 1100. After Mr. VIX dropped from 48 to 32 I may add - LOL. No, my stainless steel rats were made aware of this potential at least 40 handles ahead of time.

One of the big hang-ups short-term traders in general have is an inability to simultaneously view the market as bullish and bearish. I can point to a number of situations where shorting the market was the right move AND while that short was in play and being managed, the market's behavior indicated that a long trade was the right move without yet indicating that the short should be covered.

Once you get into the mindset that I can go short on a Monday, manage that trade until it's exhausted itself on Wednesday, yet have had a long trade intraday that was opened and closed on Tuesday, you get out of the idea that the market is only doing one thing at a time. There are "waves within waves" and there is no reason why a trader can't take advantage of that fact. At a certain timeframe those waves within waves cease to become worth trading, of course, because at the shortest timeframe the waves may only be a few ticks. I have found that the Hourly timeframe can be traded profitably in this fashion.

This game is not an exercise in academic wave theory, guys! My readers and myself have real skin in the game - and such whipsaws prove to be devastating to our accounts! Which is why early alert systems are in place which take some of the mental masturbation out of the game.

Intraday, I strictly use time and price logic to enter, manage and exit trades. After-hours is when I start to consider the day's action in terms of a wave count. Unless a wave structure appears to be nearing completion on a Daily or higher timeframe, it is irrelevant for short-term trading. A simple understanding of probability theory is all you need to analytically reach this conclusion, i.e. the probability of any specific intraday point in time being the end of a wave pattern is actually very, very low. Thus, the safer assumption is that regardless of what you see during the day and your belief that a pattern has just ended, it hasn't. Switching to this mindset is difficult for people, though, because they get "fooled by randomness" into believing that they've identified something that "looks like" the end of a wave pattern and they then proceed to enter and manage a trade on the basis of that belief. It would not surprise me to find that the wave-based traders who had the most success were those who continually refused to count patterns as complete at the end of a given day, but who saw the possibilities for how the current pattern could continue to unfold over the following and subsequent days. The least successful would be those who, like EWI, always see patterns as ending (just in time for their subscriber updates, conveniently!) and the next large pattern starting.

Wave-counting, again speaking generally, should be more like science, where your goal is to find disconfirming evidence that your count is correct. When you have eliminated all of the possibilities on that basis, the remaining possibility or possibilities should then be considered as the "real" wave count.

[yelnick]

Hock, Mcclaren still expects 6 months of sideways. My original view of 2010 is a big rolling sideways move. That could be met if we drop a bit more to complete the current wave, then have a slow retracement. The Hope Rally might still be an X wave connecting tow corrective patterns

[yelnick]

Mole, I think you run a fine service and recommend readers check it out. You provide odds with your scenarios, usually. Hochberg tends to hang onto a position until it hits a cusp, then gives alt scenarios. But these things are always probabilities. Anyone looking for precision should buy T and hold it. What I find interesting right now is how skittish the bears have become. The long upwards Hope Rally has made them cautious. This is why I think the Big Tease is on - it messes with the psychology on both sides, the skittish bears and the over-confident bulls. In a sense the path forward will always be the one that messes with the most positions.

[nspolar]

This is why I think the Big Tease is on .."

Is Yelnick being teached too?

ns

[Dsquare]

DG, I do Neowave counts on the HUI, it seems to me you could count the diametric ending in early May, by counting a triangle for wave d and a diamond diametric for wave g. Do you see any problems with that?

[Roger D.]

Another look at MCD

http://www.screencast.com/users/parisgnome/folders/Default/media/7ef39cdb-eef3-4d39-8916-47ba4addf50b

[Min]

Hey DG you're back!

Good!

Is your US Dollar long position from October-ish '09 still active? Don't know if you remember but I also initiated a similar trade around that time. My position is still open but I've been away a while so just curious.

Good to see back again.

[Edwards Magee]

Notice that only one blogger in Yelnick's article actually mentions the behavior of one of the most classic of all technical indicators . . . the Advance / Decline line. People like Daneric, and Binve, and others have no use for this indicator because it simply doesn't "fit" with their bearish, perma-bear bias and their SUBJECTIVE WAVE COUNTING!

The A/D line is quite simply, far too objective of an indicator for them to use. As a result, they avoid it like the plague ... and continue to make the same foolish mistakes with a whole slew of indicators that literally have ZERO predictive value whatsoever.

[bob m]

I get it, Edwards Magee

[Min]

I've observed that those with a "hard wired" bias can take any indicator and twist it to suit their argument.

This may be a useful skill as a salesman, politician, attorney, debator etc. but it kills as a trader.

Some of these guys may not need to ignore the A/D line or any other useful indicator for that matter as they can convince themselves AND EFFORTLESSLY PERSUADE OTHERS how it all corroborates their fancied pre-determined outcomes.

Those are the REAL DANGEROUS outlooks to imbibe but coincidently make them good contrary indicators under certain market conditions.

The ones simply ignoring indicators could be stupid, just plain inexperienced or indeed be on their way to joining the "Hard-Wired Bias Club". At any rate, best to ignore these guys 'till one can make a determination if they are indeed trash; will at least make good contrary indicators or if they are useful only under certain market conditions.

We all have shortcomings and strenghts.

Most of us are aware of of these and attempt to correct by constructing a system of tools/indicators that takes advantage of our strenghts and checks our weaknesses.

But there are a few who just have a different agenda altogether and one of the ways it manifests is in a chronic poor performance record that never seems to appreciably inprove over the years.

As long as we correctly evaluate or filter all this input we can improve our own trading.

[Molecool]

"Notice that only one blogger in Yelnick's article actually mentions the behavior of one of the most classic of all technical indicators . . . the Advance / Decline line."

Ahem - you might want to start reading my reports - I even go as far as identifying fractal patterns on both the A/D and D/A.

[GLN]

BREAKING NEWS!

MY SON IS BACK.... HE SOLD HIS ATARI FOR 100 USD AND HE WILL USE
THE MONEY TO KEEP GAMBLING.

HE WILL PROBABLY BE BROKE BY FRIDAY....

WHAT A LOSER... JA JA JA.

GLENN LOSER NEELY

[Bird]

Is it possible that the information that we gather, from elliott or fibonacci, or fractals, or traditional TA, all of which are empirically logical or rational to some degree, is not consistently workable as we would like, because we are ignoring a supra-rational faculty, also real, but almost entirely ignored in modern culture?

[GLN]

Oh, and if anyone could please spare a cardboard box and an old toothbrush 'cuz I still need one, as I'm not only broke but I've spent all my mom's retirement fund while mooching off her in her basement.

What can I say, after all I'm

GLENN (MICHAEL) LOSER NEELY!

JA JA JA!

[GLN]

I ALSO LOVE EDWARDS MAGEEK's CONDESCENDING POST. ANYONE NOTICE HOW HE IS THE ONLY ONE ON THIS BLOG WORTHY OF BEING A FELLOW LOSER?

JA JA JA!

GLENN (MICHAEL) LOSER NEELY

[Hank Wernicki]

The Australian Dollar :

0.8485 Stop to Short the June contract, "Big Decline" in the coming weeks !

[DG]

DG, I do Neowave counts on the HUI, it seems to me you could count the diametric ending in early May, by counting a triangle for wave d and a diamond diametric for wave g. Do you see any problems with that?

dsquare,

Are you talking about the HUI when you say that or using the HUI as a template for the SPX? If you're talking HUI, if you could post a chart with your specific labeling, I'd definitely take a look. I'm curious how you handle the spike higher from 460 to 500. Is that the wave-.G of your wave-g "diamond" Diametric?

[DG]

Hey DG you're back!

Good!

Is your US Dollar long position from October-ish '09 still active? Don't know if you remember but I also initiated a similar trade around that time. My position is still open but I've been away a while so just curious.

Good to see back again.

min,

I think I was looking at going long the Dollar ETF, but that was not a trade I actually put on. Clearly, it should have been. It's hard to see anything stopping the dollar right now, with the possible exception of bullish sentiment. But, with the timing of your entry being what it is, I doubt you have to worry about anything, which is always a great position to be in!

[Account Deleted]

Euro vs Usdollar moving in a channel with upside possibilities

http://niftychartsandpatterns.blogspot.com/2010/05/euro-vs-usdollar-moving-in-channel.html

Thank you

[DG]

min and Bird (and anyone not named GLN or Edwards Magee),

I've set up a blog to discuss short-term wave-based trading, using nothing but price, time and logic. I will post an ongoing list of real-time trades and explain the logic behind them (entries, stop placement and movement and exits), so if you're interested in trading that timeframe and getting some new ideas on trading tactics, I'd be happy to send you an invite.

To give you a sense of what I mean by "short-term", the holding period per trade is a little over 2 trading days. I expect the holding period to increase with a change I just made to the rules enabling winners to "run" longer once the stops get to near or just above breakeven.

Just e-mail papertradingcollegekid at gmail.com

[Hockthefarm]

nspolar:

"Does Hock work here?"

Nope, not even close. FWIW you may be confusing empathy with loyalty. I wonder if the banjo player in Deleverance, deep down, thought he was the young Sherlock Holmes as well? He had that same look in his eye.

Have you thought of giving facebook a try? You could share pics and bleed all over everyone's shoes til the cows come home.

Shake it off, big gunner, big shooter, big fella.

Hock

[trendlines]

Hi Yelnick,

An update on the Shanghai Composite:

http://trendlines618.blogspot.com/2010/05/shanghai-composite-medium-term-upwards.html

Risk-reward favours the bulls. Medium-term Wave C up may be about to start.

[Roger D.]

"It's the Dollar, stupid." Just saying

The market may bounce in the very short term,but a USD above 90 is not going to be bullish.

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/c67cf29e-b77d-4291-8211-bac3847c1407

http://www.screencast.com/users/parisgnome/folders/Default/media/eb5bf0e2-d24c-4898-bd7b-8e7cea18e34b

[Hockthefarm]

The lesson that the gubmint didn't want anyone to learn:

http://tinyurl.com/2fd9yks

I think we will look back on housing the same way we view a burrow chasing a carrot hanging from a stick strapped to his back. The owners won by 3 converted touchdowns and a field goal.

Hock

[DG]

Market breadth, in the US, recently hit an all time high during the latest uptrend. Bull market tops are usually accompanied by a negative divergence in market breadth, i.e. 1987, 2000 and 2007, not new highs.

Given the strengthening of correlations across and within asset classes since the 2007 high, I'm not sure I find the argument that a breadth divergence has to emerge prior to a significant market top compelling.

Anyone who says they KNOW for a fact that the disagreement with the bullish scenario implied by this comment is talking out of their nether regions. Of course, that's never stopped the "usual suspect(s)" from commenting on the "predictive value" of breadth and the possibility of a significant top before, so I fully expect a "response" along the lines of "You obviously don't know what you're talking about", which I will them promptly ignore as the PERMA-BULL drivel that it is.

Neither I nor anyone else KNOWS if the top is already in, but if it is and it wasn't accompanied by a divergence in breadth, that fact won't keep me up at night devising scenarios for why we need a new high with a divergence.

[upstart]

I rarely look at Elliott waves any longer. Subcycles of the monthly cycles I study appear to have bottomed, so a big bounce is expected now. The larger cycles are still due and happen to sync-up in the same month. I said on 5/23 that April was the high for the year. (Of course, I mean probably.) There is a caveat. The market turned with a pattern that has worked 6 times and goes back years, and has meant a 6-month or much more turn all but once. But if the cycles do not "tug" the market enough to break May's low in the target month, then something like a symmetrical triangle could be in the works and a new high could come as early as 4th quarter. And you may have noticed that 4th quarter is potentially important in Fibonacci terms in the long-term scheme.

[Bird]

DG, Count me in. I've sent you my email. I will follow with interest, especially since I have come to suspect, per my above post, that while we cannot do without logic, even the best logic is not enough.

[Hockthefarm]

It is Bait Car and Repo Man all rolled into one.

From Mish's board:

"THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.

The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.

Greece’s departure from the euro would prove disastrous for German and French banks, to which it owes billions of euros.

Doug McWilliams, chief executive of the CEBR called the move “virtually inevitable” and said other members may follow. “The only question is the timing,” he said. “The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious."

Can anyone tell me the difference between Western Governments and the folks that get repo'd and baited?
We are in for a real tough slog. Nobody thinks they should pay for anything. Lots of luck finding inflation out there.

As pointed out by a PIMCO exec over the weekend:

Would you rather own gold (all of which that has ever been mined fits nicely into 2.5 olympic swimming pools) or US$ backed by the political, economic and military super power of the world.

Hock

[nspolar]

Hock, BP stock took a beating in Europe yesterday (today here). I feel sad for the BP employees. Maybe they should have spoke up more, internally, against the vendorite and contracterite atmosphere that prevails in that company. It appears to be a company full of 'catalog engineers', as well as 'me too'. They (some or all of the BP employees) do not even understand the laws of thermodynamics as they relate to entropy. That is what happens when one has someone else do all the tough work all the time. Then when a well starts to blow, they (the company boys) are lost.

Like a bunce of lost sheep.

But ... contractors, vendors and 'the company' do not all share the same goals.

Do you think BP employee pensions are at risk?

Carson is very close to Long Beach. Very close.

ns

[Hockthefarm]

ns:

You may be right regarding the BP employees, but I'd prefer to wait and see what conclusions are drawn from the final analysis of the blowout.

2 things:

First, the scope of the disaster. I don't think anyone has a clue and that is really worrisome. Beaches can be cleaned up, but what about the deep marine life. It may be decades before we really understand the damage.

Second, and not to shift blame away from bp, but what about the off shore drilling industry? Nobody seems to have a clue as to how the address this problem. No one in the industry was prepared for it. That is a real problem going forward. Accidents always happen. If you can't address them, you shouldn't be on the field.

As for bp, throw them in the chipper. If there is something left at the end, fine. To me it is not even relevant.

Hock

[Roger D.]

The Squid and his pals play while Rome burns.

C:\Users\Gary\Desktop\2010-06-01_0828.png

[Roger D.]

The Squid and his pals play while Rome burns.

http://www.screencast.com/users/parisgnome/folders/Default/media/48041818-f3ae-4311-9005-5f4681d75391

[Roger D.]

The trap door in the Dow

http://www.screencast.com/users/parisgnome/folders/Default/media/8656cd5d-673b-44a8-8737-a748f3237536

[Min]

"Would you rather own gold (all of which that has ever been mined fits nicely into 2.5 olympic swimming pools) or US$ backed by the political, economic and military super power of the world.

Hock"

People afflicted with Prechtosis for now prefer the US$. But, over the last ten year an ever increasing number are prefering Gold.

I'm long BOTH YEEH HAAAW!

[Roger D.]

"Not a creature was stirring, not even a mouse."

This blog sure quiets down when the markets head lower.

Roger D.

The Dow

http://www.screencast.com/users/parisgnome/folders/Default/media/51480b1f-e1ac-4dc3-86e1-984ebcf3947d

[Roger D.]

MCD revisited

http://www.screencast.com/users/parisgnome/folders/Default/media/abbc8aa2-e4df-4de0-8e53-05fc3d143fbd

[Roger D.]

MCD daily

http://www.screencast.com/users/parisgnome/folders/Default/media/ddf15efc-9fc3-41d7-824f-225086f70c70

[Mr. Panic]

T minus 1 day until blast off (or in this case blast- down).

June 2,2010= June 2, 1930
June 3,2010=June 3,?????

Nasdaq made it back to the start of its waterfall decline/ gap down open on May 20 before reversing down but SP didn't (on the 60min fractal the equivalent of September/ October 2008 waterfall decline starting point and terminus of April 2010 retracement from March 2009 low) And I am not going to worry about SP getting to 1110-1115 either.