I've managed to remain disciplined and not post to message boards for some considerable time, well, at least about the market. I did say in my last post that I would update my forecast

for a bear market to begin sometime in 2007, and that is the reason for this post., that and to mention an interesting price setup. Probably my posting is a great contrarian indicator !



last post - http://www.traders-talk.com/mb2/index.php?showtopic=58221 "****forecast of 2006 -
===>"Long Term (month-year)- Not expecting a severe bear market this year, possible correction aka 1994....but looking to 2007-2008 for major bear market."
"

Bear market = at least a 20% drop in the Dow and Spx before new highs are possible. I don't say that drop needs to occur all now.



Before I rant and rave about that, I was looking at some studiesat Sentimentrader. They narrowed down the instance of markets which showed similar characteristics to the current decline of -

a. Sharp decline to extreme oversold readings on breadth.volume from a multi year yearly high etc

b. a consolidation



In most cases the market resolved higher, except for 1998, 1987 and bear markets of 1970's.

I don't have daily charts to hand of 1970's tonight, but I do of the 1998 and 1987 instance, and with todays drop through consolidation zone and loss of 200ma, it gives POTENTIAL for tomorrow or fri/mon to be large 'washout' days, or crashettte. There is an amazing similarity with the curent price pattern, interesting if nothing else:- I dare say others have noted similar patterns, but I have not seen this particular setup mentioned, so here it is -





1998





1987





2007







Why do I expect a bear market to begin? I'll list the reason in no particular order of importance.



My expectation was to set it up was for price to - 'look like the move coming out of the 1994 correction, because so much focus was being given (wrongly) to the behaviour of the VIX. That reveals humans unfailing pattern matching behavior of looking for the last 'similar pattern', and extrapolating it. This is what in fractal analysis gives rise to the rule of alternation, where patterns always inverse there last 'obvious' pattern, because, after all, markets never do the obvious especially when most bet on it.



That brings us to now, and the major reasons -

1. Because the downward price pattern from the last high is IMPULSIVE, and now a corrective response from it, followed by a new impulse. This means another large downwave is imminent. By itself that this does not dictate a 'bear market'. however, the market is sitting at bull market support levels. The next move down will break those levels, 1380 being the first key level, and 1350 the death toll if/when breached.



I keep reading the refrain of my avatar regarding the price damage so far, aka 'tis but a scratch', yes indeed, and that is why so many are comfortable right now, the large price damage usually comes in a few days as a bottom is carved out ( as per cahrts above) - when the refrain becomes 'geez look at the price damage'.

The other refrain is 'and look how fearful everyone else is...not me, because i'm smarter than them'.



That brings us to sentiment...



2. Because sentiment supports the price pattern.

Sentiment is at least as difficult to analyse as price patterns. Of course there are measures that can be interpretated as showing 'great fear' - let talk VIX.

It does NOT measure fear as is widely espoused, it measures PRICE VOLATILITY AND fear/greed.. IF you wished to extract a 'fear/greed' measure from it, you would need to first removed the volatiliy portion. Such a measure I have but ironically is completely useless for prediction, such is the perversity of market timing illogic.



The VIX by itself is very predictive, but not because it shows fear or greed, who knows why infact, the only reason 'anything works' ( albeit temporarily in most cases) is by my best guess because a large number of market players key off it, the perversion being that whenever 'too many' key off it it fails with unerring consistencty never found in any indicator, if you catch my meaning.

So contrary to the fear theory, the VIX behaviour is EXTREMELY BEARISH, and the same folks looking bullishly at 1994 might want to re-examine the charts for why and what happened when this occured after the 1994 low VIX....though, not that its necessarily predictive, at least for consistency sake.

The biggest failing as analysts is to look for measures that agree with the outcome we consiously ( or subconsiously) desire - the old 'when holding a hammer, you see nails' . So I try to look at as many indicators as possible. In the case of sentiment, there are at least 10 very reliable measures, many which disagree at any point in time.



For example, currently the ODD LOT BUYER's are giving a strong, reliable bearish signal. Rydex traders have failed to generate a buy signal are per previous declines of this size. Sentiment surveys are strangely universally apathetic. Overall the picture I get of sentiment is people talking up fear, especially that 'the other guy is panicked'.... and betting on being close to a bottom, or the old 'slope of hope' that bear markets are made of. The FF sentiment position polls have been most illuminating in this regard, and are again tonight.



3. Technicals

Being 'oversold' is a buy signal in a bull market.

If instead what you get is a big rally that fails, with the oversold condition relieved, then it signals a change of trend. That is what we've had, and a break of the lows on a daily closing basis will confirm this sell signal.



4. Fundamentals

Fundamentals have no relevance to day-trading, swing trading but it does come into play in the larger cycles such as 4 year and above, as markets anticipated recessions at this cycle( kitchin).

I mentioned a special condition at the outset, and this is where is exists as I see it.

I do not intend to write an enormous economic piece, I've done that in the past, and a search of the previous posts will find some of it 'lord save us all'. I called for a top in housing about a year ago, and predicted a large decline after extensive mathematical analysis due to the extreme deviation for mean prices that in all previous cases led to reversion to mean or worse reversion to extreme.



There were very few takers for the idea of a national price drop at the time, as per this thread, April 2006 calling for a top in housing -

http://www.traders-talk.com/mb2/index.php?...=51664&st=0



All I want to add is this, I am not comparing this economy to the past, or any potential price

decline to 1998, or 1970's. In my view what we are living through is an a GRAND EXPERIMENT IN ECONOMICS like nothing that has gone before, the phrase 'house of cards' comes to mind, it exists on three levels -

1. Globalized monetary transfers - the ability to literally move entire financial economies out of one

country and into another in a few hours or days. This ability exists also due to 2.

2. The automation ( software) of human decision, via 'rules' - and the assumption in those rules are the breaking point of the system, and trust me, there are always assumptions and so breaking points. Therefore there is clearly hhigher potential for what euphemistically called 'dislocations', hmm, like the financial equivalent of dislocating your manhood, not a pretty picture.

3. The longest, largest attempt to use credit creation to prevent the natural cycles.

Because politicians have learned 'its the economy stupid', the pressure on Central banks to ensure the 4 year cycle intensified over time, such that the fear of any kind of recession became unthinkable, because it might not be possible to recover in time for the election.



Over the last decade this disease of 'popularly contest politics' or 'giving people what they want', instead of 'being honest and telling people what they need to hear' ( never popular, but what democracy is based on infact..thats called leadership)...has led to in this end game to the 'too big to fail economy'.



After LTCM in 1998, then technology bust of 2000-2002, and Sept11 ...each 'panic' required a bigger creation of fake reality ( or credit ) to maintain the illusion of a 'sound economy' - I ask,

what kind of 'sound economy' requires such enormous infusion of credit to prevent a depression?



Again, we are back 'at it', with the latest crises, predictable to anyone with objectively in the

housing area. The desperation and pleas of the 'financial matrix' are deafening aren't they, what are they so scared if our economy is so sound.?



What is 'different' this time, is that 'all the eggs are in one basket', we've had a stock bubble, and when that crashed we used a housing bubble to maintain the illusion, but now thats' cracked, its

the end game - you cannot reinflate bubble until its deflated first, but it seems some need reminding that despite the omnipotent FED ( that's sarcasm in case you don't recognise it), the

nasdaq fell 90% and remains 7 years later miles away from its high.



So whilst the FED can try to avoid crashes, and boy have they had they're hands full since 1998 of their own making ( think Greek plates spinning on poles, banks running around trying to keep them spinning), their ability to avoid the inevitable is very limited. It is limited to trying to create a bubble elsewhere, perhaps they can restart the stock bubble! oh and don't think they wouldn't if they could, because these folks are desperately fearful, only madmen or fearful men act with such desperation and short sighteness as they have for a decade, or perhaps they know of an end of the world event sometime in the next 10 years so they figure what the heck? I do wonder sometimes.



Housing 'is the consumer', and this time there will be no avoiding the inevitable. The FED has infact created the ideal sentiment, because they're previous creation of bubbles and bailouts now leads most market participants to EXPECT that, the classic moral hazzard, at least that is my impression for my travels across business press and message boards.



Does this mean a crash?

It is certainly possible, and unlike 1987, I believe it would be a kick off like 1929 more than an end point - remember, rule of inversion, that is, if we do crash everyone and his brother will pull

up charts of 1987, or 1998 and show the bottom, with logic and arguement so convincing even

Prechter will turn bullish, ok, I'm kidding of course, about Pretcher :-)





But more likely is pattern different to anything previous, defying best attempts at historical comparison, because, the fundamental drivers are unique. I would not rule out one more marginal high on some indexes into the early fall, but that's the best I can see here, and the risk/reward on the longer timeframe of months are heavily to the downside as I see it .



Rant over.



I realize this is short on analysis and justification, not because there isn't any, but because

its not my intension to convince anyone of what I say - i'm simply stating my viewpoint for the record.

That's my nonsense for the day...I don't have the need to argue and wrestle every point to the ground, but if something I said needs clarification then I will obligue. Failing that i'll go back to my

happy quiet mode.



Good luck trading to bulls, bears and traders.



Mark.

Crashette pattern is now on,. Here are two charts showing the measured move to 1350 Spx ( may or maynot be in a crashette as per charts above)...



Example SPX measured move and Sterling currently just finishing same pattern( all markets are all now highly correlated, which is warning of systemic problems)












* I am looking for a closing TRIN above 3 to signal the washout, though judging from past occurance its is still best to wait for the open before looking for the reversal, right now trin is staying very low compared to the 'carnage' and so everything seems very orderly with no panic right now.

Mark

Mark,
If your view is still commodities up and stocks and real estate down over the long term, then I'm with you.
Would you agree that physical gold is the best (and maybe only real) protection
available for a time horizon of 5 years?

mike

Hi Mike,

Yes, my view is the same as posted before - commodities have begun a secular bull market, but that when economic recessions hit ( as I believe we are entering now), they will have CYCLICAL bear markets - so I look to oil and commodities as confirmations of recession i.e. like stock market, they should give a heads up, and I believe are doing so.

Real estate - no change they're, I did ton of resaarch on historical data of valuations and reversion to mean which led to my post a year ago for a top..and it was just a question to me of how we corrected, either a crash or a 10-20 year slow decline back to normal prices.

Gold, sure owning a physical asset that is recognised as monetary protects you in a way nothing else can.

But if you mean gold shares, that's not so clear, in a true crises they may well get sold off, its happened before because of the need to raise cash and a 'sell all paper' mindset.


Mark.

Ah the market, got to love it.

Well the last few trading hours have certainly been interesing. Without a doubt yesterday was on the crashette path the charts/setup suggest, we were down nearly 400dow points before the 'miraculous' rally started midday, and now we know why this path differered to the previous two, as usual insiders were given a heads up. The FED are certainly doing their job to 'stabilize the markets', no issue with that, but if you believe in free markets or an even playing field for trading then yet again the FED have just stabbed faith in markets in the heart by literally handing billions to insiders over the little guy. Particularly because it produced a 5% rally in 2 trading hours leading into an options expiration where for once the shorts were in the money.

Though I suspect, had the crash continued yesterday as it would have without intervention, the many counterparties could not have paid up on options, and the entire derivatives beast was about to explode. So, I can understand the reason it was done, but as I say there will be a price in further erosion of already low confidence in the 'freeness' of the US market.

This now confirms the degree of crises that prompted my post a couple of days ago. We now have confirmation of absolute panic in the halls of 'leadership', similar to LTCM debarcle.

The confirmation this panic intervention worked will be a swift impulse move to new highs on SPX ala 1998. What is clear is if we CLOSE BELOW the intervention low around 1370 on SPX, then it has failed, and that will be the confirmation signal of a bear market from here. That is based on historical comparison to all previous similar events, yes this could be different as I said myself, but no so different I believe.

Will it work? no is my view, this is more like the first rate cut of 2000 than 1998.

It worked in 1998 because the root problem was LTCM and it was dealt with, it didn't work in 2000 because that was result of burst bubble, just like this time in real estate, or more accurately, mortgage paper, and the scale of this problem is higher than any crises weve had, as per my initial post above. Teh dgree of intervention is confirmed by comparing price action in FTSE, DAX and NIKK with US markets, those markets show what would have occured without this, and I can't find a similar divergance in last 30 years so it will be interesting to see how that resolves, will those markets follow us higher with faith in our FED? or will they require their own interventions as occured in 1998. Then every central bank began slashing rates and ordering banks to 'lend to anyone with a pulse, and a pulse is optional', that cannot occur now because banks have already done that, so this is why this isn't 1998.

Maybe this buys 3-6months of 'relief' like the choppy rise in 2000 after the intial drop, until the real drop began in the fall, but I doubt it.

Again, the FED are sowing a moral hazard, as bullish players have come to expect and now recive these frequent bail outs, producing almost euhporia and wrongly believe in the ability to the FED to solve all problems, short memories of 2000-2002.

Next week will be a better read on which way the winds blow, when the dust has settled, expiration games are over etc.

Mark.

Mark,

I love reading your posts. Thank you thank you thank you. Even with intervention, manipulation, etc., I dig this stuff.


Best,

Doug

Love it when someone more literate than me writes what I'm thinking.
I think we have 2 weeks of relief.

Salivating at the prospect of buying some uranium in a few months.

Stocks, certainly something to keep an eye on, IMO.

My wife and I have places in Ohio and Georgia but for some time have been discussing getting a really big place, like to retire in, have family reunions at, etc. I've been hesitant, due in large measure to stubbornness and reluctance to "buy high."

Seemed like darn real estate would never quit going up, though, and darn it all....

Now, though prices have not really backed off significantly, that I've seen, the numbers of unsold places on the market has risen like a huge, mega-big dog. I bet we get some real price declines in the not-too-far future, and I'm digging it.


Best,

Doug

Thanks for the kind words.

I don't want to get back in the habit of talking about the short term, too distracting for me, but here's a couple of my more reliable indicators for next week which is obviously an extremely important week.

First one says :
1. that the move off the low is very high odds going to be retested in the next week or so.
2. that there is more rally to come before the retest, at least time wise.

2nd one says:
1. the open Monday is important, if we gap down, it must be quickely reversed, or a sell is generated, i've market with a purple dot the kind of quick pullback needed to avoid a sell.
2. that high odds the rally is about 2/3rds done in time and price.

* I don't know how well these charts will show, they are huge on my screen so its hard to shrink thesem without losing detail.









FWIW My read ( and looking at a bunch of other indicators), is we get get a small pullback(10-20 spx points) monday, perhaps a gap down or decline shortly after open monday, but then more rally for a day, or two, with little price progression and testing 1450-1470 before getting rejected and a more significant pullback of at least Fib retrace > 50%. off the move off 1370.

If we do ever get a retest, I can't predict if it fails or succeeds until I see my indicators at the time. Having looked at alot of similar setups in last 30 years, usually the rally lasts 2-3weeks or longer before the 'real' retest, but then nothing is usual right now so such historical statistical analysis is not reliable is my view, for example the decline broke many historical precedents.


Mark.

2:11pm just an update on those indicators and pattern, Spx so far down 15pts in the 10-20pts range I expected above, however there is 'danger Will Robinson' because my indicators are now moving to sell, if 1430 is broken ...which I now believe it will be today..then were going down to test critical support at 1418-1422, any move below there or a close at the days lows of any amount then I believe the retest is coming in a hurry.





Mark.

I think its better to view these charts larger, I know that can cause problmes so i've put all options here to cover all the bases-

FYI - indicator is not price based, prefer not to 'splain it...I will say I primarily trade off of Trin, Volatility, volume, Tick and price..so just imagine its one or combo of those.

Things are going very much to my 'read' on sunday...down 15pts today before little rally off 1430 (which was critical as I said earlier..though I thought it wouldn't hold today)...so working into that 1450-1470 resistance as expected and building a sell signal. To avoid triggering the sell in next few hours/day will require another large upward impulse. Of course, thats possible as its still a buy until its a sell, but in my experience it doesn't pay to long this late in the signal.


Click on thumbnail to get large image


Link to full size
http://img367.imageshack.us/img367/4972/aug20yo3.gif




Mark.

This gave me a good chuckle this morning -

http://www.marketwatch.com/news/story/us-s...84416C896780%7D
--------------------------------------------------------------------
U.S. stocks off again amid Fed-induced anxietyBy Kate Gibson, MarketWatchLast Update: 10:37 AM ET Aug 21, 2007NEW YORK (MarketWatch) - U.S. stocks turned lower Tuesday as awaited the outcome of a meeting between Federal Reserve Chairman Ben Bernanke, Secretary Treasury Henry Paulson and Christopher Dodd, the head of the Senate Banking Committee.

Earlier talk that the meeting might lead to a hoped-for rate cut faded ahead of the opening bell, said Peter Cardillo, chief market economist at Avalon Partners. "The markets are anxious to hear from the group of three - the trinity - that are going to meet today," Cardillo said of the gathering between Bernanke, Paulson and Dodd, a Democrat from Connecticut. The Dow Jones Industrial Average
Poised to open higher, U.S. stocks opened lower in the immediate aftermath of televised comments by Paulson, who told CNBC that the economy remains strong, but conceded that "what's going on in capital markets will take a penalty."
-----------------------------------------------------------------------------

What a hoot, " hoped for a rate cut"..from the now supernatural 'trinity'..great we need one a week now? no moral hazard here then....move along..nothing to see ...and "before the opening bell" no less! ....yes we can't have the masses getting in on it. ....but thank goodness "the economy remains strong"

Mark.

FYI - this post is just a shameless excuse to make fun of music fashions.




http://img517.imageshack.us/img517/200/aug211ef1.gif


For musical accompaniment click this link - gotta' love those dance moves..

[hope its alright admin to link to youtube? please let me if not and i'll remove..]


Oh and while I'm in musical mode, which is often, as regards the endless talk now of FED interventions, saving the world, holy trinities, administrators walking on water....I think Thin Lizzy said it best:
"don't believe a word...cos' words can tell lies"

..er, love the tache Phil....my brother had one just like it playing lead guitar in his band back then..must remind him. ..and the hair..well, its just not right to make fun of that..tragic.



*best guess we chop until near the close to push to sell zone, then I'd be looking for a reversal to trigger the sell signal, we are working off some extreme short term bearish sentiment.

Mark

FWIW my view is there still seems too many short term bears for any real decline here, and everything technical tells me upside is still limited to 1450-1470 before a downside retest ...so some more choppy frustration is likely...or a sharp move or two expanding range that then gets faded ending flat.....so i'm expecting no break out of 1430-1465 range tomorrow, even though all my stuff is now ready for a sell...there's still room for more chop and it would fit historical patterns for one more flatish close with a slightly wider range day tomorrow - then down thur/fri below 1430.....I am increasingly of the view frrom looking at technicals we will actually go below the 1370 intraday low, perhaps only intraday at 'some point', that point could be next week, or a couple of month but I favor sooner...but thats getting too far ahead.



Mark.

12:55 FYI - I will get a sell signal if we close the gap, and price upside looks done to me here...give a take a few...hit spx 1462 ..about expected little upside range expansion, now we are likely to close gap and take out yesterdays low around 1440...but expect we will close flattish as said last night...this would all fit perfectly to what I was thinking....

Oh and fractal-ewave-price pattern whatever you want to call it is clearly corrective abc off the low, with a ending diagonal just completed or will complete in a few hours with no significant new highs. i.e. if we break spx 1470 from here I am wrong on this...so thats a kind of stop area if I were shorting...which i am...


Mark.

Couldn't fil the gaps today so didn't get a sell, and market was surprisingly strong last couple of hours against what I expected....but still holding restistance at range 1450-1470 ..but I see there's yet another futures ramp job above resistance...which will complete the 'house of Gap' as below chart shows...



http://img503.imageshack.us/img503/2356/aug22dc1.gif



Like I said last few days there remains too much short term bears..and I'm quite amazed to be seeing it again tonight...I had too much company..good company it must be said with the idea of shorting this afternoon....but there is also a change, because this potential gap up AM above ( which may or may not acutally happen)...seem's to me to be the 'sentiment flip-flop'...and the folks are falling over themselves now to claim they picked bottoms, are long..and the V is in.....all might be true, I'm just observing the change in sentiment.

So if we gap up, I'm looking to short it andfor that to close tomorrow...as it will likely be a 3rd exhaustion gap. As for a sell signal and shorting for that, I will post if we ever get one...we've rallied everytime its come close..didn't think it would take this many posts!!! ... ...quite amazing extreme reading now..as extreme as downside was....to short other than a gap...I am waiting for

1. Sells to occur, will post if it ever does
2. a clear corrective move

I don't want to post 'trades'..because its too distracting for me...but I will post the sells/buys from these signal generators just to show why I am thinking what i'm thinking...

Ugh...right..nuf said..



Mark.

Nice little gap to short at open.
As expected couldn't hold the gap more than a nano second...slight overthrow to 1472..but looks good for reversal and

Also Finally got the sell from this decline....in some rare cases, a minor retest of the highs will occur, but that is low odds..anyway, its now on SELL. I will post charts later after close when I have time to show.

FWIW looks like 5 minor waves completing testing to close yesterdays gap....but my expectation remains for today and tomorrow to be down to first test 1430..then lower eventually.


Mark

interesting ! that works into my scenario of a possible important low near, or a day, after this coming lunar eclipse.

remember the LUNAR ECLIPSE DECADE LOW of 1990 ?

I've created a small public list at stockcharts so I don't have to keep copying these charts over, added one for NDX, and also a larger view with some stuff on it. I may add stuff over time..or not

Charts - these should update live with markets continously, I hope..i.e. hot link

I'll try ot hotlink them here, but I never have much like with that, plus they're huge - oops, get an error..it showed them but cannot post them ..due to not being a gif..oh well just follow da' link.

As said today, 5 down, looks like a completed or very near complete corrective at close, tomorrow *should be down*....but I cannot rule out one more minor high as per blue boxes to put in divergent top, espcially because futures showed a much larger wave.

OK I think have figured out how to 'hot link this' ie. it should update here in real-time rather than having to goto stockcharts list....though I won't put al the charts here, just one's I've put comments on.



*just a note to say I think the Fearless Forecast sentiment polls are unrealiable right now, having followed them for at least 3years, there's just something wierd going on with fast more votes than usualr right after the poll opens..nearly all bearish...could be wrong, but thats my feeling. Perhaps some blog or website has reffered to it generated a bunch of newbie's, dunno', but Im not using it to guage sentiment right now. IT also doesn't gel with sentiment i'm seing elsewhere suc as odd lotters and Rydex.



Were in pre-labor day low volume b.s. mode this week..but sell signal is in effect, we have a brief backtest as blue box alluded to.....one way or another we will work our way to buy signal...where we stand by then will give me a bette read....so far, nothing has happened to change my view that is a corrective move off the low, that will not reach new all time highs before a retest of the low.....but we could be a range bound market for weeks here....so for trading purpose I just follow the technical signals and not worrying about the bigger picture for now.

[older post of this i've made invisible, I tried but can't delete it so if any other moderator canplease do...thanks]

OK I think have figured out how to 'hot link this' ie. it should update here in real-time rather than having to goto stockcharts list....though I won't put al the charts here, just one's I've put comments on.

*just a note to say I think the Fearless Forecast sentiment poll ise unrealiable right now, having followed them for at least 3years, there's just something weird going on with far more votes than usualr right after the poll opens..nearly all bearish...could be wrong, but thats my feeling. Perhaps some blog or website has referred to it generated a bunch of newbie's, dunno', but Im not using it to guage sentiment right now. It also doesn't gel with sentiment i'm seing elsewhere such as odd lotters and Rydex.

Were in pre-labor day low volume b.s. mode this week..but sell signal is in effect, we have a brief backtest as blue box alluded to.....one way or another we will work our way to buy signal...where we stand by then will give me a better read....so far, nothing has happened to change my view that is a corrective move off the low, that will not reach new all time highs before a retest of the low.....but we could be a range bound market for weeks here....so for trading purpose I just follow the technical signals and not worrying about the bigger picture for now.

Just some shorter term thoughts on this chart occasionally...don't hold me to it.

Ah nice and quiet over here isn't it, makes me wann'a post more charts?



Here's another swing signal I've been watching...no its not a magic bullet, but tis' interesting....and along the lines of my current thinking.

hi entropy,

Studying that chart, please allow me to sound you out. The first spike high in the $NYMO is indicative of a "B" or 4th wave high, but not necessarily confirmation the correction is over. The next decline that ensues after the $NYMO spike (and last dip if its a bull) must put in a higher low on the $NYMO with some kind of retest of the bottom or new lows.

So the $NYMO spike is telling you to look for at least one more strong decline or correction. So far, I'm still leaning towards buying the decline, but maybe I won't bottom pick this time.



Thanks for posting your stuff.

cheers,

john

Hi John.....you are more than welcome to sound me out, questions, all thoughts you have all welcome.
Though I may not be too coherant today, as I've have been training(bike/run) like a demon in Phoenix heat today (111f today...28days over 110 this summer which is a record....a rather sick one...oh yeah..but its a dry heat LOL )...and so am probably delerious.



I like the way your thinking so far. ...the only thing I would add is, 'usually indicative of B or 4th wave', The exceptions on the chart is the december 2001 instance, which kicked off a bear market, and so I believe might be relevant this time.



In short, Yes. But is just one of many reasons, some of which I've listed previously in this thread, and give or take a few points the rally has conformed to what I expected and decline began where expected, so, the real challenge I believe is going to be determining is this current decline is 'the retest', or, another rally will occur first....I'm going to use my signals to tell me that hopefully. I will say right now I lean toward 'one more rally' from around 1400-1415 area I marked on chart, perhaps to about SPX 1500....but right now my signals remain on SELL so lets see where we are when I get a buy.



u..r welcome.

Mark

I don't think I have told you how much I enjoy reading and viewing your work. Good stuff, and yes it is nice to post here. The only questions or comments you get are "real" and thoughtful. Keep up the good work.
mss

entropy and mss,

I just wanted to take a minute and thank both of you for your excellent posts.

Even though both of you are far ahead of me on your knowledge of the markets, I do
have at least enough brain power to know talent when I see it.

Please continue your posts. There are those of us you recognize and appreciate
your work.

Thanks again, and best of luck to the both of you.

BW

Thanks mss & underabigw....it is good to know I'm not just reading my own posts ....I also appreciate all the posters on the swing board even if I don't trade the same way.

Mark.

hi entropy,



So noted. Thus as I was trying to describe and will say another way: If the $NYMO puts in a lower low on the ensuing decline, that would be a tipoff for a larger bear - thus we need to see a $NYMO higher high to stay IT and LT bullish.

Great stuff! Thanks again.

cheers,

john

That should have read " a $NYMO higher low" ...

cheers,

john

Understood and agree John...a positive divergance yes, and no 'namby pamby' one either , the lowest the NYMO should get is around -50, if we go below that I will take it as bearish even if that positive diverged to the -100 we had on the thrust down.

I just noted on the live charts (see above couple of posts)...that todays action looks bearish to me...so I think we are going to get some answers within a week here, i'm looking for spx 1400-1415 to be tested before any upside can resume....then we will see if this is THE 'retest' the NYMO suggests well get...or whether there's one more upmove first...I don't have a view on that yet.

Mark

entropy,

Do you use volume in your work? NYSE volume was over 20 to 1 up over down
today. This high of a ratio is usually very, very bullish. I was wondering if
you had an opinion about this or if it might have any impact on your analysis?

Thanks,

BW

I have a couple of useful Volume based buy/sell indicators.

But I do NOT analyse volume in the sense many so i.e. I don't worry about how much volume exists on rallies and such.

As for high volume ratio days being bullish?
I believe this idea came has taken hold from the award winning Lowry study by Paul Desmond, which looked at 90% down days followed by 90% up days marking important lows....its online somewhere if you google and well worth a read if you haven't read it.

But great as that study is, all indicators fail at times. The main reason for that can be simplified to 'what everyone knows isn't worth knowing.' So, when I see everyone on message boards, and newsletters talking about breadth and Volume, then I tend to ignore it. Whereas, I pay attension to what most people are ignoring - its sort of contrarian I suppose, but especially the last 2-3 years, just about every methodology has failed, I have stated I believe this is due to Internet and sudden availability of information - that's a whole topic.

If I were to describe my method its roughly as follows -

1. I use buy/sell indicators I've developed based on volatility, trin, tick, volume & price, primarily aimed at few hours to few days swing moves typical example is to look at few indicators I posted earlier on thread which update showing buy/sell lines). - I also have a real-time system I developed on Quotetracker that is pure short term momentum.

2. I will occasional IGNORE those indicators, based on sentiment, which I have alot of data for, I subscribe to Sentimentrader for some of it, I also guage sentiment from various message boards.

3. I use price patterns, and Elliot wave with my own fractal extensions, to look for entry points, find stops, and exit points - I NEVER enter trades based off these alone, only once the signals are on buy or sell - I used to a few years ago, and quickly discover its impossible to trade off them alone, and I've never seen anyone do it successfully, hence why Ewave gets such a bad rap....it has to be interpreted in CONTEXT i.e. within the technical & sentiment setup. I also use at support/resistance to look for entry/exists - I'm still trying to figure this part out, its constant learning...I think this is the hardest part....defining entry/exits/stops/money management.

4. I have a swing system based on dailies, IYB (don) generously shared a system, I used some of that and a few similar I have added..but I don't trade swing currently, but shorter term.....but its useful for context again.

* I suppose I should say what I don't use - well, mainly, I totally ignore anyone elses opinions, not because I think they are wrong, but because I've found you either trust your own system or you don't. If you don't trust it, well, your down the creek without a paddle, and if you do trust it, its a waste of time reading what others think , and will tend to make me doubt my own system because most traders are smart and convincing. But I do read alot of people's opinions, because I want to know how they're thinking to guage sentiment, or to pick up trading ideas.

Mark.

entropy,

Thanks for the insight into your style/methods of analysis. It looks to me
that your experience has led you to develop the science into an art. In other
words, all the indicators and charts in the world can't give someone a "feel" for
the market. That can only come with study and experience.

Thanks again for a view of your world. I look forward to your
future posts.

BW

I just noticed, that those chart I hotlinked in this thread don't seem to update properly.

So I have changed my signature to link to the full chart list at stockcharts...see 'charts and comments' link below.


Short term thoughts are on the charts - ABC completed off lows, might be DE wave to come...dunno' yet.

Bigger picture - I see no change as per comments at start of thread, and as per MCO chart, still expecting we have a retest of the low ahead of us. * though the Nasdaq/Ndx on a different pattern ( see charts) with chance on retest of all time highs on a 5th wave, coinciding with wave E on SPX/DOW etc....maybe...we shall see.

Mark.

Great charts!

Which indicator is the one below the first chart - a sort of stochastic? your own?

Do you have any time frame for your expected retest?

Things are happening fast at the moment

I'm thinking we get a retest this week (until sep 12)

otherwise I think we go for retest of highs first

Cheers

stochastic



In the next 3-4 weeks looks likely now, base on historically similar examples and also current technical setup.

Shorter term - I read the tea leaves as more downside to come, when the indicators get this 'oversold', we usually need a divergent low...so a retest of SPX 1430 is coming today/tomorrow/wed I believe....then well see.

Mark.

Just an FYI - something interesting I observed and sometimes have mentioned:
*edit: that is, all I can say about it is its 'corrective', but I cannot count it', it is not a fractal/ewave, its an anomaly.

I've changed a few charts around an updated some stuff.



That unnatural pattern I showed continued this morning...I forgot about 9-11, I guess it might have something to do with that, will find out tomorrow ...

but I added a count as best it can be counted at a higher level, with a the wave completing around 3.30, and we've dropped off since so looks right-ish.



Mark.

I created a blog to put intra-day comment updates, to point out chart updates etc.... because I think this thread is getin' confusin'.....will just post longer term swing type comments here...



Mark.