August 21, 2012 - Postmarket

The market actually... fell?

Though the ending diagonal setup was quickly disproven, my count suggests the top is in.  All requisite subwaves have been completed and we have conducted a hard intraday reversal.

Note that we have put up a confirmation of a bearish dragonfly doji (even more noticeable on the DJIA), and have RSI and CCI divergence and are overbought on full stochastics on daily, weekly, and monthly timescales.

The first order of the bears is to get a weekly reversal candle, which would be accomplished at 1405 but would look better at 1396.  The second order would be a breach of the 50-day moving average at 1365, which is approximately analogous to the thick blue line I drew in the first image.  The third order is final Elliott wave confirmation at 1329.

If Minute [c] = 1.618*[a], the target for [c] is 1174.  This would constitute a 17.7% decline from current SPX levels and would almost certainly have election ramifications.

A breach of today's highs at this point would put the bearish case seriously at jeopardy, and may indicate that the April-June decline was the whole of Minor B of (Y) of [D], rather than simply Minute [a] of it.  The target would then be well in the 1590s.

The most probable medium-term bull count as I see it is that what I have as Minuette (c) is in fact a 1 of 3, and the reversal doji signifies we have entered 2 of 3 for a needed technical correction.

August 20, 2012 - Postmarket

The market went down, then up, ultimately closing flat.  Not even holy AAPL could absolve the market fully of its downward motion, since the SPX lost three hundredths of a point.  Also, the inimitable Mish is also concerned about the effects of automation on the job market.

Given the action today, I will defer to my alternate count - that the Friday EOD high was Submicro (5) of [3] of "v" of (c) of [b].

I suspect we completed wave [4] this morning and are currently setting up a terminal ending diagonal.  Specifically, we are now in Miniscule C of (3) of terminal [5].  The ideal setup is for wave (5) of [5] to top at 1422 - a perfect double top.  Treating the move as a wedge gives an approximate apex at around 3 p.m. tomorrow at just shy of 1421, but since C of (3) may not be finished yet, this could be adjusted later and higher.

I actually see the news hook likely to be the ECB's announcement of a "bazooka".  QE by either the ECB or the Fed or both is by now almost assuredly priced in.  If there is an ECB bazooka, the logical reaction is for European risk assets and the Euro to rise at the expense of US risk assets and the dollar.  In other words, you might get stocks and the dollar both falling simultaneously.

But, as always, time will tell.

August 17, 2012 - Postmarket

Corrigendum:  The August 16, 2012 postmarket image has everything a degree too low (these are Subminuette waves not Micro waves etc.)

The market evidently decided to have another low-volume hardly-move-anywhere day on Friday.

The two most probable counts are that we either completed Micro [4] of "v" in a tiny triangle on Friday, or that we completed (4) of [3] of "v".  This latter count would be necessary to achieve some of the higher targets.

If Micro [5] = Micro [1], the target is 1428.00 exactly from where Micro [4] appears to have ended.  An overshoot is possible, as this would mean that anyone with stops set at the April high would find their stops breached, but sentiment has largely reverted to bullish, especially for AAPL permabulls ecstatic over their new highs.  On the other hand, there's still a lot of bearish sentiment as well, and a great deal of confusion.

This is normal near the peak of a B wave.

August 16, 2012 - Postmarket

The market actually did something.  It moved up.

Previous posts had indicated that this barely-moving morass of tiny candles was a fourth wave of some sort.  It now appears we have finally broken resistance, and are in Subminuette wave "v" of (c) of [b].

The placement of Micro [3] of "v" at the HOD may be somewhat premature - it is possible Micro [3] could really just be Submicro (3) of [3].  On the other hand, the triangular nature of the 4th wave becomes clearer now in retrospect.

Determining the target for "v" is tricky, and is, of course, top-calling.  The Nasdaq Composite appears to be trying to fill its final unfilled gap at 3095, which would be done with another 1.06% up from the close.  A similar move in the SPX would equate to 1430, though again it would probably be lower because the SPX moves are typically more muted than the Nasdaq's.  5=1 on the $COMPQ equates to 3140 or thereabouts, a 2.53% up move from today's close.  This would equate to SPX 1451, if the SPX rises by a similar amount.

Looking just at the SPX in itself, if 5=1 then wave [5] should be 12.21 SPX points, which equates to 1427.72 if we closed at the end of wave [4] of "v" (which I doubt).  If wave [4] ends lower, then of course the target would be lower.

Short delay

Sorry for the absence of an analysis post yesterday and today.  I am in travel.  Normal service should resume tomorrow.

August 13, 2012 - Was The Market Open Today?

And yet again, the market remained rangebound in a tiresome fourth-wave theta-burning morass of boredom.

Gold, silver, copper, WTI crude, and Brent crude dropped a bit today.  The VIX was also lower in complete obliviousness to any risk whatsoever, even though markets were actually slightly lower.

The count remains the same.  The analysis remains the same.  Bulskyn is done with this blog post.  You may go back to sleep now.

Is It The Calm Before the Storm?

This month has several particular elements that make it a rather boring month:

• It's August.  Europe is on vacation, and much of the interesting geopolitical and market news is currently taking place in Europe.
• There is a global distraction in the form of the Olympics, though this one is nearing its end.
• There is a national, and arguably global, distraction in the form of the 2012 presidential election, 87 days away.
• Nothing, positive or negative, will be coming from the Federal Reserve until at least Jackson Hole at the end of the month.
• Germany will not decide whether the "Draghi put" (European Stability Mechanism) capitalization is valid until September 12.

Things are, in other words, quiet - almost too quiet.

I decided to take a look at the Brent and WTI crude oil charts for the past 2 years and put counts on them.  We have what appears to be a reasonably clear A-B-C correction at a reasonably large scale (here, Intermediate, but it could be Primary-degree) and a first impulse wave up.

This could either be A of D (or something along those lines), or the first wave up of a full 5-wave move to test and possibly exceed the all-time high in oil... which would not be particularly good for the global economy.  A near-term pullback in oil is likely - I would expect WTI to retest its 50-day MA from the upside at around $86-87/barrel and Brent to retest the green line at about $101/barrel.

Brent crude is still in slight backwardation (WTI futures are about equal with WTI spot), which suggests some sort of correction in the oil markets.  This would likely be associated with at least a correction, if not more, in the equity markets.  But again, oil is a tricky beast.  Still, that's a lovely stochastics and RSI divergence WTI is putting in.

August 9, 2012 - Postmarket

And yet again, the market moved absolutely nowhere but forward in time.

The easiest thing to assume is that a fourth-wave triangle of some sort is shaping up.  If so, we're in a bit of a time crunch.  At the latest, we will hit the apex early Tuesday morning (before 11 a.m.); at the earliest we hit it tomorrow at the close.

Odds are this is a fourth wave, and a fifth-wave push up will be necessary.  The operative question is whether or not this triangle is the 4th wave entirely or just the B wave of the 4th wave.  In the former case we should go up in wave 5 immediately; in the latter case there should be a C of 4 down before we go up in wave 5 to ~1411.

We do, however, have to consider the possibility that we have already topped, and are simply in a convoluted topping process (which, all things considered, is pretty normal - U shaped tops and V shaped bottoms). 

There are several indicators supporting the idea of an imminent or already-occurred top - the Dow Industrials and the Dow Transports both had red candles today (the $TRAN is in its second day of red, and generally seems to be weaker than the other indices... and it's typically construed as a leading indicator).  The red line of the daily stochastics on the SPX, Industrials, and Transports has now pulled even with the black line.

August 8, 2012 - Postmarket

Well, today was boring.  Indices went nowhere.

Yes, I tried to count the squiggles, as there was very little new information out there.  The most important piece of information is that the VIX gap at 15.45 did in fact fill.

Boring nothingness at the current stage is strongly indicative of a wave 4.  The operative question is of what.  I expect it is Micro [4] of "c" of (y), but it may be more valid to call Minute [b] an A-B-C rather than a W-X-Y, in which case my "b" of (y) is actually "ii" of (c) and this apparent consolidation is in fact "iv" of (c).

If we gap down tomorrow and rally, this would support the timing model for the high being set tomorrow, likely at around 1411.  We may have already set the high, though - we have hit the target.  Though that would require this apparent consolidation to be something else entirely.

Overall I have us having closed today in Subminiscule [v] of C of (B) of [4] of "c" of (y) of [b] of B of (Y) of Primary [D].  But I could be wrong.

August 7, 2012 - Postmarket

Price-wise, we have hit the target of 1406-1430 mentioned before with a HOD of 1407.14.  We are, however, two days early in time.

The market could be done.  We have reached the 90% threshold for a regular flat.  The wave structure looks complete or nearing such, and while the horseshoe/candy-cane shapes the market has been making intraday the past couple of days have been touted as manipulation, one could just as easily think of them as distribution selling of those who bought the dip the previous day at the close.  Notice that today we had three solid hours at the end of day of red candles, even if the day overall was more bullish than yesterday.

The full Nasdaq Composite (as opposed to the NDX) filled its gap today, and at any rate gaps in most indices are now more numerous to the downside than to the upside.  The VIX rallied, and moreover UVXY led with a more significant reversal than the VIX itself (UVXY leading VIX?), closing back above 6.00.  This may foretell further upside in the VIX, and thus downside in the SPX, to come.

Additionally, the SPX stochastics dropped drastically and may go out of hourly overbought condition shortly.  But again, we're two days early in time.  We may need a little more upside before the down.

Bears should be looking for a breach of the blue line (1422-1415), and ideally of the red line as well (1370s).  The best case scenario for the bulls is a retest of the blue line that fails to penetrate substantially followed by a vigorous rally upwards.