Wednesday, May 29, 2013

05/29/13: looking for 1680

Haven't had a chance to update recently given the long weekend holiday.  The up channel broke and in hindsight I was incorrect in my rough forecast.  However, the up cycle still has not completed yet.

The dips that have been hitting 1635 should have been bought.  However, these are only short term trades as I still see the up cycle ending very soon...end of May/early June

We have a positive reversal off of the CCI 86 so this indicates a higher high above the short term high of 1674.  Rough target is ~1680 by approximately early Friday.

Tuesday, May 21, 2013

5/21/13: Slowly but surely, we are inching towards the top

I remain under the presumption that we have < 1.5 weeks remaining in this rally.  I am expecting a top first week of June, not the end of May.

My belief is to continue buying the dips into the last week of May and to start phasing out and enter into short positions by early June.  If thesis holds true, it should be a fast and jolting drop but it is NOT the top.

Slowly but surely, indicators are starting to show cracks in this bull's armor.
1.  First we have the RSI negative divergences but any seasoned trader knows that these don't work very well at tops.  At bottoms, perhaps, but not at tops.  The novice trader will use RSIs as a minimal starting point for calling for negative divergences but from experience, these are not reliable.  They are instead reliable to me in terms of getting to know what the less experienced trader is looking at.

2.  Second, we have ADX divergences but the ADX line itself is still above 30.  I ignore negative divergences if this occurs since there is quite the likelihood of continued momentum.

3.  Now for the third point, we FINALLY see a break in the OBV trend.  It took awhile but now this up channel has broken in terms of volume.  Volume leads price but when does price follow?  This tells me that the rally is almost over.  It's almost like a canary in the coal mine.  It tells bigger traders to start phasing out of positions.

Friday, May 17, 2013

5/17/13: Looking for another 2 weeks of this rally

Wow, can't quite imagine a more revved up rally than this one in the past 3 years...maybe the April 2010 ramp into the May 6 flash crash?

Here is a recap of the cycles I'm looking at

1.  CCI 8: looking for a negative divergence to develop, still don't see this so waiting for Monday/Tuesday

2.  CCI 13: UP.  After the drop into 1648, price is back in the up zone.  Cycle remains up into early June with weakness starting to develop 5/24

3.  CCI 21: UP.  Expecting cycle to show some weakness around June 1, 2

4.  CCI 55: UP.  I think this is the primary driver right now...had a mega negative divergence back during the Boston bombing event.  Expecting cycle to show weakness starting June 1, 2

6.  CCI 86 UP.  This is still up and showing weakness a bit later than June 1, 2.

Given the above, the trend is still incredibly strong into late May and then choppiness to develop early June before I expect cycles to point negative into late June, early July.

If time is not ready yet, then I am looking for price to reach 1700-1720 the following week.  Next week, 1675 Monday/Tuesday before a "correction" into 1660-1666 then back up into 1750 early June.

Crazy market, it's not over yet, and I don't think it's over until we hit the 1900 area whenever that is  1900 STILL WOULD qualify as an EXPANDED FLAT since 2007!! (1.382 * length of 1576 to 666)

5/17/13: Already ramping up

SPX wants to get to 1670-1680 range fast.  If not today then next week.  This is also the target for the IHS on the hourly (1648 head, 1660 shoulder).  Hence a breakout would be 1670-1680.

As a reminder we have a full moon on 5/24 so would be good to be cautious moving into that date.

More later...

Thursday, May 16, 2013

5/16/13: 1640 Support

We have a confluence of support zones coming up at 1640.
1.  50MA hourly at approximately 1640
2.  Channel support dating back to 1536 low.  This is approximately 1640.
3.  Breached resistance and now pullback to support at 1640.

The CCI 8 recorded a low of -200+ which is the lowest in the past month and half.  This goes to show that a 0.50% pullback relatively speaking was significant.

Thursday was the high of the cycle as noted earlier.  Friday into Monday it seems the cycle is pointing lower.  I am however on the lookout for 1640 as a likely support area for the coming ramp up into 1670-1680 next week.

Monday, May 13, 2013

05/13/13: Overall up cycle to last into early June

Taking a closer look at the hourly cycles on multiple time frames.

CCI 8 - the cycle remains UP into Wednesday and possibly into early Thursday before correcting

CCI 13 - the cycle remains UP into Thursday

CCI 21: the cycle is still UP but isn't coming off of diverging lows

CCI 55: remains UP.  Extending the trend line connecting the diverging lows indicates a cycle top in early June

CCI 86: remains UP.  cycle top possibly indicates extension into mid-June.

Given most cycles are pointing up, we should expect a continuation of this trend.  1670-1680 seems attainable even into Thursday this week.

CCI 8 and CCI 13 uptrends should end by Thursday.  The larger cycles are still pointing up so the dip generated by a correcting CCI 8 and CCI 13 should be bought.

I am expecting a medium level correction after this week into the full moon on 5/24, but again that dip I expect to buy.

Other notes for myself:
1.  72 hours from the 1536 low to the gap at 1600.  as of 5/13, we are 48 trading hours from the gap.  We still have another 24 more trading hours until a possible high.

With each trading day being approximately 7 hours (including the 30 minute kiddie hour), we have roughly 3.5 trading days left to hit 1680.

This puts a possible estimated 1670-1680 target around mid-Thursday.

Thursday, May 9, 2013

5/9/13: covering shorts tomorrow, tgt-ing 1618 then 1670-1680

After extensive review, I am covering all my shorts tomorrow at around 1618.  This is rather significant horizontal and also channel support.  By the time we get there, the 50 hourly MA would reach there abouts.

From 1618, I am projecting a fast wave 5 up to 1670-1680.

I have been waiting for an opportune time to get out of shorts.  If I am wrong I typically wait until hourly conditions are oversold.  We achieved that today but I think there is further downside tomorrow before another large rally to commence.

I am not a bull or bear, just trading how I see it...the best way to make money is to trade both sides and to ignore a lot of the narratives out there.  I suggest not to read anything any expert says on CNBC or on marketwatch or on some blog.  I think markets only reward those who think for themselves.  It is ok to take some of it in but if you take too much, your subconscious takes over and affects your trading.

I ended up seeing this rally through a very foggy lens.  Going forward I hope to not make the same error.  This was quite costly shorting through this rally.


Just jotting some notes

1635 was the high today.  If took the middle of the gap last Friday which was approximately 1607 and took the length from 1581 -> 1607, and projected 26 points on top of 1607, we get a target of 1633.

Taking this a step further, let's take the low of 1536.  The distance to the middle of the gap is 1607 - 1536 = 71 points.

Add 71 points to 1607, we have a possible target of 1678.  We won't play this exactly so let's give it +/- 2 point 1676 to 1680.  That could be a likely top area because we're running out of price projections.

Taking the 10 point 3 box reversal P&F chart of the SPX, we can calculate a vertical count off of the November 2012 low of 1340s.  The X column rallied 9 boxes up.  9 boxes x 3box reversal x 10 point box = 270 points.  Add 270 points to ~1400 which was the next low around the end of the year and you get a target of 1670.

Monday, May 6, 2013

5/6/13: This *still* could be a B wave, sounding like a broken record

I'm going to start sounding like a broken record but I am still sticking to my guns on the bearish thesis.

My thesis is we are still in the confines of a drawn out B wave that is reaching its maximum allowable B wave retrace for an expanded flat.  The postcondition after this B wave is a C wave that takes us below 1530.

If wave A was 1597 to 1536, then a max wave B retrace is 1.382 * the length of wave A.  1.382 * wave A = 84 points.  Add the 84 points to 1536 and the target is 1620.  Frankly I need to weigh this possibility going forward in wave Bs.  I wasn't careful on the risk calculation and now I am still holding shorts through the Friday gap move.

Now we are at 1619.77.  I think market is aware of this fib ratio.

In hindsight it would make sense for this setup to be an expanded flat because this would be the only conceivable way for the SPX to break below 1530s since wave Cs in expanded flats move beyond wave A.

Note that this isn't the top.  I am expecting higher moves up but the SPX needs to "reload" so to speak...transfer shares from weak back to strong for another ramp up.  None of this slow methodical movements will get SPX to 1700 IMO.

On a P&F 10 point 3 box reversal chart, SPX needs to make a higher price > 1620 to draw another "X" in the column.  However the issue is the P&F is depicting a broadening top right angled pattern.

Ideally we should be at a short term top.  NYMO made a lower low vs. Friday so chances are for some sort of pullback to fill the gap.  Ultimately I think Thursday or Friday we move back up into 5/10 to retest the highs.


When a cold streak occurs, I make sure I figure out what happened and how I can avoid the same mistake in the future.

There were a few signs that I was slow picking up on:

1.  There were two positive reversal signals on the SPX prior to month end.  A positive reversal signal is one where the oscillator (i.e. RSI or CCI) makes a lower low but price makes a higher high.  This is different from divergences.  In the case of positive reversals, price is expected to move past the most recent high.

SPX had two successive positive reversals one after the other.

In the first one, SPX closed at roughly 1575 on the hourly approx on the 23rd and had a close around 1577.56 on the 26th therefore achieving a higher low.

Both the RSI and CCI (21) made lower lows.  What happened next was SPX moved up to 1596, besting the 1592.  It started forming a negative divergence at 1597 which prompted the short term pullback.

The second occurrence then happened when SPX reached 1581, forming a major bottom.  It ended with a higher low and a deeper CCI/RSI move.  This was noticeable on the daily chart as well.  CCIs were way oversold relative to before.

This + the positive reversal combined to give SPX 1598.  Additionally there was a positive divergence on the CCI 21.  What happened was a major gap up over 1600.

I'm not sure why I was slow to realize this but to me, as a trader, this was a catchable move in hindsight.  As a result, I am not concerned about my methodology and analysis but I am slightly concerned about the process that missed this.

Good luck to all.  

Thursday, May 2, 2013

5/2/13: Holding short, still think the major cycle is due

Add me to the list of additional top pickers.  However, the jury is still on whether or not this is a failed top call.

The highs since 4/11 are:
1.  1597.35: 4/11
2.  1592.64: 4/25
2.  1597.57:  4/30 (all time monthly close)
3.  1598.60: 5/2

At first glance, it looks like we are making "all-time" highs.  However we are still trading within < 5 points of each high.  Yes, the bulls are knocking on 1600's door but this is one hell of a hurdle to pass.  Not only do the bulls want a new all time high but also a new digit recorded.

There are too many divergences abounding.  ECB's rate cut today was expected and it only made 1 point new high.  Not enough honestly.

Futures vs. cash
1.  ES hit a high on 4/30.  Cash hit a high today 5/2.  Divergence between futures and cash forming

1.  OBV still below its highs.  It is now on a triple divergence
2.  CCIs tracing out negative divergences on various time horizons
3.  Declining volume
4.  Standard RSI divergence
5.  MACD divergence
6.  Backtest of broken wedge