Monday, October 13, 2014

Waiting for a Bullish Reaction and Confirmation of a Low

Friday: 12:15 pm.  I have trimmed the remainder of the IWM ST trade taken in the 104s on Wednesday. As laid out early in the week, even under the most bearish scenarios this move back to SPY 190 was a given.

I said last Friday I would wait for the low to come in this week. All my analysis and work is laid out in this post. The Trolls were once again backwards at the low, and the die hard bulls have been buying puts all week.  The low came on the exact cycle low date that I have been tracking over the past weeks. My patience paid off. I am starting to get confirmation of the low on some indicators today. I remain IT bullish and LT bullish off the Wednesday guess at the lows.


Here is a summary of the chart work and analysis this week, and an update on the price charts I have been working with this past year.  


This year, I have been carrying the two long term scenario analogs: (1) Bullish DOW 35K, and (2) Bearish Wave 5. This chop we have experienced is exactly where the two scenarios as I have laid them out diverge. I explained this below. In the DOW 35K scenario, we did a 10% correction to chop the blue megaphone after completing a complex correction. That is what we did this week. The chart extrapolates to Dow 35k-42K, but we have time to figure that out in the years to come if this low holds. Here is the chart:



In the past weeks, I laid out an IWM move with a first target of IWM 126. The key to this move is this support area holding. Below it I ponder the bear. Above it, I stay with the bull. Here is the chart again:



Now, once the 125 SMA broke, this became a very risky market and the possibility of the September wave up being the terminal wave became a real possibility (and still is). That required me to ponder and setup the bear scenarios (why I knew we would rally to SPY 190 regardless). Those bearish analogs are set forth in the posts below. This 10 percent correction level area is very important because below this area I am bearish for year(s), and above it I am bullish for year(s). We cannot know the future, as I always say, but we can try to predict the possibilities and the levels that distinguish one from another. Many would say that the recent 30 Fibonacci retrace is too shallow for a wave 2. If you were around in 2009, you will remember that the wave 2 off the 2009 low was a 30 Fibonacci retrace. What occurred afterwards was a breath taking bullish run. I have the levels set forth in the chart below. So long as this 10% correction area holds, I remain bullish and the next area of interest is SPX 2300-400 from an IT basis. Here is the chart:



I have set the stop level where I set it as that is the bottom of the range plus a bit. It protects against a double bottom or potential small divergent low. The bear possibility still remains because of the 125 SMA break, but it is not viable unless the market actually breaks. The 125 SMA level was very good as once it broke, it told us to expect something deeper and kept me patient. What I am doing here analytically, is respecting that nobody knows the future. From an IT and LT strategy standpoint, one must stay with the current trend as long as possible and switch from primary to alternate only when the primary is negated. That is what I am doing. It takes a lot of psychological discipline for me, which is why I have stayed in my cave this week. 

One area of comfort, is that I laid out below what bear market sell offs look like (usually) on the moving averages (125 is the green/250 is the red) early this week. The current charts do not look like that. That does not mean it could not happen, but means we have a data point saying the chart is not setup for it like it normally is when a big bearish move occurs. Here is the current chart:



Going forward, I remain IT and LT bullish off the level set forth on the 2 Day SPX chart. I said last week on the public blogs that I would be going heavy long this week with a bullish reaction.  

From a ST perspective (1-3) days), I am a dip buyer and uninterested in shorting unless the bear reveals itself and switches me to the bearish alternates. I am not going to post those trades ("Wonderwoods") as it takes a lot of time and nobody ever seemed to care about them anyway. I will post again when we get the next setup on a larger time frame. 

There is always a bear path and a bull path.  As always, do your own due diligence, read the disclaimer, and make your own investment decisions.

Peace, Om,
SoulJester. 

Thursday: 3:50 pm.

I trimmed most of the ST trade taken off the IWM Chaiken setup posted below. This 10% correction area on DOW/SPX is the line in the long term sand as noted below. It marks the area between the Long Term Dow 35K analog, and the Long Term Bearish Wave 5 Analog. I remain bullish above this area IT and LT.  All I have to say for now. If it fails, I go bearish.  Peace. Om.


Wednesday Evening:

I just thought I would do a recap of the very big picture post and why I have not given up on the bull just yet and bought into today's low for one last stab at the big bull. If you have been following, we have two binary possibilities long term at this area. The two possibilities are this is either a large wave 5 that ended and we are bearish for years, or this is a bull market fakeout and we are going to hold the breakout. Here is the long term chart again:



Now, we have bearish data points all over the place as I have been posting.  However, here is what the 1926 chop of this area looked like:



Here is what we look like now:



In 1926, that correction that chopped the megaphone was a 10% correction. Today, SPX hit an approximate 10% correction.  So, this is the area as noted for the last stab at the bull market for me.

This is a very risky market here and potentially extremely bearish.However, long term nothing is dead yet so I continue to watch the levels, analogs, and potential breaks. Very binary possibilities here as I have been posting about. 

Wednesday Update: 

3 PM Update: Still no confirmation but price is reacting off that ST Setup posted below. I think the low is in. On Friday of last week, I said I would wait for a bullish reaction this week at the cycle lows. I have patiently waited. I am trying here on an intermediate time frame to go along with the ST setup below.  I am willing to be wrong. Given the risk, I am putting a stop on this at 1800. This will be the only try at the Bull from here without a breakout from much higher.

From here, we have only the bearish analogs to contend with. I am monitoring those going up given the chart break down.  What I would like to see is IWM move back above that orange line on the chart below. That would be a failed H&S. Extremely bullish setup if the bulls take it and hold it.

THIS is a risky guess without confirmation here. This market could be very bearish. I am not giving up on the bull just yet.

******

If this is the bounce low being put in here, the bounce under even the bearish 2008 scenario would be back to SPY 190. IF is the operative word:



IWM is about to flip a bullish Chaiken setup on the 2 hour chart:



This is all happening at the identified cycle low to the date. ST, I am nimbly going to guess at this low. Just ST. Without confirmation and a bullish reaction as described below, I am doing nothing on any other trading frame apart from 1-3 days.


******

Today hit the 1944 target area. However, given the risks I have been talking about, and the potential that September was the terminal wave up, I continue to wait for a bullish reaction and confirmation of a low before thinking playing a potential bull market hail mary bounce. Large Chart Perspective. Fall Bearish Scenario.

It is simple. Below the 125 SMA, I will not guess bounce without confirmation. Here is the chart with a conservative bear market thesis (blue) interposed against the counter factual bull market thesis (red):



The McClellan chart I posted below had both 1997 and 2008 as potential data points. Here is what the 2008 analog would look like:




This is not fear mongering. It is simply a data point to watch from the McClellan chart below. I am not saying this will play out. I am mindful of the possibility. 1997 is still in play, though not without a move back above support.

NOW, on the otherside of this there is support here on the long term monthly chart:



Hence, this is binary and we need to be careful. I noticed today that one of my favorite lying trolls on the public boards who has been buying and claiming this is a bull market for sure, is now posting today that it is a bear market for sure and that he knew it all along. All I have done here is fire the normal bull market position at the 125 SMA, knowing that in a deeper correction/bear market it will not work. From here, I am waiting for a setup or two given the binary nature of the market. I am waiting patiently for something I like.

Now, I have been tracking the longer term charts throughout the summer and have been mentioning how they are currently broken. Here is a quick chart dump of some of those charts:













Again, this is all happening off the potentially bearish Wave 5 in the long term DOW chart below. The summary is that this is a risky market after the 125 SMA broke and September may be the terminal wave. It is possible we rally to new highs from here, but that requires a bullish move and for support to hold. So far, that move has not yet happened and I am waiting to see what the bounce brings if we get it. I am not guessing bounce without a bullish reaction and confirmation as has been noted given the riskiness of the market. 

Tuesday Update: Still no bullish reaction or confirmation of a low. I am being patient here for the reasons stated in this thread. We are at the 250 SMA area, and not far above the 1844 support area. We are in a cycle window. As many of the market signals I have been watching have broken bearish, I have setup a bearish (blue) and bullish (red) analog for the bullish reaction I am expecting this week. This is simply an extrapolation of the charts I laid out at the beginning of the post. Chart:



*******

Monday Posts: End of day update. I am tempted to call the market top at the September 2014 high and go into bear mode for the next year or so, but I am going to stay a bit patient here and not jump the gun.

Here is the area I believe should hold initial support if the bull market is not over. I say "if" because we have lots and lots of broken charts and bearish data points here that need to be "fixed" or it is very possible that the September 2014 high was the terminal wave up. If that is true, we would be bearish for at least 1-2 years most likely.

Why am I not bearish long term yet? Because from a price perspective, all we have done so far is do a shallow retrace of the 2014 price gains in the SPX.  

If this bull market is alive, which I am assuming for now, we should see a market reaction between here and SPX 1844. Chart:



As for moving average support, the 250 day simple moving average (the 125 x 2) is in this area as well and in the past the market has not given up this area easily. Chart:




The 125 SMA and the 250 SMA are still trending bullish. Here is what the 2007-2009 sell off looked like where those two SMAs began to trend bearish:



So, in short, we are in the cycle low week, we have some fibonacci and moving average support between here and 1844, and indicators are in a postion to produce a ramp. That along with all the dip buy indicators firing is why I am looking for a bullish reaction in this area this week and follow through confirmation of a low off that reaction. 

This is a very risky market here, however, given the breakdowns. If this is a bear market, which it could be, those dip buy indicators will not work. This is a risky market since we lost the 125 SMA support. 

The reason this could be so bearish is we are attempting to discern whether a very long term bear wave (the one from 1982) ended, or whether we are going to rally on for a few more years. Here is the long term chart again from the September high:





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Just a quick update. I am still waiting to see a low put in this week. Once that low comes, the question will be whether all the bearish data points and breakdowns are for real or a fake out. I assume they are a fake out until I see a retrace back to the high and a failure.  

Here is the current SPY chart:


Here is the bearish failure scenario example from 2011:



Here is the bullish example from 1997:


I somewhat favor the 1997 scenario for a few reasons.  One is we had an extreme quarterly close on McClellan that jives with a 1997 turn:


Under the 1997 scenario, the ideal turn would be around October 14, and there is also the October cycle low that I have been tracking which has an ideal turn of October 15. These cycles are not exact, but this week should mark a turn under the cycles. So, I continue to watch for a reaction to establish a low and then confirmation of that low. 

Now, all the bearish data points we have been tracking through the summer are into bear territory and reacting bearishly. They are doing so off the long term bear wave 5 scenario I  have laid out.  So, this is really an important time for the market. If we fail to get back above support, or fail to hold support when we get back above it, the September 2014 high could end up being the high for year(s). As noted, as long as we are below the 125 SMA, this market is at risk for a more bearish eventuality. 

I am staying with the bull scenarios for now as noted, but mindful of the possibilities that we are bearish. I would like to see 3 more years of the bull into 2017 under the bull scenarios. 

There is always a bear path and a bull path. We cannot know which path our future will choose. As always, do your own due diligence, read the disclaimer, and make your own investment decisions. 

I will post again when I see another setup (either from the long side or the short side).  Good luck. 

Peace, Om, 
SoulJester

Friday, October 10, 2014

Market Dips Into Bear Territory

End of day update. Pummeled it down into close. Felt like capitulation. I believe the market has bottomed. I am going to look for a bullish reaction next week to enter long positions and then hope for a retake of the 125 SMA.  

Chart:



If we do not get one, then I am digging out the bear scenarios. 
*******

3:00 update. Market continues to hold the low. On the 1 minute chart, the fair intraday price has been being bought all day since the low. The conditions for the bull move are present:



I still need the aforementioned confirmation, but looking decent here for the bull scenario potential.


********

Mid-day update. The hunch is playing out and the market has rallied hard back to the 125 SMA. If this can take and hold the 125 SMA it should mark a low that will not be seen for years under the bullish scenarios.  

Here is the update:



Here is the long term bull scenario:



If today's low falls, I will take that scenario off the table. We must take and hold the 125 SMA for me to have the bull scenarios out and we have snapped back hard to that area.


*********

Presently, all the dip buy indicators that have served me well during the bull market are screaming that a low will be put in.  However, price is the ultimate decider and those indicators may not work in a bear market.

Currently, the market is clinging to the 125 sma and has dipped below:


To be bullish, I would need the market to trade back above SPY 193.52.  I am not going to guess at that despite the indicators.

Long term, we are below the neon green line.  There is a kick save line here, but again, I need a reaction above SPY 193.52 to consider it:


Apart from some 2008 analogs, October should be a positive month based on indicators. I do not have the time today to do a chart dump, but here is one example:



The reason I am being careful is that when I laid out the scenario for a move back to the 125 SMA, Sept. 12--Is this the top?, I noted what it looks like if the support breaks using the 1987 example:



That simple example tells me that I do not want to be guessing at this bottom below the 125 sma, so I will not despite that bull dip indicators say buy here.

In that same post, the analysis called for an October low:


So, the bullish B wave still lives from a cycle standpoint. I still believe this will play out; but, price action determines everything and I can paint a very bearish picture here as well on the larger bear scenarios. My hunch is the indicators are right and we rocket out of this dip below the 125 SMA. 

However, we also have the bearish September was a terminal top scenario. Accordingly, I need to see this trade back above the 125 SMA before I guess at the bottom despite the indicators.  If September was the cycle top, we would expect at least a year of downwards correction.  If the larger bearish scenario is correct that could be a lot longer of bearish action. I am not there yet, but the bearish data points we have been talking about continue to pile up. 

There is always a bull path and a bear path. We cannot know which path our future will choose. As always, do your own due diligence, read the disclaimer, and make your own investment decisions. 

Peace, Om,
SoulJester

Thursday, October 9, 2014

Bullish Analog

We continue to threaten the support area today that will flip my primary to the bearish scenarios if it fails. To date, it has not failed, so I continue to track the bullish analogs.

Last night, I prepared a rough sketch of the analog I will follow if this support area holds and the bull market continues.  Here is the analog:


There are long term bearish data points that we have been tracking, but I won't call the 2012 wave up over until the chart breaks.

There is always a bull path and a bear path, we cannot know which path the market will choose. As always, due your own due diligence, read the disclaimer, and make your own investment decisions.

Peace, Om,
SoulJester

Wednesday, October 8, 2014

Support Held.

The 125 SMA area has held support. No Sign of a Top Yet.  I would anticipate this low today to not be breached for the continued bull market move. If it is, things get dicier and I am going to have to ponder flipping to bearish.

Here is the rough on the fly extrapolation of the next move into an early November high:


There is always a bear path and a bull path. We cannot know which path the future will choose. As always, do your own due diligence, read the disclaimer and make your own investment decisions.


Peace, Om,

SoulJester

Monday, October 6, 2014

No Sign of a Top--Yet

As indicated the recent posts, I had been Watching the 125 SMA to hold the 125 Simple Moving Average support on October 2, 2014.  The market so far as held the 125 support (green moving average).



As indicated in the post, Watching the 125 SMA, only if that support is broken will I switch to the bearish scenarios and assume that September was the terminal wave up. Fall Bearish Scenario. That support could be broken, but so far it has not been broken so I continue to err on the side of continued bull market. If it does break, I will be pondering the near term Bear Scenarios.

On the longer term chart, the market has also so far held the green support line that I have been watching. Here is the current chart:


So long as these areas hold, the bull market continues to live and the September wave up was not the terminal wave. If, on the other hand, we break these areas, that would bring out the bearish scenarios and make this very likely the end of the wave up from 2012. I would become intermediate term bearish if that were to happen.  This is a very important level that we have presently bounced off in the market. 

There is always a bear path and a bull path. We cannot know which path our future will choose. As always, do your own due diligence, read the disclaimer, and make your own investment decisions.

Peace, Om,
SoulJester