I said in my blog i'd try to separate the longer term stuff onto the swing board, so I am here.

I posted to my blog for first time in a month on Nov 1st as promissed -
( I can't seem to link to specific blog entries, for reference see November 1st entry)

http://www.traders-talk.com/mb2/index.php?...;showentry=2019

- ".. pattern I mentioned from the last intermediate low in Aug has continue to develop... and I believe it either completed yesterday, or there is one more minor new high to come in the next 3-5 days, then an intermediate top is in again....

If I am right, were about to explode to downside in the next few weeks.

* if we decline this afternoon in a huge down swoon, taking out spx 1510, and especially 1500...then the pattern should be complete already."

We did indeed swoon Nov 1 afternoon taking out 1510, confirming the pattern.

I declined to describe the pattern, as its based on ewave, especially since most consistently bemoan ewave, or misunderstand it - but I have said clearly this is a terminating pattern for the bull market similar to year 2000 termination pattern - perhaps due to the 'echo' nature of this bull market to that one.

The decline has done 'everything right' as described in my blog to confirm the pattern - it is certainly 'explosive' as I said it must be, but we are now at the critical point that every other decline has failed.( see chart at end of post) To confirm, we need to continue the decline and CLOSE below 1420 SPX, and ideally 1400, certainly that must happen before a rally above SPX 1490.

I believe this is going to happen within the next week, but the Very short term is a toss up here.

Interestingly, the ewave pattern actually does have the setup for much predicted and never to apear 'wave 3' down here, i'm talking a 400-500 point down day on dow, breaking all bull market supports. Right now futures are up so this seems unlikely..but should the market break todays low again tomorrow, this setup will remain on the charts - and will do so until Price get out of the downward Bollinger Bands. The short term internals also allow for this, but I don't want to talk about short term here...I'm trying to seperate short term into my blog, and longer term here on swing board.


You win some, you lose some. I never expected the rally off the August lows to go as far as it did -

http://www.traders-talk.com/mb2/index.php?showtopic=74778

I was wrong on that, but if I'm right on the above pattern, then I was right that any rally would resemble year 2000, and fail as that one did in the Autumn - though note, I am not suggesting the decline/bear market will be the same - I have no clue on that right now(OK I do but....)... I don't believe its possible to usefully predict such things.

Sentiment wise some bearishness is now showing up in measures I have, but we certainly haven't seen the kind of washout/capitulation we've seen at all bull market lows. I believe that bearishness won't occur untit/if we break SPX 1400 area - then everyone will likely turn bearish in time for a snap back rally.

Options players it seems are looking for 'turn around Tuesday', maybe they get it, but my money is and will be on any rallys failing, and new lows being made over the coming week, at least until we see a spike in put/call and Trin.


Some Charts which will update for reference-

HS setup target reached, close enough -





Watch BB band, climbing down band, and up it on Volatility, until we break out of this descent, the

'wave 3' down setup remains on here.





This is a simple tool for determining Bull/Bear - as you can see, were back the critical support line.










My intermediate technicals are firmly in downtrend, and weeks away from lows, so any rally, even a week long one will ultimately fail according to these, we haven't even seen a divergent low on NYMO yet, and summations continue to accelerate down.

More later

Mark.

Nothing much to add here, but a few things.

We got an explosive one day rally, I posted intraday in blog I was looking for an 'abc zig zag' closing at the highs around 1470-1480.....we closed at 1480....close enough for govt' work.

Why was I looking for that pattern, and that level? I used the 'methodology that must not be named'...its all b.s. obviously.

The Gap up today A.M. did surprise me though to 1490...I thought we'd gap down and run....but 1490 didn't hold and we sold off violently into the close to 1470...and Q's are now leading, after lagging the who decline thus far.

I did mention a while back, that I was concerned about a possible major low around 1430, around monday - if fits my rules for the ''methodology that must not be named'....

So I am concerned about this, and also because Rydex sentiment is a bit too bearish.

But the total lack of follow through adds to my confidence that this isn't 'the low' - I see two very likely scenario's here on the swing -

1. We chop around in a range 1430-1490 for a week for so, forming a 'right shoulder' - look at chart and do some imaginings' - maybe there is some intraday range expansion, to 1420 -1500 but I doubt it.
** The technical and sentiment setup would suggest this is more likely

2. We go straight down here, with a brief pause when the low is taken out.
** the ''methodology that must not be named'.... strongly suggest this.


Repeating my self here but I really dont' see a long rally closing above 1490, well 1505 to be exact based on Fibs, were that to happen, I still am bearish for retest, but the immedaite downside threat would be greatly reduced.
The is a possible larger 'abc' in play here - a to yesterday high, b to todays low, c to new high...my time work says its possible, but the C would need to start by 10.00am tomorrow....this is low odds...but its on the charts as possible...will post in the blog if I see something on this.

Anyway the swing, oh yeah Scenario 2 requires we go straight down tomorrow/fri - and until that doesn't materialize, I wouldn't bet against this because the patterns are stunning and i've never seen such a thing - so from a purely aesthetic viewpoint it would be fun to see it continue.

So obviously any rally about todays highs negates scenario 2.


Mark.

hi mark,

Thanks for posting. Great stuff! Your contributions here and those of mss have kept me balanced and wary of this market. I can't say I am shooting the lights out here, but at least I am not getting mauled trying to long this market.

The thing to watch now for your two scenarios is this IMO. The currencies (eg. $CDN, Euro, £, and Yen) and gold/silver will give a big tell. So will oil and commodities. The USD is poised to put in an 80 week Hurst cycle bottom which coincides with a precious metal top. If PMs roll over here, then we head lower into a late Dec. low and what would be a Hurst 20 week low (scenario #2). That could be a very good entry point for a swing, but markets would not be out of the woods just then.

If markets chop around (scenario #1), then I would expect the USD to produce a feeble bounce in the coming weeks and precious metals to grind higher into 2008. That would mean a good 2008 year for the general markets on the back of a very weak dollar.

If you look back, the last 80 week lows for the USD coincided with PM tops and wobbly stock markets. These two occasions were Dec. 2004 and then May 2006.

I'm not all together sure either way, but for now "I shoot first and ask questions later". At least until these trends assert themsleves. Next week will be very important either way.

Please keep up your posts.

cheers,

john

John thanks for the kind words, and for contributing your analysis....I appreciate it.

OK well I posted intraday what I was using for trading, and it worked out quite well today, the patterns have been great the last two weeks.

Today achieved something significant in my analysis, it ruled out this decline being part of a wave 1 up off the August lows - phew...i've said all along I never thought it was, but...one of the best uses of fractals for me is to rule OUT things, well, at least allow me to guage the odds...and the odds on that are now very remote so i'm ignoring it.

So as I see it now, the best case for those majority who have remained bullish, is that this is going to be 'the retest' of the August lows....and form a large wave 4....for right now, this isn't important so lets leave this determination until later.

To be clear again - I outlined on Nov1 before the decline that the pattern was a bull market termination, so that continues to be my expectation, until the pattern is broken, and as they say 'if it ain't broke, don't fix it' - price is still doing what it should.

Focusing on Tomorrow and Monday -
I just went over a ton of charts and data - and I now have some conflicting signals.
- RYDEX data is now giving a strong BUY signal, some really extreme bearishness there, which is statistically bullish.
- But put/call, Trin,and some other key measures I have are equally bearish.
- Technicals here could put in a temporary low but ONLY IF we test the low(1435-1440 area), which we have failed to today. But if we the internals are very poor on a retest i.e. big down volume etc then it will negate this setup.

Confused? you will be ...I will try to sort this in a moment, but one more important factor: PRICE.
I outlined 2 price scenario's last nice - and so far so good on those. But both are still in play for tomorrow.

My Take here:
As I said last night, I have to go with price scenario (2) i.e. straight down to new lows, UNTIL PRICE DEVIATES FROM THE PATTERN - today it beautifully confirmed the pattern again.

This would mean tomorrow is a real washout day, finally, we haven't had one yet - 3-4% down, and I heard an interesting statistic today that says this is possible on OPEX exp' when previous day was as today.

But I can't ignore the Rydex data and technical setup for a 'bounce' ( 3-5 day rally)....but I find it really hard to see that without a test of 1420-1435 area.

I don't like to specify 'how to trade' this, but I think this is an important juncture since the decline start, so I'll give my basic trading plans for tomorrow, not advice to anyone else, trade at your risk...etc etc bla bla bla -

Day-trade plan
1. If we rally at the open or flat - look to short it, will post in blog like today if I have time.

2. If we decline for the open to 1420-1435, stand asside, to see if 1420 break - and watch any bounce attempt...if I see a key reversal I will post in my blog

3. If 1420 breaks, look for a washout move down.


Swing trade plan
Cover swing shorts if I identify a key reversal on test of 1420-1435 ( will post If i do ), otherwise remain short.

Obviosuly a big monster rally from the open will be a bad trading day for moi - if it happens, it won't be the first!

Time for sleep.

Mark.

Mark,

I cannot figure out how to upload a chart from my TC2000, so I am going to give numbers and time.

I have been considering a long term wave count, and curious on your take. It is a long diagonal triangle pattern from the 02 lows on DJ-30 (SP-500 is similar) as follows:

1st wave - 8/02 to 2/04. (7,197.49 to 10,753.63)
2nd wave - 2/04 to 10/04 (10,753.63 to 9,708.40)
3rd wave - 10/04 to 7/07 (9,708.4 to 14,021.95)
4th wave - 7/07 to 8/07 (14021.95 to 12,517.94)
5th wave - 8/07 to ? (12,517.94 to ?)

I am considering that the current move down is a b-wave in the final 5th wave. (This might be supported by your mentioned developing technicals, and potential for year end rally). The a was between August till November. Now experiencing the b and the final c to finish of the 5th is getting ready to start. This will terminate the whole pattern.

Bill

Hi Bill,
No chart necessary, I know exactly what your talking about.

[ though if you want to load charts,I bet your charting software has an option to take a 'snapshot' image, or at least save as .gif somewhere, failing that t the following always works in Windows:
1. run windows Paint application.
2. Goto your charting software, pull up the chart you want, and then simulteanously hit keys: SHIFT + PrinScrn (its the button usually just to right of F12 on standard keyboard) - this takes a snapshot of whole screen.
3. Goto Paint application, goto Edit menu, select Paste option - your chart will be pasted into paint.

You will need to 'cut out' the chart from this whole screen - click/drag mouse for that and select edit-cut, select File menu-new, then paste again, and save that as a .gif file. Then you can upload it to one of many sites such as this one as http://imageshack.us/ - this will give you a link to use on message boards. Phew. ]


My take on that - I think the basic idea there is right, in that, the long term pattern here is in my view terminating, and not 'breaking out' i.e I don't see this move from 2002-2007 as wave 1, about to breakout to a 3 as many seem to.

I see it subtlely differently in the details, which are so important on the bigger picture, but will matter to shorter term.

On the shorter one, where you have '5th wave - 8/07 to ?' - I don't right now see that as A up, now in B down....(I know many also had this 1 up, now in 2 down, and I've discounted that totally due to length of time of now '2' ..too long for my fractal rules..)...

But OK your count is definitely still valid , because B waves can take longer, but if so, my rules say it will need to run quite a bit longer to me for technical and cycle reasons, to around mid-December - which I believe is the tradional 9month cycle low periond.

If your right, then I believe we'll get a 'b' of B rally soon, for a week or two, then c of B down to that final low.

As I've been saying, I have the 5th as already done, but i've said I can see a chance this is still wave 4 - a large ABC flat from Aug low - which is slightly different to your count, but will result in very similar things.


OK - on the longer term, you said the you see it as a 'long diagonal triangle'.
Hmm...lets just say we dont' want this idea getting around..do you know what happens to ewave counts that become widely known . ...so I'm gonna' say - 'that's crazy Bill, impossible'...but just for the sake of theoretical discussion , here's an alternative but similar idea one might consider:

1st wave -10/02 to 2/04
2nd wave - 2/04 to 10/04
3rd wave - 10/04 to 10/07
4th wave - ??? sometime in 08
5th wave - into 09

*alt, similar to short term discussion above, 3rd wave still completing, currently in 4th wave of it (my flat idea) or in 5th wave of it, your ABC 5th idea( just now a different degree of 5th...)

As I say, until the technical bottom on this intermediate downturn, i'm going with 5th of 'some kind' being done, maybe of 3 or 5 larger degree.

I have had a chart of this for a coupe of years - its not in my public list, an annoyingly I can't copy it to that list, so i've temporarily allowed you to see it here, but it will only be there a while -

http://stockcharts.com/c-sc/sc?chart=$...19,Y]&r=384

- Chart

You can find my full analysis here done a longer while ago early 2006 I think, its out of date now, but most of it still applies, certainly the primary degree analysis -

http://entropyhome.wordpress.com/grandsupe...iot-wave-count/


This shows that overall, even if this is right, I see it terminating Wave 3 primary, so likely would only retrace worst case to the 1994 breakout area I believe, I slightly below 2002 lows, but take about 5-10years to do it, then primary 5 up to come into 2030'ish, to Dow 100,000 area.


Mark.

Mark,

Thanks for your comments. They were helpful in my short term consideration.

Your point on the current time factor and potential nine month cycle bottom in December was helpful and made me consider a possible alternative.

I was previously bothered by how short the 4th wave was in my original count (7/07 to 8/07). I agree it could be more complex, and would fit better. I could also see a triangle developing with a-b-c completed from 7/07 and the rally you mentioned being d, with e ending in December. That would keep the consolidation within the higher level trendline connecting 7/06 through 8/07.

Anyways, as always only time will tell the final picture. Thanks and good luck.

Bill

Just a quicky tonight, I'm feelin' tired...

I'm not seeing anything technical, sentiment, fractal, cycle or just about any method that could generate a swing low here,...anything is possible with news induced moves, but in trading you must play the odds, and the odds are lower prices are ahead before a significant multi day rally.

Another 'one day wonder' rally is always possible...and I would try to day trade long to hedge swing shorts if that turns up, But If the pattern i've been using hold out, any rally wont' get above 1460 ( to close today gap), or more likely won't get past 1450 breakdown area...depending on indicators if we get there, I will look to short those area for day-trading......a break of todays low should finally usher in the washout to 1400 area minimum.

Mark.

hi Mark,

It would seem to me that we have entered the "box". Its either still a bull and it goes up from these levels, or it goes to "hell in a hand basket".



I'm testing longs from yesterday's close.

cheers,

john

Hi Mark & John,
From my standpoint the 8/34 ema cross on the weekly has been a good rule that a trend change has occurred. I also use the 5/21 as a heads up that things have turned for the short term. The ratios of these above or below the "0" line suggest the strength or weakness of the move. Using a % of change gives a very good view of the trend. Below is a quick chart of current position.



I have been posting for awhile that 1373ish was most likely going to be the bottom of this correction, and still think so.
Best to you both and thanks for your work.
642
mss

oooooooo

Maybe NOT!

Someone let me know when you get a buy signal.

Back to the bunker.

cheers,

john

Ha! Exactly - "let me know when you get a buy signal."

Y'all (I'm writing from my wife's any my place in GA versus OH), I have some money in a bond fund that I would like to deploy into stocks, and I'm really just waiting for what I perceive to be a stock market bottom....

Sweeeet - Doug.

Thanks for the input guys...and hope you all had a relaxing thanksgiving, same for all those reading these posts.



Will do, I still don't have any swing buy signals, and most of my technical indicators are back to sell, or moving toward sell, maybe a little more upside possible first. I started adding short positions today ( see blog)....because there is some well defined risk/reward setup....quite likely I'm a little early..hence the tight stop, but I believe another large decline is coming before any chance of a significant swing low, and certainly alomost ZERO chance of an intermediate low here.

What I see right now, is the SPX has actually been in rebound, internally at least, but price has declined, the NDX shows the truer price picture if one wants to look for patterns in that sense.

I've only got time to mark up a couple of charts to show the idea of what I'm seeing -

Charts are quite large, so probably best to just click the links here:

Summation chart

BSPX chart

Sentiment indicators also never gave buys, and are moving back toward sells. Yes, there are some sentiment surveys giving buy signals like AAII, but that has been very unrealiable, for example during 2003 it gave continuous sell signals whilst the bull market began. But if you look at investor intelligence, Lowrisk, consensus bulls and some others, none are giving buys....which is unusual to say the least.

We could see some more rally attempt here, but I am seeing nothing yet to indicate the decline is done, so I will continue to view rallies as shorting oppertunities.

Good trading to all


Mark.

hey fellas
fwiw
i have the sp since 11/21 at 1105 am doing an irregular abc in a wave 2 of 3
i believe we enter into a wave 3 of 3 soon which sb about 110 to 120 points so
i could definitely see us tagging 1320 to 1330 area

regards
g

I put this chart together from data at sentimentrader. Its hard to show alot of history as detail is lost.

But my take from examing this data, is that the market is behaving differently this time to any previous decline, the total put/call actually never penetrated its lower band, and both are already approaching sell - equity already is a sell, total pc needs a close below 1 tomorrow I think.

TA seems to be held hostage to surprise FED moves the last few months, so I hestitate to refer to 'history', and we are in 'the matrix', but based on history, if this move is to be immediately tested, we will close down tomorrow, but if we rally tomorrow, then likely we rally time wise longer, but the put/call suggest not much price progress.

Bottom line as I see it, tomorrow is the decision making day on this move. Most of my indicators say we pull back, but, if the FED cuts rate every hour tomorrow by 50bps then I could be wrong on that...am I joking? with this FED one never knows. .

Yes, with this Fed.

Thank you, entropy, your latest chart is very interesting, in fact, I find all your posts interesting and insightful.

One of the iron rules sold to and accepted by public and most investor/trader alike is this 'lowering rates cause markets to go higher' effect. Without getting into fundamentals, just look at some charts, this common sense is more like a myth, or even a flat out lie, at least by these charts(borrowed from T. Wood):






I am no expert on this and there are much more other data/charts, but the most recent 15 years history no doubt should still posses some definite power to cause markets to react in similar pattern. If history won't repeat, at least rhyme? These charts reveal the true relations between Fed actions and S&P 500 price reactions which are totally opposite to what media and most investing community want us to believe. Fed's actions do cause wealth shifting hands; markets go down not up. Is this 'common sense' by design? so to benefit smart money? If so, anyone can be smart money and get ready to short the markets when Fed already begun another binge slashing. Where am I wrong? correct? Like to hear your thoughts.

Thank in advance,

goflow

Hi Entropy, thanks you for a most excellent chart. can you please tell me the data u use on the bottom two parts of the chart?

thanks.

Hi Entropy and thanks for the excellent post. Can you please tlee me what the bottom two data series are?

Many thanks to you and good trading.

Thanks for the charts goflow. Yeah.. it makes total sense that falling rates are bearish, since rates are falling to stimulate the economy i.e. falling kitchin cycle, and the market tends to anticipate recessions by about 6 months.

What maybe short term bullish, are the initial rates cuts, as we saw this time, but the effect doesn't seem to last. But the length of decline is vary variable from very short, to very long like 2000-2002. which saw 50% cut in market, 90% drop in Nasdaq, so called 'pushing on a string', but of course eventually the rates took effect, mainly by inducing another credit based boom. So the challenge is that at some point the rates cuts will stimulate the economy, and the market will also anticipate that by going up.


Mark.

Hi Tor
top one: 5day moving average total put/call
bottom:5day ma of equity put/call

The bands are proprietary to sentimenttrader.com, and I don't have the spec for them, but they are standard deviation based.

Mark.

..and while i'm here so to speak, I might as well throw my currents thoughts out here.

Were in what I call a 'decision window' here, for about the next 5 trading session I expect. This is where the market will give strong clues about whether 'the bottom is in' for several weeks/months, or whether new lows are coming.

Based on my indicators, I don't believe we will take off in a major way in the next 4-5 days, we will either go sideways/a little higher or down.

Here is the 'state of play' of the indicator groups I look at -
[Note on a term I use - down pressure = large upside upside very unlkely, sideways or downside more likely, up pressure obviously the opposite.]

For Tomorrow -
waves - favour down early, then neutral ( no help!)
Internals(volume/AD/New highs/low etc) - down pressure
Sentiment - neutral
Price momentum - down pressure



For this week -
waves- neutral i.e not alot of help here. We completed a clear 5 wave up from 27Nov thru 30th, so was that 1 up, A up, or C of a corrective...no clues right now, reexamine in a few days.
Internals(volume/AD/New highs/low etc) - down pressure until around end of week.
Sentiment - neutral
Price momentum - down pressure around until end of week.

So, overall I'm looking for a 'flat to down' week, at best on upside SPX to retest stiff resistance in 1490-1500 area and fail. IF correct, this will give time to look at more data on the bigger picture, If the market takes off to the upside closing above SPX 1500 then I'm wrong.

fyi - ill probably start a new thread soon, as this one is about month old and getting out of date, title wise at least.

Mark

Thanks, Mark,
Very much what I have explained to myself why there seems to be quite a lag time for the effect to emerge. The more liquidity good for economy and stock market is obvious, just that 'by the time' market reacts, it's the time to raise rate again to fight overheating. Yes, with this correct thinking, market reacts also VST favorably.

Just a quick update, because I don't have time for a detailed one right now, will have time by end of week...nothing has changed really, just more and more confirmation, but maybe less and less bears it seems..hmm

Short version is as follows -
- I am even more confident now of my November 1st bear market call ( see first entry of this thread) and the pattern behind it, things are shaping up here for the confirmation, my work says that will come likely mid Janaury'ish.

- Technicals and sentiment never supported a intermediate low - I gave that near zero odds and it wasn't - as now many sectors are back testing they're lows. ...and they still dont' support one.

So the consensus is we rally over xmas period ( see trader polls of any kind!) , but there is a very strong fractal signature in the market, and if it continuous i've shown the next step below i.e. for tomorrow, topping below spx 1475 ( or at today close) and heading down to test August lows in purging plunge of 80-100pts! - unlikely but the pattern is very strong so I wanted to show it. We would then see the 'xmas rally' for a few weeks into new year, back to 1470 'ish.....then the 'real' down move would occur, to 1300 and below in January.

More to he point, technicals and sentiment agree with this down price pattern, so even if the fractal ends here, my work says the best the bulls will get is weak sidseway chop perhaps to spx 1500 area over xmas - there is very little 'bullish' to see that I can find now.

Chart

http://img179.imageshack.us/img179/3650/dec1zi6.gif

Mark.

My last update was Dec 20 (above) - and things have developed as outlined there.

I targetted 'mid-Jan' for 'Confirmation' and I also used that term in the first post back in November at the top, so since I believe this is occuring RIGHT NOW, as in the last few days, and in todays action, I will explain what I meant more.

A term that is thrown around in 'waves' is the 'recognition wave', which is wave 3 in most cases, not always.
The confirmation I refered to was that of a bear market, but everyone has different measures for that.

So what I really was talking about was the 'recognition wave', that the confirmation of the bear market, would be a powerful down move occurring at the moment a big jump in acceptance of the down move occurs i.e. recognition.

I have held off posting until I see that point, which is write now as I type. I am now seeing a SURGE IN RECOGNITION - in many area. For example the put-call, poll sentiment,Ryders, and also the turning of smart market observers who had remained bullish until their models forced them bearish.


So this is the point at which PRICE can confirm, the key price area is 1345 to 1355 we are at as I type.

My confirmation will be in, if we do NOT rally strongly in this zone, and especially if we slice though it in today/next week in a very sharp down move ( wave 3 charateristics).


I had targetted 1300 and below in January - and were pretty close now...so I am looking for a bottom to this initial down move, but I do not see it yet, but were getting close in TIME. ( day to few weeks).


Here are some key things missing, that I will need to see before switching to long bias -
1. Trin spike coinident with low.
2. VIX/VXN spike coincident with low.


Mark.

Mark, kudos!

Foreign markets down 5, 6, 7% today. Yeah - "point of recognition" for sure.


Best,

Doug