3SOF

Market Overview (May 23 2006) – How Low Can we Go ?

Since my last Market Overview (last month), the market went from high alert, to high & fast sell off.
The truth is that even with the technical alert we were not expecting such a big dip, or at least not on such a fast way.

The NDX broke its support (the one supporting all 2005 Bull move), and within a few sessions, it is already near a much important support.

My attempt with this Analysis is to get a reasonable target for this sell off, I'm using a simple methodology of a Weekly DMI (Dynamic Momentum Index) integrated with a chart pattern approach.

The answer is quite acceptable, unless some major events are up to come:
Q: How Low Can We Go ?
A: 1540/1550 on the NDX (2% or 3% more of downside potential)

Weekly Chart:

(http://www.3stocksonfire.org/stockcharts/NDX_DMIta1.gif)

Daily Chart:

(http://www.3stocksonfire.org/stockcharts/NDX_st.gif)

Downside momentum is still high, panic has spread around some Global Markets... Lets see what's next...

Best regards !


.

so if the nasdaq 100 index sinks below the support at 1550 we in for some trouble?

Quote from: nullzero on May 23, 2006, 02:52:00 AM
so if the nasdaq 100 index sinks below the support at 1550 we in for some trouble?

I guess big trouble is what we have since the high alert till now...  ;)

But yes, if that happens, it means the trouble is here to stay for a while... or maybe just means that my analysis was wrong...

regards ;)

It looks like it could also play as a classic WolfeWave set up to me, minus the upside breakout of the rising wedge, the shape looks about right.  Calven and Melf Elf would probably know best about that.

While I don't think the market is weak enough to break down to quite this degree, if 1550 does not hold, this would be the long term WW target area - not very pretty!!!

Frederick,

Very nice job on that channel and your indicator.  I didn't see that channel at all.  Applause.

Quote from: ScottishTrader on May 23, 2006, 05:13:04 AM
It looks like it could also play as a classic WolfeWave set up to me, minus the upside breakout of the rising wedge, the shape looks about right.  Calven and Melf Elf would probably know best about that.

While I don't think the market is weak enough to break down to quite this degree, if 1550 does not hold, this would be the long term WW target area - not very pretty!!!

Scotsman,

DOUBLE Applause for seeing that Wolfe Wave.  That's very, very interesting.

See the rally off the October, 2005 low to the top of the channel in early December, 2005?  That was Calven's Bullish Wolfe Wave, basis the daily chart!

That rally ended at the top of this Wolfe Wave that you've identified on the WEEKLY chart.

Kinda kewl, huh?  8)

It's a Wolfe Wave within a Wolfe Wave.

There was an upside fakeout at Wave 5, too!  That was the absolute SCREAMER of a rally that we had right at the start of the year that lasted into the January 11 top, which ended up being THE TOP for the year, thus far.

Back then, earnings were expected to be good this year...the Fed almost was finished with rate hikes. tra la la la ...everything looked great!

FAKEOUT!!!  >:D

So, it certainly has tha-at element, doesn't it? 

The week of April 7, 2006, the NDX went to the top of the channel again.  That failed on a Bearish Inverted Hangman...followed by a Bearish Hangman...followed by a Bearish Doji Star Hangman ... followed by another Bearish Doji Star Hangman...followed by a Bearish Hangman...

...followed by the horrible week of May 12!

The NDX certainly is acting like a Bearish Wolfe Wave, with the fakeout, the failed re-tests, and then the harsh Smackdown.

We'll see.  I'm sure going to pay attention to the bottom rail of that pattern!  ;D

I have been bearish this year because of 4 year (mostly 4 year) market cycles.  Like these in the SP500 with a crash often in the summer, Usually followed by a rally!

(http://mdteague.com/SP1987.bmp)

(http://mdteague.com/SP1990.bmp)

(http://mdteague.com/SP1994.bmp)

(http://mdteague.com/SP1998.bmp)

(http://mdteague.com/SP2002.bmp)

Wow - great work on finding the 4 year cycle charts!!

Quote from: ScottishTrader on May 23, 2006, 05:13:04 AM
It looks like it could also play as a classic WolfeWave set up to me, minus the upside breakout of the rising wedge, the shape looks about right. Calven and Melf Elf would probably know best about that.

While I don't think the market is weak enough to break down to quite this degree, if 1550 does not hold, this would be the long term WW target area - not very pretty!!!

Good thing Wolfe Wave targets are unreliable! 1150 for the $NDX would be a brutal drop.

Quote from: SmartWrasse on May 23, 2006, 04:32:29 PM
I have been bearish this year because of 4 year (mostly 4 year) market cycles.  Like these in the SP500 with a crash often in the summer, Usually followed by a rally!

SmartWrasse,

Great charts on the 4 year market cycle.  Applause.  It's good to keep those things in perspective.

Since many members of 3SOF are relatively new to trading, I thought I'd present this chart for some perspective, as well.

If the past two weeks have looked depressing...from the March, 2000 high to the October, 2002 low, the NDX 100 lost an astonishing 83.49% of it's value.  A lot of the 100 stocks in the index were internet stocks that crashed, but this index also is comprised of the "bluest of the blue" in the NASDAQ, and they went down hard, too.

Although the NDX has rallied 121.5% off the October, 2002 to the recent high of 1761, that's barely a .236% Fibonacci retracement of the 83.49% loss. 

An NDX portfolio that was worth $100,000 at the March, 2000 high was worth only $16,510 at the October, 2002 low.  That same portfolio, left untouched, was worth only $36,600 (plus dividends) at the recent high of 1761, six years after the March, 2000 top.

So, from a longer-term perspective, the 121.5% rally over the past 3½ hasn't been nearly as good as it appears to have been for those whose portfolios have been tied to the NDX.

There's an argument, particularly from the Elliott Wave Theorists, that this 3½ year rally has been nothing more than a shallow retracement (.236%) of the 2000-2002 Bear Market.  They're wrong, of course, on many other sectors that have scored new all-time highs, but they at least have a case here, in the NDX.

We'll see how it plays out over the summer, but definitely HONOR OUR STOPS.   ;)

Thanks again for the great charts.

Great stuff everyone, thanks. We are certainly at an interesting point here. Did we just get Elders Kangaroo tail and a turn around or is this a dead cat bounce. Next week should give some big clues. Have a good long weekend (if you get one).

uc.

Yea, nice stuff guys.  Looks like we are at some long-term trendlines too.  I'm looking for a bounce.  Economics are good, US/Israel/Iran sbre rattling bothers me.  Besides the obviuos, it drives up oil price adn increases inflation fears.

I'm trying to post some charts, hope this works.  I'm no TA guru but there's a good trend, especially when you have multiple touches, that's good confirmation.

Looks like we are are ready to test the «ground» again...  :-\

The January, 2006 low of SPX 1245 held on May 24, but thus far, that only produced a Bear Flag rally back toward the declining 50DMA.

The Bear Flag broke to the downside on June 5.  The highs of June 6 and June 7 were failures at the bottom of the broken Bear Flag.  :(

SPX 1245 is key support.

Well... What a session!
I must confess I was starting to have that strange felling of «pre-crash» on the air, especially after watching all session of DAX Xetra (German Index), and seeing it tumbling 160 pts (-2.9%) which is really not common this days...

The NDX was down to 1525 pts during the morning performing a «bloody» sell off, but during the afternoon everything changed (at least from a short term technical approach).
The index managed to close near the highs of the day, and above the ascending support, making a very nice candlestick: A Hammer
A candle like this, on situation like this, can be considered a potential sign of a Key Reversal Day, a day where an exhaustive selling power gains momentum, and even so loses the battle against a new buying force.

To know more about Hammers:
http://www.streetauthority.com/terms/hammer-hangman-candles.asp

Enough said, we still need a confirmation from the days to come, but its incredible how a simple candle can change the overall outlook of the all scene.

Quote from: Ramsburg on June 09, 2006, 01:10:18 AM
Well... What a session!
I must confess I was starting to have that strange felling of «pre-crash» on the air,

Frederick,

That was looking very ugly until the reversal to the upside.  The NDX channel was broken to the downside and key support at SPX 1245 was broken.

Quote
The index managed to close near the highs of the day, and above the ascending support, making a very nice candlestick: A Hammer
A candle like this, on situation like this, can be considered a potential sign of a Key Reversal Day, a day where an exhaustive selling power gains momentum, and even so loses the battle against a new buying force.

Yes, that's a start.  It doesn't look as good on the weekly chart yet, though.  At the August, 2004 low (#2 on the chart) and at the April, 2005 low (#4 on the chart), we had long black candlesticks, followed the next week by Inverted Bullish Hammers, then rallies.  At the April, 2005 low, we had an Inverted Bullish Hammer, then a Bullish Hammer, then the rally.

QuoteEnough said, we still need a confirmation from the days to come, but its incredible how a simple candle can change the overall outlook of the all scene.

Right.  I think we're still okay if we sell off today toward the bottom of the channel and finish this week on a long black candle, but we'll need  something like a Bullish Hammer next week and maybe the week after, then the rally, like August, 2004 and April, 2005.

By the way, yesterday the QQQQ came within $0.16 of its Double Top Target IN PLAY.  That might be "close enough."   I'll post the chart in that folder.

Bear Power is not yet over.... We have more downside to come in the coming days ;)

Quote from: Melf Elf on June 09, 2006, 05:17:18 AM
Right.  I think we're still okay if we sell off today toward the bottom of the channel and finish this week on a long black candle,

We finished last week on a long black candle

Quote
but we'll need  something like a Bullish Hammer next week and maybe the week after, then the rally, like August, 2004 and April, 2005.

At yesterday's close of 1520.31, we're now more than 20 points below the channel, and we're less than five points away from taking out the October low.  This is where we need something like a Bullish Hammer, or the weekly chart isn't going to look pretty.

:(

Quote
By the way, yesterday the QQQQ came within $0.16 of its Double Top Target IN PLAY.  That might be "close enough."   I'll post the chart in that folder.

Yesterday's 37.39 low was within six cents of the 37.33 Double Top Target that is IN PLAY.

We started the week dropping below the long term support, and this is really not good for the «big picture»... but the week is not over yet (for the good or the worst scenarios).

The NDX had a strange session today, a lot of intraday volatility with several bull raids during the session but without enough strength to turn the direction yet (although, the bear momentum maybe slowing down).

Yesterday we also achieved several technical references, like the last October lows, which can be considered a potential support / reaction level, we also printed 1512 pts which are the long projection of the last big trading range (or a complex H&S pattern).

The market is discounting new interest raises because of inflation concerns; on the other hand commodities have already started a considerable correction; I'm not sure what the CPI report will bring, but after this sell off the worst scenario may be already assimilated?

This week will be very important if not crucial for the index... we are either watching the official confirmation of a mid-term trend or a major buying opportunity...

Regards !

Based on historical pattern, the market should have a bounce.

It is in deep oversold condition.

Also inflation is the story wall street made up to the public. They try to bring the stock lower and lower. This will create a good buying opportunity for them so they can have a fat bonus at year end.

In the mean time,  the market will continue its down trend until 90% of people gave up.

Right now, I did not see that happen.

I will put my money to work in the near future.

I am glad to have dumped all of my MOVI share at its high and made 126% return in 4 months (it used 30% of my portfolio money)

My portfolio will gain 20% in June because I did not buy anything after the sell of my MOVI shares. 80% of my portfolio is seatting in cash now.

More Bearishness in the SPX yesterday:  :(

1. Bear Move #1:  Fakeout Breakout above the Channel in early May.

2. Bear Move #2: Close below the channel on May 17.

3. Bear Move #3:  Bear Flag rally off SPX 1245 December, 2005 support that failed just inside the channel, and just below the 50 DMA, which had rolled over and was declining.

4. Bear Move #4: Break below the Bear Flag on June 6.

5. Bear Move #5: Successive closes below the 200DMA on June 7, 8, and 9.

6. Bear Move #6: Reistance (high of the day) at the bottom of the Bear Flag on June 6 and 7.

7. Bear Move #7: Resistance (high of the day) at the 200DMA on June 8 and 9.

8. Bear Move #8: Break and close below key SPX 1245 support on June 12.

9. Bear Move #9: Break and close below 22-month trendline support of the August, 2004 low on June 13.

I've heard a lot of "reasons" for the market selling off.  Rate hike fears.  Fears about inflation, etc.  I don't try to figure out what the reason is.  When the market keeps breaking support levels, then finding resistance at former support, I doubt very much that players are fearing rate hikes or inflation when they press that sell button. 

More likely,  players are fearing losing any more money in a wicked market Slapdown.  :(

Quote from: Melf Elf on June 14, 2006, 09:11:33 AM
More Bearishness in the SPX yesterday: 
I've heard a lot of "reasons" for the market selling off.  Rate hike fears.  Fears about inflation, etc.  I .don't try to figure out what the reason is.  When the market keeps breaking support levels, then finding resistance at former support, I doubt very much that players are fearing rate hikes or inflation when they press that sell button. 
More likely,  players are fearing losing any more money in a wicked market Slapdown.  :(

true melf,
the only thing we fear is losing more money or losing profits.. crowds follow eachother. the human condition is one of fear and there is no way around that fact. everything here that is good will hurt you. (market goes up, market goes down market goes up market...................)
it really doesn't have to do with the fundamentals of the company. the stock price always relfects what someone will pay for it. what is true value anyway? no one really knows. it is all based on  opinion and nothing more. oh, and that's just my opinion :D
the way it is,
maxi

Quote from: Ramsburg on June 14, 2006, 01:26:24 AM
We started the week dropping below the long term support, and this is really not good for the «big picture»... but the week is not over yet (for the good or the worst scenarios).

Well... the weekly chart is completely different now then 2 days ago,,, now we have a good looking hammer suggesting a reversal with a reaction on the support zone...but like I said before:
«the week is not over yet» (and what a week !!!!)

One session to go, and in fact a very special one: Triple Witching day...

From the daily chart, yesterday's high was what we can consider a reaction zone, projecting a new descending resistance for this move. Daily DMI is showing a divergence with price during the last two relative lows, (which is bullish and suggests a reversal), a confirmation could be a close above 1580/90.

Today is the day !

Great analysis Rams, (applauds)

Thought id throw in my 2 sense on the $COMPX

The Nasdaq made a huge bounce off its major support area today along with an awesome particular bullish divergence set up which Dr Elder(author of "Come into my trading room", great book by the way ;) ) suggests that its the most powerful move set up in Technical Analysis that he calls "The Hound of Baskervilles" refering to some sneaky manuever by this hound from an old story, i can't remember it off the top of my head. Besides the point, i definatley have seen this pattern work out great in the past for  spotting bottom reversals.

First chart shows The Nasdaq making an awesome bounce off of the major support level as indicated by horizontal price support and Vol by price bars.
(http://**********.net/forum/index.php?action=dlattach;attach=240;image%5Dhttp://**********.net/forum/index.php?action=dlattach;attach=240;image)

This chart shows Elders "Hound of Baskervilles" Macd-histogram divergence pattern.

How to spot the Hound:
First off their needs to be a large retracement in price as noted on the chart below by points A1(price) and A2(Macd-Histo). Secondly price will rebound from this low to make a short rally that allows the MACD-histogram to break the 0 barrier, or backbone, of the histogram. From here Price will again retrace but this time it will break through the low of A1 as indicated by point B1. Although on this second retracement the Macd-histogram(B2) will not break the low of the its first retracement(A2). The farther the distance points A1 is from B1 and A2 from B2 the more powerful the divergence in turn the more  powerful the reversal. Elder suggests that confirmation of this pattern on the first uptick of the MACD- Histogram which hasn't happend yet but i imagine will soon. And there you have it! The Hound of Baskervilles :)
(http://**********.net/forum/index.php?action=dlattach;attach=241;image)

Quote from: rickjust on June 14, 2006, 09:23:32 AM
what is true value anyway? no one really knows. it is all based on  opinion and nothing more. oh, and that's just my opinion :D

maxi,

lol...if I played my opinion, I'd be bankrupt.  ;D

Quote from: fous on June 16, 2006, 05:36:01 AM
Elder suggests that confirmation of this pattern on the first uptick of the MACD- Histogram which hasn't happend yet but i imagine will soon. And there you have it! The Hound of Baskervilles :)

fous,

I like The Hound of The Baskervilles.  ;D

Do you mean just an uptick in the histogram for confirmation, or a tick above the zero line?  Thanks.

Quote from: Ramsburg on June 16, 2006, 01:35:01 AM
Well... the weekly chart is completely different now then 2 days ago,,, now we have a good looking hammer suggesting a reversal with a reaction on the support zone...but like I said before:
«the week is not over yet» (and what a week !!!!)

Frederick,

Boy, I'll say!

That hammer (so far) is what we were needing this week.

Quote
One session to go, and in fact a very special one: Triple Witching day...
Today is the day !

Makes it fun, huh?  ;D

I have the bottom of the Bearish Channel/Bearish Rising Wedge coming in for this week at 1542, so at yesterday's close of 1573, we've got 31 points to play with during Triple Witching, and still be able to close the week out at/near the trendline on what would look like a Bullish Hammer, or a Bullish Doji Star.

On a rally, I'm looking at the 1628-1634 resistance area.

It isn't uncommon for Bear Channels/Bearish Rising Wedges to "morph" (change) into H&S Tops.  The neckline would be the recent lows of 1515-1511.  The Right Shoulder would be a failure near that 1628-1634 resistance area.

If that occurs, and if we then take out the neckline, that would put something like NDX 1269 IN PLAY.  I want to keep an open mind, as we all do, but I'm suspicious about this working out as well as it did in August, 2004 and again in April, 2005.

We're in the part of the four-year cycle that suggests that "Sell in May and go away" will work in 2006, so a H&S Top completion this summer, and subseqent tank, would be consistent with that.

Quotefous,

I like The Hound of The Baskervilles. 

Do you mean just an uptick in the histogram for confirmation, or a tick above the zero line?  Thanks.

Gotta love the hound dog :)

as an uptick i mean it breaking the zero barrier, we'll see how she plays out :)

ouch! that wolfwave would be killer!  >:D

-fous

Quote from: fous on June 16, 2006, 08:04:18 AM
Gotta love the hound dog :)

as an uptick i mean it breaking the zero barrier, we'll see how she plays out :)

Thanks, fous!

Quote
ouch! that wolfwave would be killer!  >:D

Yeah, it sure would be.   :(  >:D

Quote from: Melf Elf on June 16, 2006, 07:44:17 AM
I have the bottom of the Bearish Channel/Bearish Rising Wedge coming in for this week at 1542, so at yesterday's close of 1573, we've got 31 points to play with during Triple Witching, and still be able to close the week out at/near the trendline on what would look like a Bullish Hammer, or a Bullish Doji Star.

The bottom of the channel held, and we got the Bullish Hammer weekly close.

Quote
On a rally, I'm looking at the 1628-1634 resistance area.

That's a guess, of course, but that's what I'm thinking at this point.

Beazer Homes (BZH) was similarly postioned, at the bottom of its Bearish Wolfe Wave/Bear Channel, in early March, 2006, just like the NDX is now (chart below).

I'll post a current chart of BZH next, which illustrates how that particularly chart played out its Bearish Wolfe Wave pattern.

It doesn't follow, necessarily, that the NDX will play out the exact same way as BZH, of course, but the home builders were a market leader in the recent Bull market, and its possible that they are telegraphing the future course of the NDX.   

A rally to NDX 1628-1635 area, a failure there, and a downside break of the Bearish Wolfe Wave/Bear Channel wouldn't be pretty.

Something like that would, however, be consistent with the 4-year cycle (e.g., rally into July...down into October/November), so we want to be vigilant about that possibility.

Quote from: Melf Elf on June 18, 2006, 01:40:39 PM
A rally to NDX 1628-1635 area, a failure there, and a downside break of the Bearish Wolfe Wave/Bear Channel wouldn't be pretty.

It would look something like this (red arrows):

Just when we think it might be safe to re-enter the water...

...another shark attack yesterday.  >:(

The low in the NDX was 1543.85, exactly one point below the channel, which comes in this week at at 1544.85.  The NDX closed at 1548.94, a few points back inside the channel.

We'd like to see the bottom of the channel hold now.  Sometimes we will see a channel break...a rally back into the channel...then a re-test of the channel that holds.  The stock (or index) is saying, "Okay, that channel really is support.  I was just joking around, breaking below it."

;D

BRCD did that recently, on May 22, and again on June 14.  Broke a channel on the first occasion then a trendline on the second occasion, then in each instance, used them as support and rallied.  (The jury still is out on BRCD.  It needs a DOUBLE breakout at 6.31).

If the NDX channel isn't support, and if we take out that neckline at 1511-1515...

YEEKS.  :o

We saw that recently, too, in GIGM.  It completed a Bearish Rising Wedge...put in the second data point for a possible H&S Top...but, never rallied to form a Right Shoulder.  GIGM tanked and hit 3 downside targets in one day, then tanked further after that, off 42% from its May 11 earnings high.

YEEKS.  :o

As I've said in my last couple of posts, I'm looking for at least a "Right Shoulder rally" to that 1628-1635 resistance area, but I'm also aware that a lot of other analysts are looking for the same thing, feeling that we've reached a capitulation low and that last Thursday's 200 point rally in the Dow was the beginning of a summer rally.

It better be the beginning of a rally, because the alternative (taking out that 1515-1511 neckline) could be very nasty on the downside.  One of those "NO RIGHT SHOULDER" H&S Tops, indicating that the index is in too much of a hurry to the downside to bother with putting in a Right Shoulder (like GIGM).

I'm a very weak-handed long at this point (got in and out of APPL yesterday for a paltry 1% gain) until I see that this channel is going to hold.  I got out of AAPL because I didn't like the H&S Top completion in the NASDAQ Composite yesterday afternoon (10-Minute chart), which I'll post next.

Good luck everybody.  Watch that 1515-1511 neckline.  We don't want to see it taken out.

I take that back.  Alister (Terliso) probably wants to see it taken out.  ;D  >:D

Alister has done a great job, shorting this market these last several weeks, BTW.

H&S Top in the NASDAQ Composite completed yesterday afternoon.  It struggled most of the afternoon to regain the broken neckline, failed to do it, and closed at 2110.  Thud.

Curses!  >:D

I was too disgusted to try to calculate the downside target IN PLAY, but it's something like 2085-2090, so as of the close, there's the suggestion that we might go back and fill that gap on the chart.

Quote from: Melf Elf on June 20, 2006, 04:28:15 AM
H&S Top in the NASDAQ Composite completed yesterday afternoon.  It struggled most of the afternoon to regain the broken neckline, failed to do it, and closed at 2110.  Thud.

We had a rally in the early going to resistance at 2115, the broken neckline of the H&S Top, failed that re-test, and now have gone red, currently down to 2109.

:P  :(

The NDX so far is hanging onto the bottom rail of the channe, though.

Possible BULLISH Inverse H&S if the COMPX can take out the neckline at 2127.  The NDX has held at the bottom of the channel so far today.

Overall, this bottoming process is looking constructive for a rally, as long as we don't do any more technical damage.   

Hello Melf ;) The market hasn't been easy for sure... ;)

Trying to get some sense from the latest sessions on the NDX daily charts, I see the descendent resistance as the possible trigger needed for the upside continuation (by this I mean, for example a close above 1560 tomorrow, the confirmation would be printing 1576 or above). This resistance was touched last Thursday and has been forcing the NDX down since then.

On the other hand, the long term support is still holding, and we don't want to see it crossed bellow (although with the current volatility it would be normal even on a bullish scenario). The real confirmation for a bearish scenario would be new lows below last week sell off.

Volatility, indecision, erratic moves is what we have now...  I must confess this is one of the most difficult analytical situations I've had faced for many years...

Regards,

Quote from: Ramsburg on June 21, 2006, 12:34:18 AM
Trying to get some sense from the latest sessions on the NDX daily charts, I see the descendent resistance as the possible trigger needed for the upside continuation (by this I mean, for example a close above 1560 tomorrow, the confirmation would be printing 1576 or above). This resistance was touched last Thursday and has been forcing the NDX down since then.

Frederick,

Yesterday was a Bullish Doji Star Hammer, the low of which (1544.30) was just about smack on the bottom of the channel.  If this has been a 3-day consolidation of last Thursday's big gain, and also a re-test of the bottom of the channel which so far is successful, that looks fine, as long as we move higher and take out your 1576.  ;D

Quote
Volatility, indecision, erratic moves is what we have now...  I must confess this is one of the most difficult analytical situations I've had faced for many years...

I think we all did a very good job seeing the May 11-12 breakdown in this and the QQQQ folder.  We need a "group applause" button.

;D  ;D  ;D

I'm having difficulty recently, though, trying to figure out if we just made a very tradeable low, like in October, or if we need to put on our crash helmets (looks ugly if we break NDX 1511-1515).

I had this same difficulty at last October's low, and so far, the NDX is acting similar with the recent break of support, and this week's re-test of the bottom of the channel, which so far, is holding.

In October, in the NASDAQ Composite, it looked pretty bearish (chart below):

1. We broke a channel
2. We broke horizontal support
3. We failed on the first attempt to regain the channel

All of those were BEAR TRAPS!

In late October, the COMPX finally held a re-test of the bottom of the channel, then it went on an upside screamer to Calven's Bullish Wolfe Wave target.

But, those Bear Traps made it tough to figure out for awhile, and that's a bit like what we're seeing now.  Erratic, indecisive, volatile trading, as you say.

A H&S Top on the 10-minute COMPX chart...the "morphed" (changed) into a BULLISH Inverse H&S pattern yesterday...but, it didn't take out the 2127 neckline, and it sold off again to 2107...

A lot of "false starts." Frustrating!  >:D  >:D  >:D

BTW, if I understood fous correctly (please confirm if you read this, fous), we got the bullish "Hound of the Baskervilles" signal on Monday (June 19).  I'll post that next.

Bullish "Hound of the Baskervilles" signal, or just another annoying, yappy puppy?

"Elementary, my dear Watson!"  Easy for Sherlock Holmes to say...  ;D

In either case,  I think we've got...

Quote from: Melf Elf on June 21, 2006, 03:36:24 AM
Frederick,

Yesterday was a Bullish Doji Star Hammer, the low of which (1544.30) was just about smack on the bottom of the channel.  If this has been a 3-day consolidation of last Thursday's big gain, and also a re-test of the bottom of the channel which so far is successful, that looks fine, as long as we move higher and take out your 1576.  ;D

So far, that scenario is playing out nicely.  We've been trading steadily above Frederick's 1576.

If we can hold these gains today, allowing for some backing and filling, this nice action ought to get us at least to that 1628-1635 resistance area.

Quote
BTW, if I understood fous correctly (please confirm if you read this, fous), we got the bullish "Hound of the Baskervilles" signal on Monday (June 19).   I'll post that next.

Love that doggy!  :D

$COMPX, $NDX, and $NDX and $DJI ALL forming a Bullish Rising Three Methods continuation pattern today.  Usually most helpful in indicating the continuation of a bullish trend, though clearly for us that is only just getting started a week ago, so I dont know how to interpret it fully.

However, if the volume is strong by end of day, I believe this may be the follow through day the market needed to be a confirmed rally.  If nothing else, it would be nice if this harkened even a flat market for awhile, because I think we can all still make money in that, just somebody please stop those bears!

Hey guys,

first applaud to all for your outstanding work. Second I want to share something I received today. it's about Elliot Wave Theory and we talking about long term. Since I only know the basis of Elliot Wave  I can't comment that statement but I'm sure there are people here who can and maybe will give their opinion  ;) .


Here is the statement :

[/b]


Despite the optimism expressed by US Federal Reserve Chairman Ben Bernanke, the markets' exuberant response will not last.

Yes, we might have a bit more oomph left in the hot air balloon of Fed-hyped expectations, but the larger picture is not pretty and you'd better buckle up and hold on to your seats.

A severe decline is on the horizon.

Employing the power of the Refined Elliott Trader, the most significant advance in Elliott Wave Theory in over 70 years, here's how we see the six most widely traded currencies and three major US indexes shaping up.

Our analysts at Elliottician.Com caution that the markets could be choppy for a little longer, perhaps until 29th of this month, when another US Fed rate announcement is due.

Over the next few months, maybe the next year, we expect a very bearish outlook for the Dow with significant potential to drop well below 10,000, perhaps, in worst-case-scenario, to nearly half that.

Quote from: tokyopua on June 21, 2006, 02:29:12 PM
However, if the volume is strong by end of day,

tokyopua,

Yeah, Art Cashin (sp?) just was on CNBC, talking about the low volume.  He said, "We need players to vote with their wallets, to have a good election."  I like that, and I agree.

:D

Quote
I believe this may be the follow through day the market needed to be a confirmed rally.

So far, the break of the channel...Thursday's rally...the selloff that successfully re-tested the bottom of the broken channel yesterday...and, today's upside follow-thru rally all smacks of a Bear Trap short-squeeze today.

Short-term, a lot of downside targets in stocks MADE, and the Bears risked "staying too long at the fair," not covering.  Bullish sentiment currently is the lowest since the major October, 2002 low, so that's also supportive of more rally.  

QuoteIf nothing else, it would be nice if this harkened even a flat market for awhile, because I think we can all still make money in that, just somebody please stop those bears!

Agreed.  Some money on the upside can be made here even in a flat market.

What I'd like to see is something like:

1. More follow-thru to that 1628-1635 resistance area with good volume coming in,
2. Not too much give-back
3. A Right Shoulder of a Bullish Inverse H&S with the neckline at that 1628-1635, per the arrows on the chart below.  

That would give us a more sustainable summer rally.

That's getting well ahead of ourselves, of course, but we want to try to anticipate some kind of scenario that we would need to negate the current bearish-looking chart in what also normally is a bearish phase of the 4-year cycle.

>:(  >:D

"There must be some way out of here." said the joker to the thief. - Bob Dylan "All Along The Watchtower

:D  ;D

EDIT: Sorry, I label my shoulders backwards in the chart.  Dummy.  ::)

Quote from: Jimbo on June 21, 2006, 02:58:40 PM

Hey guys,

first applaud to all for your outstanding work. Second I want to share something I received today. it's about Elliot Wave Theory and we talking about long term. Since I only know the basis of Elliot Wave  I can't comment that statement but I'm sure there are people here who can and maybe will give their opinion  ;) .


Here is the statement :

Elliottician Alert: Buckle Up

[/b]


Despite the optimism expressed by US Federal Reserve Chairman Ben Bernanke, the markets' exuberant response will not last.

Yes, we might have a bit more oomph left in the hot air balloon of Fed-hyped expectations, but the larger picture is not pretty and you'd better buckle up and hold on to your seats.

A severe decline is on the horizon.

Employing the power of the Refined Elliott Trader, the most significant advance in Elliott Wave Theory in over 70 years, here's how we see the six most widely traded currencies and three major US indexes shaping up.

Our analysts at Elliottician.Com caution that the markets could be choppy for a little longer, perhaps until 29th of this month, when another US Fed rate announcement is due.

Over the next few months, maybe the next year, we expect a very bearish outlook for the Dow with significant potential to drop well below 10,000, perhaps, in worst-case-scenario, to nearly half that.

Jimbo,

Thanks for the sobering alert, its good to think about both sides.  I dont know much at all about Elliot Wave theory, but I am curious to know if you have some sort of a subscription to these alerts, and if so, did they predict the current decline before May 11th?  

I ask in part because I recall seeing an Elliot Wave prognostication of major bear market activity that was supposed to begin with a crash on October 31st last year.  This article was featured a few days before that on the main page of investors.com and had me pretty worried back then, though it never panned out.  

That said, with the way things have happened recently, I am quite willing to listen to the bearish case, whatever the source.  Hope somebody here knows more about Elliot Wave theory and can offer and educated opinion, as I cannot.

Quote from: Jimbo on June 21, 2006, 02:58:40 PM
Since I only know the basis of Elliot Wave  I can't comment that statement but I'm sure there are people here who can and maybe will give their opinion  ;)

Hey, Jimbo!

I have only a rudimentary understanding of Elliott Wave Theory as well, but those guys, as a group, have lost a lot of credibility with me over the years.  That's unfair of me to lump them all together, and I don't, but I mean "as a group."

As I remember, led by Robert Prechter, they came into prominence making a good bear call on the 1987 crash.  For many years after that, it seemed that EVERY interpreation of the market was bearish, bearish and MORE bearish, and incorrectly so.

Most indices have scored new all-time highs over the years.  But, the NDX, as I mentioned earlier in this thread,  barely has had  a 23.6% retracement of its 83%  2000-2002 decline.  The Elliott Wave crowd seems to like to point to that kind of exception to justify their bearishness, rather than consider how well the general market has done over the years.

Again, that's unfair of me to a degree, but I've run into a number of those guys who have seemed determined to have Bear Markets.  Did you ever know anyone like that?  That clings to anything that supports their opinion, no matter how much evidence there is to the contrary? 

That's just overall impression.  I'm not real fond of Elliott Wave Theory, obviously.  It seems like a very tortured way of analyzing the market.  A lot of "re-labeling" of the waves to support one's biased point of view, if you know what I mean.

In fairness, I'm sure that there are some good E-Wave analysts out there, and the guy you quoted certainly could be one of them.  If you follow him (or anyone else) try to observe how objective they seem.

One guy I read for a long time would write things like, "I can't wait to see the Bulls get totally screwed, like they deserve!  This market is going to CRASH..CRASH..CRASH!"

Um-mm.mm...having a problem with objectivity?  ???  ::)  >:D

There seems always to be dire, crash predicitons.  Frankly, I've wondered if a lot of those guys are chronically depressed.

Just my opinion, of course.

Quote from: tokyopua on June 21, 2006, 02:29:12 PM
$COMPX, $NDX, and $NDX and $DJI ALL forming a Bullish Rising Three Methods continuation pattern today.  Usually most helpful in indicating the continuation of a bullish trend, though clearly for us that is only just getting started a week ago, so I dont know how to interpret it fully.

However, if the volume is strong by end of day, I believe this may be the follow through day the market needed to be a confirmed rally.  If nothing else, it would be nice if this harkened even a flat market for awhile, because I think we can all still make money in that, just somebody please stop those bears!

Um, like Melf Elf said they were saying on CNBC, volume just wasnt big enough today to make this the follow through day.  IBD Big Picture analysis today also said there wasnt enough volume.  And the Bullish Rising Three Methods patterns I was talking about look kind of weak now at the end of the day because of the sellers that came in and reduced the size of the todays candlestick.  Ugh...

Quote from: tokyopua on June 21, 2006, 03:16:50 PM
Thanks for the sobering alert, its good to think about both sides.  I don't know much at all about Elliot Wave theory, but I am curious to know if you have some sort of a subscription to these alerts, and if so, did they predict the current decline before May 11th? 

Tokyopua,

I'm sorry for my late reply but I was away. No, I don't have a subscription to these alerts and I can't say anything about previous predictions. It was a friend of mine who sent it to me as an interesting reading. I thought it's good idea to share a different opinion. Although I don't think we'll see a dip well bellow 10.000 on the Dow I believe we're not done going south. IMHO

Quote from: Melf Elf on June 21, 2006, 03:39:42 PM
That's just overall impression.  I'm not real fond of Elliott Wave Theory, obviously.  It seems like a very tortured way of analyzing the market.  A lot of "re-labeling" of the waves to support one's biased point of view, if you know what I mean.

Melf Elf,

you are absolutely right. A second your opinion as I tried labeling and counting the wave before and every time there was someone else ( more experienced of course ) with a different point of view. One thing I like about Elliot theory though is identifying the impulse and corrective waves. It really helps a lot when combined with other technical analysis like the ones you're doing. The higher the probability the better for proving you are right. Just my 2 cents.

Basis the weekly chart (this is a daily chart), the bottom rail of the channel came in last week at 1544.85.  Friday's low was 1544.11, and the daily candle was a Bullish Doji Star Hammer.  Not much upside follow-thru today, but the NDX is hanging on.  As long as it does, I think we've got a decent chance for a rally to that 1630-ish resistance, at least.

We have to raise the bar for this week for the bottom of the channel, to 1547.35.  The NDX currently is at 1555.

Quote from: Jimbo on June 24, 2006, 02:15:18 PM
  One thing I like about Elliot theory though is identifying the impulse and corrective waves. It really helps a lot when combined with other technical analysis like the ones you're doing. The higher the probability the better for proving you are right. Just my 2 cents.

Jimbo,

Yeah, it's especially nice if you can correctly identify a Wave 3.  Those usually are the strongest moves, as you know.

We broke below this Bear Flag at roughly 2112 yesterday, which brought in more technical selling into the close.

That break put the June 14 low of 2065 IN PLAY.  :P  :(

We're currently rallying off this morning's low, back toward the bottom of the broken Bear Flag.

Trying to anticipate a "good" outcome for a rally, I'm thinking that we might go down to 2065-ish on a Fed rate hike tomorrow,  put in a double bottom near there, then rally.

I wouldn't like to see us break that 2065 by much if we re-test it.

Basis the daily chart, the pattern off the June 13 low is a Bear Flag. 

On Monday, July 10, the bottom of the Bear Flag comes in at 1527.63.  A break below that would put the June 30 low of 1511.63 IN PLAY, and also would put 1448.33 IN PLAY.

Friday's close was 1533.77.

Basis the weekly chart, we've closed below the channel.  A dpwnside break below the 1511-1515 neckline would complete a one-year H&S Top.

Quote from: Melf Elf on July 08, 2006, 05:02:17 PM
A dpwnside break below the 1511-1515 neckline would complete a one-year H&S Top.

The NDX currently is at 1514.  Honor Thy Stops.

Quote from: Melf Elf on July 08, 2006, 05:02:17 PM
Basis the weekly chart, we've closed below the channel.  A downside break below the 1511-1515 neckline would complete a one-year H&S Top.

The NDX printed 1508.91 yesterday, but recovered nicely into the close, suggesting a possible downside fakeout.

Today, we've printed 1500, and we currently are at 1502.  We'll see how the NDX closes today, but as it stands, the fakeout looks to be yesterday's double-bottom that wasn't a double-bottom. 

Drat!   :(

The fact that we closed below the channel (blue line) on a weekly close last Friday, combined with the fact that we're now breaking a year-long H&S Top sure doesn't look friendly.  The positive divergence in the MACD last month produced about a  5% rally, but we've now taken out the June 13 low. 

Question to fous, maxi, or to anyone:

Does this break of the June low give us the "Hound of the Baskervilles" signal?  >:(

The NDX printed 1508.91 yesterday, but recovered nicely into the close, suggesting a possible downside fakeout.

Today, we've printed 1500, and we currently are at 1502.  We'll see how the NDX closes today, but as it stands, the fakeout looks to be yesterday's double-bottom that wasn't a double-bottom. 

Drat!   :(

The fact that we closed below the channel (blue line) on a weekly close last Friday, combined with the fact that we're now breaking a year-long H&S Top sure doesn't look friendly.  The positive divergence in the MACD last month produced about a  5% rally, but we've now taken out the June 13 low. 

Question to fous, maxi, or to anyone:

Does this break of the June low give us the "Hound of the Baskervilles" signal?  >:(

Quote

probably if there was a bullish macd divergance and the lack of interst in buyers has made this
a " dog that isn't barking"
more later,
maxi

"The market sold off because of problems in the Middle East."

Technically, this  is one of those situations in which the market didn't need any reason at all to sell off.  We already knew that the NDX:

1. Broke two-year channel support (blue line) on a weekly closing basis, on July 7.

2. Closed below the second Bear Flag/also Right Shoulder (red circle) on July 10.

3. Closed below the 1511-1515 neckline of a year-long H&S Top on July 12.

If the market were bullish, we likely would see these "fears" overcome fairly quickly, and the market would continue to rally.

Broke support...broke support...broke support...isn't bullish, especially not when it's the kind of support that we've broken.  That's a lot of technical damage done the chart.

There's always a chance that yesterday's break was a Bear Trap, but that doesn't seem likely.

Rallies back to broken support are common, so the NDX could rally back to the broken neckline at 1511-1515....or back to the bottom of the broken Bear Flag/Right ShouLder... or back to the bottom of the broken channel (blue line), but the year-long H&S Top is a ton of resistance to get through without any kind of base having been built.

The Bear Flag Target: 1448.46 is IN PLAY

The H&S Top Target: c. 1265 is IN PLAY (it goes ON HOLD if the NDX trades back above 1511).

I think we are in for a recession. Here are some of the following fundamental reasons the market is tanking.

1) World instability ex.(Iraq, Israel conflict, North Korea, Iran nukes, Nigeria, world wide terrorist attacks, etc.)

2) Rising Energy prices (Oil, electricity cost, etc.)

3) Rising Inflation

4) Declining Dollar

5) Cooling real estate market

6) Political polarism and division in this country.

Im sure we can add a couple more lines to this list once we progress down the economic cycle of a recession. Unemployment, business slowdown, foreclosures, etc. Looking at the history books it looks a lot like the 1970s recession. Seems to me the markets will be in limbo for the next 2-5 years. Only way to make money is playing the stocks on a short term basis long or short taking your gains fast!

Market near a top? Latest rally upward the last few days seems to be slowing down. Did we just hit a top today in the 1100s. Today seems like a safe day to enter short positions in the market.

Nice rally of over 100 points in the dow and over 25 points in the naz. The question is why did we rally? Economic data coming in shows slowing economy and rising inflation. So this rally supposely is based off the guess that the FED will surely pause intrest rates. This is dangerous assumption one would think. So that would say that at the current levels the markets are at the assumption that the FED will stop rising intrest rates is baked in. So if august 8th comes around and we are still trading near these levels there can be a nasty pullback if they raise interest rates again. If we are trading near these levels one would think even if they do pause the interest rates since its already priced in how much more can we rally up considering the negative outlook on the economy. If the FED chooses not to tame inflation and save valuation of the dollar. I will start pulling my savings out of the bank and putting it into foriegn ETFs, euros,  and commodities (gold and others).

Melf Elf,
So, is this another rising wedge (bearish formation) that we are seeing?

Quote from: beroznikmal on July 28, 2006, 03:09:40 PM
Melf Elf,
So, is this another rising wedge (bearish formation) that we are seeing?

Yes, b.  See comments in the QQQQ folder.

Market is up again!  ;D good for longs bad for shorts hehe. Im fully positioned in 100% short slightly underwater on most my shorts but Im not going to cover. These rallies are on low volume and running on decent news not great news... I have a sense at these levels we are in line for a big sell off next week with the FED, of course everytime I think there will be a sell off it just keeps going up. The more I look at the situation, the more I think the FED is going to raise interest rates. Europe continues to raise interest rates and England today just raised their interest rates today. I believe reality is soon to set in.

That makes two of us holding out for reality  :-[