Point of Recognition

Mole asked me to cover for him this weekend while he kicks his Zero research into serious over-drive.  Don’t expect this to be the long glorious posts that you are used to over the weekend, as I have a long list of things to get done also.  We just decided that I was the least burdened of the two.
We are in a very nice position right here either way you might want to play the market.  Right now we could assume the trend down, with a breaking point of 1192.70 in $NDX.  This thought would be based upon:

1. The lack of expanding breadth.  Breadth is bullish, but if this is a high, it would signal yet another bullish close with diminishing volume.  Not quite a divergence, but a good sign that we aren’t heading significantly higher.
2. Short term, we are at the bollinger (2.0/20d) and this is a nice indication while divergently oversold in the STO, as well as the MACD.
3. There still remains to be a group of leaders.  Yes, the auto-makers will get their bail-out, and the banks will get theirs, but we need a leader.  The trannies aren’t taking off, the $UTIL has had no net change in 2 full months (i.e. BB squeeze), XHB is rallying but losing momentum (there is a STRONG confluence at the previous peak of 14.71).
4. Finally, the larger trend being down, and seeing declines trace out 5 waves.  Unfortunately, we can potentially see 5 wave moves up, indicating either an ending diagonal, or that the the operating trend right now is indeed up.

As I said though, this is easily hinged upon 1192.70 in $NDX and 8831.35 in $INDU, meaning that a break of that level would have us looking upwards to at least 1235 in $NDX and 9100 in $INDU.

However, if you choose to see the recent action bullishly based on:

1. A strong rally that has refused to break lower.
2. The potential H/S bottom in $NDX, $INDU, and $SPX, where in $INDU, the neckline IS the breaking point for the bearish case.
3. The break of the upward trendline, and then pushing right back through it, and then above horizontal resistance.  This amounts to about an 8.5% reversal in $NDX, which would be a strong bullish indication should we break through the aforementioned support levels.
4. As with the bearish case, we could make out 5 wave working up, which could indicate a triangle with the larger trend being up.

That said, we are at an action point.  If we are going lower, if will be from right at the current levels, as $NDX is not permitted to travel much higher.  There are a few more indicators that are starting to show signs of a big move coming up, but I don’t want to jump the gun.  As soon as they have confirmed, I will let you know.

That is it for me.  As I said, Mole is busy scheming and tweeking the Zero.  I am sure he will let us all in on the details as soon as they are “Alive!!”

Skål!

Mole here: Yes, it’s alive! Check out version 3.0 of the Zero, plus a new tutorial, plus a brand spanking new trend trading system (finally we are going back to our roots, Berk). And last but not least – a case study of the past 20 trading days based on the ZI and the new trading system. Pretty pictures included for you illerate street rats. The latter, my deer leeches, will blow your socks off – a must read ! You will be tested…

FYI: I have also recoded the Zero to ignore all the ‘noise’ surrounding the zero line – the signal is now beautifully normalized and all permanent swings above the zero line are now VTAs (read up on that). There are no more blue lines – only red and green – absolutely loving it now. The only thing I didn’t get done were the ZI entry/exit strategies for TOS – which would give us ‘on chart alerts’ on a VTA. I know – I’m a lazy bum – only managed to work 20 hours this weekend.

Guys – I am very excited about this – once you read the case study I expect you will as well. No more excuses – now let’s make some fracking money, steel rats!

Cheers!