I analyze macroeconomic issues from a fundamental perspective, and I analyze market behavior from a technical perspective. Original macroeconomic analysis can be found here and both macro analysis and commentary can be found on my Caps blog. If you like or appreciate my analysis, please add yourself to my Following List

Wednesday, September 28, 2011

Sept 28

No good. The volatility has been more than my 15-min system can handle, but for the last few days it is swamping even my 60-minute system. The last 3 60-minute signals have been losers (starting with the gap up yesterday). Like I said Monday: If this thing breaks 118 on this wave, likely a new buy will get triggered (that is a very ugly set up).. Ugly indeed. I am sitting out until I get a compelling setup, and frankly nothing looks good in the no-mans land between 114-119.

Tuesday, September 27, 2011

Sept 27

What a mess

Monday, September 26, 2011

Sept 26

Just continuing to watch this this bounce. It's still in no-man's land with regard to the counts, and has not triggered anything on my trend system (no divergence signal at the bottom after this down cycle. And 92% of cycle bottoms have divergence. So the odds say sit tight and wait for a lower low). However the strength of this rally at the end of the day seems very out of place. This could be a rare instance where we get a bottom on no divergence. If this thing breaks 118 on this wave, likely a new buy will get triggered (that is a very ugly set up).

So the bottom line is the tape looks ugly, the indicator setups look ugly, the count looks ugly, my 15-minute system is getting faked out like crazy the last 2 days, so I am just sitting tight and waiting for a 60-minute setup to emerge.

Yet another reason why I don't think we saw 'the' top

I was going through my chart list and found a chart I put together in February and that I featured in this post: The VIX and Market Tops and Bottoms. The conclusion from that post was:

But based on the last two major tops (2000 and 2007), the VIX had very obvious divergence with the SPX. That isn't exactly what we are seeing now. The VIX is making essentially a double bottom (or as shown below, the inverse VIX is making a double top) when measured on the timeframe of a year. I would be very hard pressed to call this divergence 'obvious', especially compared to the last two major tops. This is another market measure that leads to the conclusion that I reached a few months ago: Whatever top we find here will not be a 'major' top. For more discussion on my long term thoughts, see here: Macro Thoughts and Observations. Is the Bear Market Dead? Is this the Start of a new Secular Bull Market?

Since that post in February, the peak in May also saw a lower low in the VIX, which means that there was no VIX divergence at the May peak. By itself, that is not conclusive to say a major top won't form, but when taken with other evidence, I think there is still a compelling case to be made that the May highs will be revisited (and likely broken to the upside) before this cyclical bull market is done.

So yes, that means that I think this current down wave is likely to be a correction in the cyclical bull. I have been maintaining for awhile that this will be a complicated 3-phase cyclical bull market (upleg, consolidation/sideways, upleg). Much like the 1970-1973 cyclical bull (Primary Wave). But since this wave is one degree higher (Cycle Wave), it will take longer and have a bigger sideways section in the middle. And after things are said and done I think this zone between a 1350 and 1050(ish) will end up being a relatively sideways wave in the big picture sense.

Friday, September 23, 2011

Sept 23

Nothing striking to comment on. Just waiting for this bounce to play out.

Thursday, September 22, 2011

Sept 22 (2)

I still maintain the (unpopular) opinion that the count down is not an impulse. Current thoughts:

However, the bottom line is that I don't get too ideological on the count. I trade whatever the waves give me. And if I think the trend is up (like Tuesday) and my Trend System gives me a sell signal, then I sell. And if the sell signal strengthens, then I go short.

It always pays to have a system to keep you honest and on the right side of the trade, especially though all this murderous chop (especially when the range is more than most bull markets make in a year).

Sept 22

Exiting out of shorts. This is such an extreme oversold reading. I will wait for a bounce to re-evaluate. See Trend System.

Wednesday, September 21, 2011

Sept 21

Legitimate sell off is happening. I have gone short. The early signals yesterday on my Trend System that told me to get out of my longs further deteriorated today and a number of secondary/confirming indicators all triggered more sell signals.

Tuesday, September 20, 2011

Sept 20

Nasdaq has been leading up recently, and now it looks like it is leading down. The Nasdaq was down 0.88% for the day, whereas the SPX was down 0.14%.

Combine that with the fact that today opened bullishly and closed very bearishly, and that my cycle chart made a divergence top with the peak today, then we have a forecast for near term weakness.

I am still unconvinced that it is the start of a 'great wave down'. But I will let my cycle chart evaluate that for me. In the meantime, I am looking for a move to the downside for the near term.

Monday, September 19, 2011

Sept 19

Nasdaq closes slightly down (basically flat) vs. a down day for the SPX

Current count (still based on the same theme over the past couple of months)

Friday, September 16, 2011

Sept 16

Nasdaq has definitely broken the previous resistance.

Thursday, September 15, 2011


Along the same theme as my last post, the DAX (which might be considered to be the leading market in the Eurozone) looks poised for a good sized reversal. Strong divergence is being registered.

Sept 15

Action still does not look imminently bearish to me. The fact that there is so much focus on the bear flag and that a large number of people seem to be talking about it (including normally non-TA types) makes it seem like a big fakeout, at least to me.

However, if it breaks down, then it does and I will trade it accordingly per my trend system. But something tells me the break will not be in the expected direction.

Friday, September 2, 2011

Sept 2

Sell signal at 118.53