Real

There is a lot of talk / speculation about a bounce here. "Everybody is bearish, including CNBC. The market loves to fake people out. Since a breakdown is expected, there is no way it will do that".

Quite frankly, I hear a lot more talk like that above instead of people calling for the breakdown. I think people are trying to get too cute calling everybody else a contrarian indicator.

I think the simple fact is: this move is real.

We have acceleration down, increased breadth down, increased volume, increased distribution. For crying out loud the daily indicators aren't even oversold yet!!!. I think the macro and fundamental situation is deteriorating precipitously, and I think for the first time in the last year and a half the macro and the technicals are finally coming back together (and I think this is a very bearish combination).

I don't know the future, you don't know the future. I think you are a contrarian indicator, you think I am a contrarian indicator. But I think odds and the risk/reward (and that's all I can play) favors a mini-crash here. I have no interest in getting cute with this wave a trying to time a bottom. I think we have a few weeks of some pretty sharp selling off ahead of us.

Update on the Large Count

Here is my large count for the SPX, updated from this post: The Larger Count, with a P2 Placement that I Like





Here is my accompanying VIX chart, updated from this post: Impressive VIX

Lowest close since November and a Death Cross soon?

Looks likely to me.

As I was saying last week, we have Death crosses on the NYSE Composite, CAC 40, IBEX, NIKKEI, HSI, and SSEC. It looks like the S&P 500 will be added to that list soon.

Nice Surprise

Nice gap down this morning. Right on to support. But what's the count? As an impulse, the count stinks, but here is my interpretation. It could also be a double zigzag (this count is a lot more compelling).

But like oneofdaworst and I were discussing, I am not getting too caught up in these Minute degree waves. If we break above 1110 on strength I may hedge long with some dry powder. But I am not giving up or covering my core short positions. I think the primary trend is back to down, and I am not giving that position up. I have no desire to get cute with this. The macro situation is deteriorating precipitously which means that all the major surprises will be to the downside.

Therefore, no matter what the Minute degree waves are saying (and there will be many volatile fakeouts, or did the last 2 weeks not convince you of that) I will be net short for awhile (at least until Int 1). When we get down to the 950 area to some real support (1040 is just a way-stop) then I will re-evaluate.

Time to Rally?

Is the market going for a hat trick?

Options

I have been showing Option 1 since it is my preferred count. But Option 2 is still in the mix. I don't like it, I don't find the truncated leading diagonal compelling, but it is possible. I am cognizant of this option, even though it is not my preferred. I know most of you probably are as well, but I just wanted to be more explicit regarding that this is still a very possible option.

Even though Option 1 is still my preferred, there are two things that I read this weekend that is giving a little more weight to Option 2. First, this interview with Robin Griffiths. This is an extremely good interview and worth 20 minutes of your time. Near the end of the interview he talks about July 26 being a turn date for the current rally. If this is right, it fits with a more extended rally corresponding to an LD retrace. Second, Stormchaser has made several very good and relevant observations regarding trends on several different indices: here

Just letting you know what I am seeing. I am not doing anything at this point for Option 2. But if we get to 1110 and we see no weakness, I would be inclined to hedge long with some dry powder. I probably won't get too cute with it though (I won't cover short, just add some small hedges), because I do think the primary trend is down. And I will not be shaken out of my position nor do I have any interest in giving up my position.

Fuzzy

No follow through on the down move today so the 1-2, 1-2, 1-2 option is out. The bottom was carved out on positive divergence. I like 1100 now as a pullback target and will be watching for weakness there.

You say goodbye and I say hello, Another look at an old friend: Risk

Over a month ago I wrote this post: A look at an old friend: Risk and had this to say:

There are many ways that we measure "risk" in the market. Most of it is actually not risk, but measures of volatility that people ascribe to risk. But things like the Beta and trends in the VIX are used to describe the risk environment (the volatility environment). I have talked about the VIX many times (such as Impressive VIX and VIX-Sentiment). And I am interested in another topic today.

Equity Risk

Looking at the movement of Small Caps relative to Large Caps can be very informative. Small Caps are much more volatile and during the good times can juice your returns (and during the bad times can crash like, well ... small caps during 2008).

But these moves are based on herd behavior. The herd is always very bullish at market peaks and very bearish at bottoms. So looking at when Small Caps are richly valued relative to Large Caps describes when bullishness becomes uber-bullishness and can be the precursor to a trend change. This is another indirect sentiment measure that I like.

In particular, when I look back over the last few years, the ratio of the Dow Industrials to the Russell 2000 reaches a certain level when trend changes occur. The ratio is at that same level currently. And the market is saying "I AM SUPER BULLISH!!!". Lots of talk about going to new highs is funneling money into more speculative issues, like junk bonds, homebuilders and yes small caps.

Which says to me: The risk environment is extreme.

Good luck out there.

Here was the chart from that time:



The market continues to break down and we have several bearish developments

1) Volume on the down moves are *much higher* than the volume corrective rallies back up
2) Many, if not the majority, of major indices (international and domestic) have been making lower highs and lower lows for the past few months
3) Many of the US indices have closed below their 200 day MAs for weeks
4) Last week on a break back above the 200 day MA, it tested the 50 day MA from underneath *and failed* (this is quite bearish). This is true for the SPX, INDU, NYA, RUT, COMPQ, and NDX
5) Many ETFs are showing death crosses (50 day MA below the 200 day MA) but we now have a major US index showing the same behavior: The NYSE Composite (NYA)
6) Many international indices are showing the same behavior: CAC 40, IBEX, NIKKEI, SSEC (Shanghai), HSI, etc. The are not small indices, this is a big deal

I could point to a whole host of fundamental factors as well, but those are well-documented in my Caps blog. The real point is to show that we are in the midst of a trend change. Does that mean we go into crash mode? Maybe, maybe not. But I think this is a possibility you should be cognizant of and at least prepare for in the way of reducing exposure to risky issues.

At any rate, here is my updated risk chart. It is saying that risk is most definitely increasing



Oil Chart

Short term looks like it could be bearish

Accelerating ... but in what way?

Based on the end of the day yesterday and the move this morning, it seemed like this wave is slowing down. But then end of the day today, based on how it closed, gave some ambiguity to suggest that it could be speeding back up ... hmmmm

See yesterday's post for my thoughts: What to make of this?

Options:
1) Finished Impulse with expanded flat
2) Series of 1-2's
3) Leading Diagonal, per alphahorn - Do we have a wave 3?!!!!!!!!!!!!!!!!!!!

Here are the options:

What to make of this?

There are a lot of ways that the move since early June can be counted. There are pros and cons to all of the options, that is to say there is nothing cleanly impulsive or corrective about the waves. It is sufficiently ambiguous to defy a clear interpretation. Anybody who says otherwise is blowing smoke (or else smoking something). This really is a mess.

So in this post, I will step back a try to attack this technically first and then move into some of the wave counts and try to determine where we are. I will most certainly be wrong, but I think the exercise will prove useful and hopefully this will start a good discussion.

Daily Chart:

There are still a lot of bearish developments on the daily chart which is why I tend to lean bearish

1) Death Cross (50 day MA moved under 200 day MA) on the NYSE Composite
2) 50 day MA serving as resistance for SPX, NYA, INDU, RUT, COMPQ, and NDX. This is *very bearish*
3) Trendline is reinforcing resistance at 50 day MA on SPX
4) Up volume during the last 2 rallies has been *pathetic*
5) Daily RSI, Stochastics and MACD have all turned down again



What this does is it helps put some of the possible counts into perspective:

The leading diagonal count: If this is just the B wave in a Wave 2 correction, we have a lot of daily downward momentum to overcome in a C wave back up which would travel about 100 points. Possible? Absolutely! But is it likely? My gut (which has been terribly wrong on numerous occasions) says no

So where does this leave me?

It leaves me with the count that I have been showing the last several days. But it further means that the count the last 3 days needs to be interpreted as an impulse down. I was not leaning this way. It seems to be corrective, that big triangle right in the middle of this wave does not work as a 4, (and counting a triangle as a 2 makes me want to puke all over your head, sir -- for any Arrested Development fans).

So I am going to take a little bit of 'creative license' in counting this wave as an impulse, and lets see how ugly it gets:



.... pretty ugly. It does work, but I don't like it. But then again, nothing about the waves the last few months have been clear to count. So, ugly as it may be, this is what I am going with.

Here is how I think the next Minute waves will play out

Bork

Current count:

Falling

In Friday's post Slowing?, I had this to say:

There is definitely a lot of indication that this move is slowing

1) It keeps flirting with the lower channel line
2) Negative divergence on 15 min, 30 min, and now 60 min indicators
3) Acc/Dis indicators are either flat or slightly distributive

I still think we might get a pop Monday morning, but I have the sneaking suspicion it will be followed by a drop

So far that looks to be playing out. We got a perfect 50% retrace on the wave. Here are my updated charts:





Also I want to point out my VIX chart. In early May, I wrote this post Impressive VIX and I made this chart:



Here is the same chart with the same exact green projection.



The reason why I made this projection, and is the same reason why I think the countertrend rally is now done, is that over the past decade, major events (some of them reversals) have taken place at the black line, what I am calling the long term Line of Action. We had a major breakout on the VIX, and I was theorizing back in May that the next pullback would retest and bounce of this important trend line.

Lets see if that theory holds water.

Here are my longer term VIX charts:

Slowing?

There is definitely a lot of indication that this move is slowing

1) It keeps flirting with the lower channel line
2) Negative divergence on 15 min, 30 min, and now 60 min indicators
3) Acc/Dis indicators are either flat or slightly distributive

I still think we might get a pop Monday morning, but I have the sneaking suspicion it will be followed by a drop

Update on Short Term Gold Count

Here is my short term Gold count (using GLD as an intraday proxy for Gold). To understand where this count comes from and all of my longer term charts and counts for Gold, see this post: binve's Gold Foil Hat Zone: More Thoughts on Gold's Massive Bull Market

My target for the next major wave is ~1400 based on the current cup and handle formation. This also fits with the price touching the upper channel line.

Lines

Looking at my pattern chart. Several lines are coming to a head today. Per my last post, I think we have more upside. But how much will be determined by how it handles this zone

Vomit

Out with the barf bags!!

Here are the things that make me want to puke currently:

1) This wave could be done as of the high this morning
2) This wave could have more corrective extensions (I can think of about half a dozen ways to count this correctively and they would all be legal counts)
3) The impulsive count for this wave since June 8 *really* makes me want to puke
4) At the same time, my preferred count since April 25 makes we want to puke almost as hard
5) This wave could be the end of 2 in my preferred count
6) This wave could be the end of A of 2 in the truncated LD count (the truncated LD makes me want to puke, gag myself, and puke some more)
7) This wave could be the end of 4 of a LD that is still going on

Have I missed anything?

Oh yeah, Gummi Bears really make me want to puke.... I guess that will do for now.

Here is my microcount. What do I think of it? You guessed it, it makes me want to puke. Until we break the channel completely we are in a guessing game: It might be over, it might not.

So besides having a barf bucket handy, I am sitting tight in my shorts and dry powder to wait for this gastric-acid-covered-wave to give us some fu**ing clarity.

Happy OPEX week!!



Update 4:05, adding EOD chart

Die (ahhh!!!) Diet (ahhh!!!!)

Is this count right? I don't know
Are the degrees correct? I don't know
Am I confident in it? I don't know
What do you know?

.... Homer likes donuts?

Is It Time to be Bullish on Cattle?, (part II)

In my last post: Is It Time to be Bullish on Cattle?, I said this:

binve says "Moo" [translation: If it makes a higher low at support ~64-65, then there is an inverted H&S setup that targets ~80, which is also the 38% retrace from the top]..... cows have a very concise language, leaves more time for grazing.

Here was the chart from the last post



The last week has been showing a bottom being put into place where I was anticipating. Here is what the chart looks like today:



The ETN COW is showing a similar pattern. It somewhat tracks this underlying index (i.e. it is supposed to but doesn't do a very good job all the time).

So, is it now time to be bullish on cattle? binve says "Mrraaa Mrrooooo mo moo Moooo" [translation: yes]

Disclosure: I am long COW

Updated Micro

Today is not acting like a top at all. I was saying before that I was not convinced that I had the degrees labeled correctly in my micro count. Today pretty much confirms it. Here is another option I am looking at:



and larger count

Jacks

Hmmmm..... Got the pullback I wanted ... and then some :(

The move was much stronger than I would have wanted. Yet the volume was not particularly impressive. We did break over and close above the 200 day MA for the first time in weeks. Yet we are hitting the underside of a major trendline. The move was up all day long. Yet it was never clearly impulsive.

There are a lot of contractions right now. It could be a major bull trap or a major bear trap. I think that is a realistic assessment and I think it stinks. I hate the risk/reward here right now for new positions based on the ambiguous nature of where this wave landed and what it said (or failed to say). I want to see a breakdown confirmation first before I add to shorts, and I want to see how this move handles 1130 before I think about covering.

In the meantime, I am just sitting tight with my shorts.

Apple

Crisp Apple? (okay, that's a stretch).

So far we have 11 waves for this leg = triple zigzag, which C waves can sometimes be. I am not hard over on this, and I am liking this wave less and less.

Done? and The Two Options

Could it be done? We have a move that looks remarkably like an Ending Diagonal on the 5 minute chart. We have a double top in place. And on the 30 minute chart it happened on negative divergence



Primary Count:



Alternate Count:

Progress on the Current Wave

See last night's post: Crisp

Based on the pullback from yesterday and the speed of the move up today, I still like 1110 as a target (I am skeptical of 1130 at the moment).

Mostly Dead

What am I talking about? The Leading Diagonal. I wrote here last Thursday that the Leading Diagonal was dead: A Third Look at "Always Another Option". And that count is definitely dead. I do not buy a truncated Leading Diagonal for the SPX as well as severely shortened 5th waves for the COMPQ and INDU.



But Col has a very nice theory that we could still be in a leading diagonal, see this post here: http://ewtrendsandcharts.blogspot.com/2010/06/monday-updates_14.html

Here is my count for this option. It is something that is definitely worth keeping on your radar screen