Explosive Rally

It took me by surprise that the R2K moved cleanly back into the 2014 range and the SP500 back above its 200MA in yesterday’s powerful up day. However, I believe odds are we still roll over here around tomorrow’s new moon only from a little higher up. That would make for a double fake: first below and then above the key technical levels. The weight of evidence still supports this being a second chance peak and that even if that is not the case then the market should first retest last week’s lows.

With history as our guide, here is the mid-2010 correction:

22oc2

Compare to the current:

22oc3

Both corrections began measured then collapsed in capitulative style before rallying back up from the purple circles back to the more measured downtrend. If this is repeating then the SP500 should now turn down again and tomorrow’s new moon provides the ideal timing for a reversal.

We can see how in 2010 the market based over a period with the MACD turning up. We lack such a stabilisation currently.

In last week’s analysis I argued for why we are now equivalent to late in the 2000 or 2007 topping processes, effectively January 2008 or October 2000. Both historical mirrors saw a similar collapse to a capitulative reversal point before a rally back up like now:

22oc522oc6And in both instances price came back down to the lows, again stabilising against a rising MACD.

So all three analogs suggest price should come back down to retest the lows and stabilise around those levels over a period.

If this is not to occur then we could look to mid-2007 for the more bullish outcome:

22oc9A rally all the way to marginal new highs from a single-legged correction. However, I remind you that this corrective leg was the start of the market topping divergences in 2007, whereas now we are mature in those divergences, equivalent to January 2008. Various indicator readings just don’t match up well with mid-2007.

If we draw in the crash analogs, such as 1929 and 1987, then we are still in keeping with the second chance moves to a lower high before the true collapse, but only if we now roll over again over the next several sessions and head back down to last week’s lows. Crashes may not occur often, but I maintain that we have all the conditions in place for one to occur, and I stick with this being the most likely scenario: reversal around tomorrow’s new moon and then major crash into the beginning of November. Stabilisation to occur from much lower.

If we are not heading for a crash then the three analogs at the top of the page show that we should still make a retest of last week’s lows. I think the mid-2007 analog has the slimmest chances of reoccurrence but it will become clear over the next several sessions as if something like that were re-occurring then stocks would consolidate yesterday’s break upwards and rally higher still.

All the other analogs argue for a reversal back down without delay, and this still looks the most likely (geomagnetism is in progress, capitulative breadth is back to zero and various indicators are overbought), so I leave the analysis there for today and we see if that occurs before the week is out. If it looks like we are rolling over again then I will add again to the short positions.

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250 thoughts on “Explosive Rally

    1. John,

      Thank you for this update. I too was taken back by this ‘explosive rally” Like you, I’m short this market.

      GL to all

  1. On the index I trade, the double top pattern playing out on RUT would still be alive and well. Yes it would be much neater if it had of sliced straight down once it broke support but they don’t all do that. The low on the 13th oct tagged the common reversal target. The low on 15th oct was the usual stop run. The move back into the trading range above is just a common back test. 1340 is my final target for price to roll over and head down again. If price headed much higher than this though I’d consider the pattern to have failed (that’s just my opinion) and time to look at a different setup.

    Just Jeff

  2. Thanks for the update, John. Explosive rally indeed, and an explovive sun again: The F10.7 solar flux touches the year’s high http://www.solen.info/solar/images/solar.png and the sunspots are increasing http://www.solen.info/solar/images/cycles23_24.png . The peak of Cycle #24 might stretch into 2015-2016. At least this is what the solar cycle of 178.770 year suggests: Every 16 loops about the barycenter the Sun repeats a very similar path determined by nine subsequent synodic periods of Jupiter and Saturn (9 * 19.858 years = 178.720 years) http://time-price-research-astrofin.blogspot.com/2014/03/sunspots-and-stocks-big-picture.html . Regards. Georg

    1. Dear Georg
      solen states as well that “Polar field reversals typically occur within a year of sunspot maximum”. At this link: http://www.solen.info/solar/polarfields/polar.html one can see that:
      – northern polar field changed polarity first in June 2012
      – southern polar field reversed in July 2013
      Given the fact we are in 10/2014, the the peak of Cycle #24 should be behind of us. Your comments highly appreciated. Thank you. Sinuhet

      1. Dear Sinuhet, the (cycle of the) reversal of the solar polar field is different from the sunspot cycle. It is a physical fact that the reversal into the southern hemisphere of the sun already took place while the sunspot cycle considers sunspots on both hemisphere. I hope I was able to make the point. Regards. Georg

    2. Interesting comments Georg and Sinuhet.

      So far, SC24 smoothed sunspot numbers have mirrored very closely the average of previous weak cycles, by peaking around May/June 2014. If that mirror continues, then the resultant speculation peak would be around August 2015 (but this is just on average, and far from certain).

      SC24 “seems to have gone a different path” to SC5, as John points out. But by the same token it has also gone a different path to SC23 (2000) and SC17 (1937): http://www.solen.info/solar/cycl17.html

      The solar polar magnetic field strengths are more important than sunspot data, because it is the former which gives rise to the latter. Unfortunately, the direct magnetic data only covers the recent strong solar cycles since 1968, so tells us very little about how the current weak cycle will progress.

      The timing of the SSN peak was largely irrelevant in previous weak cycles (the final drop-off from the plateau being a much more consistent guide). In fact, the SSN peak is not a very reliable timer of speculation even in previous strong cycles either, being around two years out in SC11, SC 18 and SC19.

      I personally don’t see any convincing evidence that the effects of SC24 are meaningfully waning yet, and this is backed up by NWRA’s Effective Sunspot Numbers measurements.

      1. Good points Mark about the solar magnetic field strengths. I have a friend who does weather forecasting including earthquakes, hurricanes, tornadoes, etc. based on changes in the intensity of the magnetic fields coming to earth, which will also affect human mood.

        It would also make sense that we have a speculation peak later in 2015 because I think the Fed still has more printing to do and the populace is still looking to the Feds to save the day for them.

        That said, the Elliot wave count for this sharp rally is a wave 2 or wave B up, meaning we should still have a good or large sized wave 3 or wave C down soon.

        1. This sharp correction is actually the Primary wave 4 (of 5). It could have been complex but Primary 2 was complex and alternation occurs more often than not on corrective waves. Primary 4 will have 3 Major waves in ABC pattern. This correction is Major wave B and was totally expected by Elliott wave theory. The 61.8% bullish pullback is the first of a corrective (bullish) ABC pattern. These Intermediate waves make up the Major ones. And within the intermediates are the minor waves. By now most people have thrown in the towel. But most people are absolutely useless traders any many cannot even invest properly.
          Furthermore the down move that is starting as I type (Intermediate B of Major B) is destined to turn at either the 1901 or 1869 SPX pivots. The Intermediate C wave will also surprise all permabears. By the time (not so long) that Major C (the down move) comes along most bears will be broke.
          Primary 5 is yet to come and that will also surprise. No astonish, with new highs next year.
          But hey, why should I waste my time on the crowd. Naysayers all.

  3. I’m reminded of the period from about July 1980 to July 1981, just by possible appearance. Several very sharp 5 to10 % moves in a topping process.

  4. Today is a good risk:reward point to go short on SPX or NDX at early morning highs. Fib 61.8% retrace exceeded on both indexes and heading into solar eclipse tomorrow. It is to bounce both above and below the 20day-MA in the next week during some increased volatility, so a 50% retrace is not out of the question implying low 1880’s and 3840’s for SPX and NDX respectively.

  5. I am thinking we will have a quick down move this afternoon, Friday, Monday and then sideways/up thru the midterm elections of US and then down to Us Txs holiday.

  6. Also Saturn, the sun, and earth line up directly early Nov. which usually caps upward moves in the stock market for about a month.

  7. The way I still see it, this is a mega bull trap. I will be looking to go long VIX either Thursday or Friday on a strong up surge in the markets to top out this rebound.
    I mentioned last week that SPX would likely target 1980 and see nothing to change that view. Should hit it within the next two days.

    1. You are unlikely to get 1980. Probability leans towards it not exceeding the Oct 8 high about 1970. The down move starts today but could trade at today’s high again tomorrow but with an even bigger decline. Friday is a wild card because it could trade higher again temporarily before a swift pullback to even lower lows but this is no guarantee. Early Thursday would still be an ideal entry point to short. Solar eclipse occurs Thursday evening.

  8. John, this is a great article post. I like how you outline several scenarios and state even if your crash event does not play out that there still is a high probability of a retest of the Oct 15 low. The question is how low will this retest be? You indicate it gets to equivalent Oct 15 low at the very least. Conservatively, it might only go down and form a higher low.

    But either way there is still plenty of room for at least a 3% to 4% decline from these levels today in the very near term.

    1. the action the last couple of days highlights the importance of proper identification of short term trend (still down as per the 65ma elder system) and of identifying net line trading opportunities (could have taken a ONE DAY trade with tight stops and made some cash)…

      we are still in a down trend so the VXZ:VXX signals for shorts should be seriously considered – these are SHORT TERM SWING TRADES ONLY

    2. Banned by Elvis:

      On stockcharts.com, what parameters did you put in to draw the chart as you did above? This looks like an excellent intraday direction indicator. Thank you.

      The Humble Trader

  9. the chart that NEVER lies is giving a non-confirmation on the AD fld even though the indicators on the chart are trying to swing to the buy side because of the absurd action of the last couple of days

    1. bbe you can’t do this to me!! You can’t mention the ‘chart that never lies’ and then not show it. I’m getting addicted and need my fix. Lol.

        1. Is that an ellipse that I noticed on your charts? I find their use interesting. Any reasons, that you can discuss, why you used an ellipse. Thanks,
          SC

  10. I’ve begun my staggered re entries “short” via currencies, as well small position short SP 500 at 1940 via Dec puts.

    If it’s not here, then 1970 who cares. It’s splitting hairs at this point.

    1. FK,
      I want to be sure I am clear. When you say, ‘ “short” via currencies’, are you meaning short the currencies (or the $)? I’m sure this is common knowledge FX language, but I want to make sure.
      SC

      1. I am “short risk” via the currency market ( as I trade fx moreso than equities ) so in this case…….moving back into position long JPY vs the majority of other currencies.

        1. FX,

          OK, thanks. ‘Short via currencies’ = Long currencies & short $.

          The reason that I ask is that I am of the opinion that the key to understanding macro market moves is to be found in foreign currencies. They reflect important movements of capital. Sort of the ‘canary in the coal mine’. And your view is valued.
          SC

        1. eod trades so that you need to make sure of your position BEFORE the next day!

          makes it interesting but also makes you pay more attention – can cancel the trade before 12:45 pst

  11. We had an explosive rally on Oct 2,3&4 as well as the 8th. I alluded to oil in 2008.On Aug 21st it was up $8 or 6%. From Sep 16 to Sep 22 it went from $90 to $121 in five trading day. That is over a 30% rally on the way down. It is nervous shorts and dip buyers I guess. If one anthropomorphizes the market, one could say it is trying to scare you out of your shorts, or preventing you from making any money. As well as keeping the longs in and hopeful.

  12. the spike in june 2015 tbonds could be signaling a collapse is imminent. or it could be a really fat finger. i hope it’s the former

    1. The best explanation for what is happening,- mkt topping, commodities, tanking, and interest rates falling is a deflationary episode.

  13. this is going south fast and the machines will feast first on little fish and then eat their own tails (again) in the frenzy

      1. I will be adding more of both tomorrow on weakness or strength, I don’t really care, that was the signal I was looking for.
        The lows for both were probably today.

  14. I took multiple long positions yesterday morning
    and closed all but 2 of those today, 90% cash.

    Hopefully some downside over the next couple of days,
    see what happens.

  15. I really like your TVIX/UVXY call Allan. I have also been adding my UVXY long positions since yesterday and at the market open today. I will add more tomorrow as I see the corrective rally has temporarily come to and end. The only lifeline bull has right now is the FOMC on 10/29 and the rumored QE4. Worst case scenario is another shallow rally before November, which has very low probability imv.

    The ship is sinking. John has been right!!!!

  16. Purvez: You meant ppl on this board? Who are jumping for joy???? The bear is still less than 15% of the pop. How could that be interpreted as “too many”???

  17. have been using John’s charts he provided on 1937 and 1929 analog. You come to some interesting conclusions. The action today very much looks like the start of wave 3 lower which will punch through the multi year megaphone line around 1620 and come to rest around 1400 applying both analogs. The rubber band in terms of leverage and valuations has been certainly stretched enough to make both paths a possibility. According to wave 1 down we are tracking 1929 and 1937 at a ratio of 2/3 which I have applied on the daily % moves following both paths down.

  18. The X1 flare today killed it. Sun spot 2192 is on a rampage. Just where did John get those numbers about sun activity posted the other day? The ones about this week being 10 and 20 and such?

  19. Lunar declinations are such a useful indicator, especially time when moon transits across equator to northern position. Definitely a time to be in the markets. Next equatorial S to N transit is Nov. 3. Price tends to peak at N., fall to S. which is valley, rise back to N and as it crosses the equator, prices go on an escalator.
    If you want the dates google: Lunar Declination 2014 calendar. If you poke around for a while you will see amazing correlations between the declinations and market moves. I have looked at 2013 and the same patterns are present.

    1. Steve S.,
      That is really good research you have done (are doing) on declinations. Fascinating. I wonder if there is any difference between maximum and minimum declinations in the Sumer and the winter? Specifically as it is related to Full or New Moon. Why? Well at summer solstice, how is the ecliptic positioned relative to the equator, and at maximum declination where is the Moon relative to the Ecliptic? There are some that say that at a Full Moon there is some energy (ions, or whatever) from a solar plasma tail off of earth that are reflected back to earth (contributing to Lunatic Syndrome). So many questions, so little time.
      SC

      1. “…the Magnetic-field and Plasma experiment (MAP) revealed that: 1) after impacting the lunar surface, 0.1 to 1 percent of solar wind ions lose some energy and are reflected and scattered; 2) solar wind ions normally contain helium nuclei and protons (hydrogen nuclei), but the solar wind ions that are reflected and scattered from the lunar surface contain no helium nuclei and are almost entirely made up of protons; and 3) the reflected solar wind ions from the lunar surface are accelerated.”

        1. Thanks for the illustration Georg – its difficult to imagine these processes without one.

          I think this subject is especially important right now, because we’re right in the middle of the Tetrad where the effects of new moons getting in the way of the solar wind (and full moons reflecting it) will be maximised until late September 2015. And this while we are also subject to solar cycle activity that none of us alive today have experienced before.

          Also, the annual intersection of our sun with the galactic ecliptic has been coinciding with the winter solstice since 1980, and this timing coincidence will end in 2016.

          This next year or two is a time to expect the unexpected, I think.

        2. Mark, our solar system intersected the galactic plane 3m years ago and will very likely do so again in about 13.5m years from now. So whatever unexpected may happen within the next 2 years will certainly have nothing to do with that. Georg

      2. Steve, the “big three” shapers of price curve are: seasonality, the tendency for price to move down early Jan, up into Feb, down late Feb, up Mar, down into mid April, up mid april to end May, down till mid June, etc.; Lunar Edge, the tendency for price to rise and fall with M phase; declination, the tendency for price to rise S to N and fall N to S with an acceleration of price on S to N Eq crossing and a cessation of selling on N to S Eq crossing. As far as designing a system simply plot these on a calendar of 2015 with high beta during convergence of positive factors. Low beta during lack of convergence, and negative beta during convergence of negative factors. This system is so robust I have no interest in other approaches at this time.

    2. Steve S, I’m a complete noobie on this one so I need a basic 101 type lesson please. I found this : http://www.moontracks.com/declinations.html and I think the big bell shaped one represents the moon. So then I’m comparing the date it crossed the equator (8th Oct) going from South to North to the market and indeed we had a big up day. Then going from North to South the equator was crossed on 21st Oct and that was also a big up day. Is that how it’s supposed to work. i.e. equator crossings regardless of direction tend to be up days in the market?

      Have I got any of this right? Lol.

      1. Yes, this is exactly right. Both N to S and S to N crossings of Equator add oomph to the market. The difference is the S to N crossing usually brings a 5 day generous up move in price which slows as M approaches far north. The N to S crossing is a calm before the price downdraft which usually occurs the days after M crosses the Equator on the down side.

    1. Pegasus, you are truly the flying horse of wisdom. I am looking for a sell off especially next Monday. Will rally beginning 10/28 next Tuesday and keep going up until mid November. IMO only short until next Monday.

  20. Judging by the current futures it looks like we get the strong move up today that I was expecting either today or tomorow.
    I would expect the VIX to double bottom and its ETF’s to possibly do the same.

    SPX target stands as 1980 to set the right shoulder in place ahead of the plunge.

    1. Looks like it’s going up as you say. I think when the actual crash comes it will involves multiple days of 400+ point drops on the dow. Taken a small short on dow and looking to build but for now it’s starting to look quite bullish.

    2. A few signals I am looking for here:

      – Trannies rebound highs should be in, so lower highs despite higher rebound highs in the main indices today or tomorrow
      – DAX to break back below 8900 level
      – VIX to either double bottom on the intraday charts or higher low and possible divergence in TVIX/UVXY
      – Ditto the R2k as per Trannies.

      If the above come to fruition I believe the stage is set for next week

      1. trannies up 2 1/4 percent today! Much larger move up than Dow or SPX, the trannies have now retraced 78 percent of the entire drop. DAX over 9000, so not likely to go below 8900 before it closes in just a half hour. Rally is still looking very strong.

  21. Looks like a setup for a inside range day today (spx 1927-1949) with a pop on Friday to 1956 then a drop next week into election. Bulls have shot themselves in foot with rally – so nomo QE for a while. Calderos EW calls drop a B wave so probably to 1870-80. Then rally to bottom of failed wedge at 1975-80 for KOD (kiss of death) before Thanksgiving. Then we see retest of lows into Jan 1740-80. DAX had KOD about 3 weeks ago then dropped 10% in two weeks.

    1. Bears have lost momentum for now so best to wait for markets to turn round again. I thought yesterday was it but today has been explosive upwards.

  22. “You are unlikely to get 1980. Probability leans towards it not exceeding the Oct 8 high about 1970. The down move starts today [Oct22] but could trade at today’s high again tomorrow [Oct 23] but with an even bigger decline.”

    Unbelievable as it might seem given yesterday’s sell off, the gap up today at open is making this above statement possibly come true. If so then look for increased volatility with a 25-30 point SPX decline intraday to rest closer to the 20day-MA. It should decline below it early next week.

      1. John Li, I do not know if there is a reliable signal or not. I am merely following a fractal model dating back to spring 2014. It rallied for about one week from a severe correction similar to one we just had. It then traded sideways in a wide range for three weeks after the one week rally. Today is already a bit over one week from last Wed bottom and late afternoon marks a solar eclipse. Thus I assume it coincides with a temporary turning point for a two or three day decline.

        If there is no strong decline later today then I might get stopped out of my shorts that are already underwater now due to this unbelievable strength in the market right now.

    1. Today’s high slightly exceeds yesterday’s high (so far). Does the high of today exceeding yesterday’s make the analog invalid?

      1. No it does not unless it blasts above the recent Oct 8 high. It is now overextended and supposedly due for at least a partial retrace. I mean looking at the facts SPX has rallied back 130 points in a little over a week from the bottom!

  23. All gains of today will probably evaporate in the afternoon so indexes may end flat or even down. Tomorrow and next week bearish with no escape.

  24. Ref solar eclipse(SE) question. In the 1929 crash, the crash low (EW 3, NOT FINAL LOW) was 10-29. SE 11-01. 1987, LOW of first leg down 10-19, SE 10-22. 1980 GOLD CRASH SE 2-16, closest turning pt temp low 2-26. 97 SE Asia crash, temp low and SE NOV 1 & 2. 2000 A MONTH APART for temp low? Not that great.
    The most noteworthy is the crash phase has started at a lunar eclipse, 9 of 15 crashes. The lunar eclipse was 10-8, and the crash seemed to start, but what is this rally?

  25. Price action rules. Biotech broke out. Apple broke out. Gold stocks collapsing. Yen broke important trend line…will continue falling. Looks like last weeks dip was enough to reset everything. Sad but true.

    1. not convinced of that yet, but if it goes much higher I may start to think you’re right. I’m still following the script that has the recent high as the top of primary wave 3 (that took about 3 years to complete). The move down from that high to the recent low was wave A of what will eventually end up as an ABC correction. The move up that most on this board are expecting to top soon (any minute now!) is wave B or part of wave B. Once it’s complete, wave C will take SPX to a low that’s below the recent low.

      The caveat is that the move down to the recent low could have been the entire ABC correction. Seems unlikely that a 3 year uptrend would correct in less than a month, but anything is possible in these markets.

      Here’s much more detail on this wave count if you’re interested: http://caldaro.wordpress.com/

      His weekend report is the best place to start as he reviews the wave structure of entire bull market in each weekend report.

  26. I told you so. Just buy QQQ, AAPL and IBB and short gold stocks, sit back and watch your portfolio grow. What’s so complicated ?

  27. should have gone with the 1975-1980 projection – the break of 1930 yesterday was weak and looks like it was just meant to shake out the weak or get the geeks (me) to short

    now comes the steel balls question – to hold or not to hold and do we go to 1975ish

    the chart that NEVER LIES is still 3 up and 3 down and the uptrend is not confirmed by the elder systems

    intraday that will really spook the children?

    http://stockcharts.com/h-sc/ui?s=$NYUD&p=D&st=2014-05-01&en=today&id=t27907789982&a=367854604&r=1414077907592&cmd=print

    this was just a mid channel rally until…ahyeeeee can gas for meeeeeee!

    this is just wrong!

  28. People thought I had rocks in my head last Thursday when I said SPX 1980 likely rebound high. Should see it, or somewhere close to it early tomorrow and then reverse.

      1. i didn’t post anything but i thought you’d lost your mind, just when i was begining to think you were a genius.

        now i guess it’s true

    1. not me – my two hour chart said 1975ish was real possibility and now with the breakout of the mid keltner we are likely going to exceed that just a bit before the fail…

  29. well if this holds up then going leveraged long until Nov 19 is the only course!

    ahyeee more can gas for meeeeeeeeee!

  30. imho How I see the gap up today is an almost finished, exhaustive top out of wave 2. My strategy remains the same, that is to locate its peak and short. I still have no doubt that wave 3 will begin shortly, that the indices will plunge impulsively as this ship is sinking. My target is after the FOMC.

    1. erick, I personally believe that would be a serious (financial) mistake if you follow through with that thinking. I mentioned maybe two months ago that there would likely be a (regular) correction that would extend until about mid-Oct. And also that sentiment in the media and investors around mid-Oct would get overly too bearish and expect or anticipate the possibility of either a crash or waterfall decline. Instead I argued that should be the exit point to either close out shorts for either profit or get out of under water shorts for minimal damage and an ideal entry point to get bullish. The action is based on a mirror of what occurred earlier this spring 2014 during the April correction.

      From reading all of the comments during the past six weeks on this blog that is the sentiment among the majority … expectations for a significant decline approaching close to 20% or some flash crash scenario. And I believe that is still the general sentiment among many even after this snap back rally from the bottom … the expectations for a lower low than Oct 15 in the near future.

      If one was not prudent to at least cover partial or all of their shorts at the mid-Oct carnage, then I would highly advise you take advantage of this coming dip in prices to do so then. It will likely be the last ideal exit point for shorts. Even if you are completely stubbornly pig headed into believing the bearish scenario, at the very least, you can reposition your shorts at more favourable entry prices and then possibly profit on subsequent dips in the future.

      1. Thank you Steve T. I am not a stubborn bear. I rely on Ewave (mainly) tool, other technical indicators, geocosmic plus John’s solar research as my base for trading strategy. I became a bear in April, on and off, and have been a bear since August.

        The reason why the current rally doesn’t waver me is because this corrective rally is fully expected from the Ewave perspective. In addition, it is also expected to be short lived, a fake out.

        At this point, all the research I’ve done points to the once in a lifetime opportunity, that the crash window for 2014 is within November-December time frame. I have not seen anything within this rally, which may change my winning strategy since August, which is to identify the peaks, and short. I’ve taken several small losses for couple big spikes in inverse ETFs. On the other hand, my exit strategy is no different from John’s, that I will exit shorts only when the abnormalities are observed.

        My expectation is a Dow plunge at the minimum to the 15000 level by December. I don’t see this market survive until March 2015 as the latest.

        1. Another observation I’ve seen so far on the hourly chart is that the divergences are building in SPX. I am looking for a pullback later today or after today.

        1. pimaCanyon. If my count is correct, the next wave down should be very impulse and might take SPX all the way down to the 1600-1700 level, Dow to the 15000 level. from the geocosmic standpoint, I don’t see that happen until at least after the election, perhaps during the week of 11/10. That would be my best case scenario as well.

          BTW, there are convergences built up today. Hopefully that continues to build in the next few days, then this thing will tilt over when the waterfall selling erupts.

          Just imho.

    2. If this will be wave 3 or wave C, then judging by wave 1 or A and also by current 2/B correction, this should be one of the cruelest events in stock markets in last decade or more. There will be rapid rallies for sure but discipline needs to be maintained at least until 1570-1590 zone.
      I still have in mind scenario where we get to new highs in wave 5 of 5 for the sequence staring in Oct 2011. However that last bearish move did not have character of mild wave 4 but rather could be first taste of brutal decline. Such rapid corrections as we witnessed last days are rather typical for major bears then late bull markets. But if we move further and cross 50 DMA and then1970-1980 zone then it will be over for bears.

        1. Ok certainly not on the 3 platforms that I have trading accounts on. Hmmmm I wonder if they are suppressing things. I love a good conspiracy theory.

  31. BBE, it looks like you will get caught with your pants down again, the only reversal I see today is way up. Look for another 300 point day for the DOW. Easy money. And don’t forget to short GDX before the close.

    1. my pants will only be down eod – I’ll go long and lower my bonds IF nothing changes – I think I said that earlier so are you illiterate, mean, random or just flippant Nick?

      made so much money on the trade before yesterday that one day like this isnt even getting caught with my pants down. more like forgetting to zip my fly!

      roflmao

  32. again, the DOW hasnt confirmed s–t and the 26ema on it is twisted down like a cripple – as I said internals are improved across the board. I belive I am typing in English, right Nick? lol

  33. for Nick: the ED on the dow is probably one of the biggest in market history – it failed and is retesting…

    how to you bet price will act at the broken trendline?

    also on the shorter term charts there was a ragged invhs that measured right to todays rally – so reversal may be how the market catches YOU WITH YOUR WEENIE HANGING OUT!

    roflmao!

  34. These type of rally could derive only from huge short covering of stupid bears that not close in the right day their losing short, Derivative market is the only place where price action forms and lead market … no need to accumulation…V shaped swings or crash (two-three times in a decade).
    look at daily range? what the fuck is happened? at 1950 range was 15 points of SEP, now 25… Said that 2150 for late 2015.

    1. that’s interesting Andre as that matches the geometry of the 13,65 ema on the spx

      how’d you come up with your view?

    2. Andre,
      Totally agree but may see a high tomorrow. No doubt the SM will rise into the elections and no matter the outcome, it looks as if they will rise into year end now. What are you seeing?

  35. xrt and rth are in the bull camp and absol breath is probably signaling a long entry so Nick I may be on the bus to hell with ya soon with my fly down and my antidepressants firmly in hand!

  36. BBE, yes your english is good, but not great. Still, I do understand your analysis. We’ll see how the market closes today. I’m buying AMZN big time before earnings after the close. Again, easy money.

  37. The easy money folks are having a panic buying. I just LOVE it. Bulls are sucking in dumb money before opening the trap door in November. Same old game 🙂

    1. maybe it’s Nicks cousins jumping in but I think it’s that last desperate volleys of POMO before the end of the Quack Engineering (QE!)

  38. I hope Nick and his cousins will drive the Dow over 400 today. I’ll check back with you in November if you are still around on this board…. to see how your easy money has been spent.

  39. I don’t mean to offend anyone with my personal trades. Just wanted to share with Allan that I’ve accumulated UVXY earlier today, as I am seeking for his advice on the VIX vehicles and his strategy.

    1. I like to read what other traders are doing, so keep those trade ideas coming! Can I ask why you’re going with UVXY instead of just buying at the money or out of the money VIX calls, say January expiration, or even December? UVXY has horrible decay, but then long calls has theta burn, so pick your poison.

      1. You read my mind. I own both the Dec UVXY calls and long UVXY.

        Extremely risky to hold VIX vehicles long as you know, so I also hedge by XIV call. I have never held these vehicles more than a few weeks. Holding them a little longer than usual now as I see great potential for the crash window to open between Nov-Dec. 🙂

        1. thanks. Hedging with XIV sounds like a good idea. I think that etf may be the only VIX etf that does not have decay problems. In fact, I think it may actually benefit from the VIX rollover that causes the other VIX etf’s to decay. So XIV will actually go up over a timeframe where the VIX is in a trading range.

        2. You are absolutely right pimaCanyon. Holding XIV the last 4 years would have returned 1700% on average. VIX by default is designed to go to $0 and VIX thrives the past 4 years thanks to the Fed printing printing. That will come to an end sooner than later.

  40. bbe I do LOVE your comments. It’s my ‘laugh’ for the day regardless of whether I’m crying for my positons or not. Thanks ever so much.

    May you prosper with whatever you decide to do cause (I need) you here.

    1. So are the bulls going to put on a ‘SHOW’ tomorrow OR quietly slink away? I’d love them to put on a show so that I can short it. Ooops just gave the game plan away.

      1. not sure what the bulls will pull tomorrow, but short-term indicators show extreme overbought. i am just happy that |(hopefully) there will be no more free money to hand out. enough! let the invisible hand do its work.:)

  41. Many of these waterfall declines look similar. One of the particulars is the rebound rally recovering at least 60% of the first decline. Another is the # of days to achieve the initial decline. Waterfalls use less than 25 to get the initial decline over with. The % move down this time was a little light so this could be another fake out.
    I have gone in again after getting stopped out in that Feb miss. The risk on the upside is only a couple of % while the downside potential is multiples of that.

  42. It looks like the beginnings of very s/t H/S pattern on SPX with top at 1962, shldr at 1956. A move down to fill gap at 1927 Fri PM or Mon AM then recovery to 1950 would provide low risk short entry. Next gap down is 1906. It looks like I had my range day and pop backwards.

  43. Interesting pattern regarding mercury retrograde after farthest west elongation. The last 5 cycles of this have resulted in pronounced weakness the 20 trade days after. Last five were 3/31/13, minus 1%; 7/30/13, minus 3%; 11/17/13, minus 1 %; 3/14/14, minus 2 %; 6/12/14, minus 4%. Next one to occur Nov. 1.
    Seasonals: bullish starting next Monday (maybe super bullish vis election bias)
    Moon phases: bearish starting next Monday
    Declination: bullish starting next Tuesday is farthest South Declination
    Merc Retrograde: bullish until November 1st.
    Combined guess: bullish until at least November 4th mid terms, then 3% down move.

  44. I believe 2015 is the 7th year of the 7 year cycle last one of which was 2008 so this year to finish sideways from here and the summer of 2015 to be the big decline.

    1. 7 yr cycle. I have read 2000, 2007, and 2014 as tops. 6 yr cycle bottoms Oct 2002-Mar 2003, Oct 2008-Mar 2009 and Oct 2014-Mar 2015.
      Dow Theory now bearish primary trend. Hence, sell sell signals and ignore buy signals. Well, the buy signal of 5 days ago worked well. It is when the summation index turns up – it is a medium term signal few weeks. The short term mcclelland oscillator gave a sell signal today. If we bears are right at all, it should work – in a bull mkt they don’t It is the high today is not confirmed by a higher oscillator number. Are we having fun yet?

      1. Maybe, however carry this back to 1994 had down turn, 1993 didn’t. 1987 had down turn, 1986 didn’t. I think the 87 94 01 08 15 sequence is better fit than
        86 93 00 07 14.

      2. Also in 7 yr cycle going back: 29 way up, 30 way down; 36 up, 37 down; 43 up 44 flat; 50 up, 51 flat; 57 way up, 58 up; 65 up, 66 way down; 72 up, 73 way down; 79 down, 80 flat; 86 up, 87 down; 93 up, 94 down; 2000 top, 2001 down; 2007 top, 2008 way down; 2014 flat, 2015 way down. Based upon 12 previous cycles clearly next year is the big price loser.

  45. Thank you, Erick. I have benefitted from the input of everyone, especially Andre’ who is eclipsing the ordinary with his research. My latest study combines seasonals, lunar phases, declinations, apogee/perigee into a model for projecting future prices. Should have it complete in a few days.

    1. awesome. are you using some kind of software to put together the model? and how do you do your studies and back testing? Do you just put together a list of dates on which the phenomenon occurred and then go back and look at the charts, or something more sophisticated using software?

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