Chart Medley

In preparation for next week I think my intrepid stainless steel rats need some low carb & high protein charts to sink their teeth into:

If you have never heard about the II Survey: Each week the service Investors Intelligence surveys some 140 financial newsletter writers to determine whether they are leaning bullish or bearish in their opinions to subscribers. The resulting Investors Intelligence Survey compiles the data to arrive at a weekly percentage of bulls v.s. bears. The Survey is considered a contrarian indicator, since extremes in either direction are signals of reversal of the market’s current trend. We like contrarian indicators - that’s where the magic happens.

Based on that we can derive a bull/bear ratio chart, which IMNSHO is the most important. A rising trendline means bullish sentiment is outpacing bearish sentiment. Besides the numbers it’s also important to gauge the velocity of sentiment change. The 2.00 area is associated with bullish extremes and market tops, and the 0.60 area with bearish extremes and market bottoms. We are now touching 2.9 plus we also made a huge jump in a matter of one week. Mmmh - I wonder what’ll happen next…

Seems to me that since August investors have maintained a very bullish bias - as you can see turning points seem to happen when sentiment leaps forward in a rather short amount of time (indicated in red).

Sorry for the tiny chart but that’s the best I could find (please send me larger version if you can locate one). But what stands out nevertheless is the bearish sentiment reading, which now has fallen below that of the October 2007 top in equities. Despite the fact that we are way below the 700 mark painted during those ‘bullish days’.

At the very same time we also saw the VIX descend to 2007 levels as it attempted a breach of the coveted 20 mark - however failed for the second time. Not did it just bounce - it gapped up the next day and closed 20% higher. Yeah, yeah - Dubai Shmubai… as if that mess wasn’t already known by anyone with real skin in the market.

Bonus chart - remember when I posted this one right at the top?

What does all the above tell you about the ‘health of the rally’? Where do you think we’re going next? Dow 11,000 or Dow 9,000?

Exactly.

Give it time - stay the course.

Cheers,

Mole

This entry was posted on Saturday, November 28th, 2009 at 5:02 pm and is filed under Market Outlook, Trading Psychology, Volatility. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Centrifugal_Deforest

NEW POST
NEW POST

fast996

It's Sunday night and the Goldman computers are working perfectly, USD being sold with gusto and the ES is up in mirror fashion.

But the smart money has been selling GS since October. You got to love those icemen.

marcopolo101520

Friday I heard they stopped trading on FTSE...

marcopolo101520

DAX and FTSE willbe interesting...tomorrow.

yudhisthira

Aussie dollar around 61.8% retrace of thurs-fri decline. ES may want to go to 78.6%? Damn.

yudhisthira

News does not matter, but it relieves the boredom:

For some reason The Times has been removed from news stands in Dubai ...

From The Times: Central Bank of the United Arab Emirates takes hard line as Dubai counts soaring cost

... The rulers of Abu Dhabi are expected to make a statement before the markets open on whether they will bail out Dubai and which businesses and projects will be rescued.
...
Senior analysts in the region expect that projects regarded as folly will not be backed but operations and investments with a strong business model will be.
...
Today will mark the first key test of whether Dubai will default on its estimated $88 billion debt pile, when interest payments of about $138 million on a $2 billion bond issue by Jebel Ali Free Zone Authority, a unit of Dubai World, become due.

I think many people consider most of Dubai "folly".

http://www.calculatedriskblog.com/2009/11/times...

bluetrader

Wow....even CNBC isn't trying to gloss this bit of news over. Yet, the ES is positive....what gives? :)

-Dave-

http://www.cnbc.com/id/34195696

molecool

Every Monday in the past few months has been a ram job - same old - same old.

marcopolo101520

Wake up as usual around 5am, went into Galleria Mall and Target parking lot was full (pass by Best Buy and that was full too). Went into Target, huge lines, left in 2 minutes. Saw people buying like 2 large TVs (crazy!), lot of movies and games, toys and kitchen stuff. On my way out passed by Macy (really quiet there - maybe a sign) and Old Navy (there was a line outside the store). Overall I feel like people still do not realize that there is time for better sales. My wife went Saturday to Macy and saved with specials and coupons about 80% of the retail price. Probably we spent this weekend around 200$ (way below 347$ mentioned by NRF - I guess the guy with the 2Tvs helped there with the average). Yes, I admit I spend some $$ (included in those 200) on ink cartridges (long due for replacement) and some wiperblades for my wife's car (amazon had a nice sale there).
But as I said that's all this season....loaging up the shotgun for spring bull hunting, unless they open the early season.

marcopolo101520

Gold is not moving, silver is up nice, oil is slow too but the night is young.

marcopolo101520

Nov. 30 (Bloomberg) -- Treasuries fell, eroding the biggest monthly gain since March, after the United Arab Emirates’ central bank said it will back the country’s lenders as they face losses from Dubai World’s possible default.

Attn: Country's lenders nothing about international/foreign lenders like HSBC, RBS, Citi, JPM. Still the futures are pointing up. Playing games again is back in fashion?

bluetrader

A little bit of nifty information some might find interesting. Over the Holidays My wife and I spent most of the week with her sister and brother and law. Her brother in law runs a couple of charter fishing boats out of Little River SC...(Myrtle Beach area for those not familiar with the location). Anyway, in talking to him he told me that his year hasn't been all that bad. Interestingly enough, more than just a few of his returning customers are out of work. He attributed it to the fact that he usually books his boats months in advance and most of the customers pre pay via credit card well before their trip. His fear is that next year will be the bad one as his bookings for late winter and spring are not exactly up to par. Usually his customers book their next year's trip almost as soon as they return to shore. For the most part, that has not been the case so far this year. Furthermore, if there is a place in this country that is completely dependant on discretionary spending it would be Myrtle Beach. Of course, he has alot of business associates and friends in the area that he talks to regularly. According to him, 2009 summer customer counts were up from last year but spending/revenue was down. Another point of interest was his neighborhood of homes in the 250k/350k range....I noticed that the homes on both sides of his house were for sale. Of the 18 homes in his neighborhood only 7 are occupied. The rest have been foreclosed on. These are not vacation or second homes. These were primary residences of people whose livelihood depended directly on discretionary and retail spending. It was quite an eye opener and a pretty sobering experience. Actually, it was downright unsettling. I live in Fayetteville NC and due to the large military base here, our local economy has been somewhat insulated from the problems that are plaguing other parts of the country. Read what you will into this post. It's just now glaringly obvious to me that we are far from any type of recovery and I've now seen first hand that what we are being told day in and day out by the MSM and CNBC about our 'great' and 'resiliant' economy is total BS.

-Dave-

jamesmarkii

Margaret Willis Elementary

bluetrader

Oh...LOL Usually when someone throws out a block of time that they were in Fayettenam it's because they were stationed here. Looks as though you were here for the same reasons I was...Army brat. Is that correct? I was at 71st HS then..... Makes me feel old. On another note, ES is looking kinda topheavy...might be an interesting evening.

-Dave-

jamesmarkii

army brat
i started kindergarten there in 1984, lol
m little brother there also in 1988.

jamesmarkii

Fayetteville, NC
1984-1989

bluetrader

hoooooah!....Fayetteville NC 1968-present. AKA....screwed for life at birth.

-Dave-

TomOfTheNorth

Great comment Dave. I too suspect an ongoing propaganda campaign. Here in n.e. MN, U-3 is officially at about 18% and rising....no recovery here.

Scoops

Fantastic article brought to my attention from TTW.

http://www.minyanville.com/articles/jeff-cooper...

ClutchShorter

WASHINGTON (Reuters) - "The Treasury Department is expected to meet with lenders on Monday to press them to do more to rework troubled home mortgage loans, a source familiar with the Treasury's thinking said."

Translation : "Holy cow batman, let's get our shit together before this gets any worse"

steveo77

Cool batman motiff....check this chart I did just lately.

http://oahutrading.blogspot.com/2009/11/mutual-...

TomOfTheNorth

affecting my best "Frank Gorshin as The Riddler" laugh.......

Great chart, awesome graphics!

orth

"Toubles a brewin in Gotham city."

yudhisthira

Aussie Dollar at 50% retrace of thurs-fri decline. ES at 61.8% retrace.

yudhisthira

Watching the World
— By Kevin Drum | Sat November 28, 2009 10:31 AM PST

John Judis a few days ago on the possible fallout from the Dubai World crisis:

You have to remember that the Great Depression only became “great,” that is, global, when an obscure Austrian bank went under in 1931, and set off a massive financial explosion around Europe. Capitalism is an irrational system that is often full of unpleasant surprises. The collapse of Dubai World may turn out to be nothing. But it could also turn out be one of those unpleasant surprises.

Hopefully not. But this has always been my biggest concern. A slow jobless recovery seems all but certain at this point, but I also think we'll be lucky if that's as bad as it gets. The nightmare scenario is that something like Dubai World panics investors and sends them fleeing back to quality; Eastern Europe can't roll over its debt; Brazil goes kaboom as hot money suddenly stops flowing; Western European banks start to fail; etc. You can fill in the rest.

http://www.motherjones.com/kevin-drum/2009/11/w...

molecool

"A slow jobless recovery seems all but certain at this point,"

Why? Because they keep saying that on the telly? ;-)

How does a 'jobless recovery" work exactly? That's right - rich influential elite banks make coin on the backs of taxpayers while regular people are losing jobs in droves and fall into poverty. Wait - I got another word for that:

Plutocracy (look it up).

bananaben

It's not a jobless recovery - it's a jobloss recovery. Green Shoots!!

Thank you Dubai for allowing me to at least rebalance some of my short positions. They will do everything they can tomorrow morning to try and restore "confidence" tomorrow so watch out.

orth

Jobless recovery an oxymoron like being almost pregnant.

TomOfTheNorth

I heard Gerald Celente use that line last week....Is he lifting your material???? That BASTARD!

orth

Actually, I'm the bastard. I hope he doesn't call his lawyers Dewey,
Screwum, and Howe to sue me for plagirism.

TomOfTheNorth

I hear he's calling in the big gun 'Rainmaker', Howie Cornholem! Yer screwed now....

orth

Its too bad the guy is afraid to say what's on his mind. Gotta love'im

yudhisthira

yeh, good point. jobless recovery?

goldpackers

Seems Black Friday was pretty weak overall. Any news?

Iguanadon

This is the most "official" info from the NRF.

http://www.nrf.com/modules.php?name=News&op=vie...

Publius Federali

No point looking at stats as they are all made up and brought to you by the people who have a rooting interest. Go out to the malls and take a look yourself, that would be my best suggestion. I personally do not care what anyone says until the numbers come in officially (if such a thing exists). To convince me that retail sales will not be horrible someone needs to get through my semi-stupid skull how a country filled with people in debt, with no jobs and no access to credit can possibly buy anything, much less imported crap that now is more expensive because of our trashed toilet paper currency.

steveo77

http://screencast.com/t/ZGE5YTQ3YmMt

XLF being held down by a Fib Fan, been watching this for over a month.

fast996

The announcement of the UAE backstop of the Dubai World mess still leaves us with this problem. A 8 billion dollar loan by Citi bank to Dubai. Come'on Turbo Timmy cough up another lung. do ya think US taxpayers will stand for bailing out Dubai's sand castles built on piles of shit??

http://www.7days.ae/storydetails.php?id=75035&t...

steveo77

Actually, I think we all need to express outrage at the lack of outrage

fast996

I think the Chinese have the right solution for this kind of thing, send them a valentine, Chicago style.

Vardoger

Great work.

jamesmarkii

roasting

steveo77

I did a little write-up on Dubai World, following some of their links and "assets". Looks like mark to market could really be zero on some of their grandiose plans, unless they can convince others to throw good money after bad to bring projects to completion-- then mark to market might be 20%. Just my humble opinion....

Check it out, a quick click throughs can provide a bit of perspective and scope on this debacle.

http://oahutrading.blogspot.com/2009/11/dubai-w...

goldpackers

Seems $ would have held gains if this was any decent sell off. Still favoring ~1073 by Tuesday/ Wednesday. Hopefully 1060. Favor this is 4 of a diagonal until we blow out 1060 for a couple of days.

The_Grim_Reaper

This is pretty interesting. It's possible and likely some more selling should be expected in the near future, but I also see reasons to think it's shallow. Just to play devil's advocate:

1. The bearish percent could move to single digits before this bull run ends.

2. The fed is the bull -- who cares how people feel? In other words, if the liquidity is there, the market will continue on higher, and these sentiment indicators will only give you clues about short-term tops. It will be interesting to see how high the bearish percent goes as price drops. Meaning that if a huge number of people are converted to bears on a relatively small pullback, then the sentiment will have corrected with no meaningful change in trend.

3. Nothing has changed really in terms of a channel or support breakdown (yet):

http://ethicalcheating.blogspot.com/2009/11/has...

All this said, I do think playing small on the short side is not a bad plan on the next bounce. However, as I noted, in the past when I see high CPC readings on a distribution day, that can (but doesn't have to) mean a bottom is near.

Graphite

In other words, if the liquidity is there, the market will continue on higher

You see this argument everywhere in the "bearish, but expecting higher prices" blogosphere these days. This is effectively like writing "if sentiment continues to improve, the market will continue higher." It is in the nature of the Fed's liquidity "injections" that they depend upon waxing investor confidence in order for that liquidity to be taken up and plowed into asset purchases. Toppy sentiment indicators are effectively the same as toppy liquidity indicators.

And yes, toppy indicators can get more toppy. But the Fed is *not* the bull.

Bart7

Good post Mole. I posted that Investors Intel info last week several places and nobody had anything to say about it. Record low bears, lower than 2007 top. I think investor sentiment is an important key to timing market turns, not exact but adds another clue.

molecool

I read your comments but don't always have time to respond - too busy. I often post stuff and nobody even mentions it - but I keep on throwing it out as some people do pay attention.

texpresso

Mole, can you give me a quick TA lesson? do megaphones and pennants in the RSI indicate anything other than increasing/decreasing volatility?

molecool

First up - try to use the RSI_EMA - and yes, those patterns do have meaning to me. Of course others might disagree.

bluetrader

Sunday morning musings.....On Sundays I like to get up before everyone and spend some quiet time just scrolling through charts of the indexes, sector ETF's and my favorite stocks. This morning as I rolled through the sector ETF's I found myself gazing at one in particular...the XRT. I couldn't stop looking at it. I even left it, moved on to other charts and came back to it several times trying to figure out what kept bringing me back. Well, after a few more minutes of soaking the chart in it jumped out at me and hit me in the head like a hammer. I even felt like an idiot and to be honest I still do for not noticing something so simple at first glance.....The XRT is nearing it's all time high....yes, that's right ALL TIME HIGH, prior LEH collapse high....Is this for real? Am I supposed to believe that the ETF that mirrors our retail sector whose very survival depends on the spending habits of our fellow citizens...many of them out of work BTW...is once again nearing all time highs? And furthermore, that it's justified? Look...I'm good with the theory that the market is a forward looking entity and all that mumbo jumbo but, this is akin to outrunning your headlights. The point of this ramble is that when you outrun your headlights the common end is that you run into a tree and I'm grabbing a fair amount of XRT puts in the morning. It has crash written all over it.

-Dave-

molecool

Damn - I wish you had made it a puzzler ;-)

I'm impressed you got fascinated by that chart. Do me a favor and put up a left chart between the XRT and the SPX and tell me what you see.

bluetrader

LOL...What is a left chart?? Just when you think you know something Mole comes around and makes you look stupid. :)

-Dave-

molecool

In TOS you can correlate two charts with each other - the left y axis gets aligned with the right y axis.

bluetrader

Ok...thanks. I call that an overlay chart. But, you learn something new everyday. I just got TOS a couple of months ago through TDA and I'm still finding my way around it's platform and that's something I haven't learned to do with TOS yet. Looks like I have a homework assignment. Actually two....learn how to correlate TOS charts and find what I see between SPX and XRT...thanks again.

-Dave-

Drainage

Good insight on XRT. It really is absurd. I see it being still more than 20% below its June 2007, but this is still way ahead of any potential rebound in retail spending.

Publius Federali

I believe this is what happens in bubbles. Please note though that it is about 20% off its all time high in '07.

The strangest thing about this is when we compare these stocks to the past '07 highs those highs were set a peak earnings and also were predicated on continued ludicrous earnings' growth. Furthermore, we are talking about one of the weakest sectors around, since retail sales had a foundation in consumers buying crap they could not afford on credit. Now consumers have no jobs and no credit. I think after this holiday season that we will see massive bankruptcies in this sector. What is crazy is that instead of pricing in this potential, these stocks are pricing in a continuation of the old spending habits.

Another index that is even closer to its all time high is the RTH, which is only about 15% down from '07.

However, with that said, shorting these puppies is just impossible. There is no rationality to what is happening. You could have shorted RTH at 85 thinking it was already too lofty and watched it go up another 10 points. There is nothing to say that these indexes can not go up another 10% from here, you only have to look at the price action the last two months for proof of that.

What we need is P3 to start and that will signal the end to this bubble, without a P3 confirmation things can continue up. And if you want to buy puts you are even more screwed than two days ago because the VIX just popped and if this rally continues you will have not only the price move against you but also decay up the wazoo (I believe that is a technical term).

bluetrader

""What is crazy is that instead of pricing in this potential, these stocks are pricing in a continuation of the old spending habits.""

I need to take lessons from you in getting my point accross :)) That is EXACTLY what I was trying to say.

-Dave-

molecool

Enjoyed your comment.

amokta

http://www.dailymail.co.uk/news/article-1231563...

however appealing such stories are to perma-bears, we must consider if all will be well infact, and this is scaremongering

hey ireland was (past tense) in a worse position, but now its banks have all gone up 300-400% from lows. anyone really think they will go back to lows?

Offtimer

Yes they are bankrupt. Is that Dr. Who's Tardis?

labdude

As a newb here--been lurking for about 6 weeks now--I hope the following is a helpful comment.

Regarding the small chart mentioned in the post--I use Firefox browser--I use an addon called image zoom--no problem here with small charts--I typically magnify posted charts 200% anyway for easier viewing and studying (trying to educate myself).

Another benefit, some cleavages can look as deep as the "Grand Canyon" too.

molecool

On the Mac you guys can use the ctl key and the center wheel on the mightymouse.

bsummertime

great post mole. thanks for all your work!!!

catracho

great post..as always ..a head clearer! Let's see what next week brings...

kanur

I have a hunch:

http://www.screencast.com/t/NzZkMzBlN

gregn

Having three regular posters is great: Mole provides the psychological analysis with some quality EW counting, gmak provides pure background market information every morning with good setups and Michael provides great trading lessons. What a team, what a team! ;D

gregn

Mole, great post as usual. Charts are fantastic.

texpresso

1. love the contrarian angle, was thinking that right before i read it. 2. f--- the VIX, it is NOT a leading indicator. it plummets straight back to nothing routinely, yawn. there was no volume on Friday, forget about it already b/c you learned nothing. someone correct me if i am wrong, but i see no evidence of heavy options action

until i see some volume, i still expect SPX 1020-30 next week; if not, then the market is in a new cycle, then maybe we will see some new highs. you new guys remember, no negative LEI, no big dips. quit fighting the LEI. futures? i totally agree that LEI will go down at the first of the year, then the sell is on

btw Mole, are you the "The Mole" at Seeking Alpha?

molecool

Nope, not me - some other Mole.

texpresso

he is English and pretty dang good too, i guess English Moles must be a pretty high quality species

molecool

We German moles use the English ones as butlers.

texpresso

well, i totally screwed the pooch there! my apologies, i thought you were English, was shooting for a compliment. your analyses are always interesting and educational

molecool

Well, you might not see the forest before the trees in regards the the VIX. It's not about it moving up - my point was how much it gapped up after attempting to breach through an important bullish demarcation line.

grednfer

Yeah...the system is messed up...too much gov't intervention....thats an old story though. Look not only at the vixes, but all the gapping around the ETFs (SPY, DIA, IWM, QLD, etc) are doing......they're holding it up artificially. Can't argue about it, just have to figure out how to trade it. Its gonna get real nasty if congress tells Ben to get out of the market.

I like your ES daily with the RSI gismo.....I use that a lot! Have you ever noticed that you can see a 5 wave structure in the RSI? Lately I swear I can see 5, abc, 5, abc. Since you're an EW guy I thought I would ask. The reason I'm looking at that more is because they are jacking with prices so much its difficult to forecast the next move.

And when that Daily RSI hits 30.....wait for the next lower price and thats great 5 day long.

Stainless_Steel_Hamster

Great post mole

from the hamster front I just say 2 things

BPSPX 76 MA13 77.... we've got a crossover
SPX:GOLD 0.92 a 0,02 drop in one day

we're heading down

CastorTroy

Financials and small caps showing significant relative weakness and technical damage. Let's see how the market reacts next week as we see broader participation. Don't forget about the jobs data at the end of the week with the market expecting only 111K loss for the month of November
http://tinyurl.com/yea79kv

bluetrader

Been a lurker here for quite some time...as always great TA. I think Thurs/Fri showed what a paper tiger the market truly is right now. The selling into the close told me everything I needed know. There didn't seem to be too many folks wanting to hold into the weekend. The only thing that worries me right now is a Santa Claus rally. However, last year the market had sold off for almost a solid three months prior to the 'Santa' rally and had to blow off some steam so to speak. It's a totally different story this time around.....the more I think about it the market might just might need to blow off a little steam this December...just in the opposite direction. Just my thoughts.

-Dave-

dreadwin

Fantastic charts. I'm hoping for another bounce on Monday so I can short the #$%@ out of everything.

Guest

Scoops

I'm not sure what kool aid Hulbert is reading. I'd like to see some of that skeptisism he's referring to. He mentioned EWI and Russel. That's not exactly wide spread imo. Now look at the II and ISE readings which are both pushing extreme mouth breatherness.

DavidDT

If his very own paid newsletter says so (Hulbert Stock Newsletter Sentiment Index ) - it is widespread

They are ALL sales people and sucker to buy advise or subscription is born every minute (people are too f..ng stupid to believe that to play stock market game they only need 3 ingredients - MONEY, DARTS and DISCIPLINE)

molecool

Were you here during that time? If so, you might remember what I said.

raised_by_wolves

(1) It is less important for me to know whether the market is going to go up or down. It is more important for me to know how it is going to go up if it goes up and how it is going to go down if it goes down. That's why Mole's two-wave-count charts have been extremely helpful to me. Also, Mole saves me time. I don't have to go find a bearish wave count on one site and then go find a bullish wave count on another. They're both here on Evil Speculator.

(2) Mole does sometimes speak emphatically. Have you never heard him say, "Get out! It's a bear trap"?

molecool

http://evilspeculator.com/?p=9144

Seems like you are unable to follow simple instructions mate. Also, you might want to read up on probability theory before you run your mouth next time. You obviously have no clue as to how technical analysis works - read a book or something. Binary traders get wiped out - just a matter of time. Being nimble and always considering several possibilities/scenarios are key to long term success in trading.

But you know what - you don't sound like the guy who's ever satisfied or happy anyway. So, you venture around on trading blogs, jump from one analyst to the next, and then blame whoever is convenient when your trading goes to shit.

Why don't you go hotoptionbabe.com - she simply tells people what trades to take - you'll fit right in there. No thinking required.

Earl of

Hotoptionbabe.com is a comfortable place to hang out and learn about options. No harm in paper trading the trades mentioned there.

No cure there, though, for someone uncomfortable with the notion that "either this could happen or that could happen".

DavidDT

well...
put me in the "have no clue how technical analysis work and have no idea what trading is about crowd",
but I cannot see anything in that post hinting that H&S WILL fail.

Also, I cannot see any "blame" in "davosdax" post...

Mole - do you need another vacation?
A lot of people were hoping you "were coming back" man...

molecool

The big bad bear trap painted underneath the H&S wasn't clear enough?

DavidDT

snaky looking bear trap is clear...what is questionable is that up then down lines after that.
None bugs you on correctness of your analysis, you and a lot of other people know that you are better than a lot of others....
the problem is...is...was brought up so many times..that it cannot be corrected :)
People skills
well...
We are what we are.

molecool

You try running a free report and then watch people show up and piss on yor leg. Fortunately those types are in the clear minority.

DavidDT

Hell!
THAT is very true.
In the summer of 2007 I got so pissed off because I tried to be cautious about sudden rally end and quite a few people were writing me emails blaming me for "missing run up" (during 1 or 2 months) that I decided just to stop blogging (I did not want to get involved in the "cats fight" on the blog) - all in a sudden when I announced that I am out - I got hundreds of support emails and realized that I can help only those who are interested in learning.
Since then I just take blogging for what it is - I give without expecting much in return knowing that occasionally I will be pissed on - it is my choice to live with that or not to and I learned not to let my short fuse to affect mood of people on my site

itsgold

I can see how you arrived at that conclusion, but if you check Mole's bi-directional [up and down.. confused me also at first] forecasts, you will see he posts specific price points that confirm the direction of which forecast he's leaning towards. As in retracement to bid at point X confirms up, while a bid at point Y confirms down.

raised_by_wolves

Exactly.

Marc45

Before you guys get too harsh I would add that almost every EW analysis I've seen for the past six months has been exactly that, either we go up or we go down. And how many times has EW said, if we breach such and such level, we're going down to SPX 400? And how many times has this not happened?

My point is that EW and TA hasn't worked terribly well in an environment of high gov't intervention and low trading volumes catering to the big money players. EW was conceived in a different time and a different market. If our gov't would leave the freakN markets alone, then EW and TA might have a chance.

I personally tend to trust cycle theory most and I realize that everything is evolving and what used to be highly accurate isn't anymore. That's the efficient market theory at work.

BTW, I am totally short this market.

Graphite

My point is that EW and TA hasn't worked terribly well in an environment of high gov't intervention and low trading volumes catering to the big money players.

EWI called for a large, sharp rally starting in March, a VIX possibly in the teens, and of course, a resurgence of the belief that the Fed and the government "control" the market and can push it where they want it to go. It sounds to me like EW analysis is working perfectly to analyze not just market moves but investor beliefs as well. A few years from now, being a few months early in calling this rally's top is going to look like an insignificant error term.

DavidDT

try D-Wave for a change

molecool

At least someone gets it...

amokta

quick query - did the dow/s&p fallen further after hours on friday - do the 'futures' price on cnn/bloomberg mean anything - they seem to be lower then close prices, but mathematically, the figures dont add up ! (i dont do futures!)

Also, are some of the comments getting ahead of them, into 'P3 thinking' mode - can we call P3 yet (and even if their is a correction, it might just be a mini). However, Bob Prechter has seen enough to advise going to full short position, so if we are wrong, we are in good company !

steveo77

Futures prices are always different than "cash" prices. The Cash price is the actual index.

Futures trades 15 minutes past the index close. Seeing futures sell off after "close" can be foreboding, but it doesn't necessarily mean anything...don't read too much into it.

I am in Hawaii, so 8:15 on this chart is 15 minutes past the short Friday close...indeed there was some additional selling going on.

http://screencast.com/t/ZTEwZTk0OW

jamesmarkii

i saw a 1091 close
but stockcharts said we closed at 1087

jamesmarkii

Mole is da man!

Moleman

Leisa

The vix is putting in a W bottom...wonder if that will translate to the indices.

jamesmarkii

vix to at the bare mimimum 33

Leisa

Next week will be an interesting tell.

sloth_bear

Thank you Mole!

Persian_Gerb

Any thoughts on which sectors/indexes go first? better yet, which sickly deers would be MOST profitable to take down.

jamesmarkii

find what goes down the fastest on declines using previous market corrections as benchmarks
ill throw you one bone
enoc

molecool

Well, why don't you do some homework and report back?

Persian_Gerb

Financials & Real estate
http://sg.us.biz.yahoo.com/etfguide/091110/432_...

Historical guidance, probably the best point of reference available, shows that a market bottom has always been associated with low, very low P/E ratios and high, very high dividend yields and mutual fund cash reserves. Extreme P/E ratios and dividend yields show that fair valuations have been reached, while extreme mutual fund cash ratios show that the sentiment is right for a change.

None of the above indictors has reached levels indicative of a market bottom. In fact, all of them point towards much lower lows. Just as a lion doesn't give up hunting until it captures its prey, the stock market keeps on declining until fair valuations are reached.

jamesmarkii

enoc is a wonderful short
i was shown the light at 31.91 a few weeks ago
hasnt disappointed

Scoops

Great post Mole. As usual.

JoeBear

AFMPFM... (Another Freakin' Masterpiece Post from Mole!)

AudioTactics

I agree that the Dubai debt delay is not a big deal for the US market (exposure is primarily in European banks) and I think that the market reaction to the Dubai situation is just a clear signal of how vulnerable risky assets are at these levels.

The important take-away from the Dubai situation is that it has the potential to trigger a significant bounce in both the $USD and the VIX, which could lay the foundation for a more serious correction in the equity market.

steveo77

Agreed, and adding....lots of countries and banks are in the same situation. Bad balance sheets are intentionally being hid.

Everyone is "all in". The consumer ain't buyin' it.

EdblDD

Great post RatMaster. Good to see you back in form.

steveo77

Well said!

TheBHBgroup

awesome post totally kick ass....and what's even more interesting mole is take a gander at the aussie dollar and what it did the past 3 sessions....broke a daily trendline thats been holding it since last March. Aussie dollar is of course a risk dollar and let's just say the tables are turning for risk once again.

cheers and thanks for your work as usual!

JB

molecool

Yes, have been following the Aussie Dollar as of late - remember when it used to be the carry trade currency of choice?

TheBHBgroup

I do remember that as well....I am not a big believer in carry trade being the reason for a move.....but the news seems to like that concept quite a bit......

WTFed

It will be ugly when it comes. Thanks Mole.

St. Deluise

haha you can really tell when mole is in high spirits- another excellent post. also, that spx / ii chart is a work of art

amokta

http://money.cnn.com/2009/11/25/pf/expert/marke...
this chap says just hold on to equities, but just diversify - is this the key to surviving P3?

steveo77

Hell no

molecool

Absolutely NO - diversification is the a 'myth' created to keep folks vested in equities. Diversification across performing asset classes is fine and dandy but these days almost everything is high beta. Don't fall for this kind of crap - use your brain. There are a lot of idiots out there running their mouths. What did they say last year before the market crashed? Where they wrong wrong wrong? If so, why listen to them now?

LogansRun

Good post Mole. Even if we had the data and the tool to crunch the numbers to find the optimum diversification I'm not convinced it would outperform qualitative thinking. Of course, the statistical arbitrage stuff sounds very enticing.

amokta

I agree, i just wanted to point out that the MSM/advisors are still saying the same old things, have they not learnt anything from last year?

Scoops

Diversification holds the same place in the toilet as all the other crap the msm and crooked advisors feed the uneducated public. Dollar cost averaging, buy and hold, don't trade, and the list goes on. I read an article today in the Canadian mag Macleans, where they referred to a put option as a "complicated" instrument to "bet" against falling prices. Unbelievable. Oh well, I guess we have to take money from someone. After all this is a zero sum game.

brendl

macleans is canadas version of newsweek or time. utter shite. what can you expect from a rag that makes a profit (barely) by making the public feel content and ignorant all at the same time

WTFed

Diversification + Deflation = No Vaseline

brendl

hahaha..thats funny.

Drainage

Stimulating post, Mole. Thank You.

Too few pay attention to sentiment readings. It used to be the same way with volatility. I am going to watch the free NYSE % bullish chart at http://www.investorsintelligence.com/x/free_cha... and see how this responds to market price changes.

Investors Intelligence looks interesting, but they have many services, some with apparent overlap, so it is hard to know what has the best bang for the buck. If you have recommendations, please share them.

JiangxiDad

Here's a free link to the first chart used in the post, and some other free stuff.
http://www.schaeffersresearch.com/streetools/ma...

someone posted it in another thread and i bookmarked it.