A Top of Sorts is Near

Today was my turn date, which means a top this week.This might be it, or just an interim stop before we get back to the Sp1150-75 area. Turn dates are chancy things, and it appears to me that we have more upside, in part because I think we get back to Sp1150 before falling, and also because I expect the Dollar to reverse at about the same time. It has retraced 57% of the rise in the Dollar Index, and should be expected to go a bit farther, to the 62% area, before bouncing.

The stock top and Dollar bottom may resolve this week. Friday has the unemployment report, and it will be watched for guidance on the economy after the mixed GDP report last Friday (which is likely to be revised down from 2.4% to 1.7% given poor news on durables Monday). The STU thinks after the 8:30a pronouncement, market sentiment may break, beginning the fall.

As you might expect, the STU thinks the top is nigh based on wave structure. This chart excerpted from Daneric shows the recent pattern: a triangle fourth wave and the fifth wave thrust out of it. The thrust has gone back to 62% retrace in the Dow, but is below that in the S&P. A thrust the width of the triangle is normal, and targets near 1140, which is the 62% retrace given a bottom at the low point (1011 on Jul2).

In my Big Tease count, and the STU count, the low point is May25 at 1040, giving a target of 1151. Look for a thrust to 1140-1150 range in the next two days.

The STU also comments that each move up since Jul2 has broken in five waves, meaning they do not see this as a triangle formation, nor an ending diagonal, with one exception: the Nasdaq had a clear overlap of waves 2 and 4, and has fallen behind the Dow and S&P, compressing into a fairly clear wedge.

The bullish view is best expressed by Carl Futia, who brings out the Three Peaks and a Dome formation. The next two charts show the formation and the current count of Carl. The implication is very bullish: the market should now run up above Sp1200. This gives a good contrast over the next two days: an impulse up that crushes through the 1140-1150 level supports the bullish case, while a sharp thrust that stops in that zone supports the near-term top view. 

   

 
 

Comments

[Bird]

Sorry for not having followed more precisely, but what was the basis for your turn date Duncan?

[Nick Radge]

STU must be the worst users of TA on the planet. They do nothing but label the chart according to their own belief and not what the chart is suggesting. A quick look at a weekly chart shows a clear 5-wave impulse off the Mar09 lows. The choppy action since stinks of a correction. They do nothing for the credibility of EW.

[Daniel - Taz]

I agree.

A little more upside but it is late in the ball game.

We are seeing some non confirmations here - between indices and currencies in relation to the S&P500.

Breadth remains OK so we could manage another marginal high or two. We would also have to spend at least a few days on the side for breather to deteriorate before the market could slide in a meaningful way.

My diametric remains live here in OZ though I am concerned by the breath.

Taz

[www.google.com/accounts/o8/id?id=AItOawmv5FT0nGt2EOWVMM5O6W8Y3ktxtMZWdPM]

Nick Radge

I don't think you can say for certain that the move off the March 2009 low is an impulse or is a correction - it could count as either.

This guy shows both possibilities:

http://gi61et.blogspot.com/p/5-wave-impulse-counts-for-rally-from.html

http://gi61et.blogspot.com/p/counts-for-rally-from-march-2009.html

Check out his long term dow counts which show how these moves from March 2009 might fit into the bigger picture.

Yes, STU is too dogmatic and probably not too objective, but they may turn out to be right...eventually. Every dog has his day.

[yelnick]

Bird, not complicated, I was working off several ratios, such as a+b=c in time in a flat, and timing them not from the nominal high/low but the bifurcation that breaks the trend. I initially came up with aug4 by looking at the May-Aug patterns in key years, like 1987, 2002 and 2008, which saw a peak in the 2d or 3rd week of May with a secondary peak in the second or third week of August, and more precisely a bifurcation around the third week of may followed by a secondary bifurcation around aug25. (The bifurcation means a break out of a topping range.) Given a top on apr26, we looked three weeks earlier than 'normal", to the extent any of these occasional patterns can be considered normal; and hence pointed to three weeks before the aug25 week. After the nested 1-2s of EWI blew up when we bounced off jun8, and the Big Tease came back, I used the jun8 bottom; and then used the bifurcation after jul2 which happened on jul8. The a+b=c calculated to aug4, fitting the initial back-of-the-envelope date.

And yes, I know I count the Big Tease beginning May25, so holding to the Aug4 date is inconsistent with the a+b=c method, but it remains consistent with the historical pattern. If we peak below 1150 by the end of this week, Aug4 (+ 2 days) may mark the wave 3 of C top, and the final waves 4 and 5 to the ultimate top may take the same 9 trading days that we had between may25 and jun8, putting the ultimate turn date out into aug18 +/- 2 days.

BTW I did not use Arch Crawford's Cardinal Climax. It is a delightful evening show with four planets near each other (venus, mars, saturn, mercury) and three others 180 degrees away (Jupiter, Neptune, Uranus), and the slight tidal pull may have spawned the huge solar flare that is now pummeling the magnetic field around the planet - but we do not know if that is a cause of such events. The aurora apparently has been seen in the 48 states, up along the northern border.

[Perigee]

Forget the SP500 - wheat has been on a tear. It is limit up already tonight (Oz time)- amazing move up the past few weeks

[Molecool]

IMNSHO we are in 27, not in 14.

[Account Deleted]

Dow Jones Futures before opening bell
http://niftychartsandpatterns.blogspot.com/2010/08/dow-jones-futures-before-opening-bell.html

[Bird]

Thanks Duncan. My own methods using time and price based on fib arcs gives specific time (and/or price) junctures to look for major trend changes. False positives occur, but false negatives are relatively rare, meaning, if there is not "lock out" then the trend isn't over.

If today's weakness is the start of a major move down, then you will be spot on, but as there is no lock out, it would be a false negative for me.

[Penny]

Interesting !? :-

http://blogs.reuters.com/james-pethokoukis/2010/08/05/an-august-surprise-from-obama/

[JT]

Happy One Year Anniversary to Bob Prechter and EWI.

It was on August 5th, 2009 that they inititially went Bearish, calling for P3 to begin with a 50% short recommendation at SPX 1000. Shortly thereafter, they added another 50% at 1038 to have an "average" at 1019. On November 23rd, they went to 200% short with the SPX at 1106.

While costing their "followers" and all of the drinkers of the P3 "Kool-Aid" a ton of money ... they also missed out on the greatest single stockmarket rally in a generation.

Happy Anniversary Bob!

[Penny]

JT, perhaps their "charts" actually said 5th August 2010 - and they simply misread them !?

[JT]

LMAO!!!

In any event, Prechter missed out on the BIGGEST stockmarket rally in a generation, costing his subscribers a fortune. This call might go down as just as bad as Precther's "Lost Decade" from 1993-2003.

[Les]

There have been a couple of widespread speculations about a widespread bailout for homeowners. Another one is that all loans would be automatically refinanced at 2.5%. Neither probably will happen since the banks would lose a lot of the income in either case. Right now, they're being paid by the government to stall on foreclosure processing.

[Dave]

Yelnick,

You have by far the best EW blog and greatly appreciate all your work. I have a question on EWP.
Would someone please provide me with a count on it.
The move down from the 07 high is a clear 5. The rebound (to me anyway) looks like an A wave to the April 10 high with a 3 wave move down into the recent low implying a move to new recovery highs. Does anyone out there agree or see a bearish pattern emerging? We are very close to a 61.8 retracement off the April high.

Thanks,

Dave

[Dave]

It also looks like some sort of triangle from the all time high might be in play. Thoughts?

[www.google.com/accounts/o8/id?id=AItOawmv5FT0nGt2EOWVMM5O6W8Y3ktxtMZWdPM]

Dave, I posted a couple of links to a blog above which shows a count agreeing with your A wave to April 2010, but he also puts the bearish case.

Looks to me it could be either so until something decisive happens you have to trade with both possibilities in mind. Mostly this means take your profit while its there!

[www.google.com/accounts/o8/id?id=AItOawmv5FT0nGt2EOWVMM5O6W8Y3ktxtMZWdPM]

Dave - see the long term count 3

http://gi61et.blogspot.com/p/long-term-counts_08.html

There's a lot of good stuff over there - I can spend ages going through it

[Dave]

Thanks. I was curious about EWP (Spain) ETF.

[Hank Wernicki]

How many times have we seen Three Peaks and a Dome formation ?

How many times has it actually worked ?

Just curious

[Les]

There was a mini 3-peaks and dome from November to February. Notice how both lows have acted like magnets since. I don't think the current market fits the pattern. Futie doesn't have a reasonably flat base for the 3-5-7 and 10-12-14.

A better choise is the dome and 3-peaks which may be what's being traced out. This is the pattern that was traced out after 1937. Point 3 would be the first major high in April. Points 3 through 7 would be a wide trading range before the market eventually goes back to the 2009 lows.

http://www.thepatternsite.com/3peaksdome.html

[Roger D.]

The ES

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/3a8fc43d-54b6-4d87-aa29-14640eff8f57

[Bird]

Roger, if by your chart you mean to imply that the top of this trend is in and the downturn is upon us, then just look back on the same chart to the uptrend that preceeded the current diagonal you have drawn. Could you not have drawn similar converging lines, which was followed by more repeated tops on the same swing, and then followed by a brand new uptrend after the intermediate correction?

[Mr. Panic]

Yelnick, I need to study your August 4 cycle call because it looks spot on. Yesterday, there were fractal resemblances to both Jan 5,6 2009 high and the April highs in SP and Dow and in a bigger picture the whole rally off the July 1 lows was identical in form albeit an abbreviated version to the rally off the Nov 21st lows in 2008 into Jan 6,2009. The Transports put in a fractal almost identical to the fractal of its April May highs. It was the last index to top out on May 3rd and with today's action it is putting in a similar pattern to the Jan highs. Russell 2000 also closed on its low of the day today while the Dow closed practically at its high.

[JT]

Today's action is literally meaningless... given tomorrow's private sector jobs number.

[Roger D.]

MCD

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/0adbf4fd-01c3-42c7-90e8-333022bd59dc

[DG]

Posted by: Bird | Thursday, August 05, 2010 at 01:56 PM

Be careful, Bird. The next thing you know, Roger will be telling you you don't know how to read a chart.

I, for one, think his new "tri-corner hat formation" has the chance to revolutionize technical analysis.

The sad thing is that I've been watching August 6th as a potential end for the current wave pattern for quite a while now and if it happens, I'll obviously be happy that my analysis turned out correct (and will make some money, to boot), but I also know that I'll have to see Roger posting more of his "wave-iii of 3 has begun" crap in the aftermath.

[Daniel - Taz]

Hey DG

The more I look at things the more I think an X wave will develop, inline with your call.

I keep thinking of Neely's guidelines for Wave-B being 2-4 times time of Wave-A in a flat. Plus all that money in corporate bonds could very well move into equities at some point.

I would conserve your energy and forget about debating the merits of wave 3. The reason I am a NEowaver now is because it was too easy to bend any count to fit my mindset with your orthodox EW. I became dogmatic, ignoring any info that told me something else was occurring. I think you have met a historical version of me and only time rather than logical analysis will prove telling.

[DG]

Hi Taz,

A couple of options remain on the table, but I think that regardless of what the pattern is at the higher Degrees, at the lower Degrees, it is ready to end, based on the rule that no one segment of a Corrective pattern of more than 3 segments can be longer in time than the combined time of the prior 3 segments.

http://yfrog.com/j5spxdailyaugust1p

Regardless, I continue to trade long and short depending on market behavior.

I would conserve your energy and forget about debating the merits of wave 3. The reason I am a NEowaver now is because it was too easy to bend any count to fit my mindset with your orthodox EW. I became dogmatic, ignoring any info that told me something else was occurring. I think you have met a historical version of me and only time rather than logical analysis will prove telling.

I don't think this is an uncommon occurrence. Many will just give up on wave theory after such an experience, but some will continue to try making progress and refining their use of the theory. I'm sure as we speak, someone is finally fed up with waiting for P3 and is looking around for better ways to count the market.

[Bird]

DG, Roger will be right. I can only make money when the birds tell me to.

[yelnick]

Dave, while not following your script entirely, Neely sees the Flash Crash as part of a corrective wave. The count has the Hope Rally thru January 2010 being corrective, and then the drop to Feb5 is an X wave setting up a further corrective pattern. The A wave of that ran Feb5-Apr26, and we would be in the B leg. When it finishes, we get leg C which could go to a new high.

[KRG]

Y, DG, Vipul,Taz: any thoughts on dollar-yen. would like your comment on the following:

http://krgonline.blogspot.com/2010/08/carry-on-yen.html

Cheers

[DG]

DG, Roger will be right. I can only make money when the birds tell me to.

Posted by: Bird | Thursday, August 05, 2010 at 07:10 PM

He won't be "right" in any sense that matters to me or anyone else trying to take advantage of both the long and short sides of the market. Nor will his wave count be "right".

We're in a market which embodies the J.P. Morgan perspective "the market will fluctuate". If you guys understood that you'd see the daily opportunities presenting themselves, both long and short.

[Gooner70]

Hank

In response to how often has 3 Peaks pattern worked. The Bank Index traces out a huge 3 peaks from 1992 - 2008 which was pretty text book. That can be seen at the following link :

http://4.bp.blogspot.com/_bz2Veynkoic/TFvhxqYYROI/AAAAAAAAAbk/lK9w9K7JbXI/s1600/Bank+Index+3+peaks.jpg

It also worked on a fractal basis. In the the second part of the pattern there was a 3 peaks + domed house pattern, and again the second part of that pattern was a 3 peaks + domed house, and so on to a much smaller degree.

However, since they are so rare, I do not believe they can have predictive power until the Domed House is in and confirmed. - If one looks back one could find potential 3 peaks patterns in so many places, markets, and time frames, particularly if loose criteria is applied, however, so few actually follow through.

Regards

Gooner70

[DG]

KRG,

I am wary of the fact that in your 3 down, wave-(v) is more subdivided than wave-(iii), despite not being the extended wave. I'm also wary of the fact that within your 5, there's a big (relatively-speaking) Corrective spike in the middle of the wave. To me, that short of action is indicative of an x-wave moreso than a segment of an Impulse.

If I were to take the entire formation as one pattern, I would tend toward viewing it as a Neutral Triangle, rather than an Impulse. Neutral Triangles can closely mimic Impulse waves, but are comprised of :3s instead of :5s, so none of the waves are mistakenly labeled as :5s within the formation.

To a certain extent that does not change the outlook much, since, as in 3rd-wave Extension Impulses, the first and last waves of a Neutral Triangle tend toward equality, meaning more downside for the Yen. Post-pattern behavior will be slightly different as well, but not dramatically so.

[Hank Wernicki]

7:51 am

IF the ES stalls at 1130 it's a short entry this morning

a little higher would be ideal

[KRG]

DG : Thanks for your comments

"To a certain extent that does not change the outlook much, since, as in 3rd-wave Extension Impulses, the first and last waves of a Neutral Triangle tend toward equality, meaning more downside for the Yen"

So the upside for Dollar is a strong possibility within this structure.. right?

Regards

[Hank Wernicki]

Kaboom

[vipul garg]

KRG
its a 40 year period ..its a long duration analysis.
just replace the labels you ve put the following and see if it looks meaningful:
(1)-a;(2)-b;(i)-c;(ii)- d( at the first high); (iii)-e === expanding triangle
(iv)-x
(v)-a; (4)-b; 5?-c? === possible contracting triangle.

c wave should be ending soon which will mean the low will be in.
but it also implies a long drawn out period of complex sideways movement.

[Mamma Boom Boom]

>When it finishes, we get leg C which could go to a new high.<

Hurray! There's a man that has it nailed. I've been telling you since May that 1150 was absolutely minimum and that a new has was likely. Actually, at this point, I can see 1250 as a possible target. It's time you guys get on the right side, make some money for Christ sake.

[Roger D.]

The setup is in place for a failure here and a big deline to start. Meaning Yelnick's top is in. No new high.

Roger D.

[www.google.com/accounts/o8/id?id=AItOawmv5FT0nGt2EOWVMM5O6W8Y3ktxtMZWdPM]

Roger D, this guy's count agrees:

http://gi61et.blogspot.com/2010/08/1549-bst-spx-upate.html

But he says 1088.01 has to go to be more sure (well, as sure as you can be I guess)

[Roger D.]

MCD's possible "diamond" top

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/f40a93f3-71d0-4577-875b-23b2ddc61f9f

[Roger D.]

The ES

Roger D.

http://www.screencast.com/users/parisgnome/folders/Default/media/a42e89dd-b82d-41ab-b8c2-b108072f5052

[twitter.com/DrBubb]

There is still plenty of time to break the uptrend today:
http://img230.imageshack.us/img230/244/zzzzr.png

If it goes, SPX may close below 1100, even 1087 and kill the Bull case.

[Trader 123]

This "pullback" out of overbought territoty with the NYSE A/D line making new highs this week, will wind-up catching all of the P3 Perma-Bears in one of the biggest bear "traps" of all time.

Mark my words.

[Trader 123]

US Steel is up today.
So is Arch Coal, Walter's Energy, and Freeport Copper. So much for a down day.

:)

[Bird]

Today's morning sell-off has given me pause in the continuing debate as to whether Yelnick nailed it with his call of the top on the 4th. So I've looked at it again. Now markets are not always harmonic, so I can't rule out Yelnick's call, but the high that formed on the 4th misses one fundamental rule that I follow, which is that "every swing will either circle to the next major turn in time, or the one after." Using the Dow on the daily scale, the Feb-April swing does not give the July low in time, thus it must give the ensuing high. Aug 4th just doesn't lock in. So the move must continue up until it does. The next mark for this is mid-month or so.

Now all 10 of you will know that I am a true idiot, not to be listened to under any circumstance.

[Dave]

Does anyone have any additional thoughts on a turn in the dollar? Recent Daily sentiment? EWFF talked about 79.50 as the potential target. Anyone agree, disagree?

Thanks,

Dave

[yelnick]

Bird, is your swing the time from feb5 to apr26? What day would it have pointed to?

Zoran used to find that time patterns are much more precise between bifurcation points, not the nominal high/low. The bifurcation off Apr26 occurred about a week later. The bifurcation off Aug4 seems to be today. The end of the Flash Crash didn't bifurcate until around Jun8, since the may25-jun8 pattern failed to clear the congestion zone.