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Mixed messages…
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Mixed messages…

by MoleNovember 18, 2008

More of the same old expiry antics we should expect.  We git a nice drop through the mid-day, and finished up with a nice rally right from the recent lows.  I told Mole earlier that I would not be surprised to see the institutions step in a little above the prior low.  “Low” and behold, there they were, a little early to catch the bears off guard.  With that said today’s action leaves us with little resolution or our choices.  An ending diagonal remains on the table, in which case we would likely be rallying in a [C] wave of [II] (rally, drop (in [3]), chop (in [4]), drop (in [5]), rally big), targeting 1250.  The problem with targeting 1250 is that should we get that high, we would have limited downside to keep the resistance lines converging.  This means that we should either expect a reversal back down before 1250, or expect the 1110 – 1100 resistance zone to hold pretty firmly.


Should we get our early reversal however (1200 would be most obvious), and we could target 1050 once 1100 finally breaks.  That would be about the maximum allowable (and most likely too far if we push all the way to 1250) to keep $NDX from becoming and expanding diagonal (HIGHLY unlikely).  However, should we push to 1050, and show little signs of stopping, we can likely eliminate and ending diagonal (which in EWT should NOT follow a triangle if you think about it, as an ED is not a “thrust”), and keep the 4th wave triangle on the table.

And to make matters worse, I can present a STRONG case to bring the 4th wave flat back into our sights.  This will be quickly discarded should $NDX push beneath 1110, but the lack of a new low today, while $SPX and $INDU, remained stronger forces us to consider that we could still be targeting 1350 or 1375 before we finally move lower.  I have no desire to muddle the view with additional counts, but also feel that I should be fully prepared, and that NOT considering the flat (again) would leave me biased against the largest of the potential upside scenarios (not a good idea).

So, we noticed the inaction of the XLF today on the upside, and it was kind enough to put in yet another low.  This is a good sign that we should be heading lower.  However, it is sending us mixed messages as we have a reversal candle (showing late day buying (wonder who that was…)), as well as a bollinger reversal signal.  Any break of 13.50 would likely mean that XLF was going to challenge 16.50.

This brings me to the breadth which was modestly bullish at best.  In fact, the $RUT put in negative breadth today.  When compared to the 13th, today was roughly 1/10 as bullish.  If we don’t start off with a rally tomorrow, I will be watching for 1110 and 1100 to break.  Beyond that, expect flat markets after tomorrow.

That’s it for tonight…

Skål!


About The Author
Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.

  • BigHouse(Aka Mr Vix)

    Thanks for the post. Any idea about the Dow? It just seems to be bouncing from 8,000k+. If it would only cut through it.Will it due it? I can't see it not. How many times do w esee it test it?

  • https://www.evilspeculator.com berkshire

    I see 8600 to 8900 on the upside. I don't know what it is going to take for the market to break lower. Maybe they won't at all. I would have a hard time believing that, but won't let that affect my judgment.

    But of course, we have expiry to throw everything out of whack also… Sheesh…

    Skål!

  • gagelle

    Thanks Berk. Another interesting analysis. Do you think the possible bankruptcy of the US auto companies will have an influence on the markets? At this point, it doesn't look like they will get the money,which will add over 100,000 people to the unemployment rolls. But I'm thinking more of the psychological affect on the markets.

  • toad37

    Thanks Berk. Futures are down, from the close it looked like we would get some follow through. I still expect them to move the market a bit higher into opex.

    I'm going to start just trading the SPY for a while until I get a better grip on things.

  • Ukla the Mokk

    Berk, as always thanks for your EWT-to-english translation on the wave count 😉
    I've been in cash all week thus far (thankfully, because this is an annoying expiration week so far!), but to those who have dipped in, I hope you've been doing well.

  • Ukla the Mokk
  • OttoPiloto

    If GM goes BK I don't think they'll go out of business. They'll just get a do over…cast away pension and labor obligations and start with a relatively clean balance sheet. Like what Delta and Northwest Airlines did (not United, USAir, etc.) A GM/Ford BK might just give this market the catharsis everyone is looking for. Anyways just my 2 pennies.

  • gagelle

    Thanks Otto, I never thought of it that way. GM was saying that if they do BK, their suppliers will cut them off. But they could have been exaggerating in order to get the money.

  • GEO

    It will go up – see its chart (closing one) for the end of 1974 and you will notice the same game as now!

  • toad37

    I figured you would like that my friend. 😉

    Love that video man. +1 right back atcha!

  • Tom
  • de3600

    ratt and roll toad

  • gagelle

    Texas grand jury indicts Cheney, Gonzales of crime

    http://www.reuters.com/article/newsOne/idUSTRE4

  • gagelle

    The Deflating Mortgage and Housing Bubble, Part IV: Where Is the Bottom?

    http://tinyurl.com/5u426s
    [Open in new window]

  • gagelle

    Superb panel of economists including Dr. Roubini. Only problem is that you can't see the charts.

  • Paleface

    Have their suppliers any big enough alternative customer? IMHO they will share GM's/Ford's future.

  • Paleface

    Mole, Berk I follow your blog from the first post, and I think I will follow till the last. (I mean the last buck on my account:))
    One of my reasons is that I can check my simple TA in the light of your EWT analysis. (The only thing I know about EWT that it's a three letter abbreviation.) But it seems to me – with full respect – that the wawe count is exactly like our East-European history: the past is changing at every turn.

  • Paleface

    A shocking chart about “AAA” credit spread:
    http://market-ticker.denninger.net/
    If its true…

  • stopsarein

    Yes but the daily pivot at 849 is holding. If bad news doesnt break that we may go higher.

  • Joe

    Could anyone tell me what software is being used to display these charts.

  • http://www.itrade4real.com itrade4real

    Sounds like no setups worth taking, from your analysis. Also, follow through has been non-existent, but somethings gotta give soon, either way.

    I'm flexible to trade either side, with little to no bias.

  • http://www.myspace.com/181419967 JZT_CHIL

    My gosh, Liesman needs to shut his mouth for a minute & let Santelli give his two cents! Egoistic guy!

  • http://www.myspace.com/181419967 JZT_CHIL

    As the others suggested, they need to show what they're gonna do with the $$. Cut production to go into the “meet demand model” not the “push supply” strategy. Cut certain vehicle models [unprofitable/gas guzzlers]. Lower workers' per hour income, like the workers & pilots did in the airline industry. Close some plants. They could merge, etc. More than just belt tightening there.

  • Growler

    Dude. It is true.

  • Growler

    Bond market is not happy.
    $TNX = 34.57

  • itsallgood

    Something fishy in the Yen this morning and way too quite through the night. I've been trading the Yen every day (and night) for the past 5 weeks (and its been pretty good). Dont like the price action right now. tt looks off (no I dont have charts to show). Its like its being held back from running (up). I'm scalping it and its not getting the proportional upside against the ES down action. It may sort itself out later – it usually does but right now its off-ish looking to me.

  • ablebonus

    Art Cashin said end of day rally yesterday was due to index funds rebalancing – BUD was replaced with a tiny company, so the funds that were in BUD had to go into the S&P Index.

  • GKM

    Hey Berk, just wanted to point out that if you use your D and E on the NDX chart as A and B of wave 1/A of the possible 3-3-3-3-3 ending diagonal, then you don't have the problem with an ending diagonal breaking from the triangle. The problem then becomes, for the NDX, that C of wave 2/B of the ED was truncated but you only have that problem with NDX and not SPX or Dow. So if that is the case then we are in wave 3/C of the ED and tracing out a series of impulsive waves for the next move. However, hopefully I'm wrong about that part and we can move higher in a 2/C for better shorting opportunities.

    Thanks to you and Mole for all your hard work.

  • itsallgood

    Its starting to resort itself out now. and move back into proportional relationship. Its like they were holding the ES down – but not for real. I know this sounds crazy. I cant totally put my finger on it….Lot of Bullshit going on this morning – yeah like its a not a normal day.

  • Paleface

    Do you see the last 20 minutes on EUR/USD? Huge up.

  • Growler

    http://calculatedrisk.blogspot.com/2008/11/wsj-

    WSJ: CMBS Market Shows Fissures

  • BigHouse(Aka Mr Vix)
  • BigHouse(Aka Mr Vix)

    XLF hitting 11.50. It goes down every day

  • Erikd

    $TNX gapped down again, and is not filling and starting to turn down. I am 100% short . ride the slide

  • gagelle

    That's a good point.

  • gagelle

    Oh, I believe it. Thanks for the link Paleface.

  • gagelle

    This is only the beginning. Wait until more data comes out.

  • C.C. Rider

    Anybody feeling the boat shift to the long side. A big move is coming and it doesn't FEEL like it's going to be to the short side. I positioned long QLD on Monday and am breakeven. A pop to $30 would do wonders for my account, so I am a little biased in this den of shorts!

  • ZigZag

    Transport are down and the Dow is up. Not good..

  • molecool

    My new post just talked hints towards that.

  • molecool

    CLEAN CUPS!

  • gagelle

    There may be a pop this week because of options exp., but watch out after this week when new data comes out. Many stocks will blast through 03 lows. Just my humble opinion. (This is just the beginning of bankruptcies.)

  • Paleface

    A shocking chart about “AAA” credit spread:
    http://market-ticker.denninger.net/
    If its true…

  • JohnyWalker

    Yes but the daily pivot at 849 is holding. If bad news doesnt break that we may go higher.

  • Joe

    Could anyone tell me what software is being used to display these charts.

  • http://www.itrade4real.com itrade4real

    Sounds like no setups worth taking, from your analysis. Also, follow through has been non-existent, but somethings gotta give soon, either way.

    I'm flexible to trade either side, with little to no bias. I'm updating my site with P+L, after being stopped out (after hours) of the ZB futures (Dec. 30 year). http://www.itrade4real.com

  • JZT_CHIL

    My gosh, Liesman needs to shut his mouth for a minute & let Santelli give his two cents! Egoistic guy!

  • JZT_CHIL

    As the others suggested, they need to show what they're gonna do with the $$. Cut production to go into the “meet demand model” not the “push supply” strategy. Cut certain vehicle models [unprofitable/gas guzzlers]. Lower workers' per hour income, like the workers & pilots did in the airline industry. Close some plants. They could merge, etc. More than just belt tightening there.
    They need “liposuction” or “GI bariatric surgery” – those sorta things.

  • Growler

    Dude. It is true.

  • Growler

    EDIT: Bond market is very active.
    $TNX = 34.57

  • itsallgood

    Something fishy in the Yen this morning and way too quite through the night. I've been trading the Yen every day (and night) for the past 5 weeks (and its been pretty good). Dont like the price action right now. tt looks off (no I dont have charts to show). Its like its being held back from running (up). I'm scalping it and its not getting the proportional upside against the ES down action. It may sort itself out later – it usually does but right now its off-ish looking to me.

  • ablebonus

    Art Cashin said end of day rally yesterday was due to index funds rebalancing – BUD was replaced with a tiny company, so the funds that were in BUD had to go into the S&P Index.

  • GMunni

    Hey Berk, just wanted to point out that if you use your D and E on the NDX chart as A and B of wave 1/A of the possible 3-3-3-3-3 ending diagonal, then you don't have the problem with an ending diagonal breaking from the triangle. The problem then becomes, for the NDX, that C of wave 2/B of the ED was truncated but you only have that problem with NDX and not SPX or Dow. So if that is the case then we are in wave 3/C of the ED and tracing out a series of impulsive waves for the next move. However, hopefully I'm wrong about that part and we can move higher in a 2/C for better shorting opportunities.

    Thanks to you and Mole for all your hard work.

  • itsallgood

    Its starting to resort itself out now. and move back into proportional relationship. Its like they were holding the ES down – but not for real. I know this sounds crazy. I cant totally put my finger on it….Lot of Bullshit going on this morning – yeah like its a not a normal day.

  • Paleface

    Do you see the last 20 minutes on EUR/USD? Huge up.

  • Growler

    http://calculatedrisk.blogspot.com/2008/11/wsj-

    WSJ: CMBS Market Shows Fissures

  • BigHouse(Aka Mr Vix)
  • BigHouse(Aka Mr Vix)

    XLF hitting 11.50. It goes down every day

  • Erikd

    $TNX gapped down again, and is not filling and starting to turn down. I am 100% short . ride the slide

  • gagelle

    That's a good point.

  • gagelle

    Oh, I believe it. Thanks for the link Paleface.

  • gagelle

    This is only the beginning. Wait until more data comes out.

  • C.C. Rider

    Anybody feeling the boat shift to the long side. A big move is coming and it doesn't FEEL like it's going to be to the short side. I positioned long QLD on Monday and am breakeven. A pop to $30 would do wonders for my account, so I am a little biased in this den of shorts!

  • ZigZag

    Transports are down and the Dow is up. Not good..

  • https://evilspeculator.com molecool

    My new post just talked hints towards that.

  • https://evilspeculator.com molecool

    CLEAN CUPS!

  • gagelle

    There may be a pop this week because of options exp., but watch out after this week when new data comes out. Many stocks will blast through 03 lows. Just my humble opinion. (This is just the beginning of bankruptcies.)