TIME & PRICE ANALYSIS
AM UPDATE FOR DEC. 11
Globex is up only slightly from last night (.60), not enough to trigger a good gap trade. I would like to have seen up 4 to 6 points for something to develop. If that changes between now and 9:20 I will post another update before the open. The pattern for day-traders looks to see flat open, then lower prices. Any rally that takes place may be around 11 AM. That rally make be a fake-out move, fail, with the final low coming around 1:00. But, again, use technicals to confirm. Buying the DOW JONES futures is not high risk right here. But leave room to scale in one more position. There will be at least one more move to test or re-test the highs before all is said and done. And it is likely to take place before the end of the year.
I hope some of you took the advice last in last weekend's update and did some shorting with Japan. Since that update (Nov. 30) the Nikkei has sold off nearly 800 points, and hit my first cycle target of 14,400 last night. We will be looking to buy this index in the coming weeks.
Gold stocks may gap down at the open today and should fill that gap. You can tell the transistion from a bear pattern to bull pattern by the gaps. Gold has been opening higher, then falling back the past several weeks. Now the reverse should start developing, where it opens down and then gets stronger as the day progresses. These type of patterns are always seen at cycle lows.
EVENING UPDATE FOR DEC. 10, DEC. 11 TRADING DATE
I said last night we were about ready to break one way or the other and that we did. I also thought the market would get one last gasp to the upside, and it did that also, all 15 minutes of it. And I am not surprised one bit by the action today. I warned of the technical condition of this market Tuesday morning. And it still is not over. 8760 has been my minimum target, and we are nearly there. And with so much time left, the target is likely to be much lower.
I am still working on the phasing of the shorter-term cyclic components, and, if I am correct, the market should make a short-term low near 1:00 tomorrow afternoon, and mount a rally into early next week. I still see the 23rd as a low, possibly a secondary low, too soon to tell for now. The market closed right at the lows for the day. The projected high for the Dec. S & P contract was 1190, and was right on the money. If you took a short from there, you had a good day with absolutely no risk. I expect a low made tomorrow afternoon, followed by astrong push up into Monday. The strength of the rally into Monday will tell me a lot about whether we move out early or hold out for an attempt at 9400 later this month.
Tomorrow we will begin the test of my gap-trading system for options trading. This test will conclude on expiration day, next Friday. If you decide to take these trades, do so at your own risk. This is a system in TEST MODE, remember that. For a trade to occur tomorrow we need to see a nice gap up on the Globex futures. If that does not occur then no trade. Stops are set at 25% of the contract purchase price. So drawdowns can be brutal. But the system wins a high% of the time, which I hope will make up for it. I will assume an initial starting account value of $5,000, and re-invest all $$ back into the next trade (rough!). Check in at 9 AM to see if a trade develops.
From tomorrow on out I will be doing the posting for the day-trading pattern by 9 AM. The reason being obvious. I can see the action from Globex to better-determine which pattern is likely to develop. So be sure to check in.
Gold stocks gave their first indication that a cycle low is being made with the strong push to the upside today. I expect big things to happen in these stocks over the coming weeks/months (I know, they have been saying that for years!). The cycle low is still forecast for the 15th. BE AGGRESSIVE HERE in buying. (That means you, Rick!)
MACD DAILY SLOPE - DOWN
WEEKLY MACD SLOPE - DOWN
OVERBOUGHT/OVERSOLD INDICATOR - .23(BULLISH)
CALL/PUT $$ RATIO - 1.25/1 (NEUTRAL)
TOMORROW'S PROJECTED RANGE FOR THE MARCH S & P FUTURES CONTRACT: HIGH - 1188 HIGH - 1165 LOW
TOMORROW'S PROJECTED RANGE FOR THE MARCH DOW FUTURES CONTRACT: HIGH - 9018 HIGH - 8770LOW
Traders who sold the break of 1174 should have nice profits as of the close. The target now may become the gap left over from last Friday at 1154. If you are trading the March contract that level would be 1166 area. Look to do your covering there. Use your technicals to confirm, or just trail a stop. I usually stop loss on a break of the 60 min bollinger band moving average. And I use 10 as LEN instead of their standard 20 LEN.
Short-term traders should look to buy a low made near 1:00 tomorrow afternoon. There may be a possible rally attempt early morning, then selling into this timeframe. Take only 1/3 your normal position, since I count this trade as a counter-trend trade. I recommend you use the DOW JONES futures contract. I am posting the projected high and low for the March Dow Jones contract above. Look to buy at the projected low, or at 8750-8800 support area. Use your technicals to get the best price. Usually, after an early morning rally attempt, MACD will start moving back up, and the next wave of selling starts and MACD will hold above its low while the market PENETRATES it's low for the day. That is the proper buy point. OR, just wait and buy at market, AFTER AN HOURLY LOW HOLDS. Then just buy the close of that hour. Will may look to add one more contract over the coming days. I expect at least one more test of 9400 before the year is out. But we want to have plenty of room to add in another long on any dip on down. If we get a quick profit into early next week, as I suspect we will, we will look to move out and re-enter on the 23rd. Options traders might want to use a high dollar January call option (to better simulate futures trading) for this trade just in case we are early and decide to hold out for a little longer time frame.
Notice that the above projected lows come right into important support tomorrow. With small degree cycles working on a bottom, time and price should meet to cause a change in trend. We'll see. Thanks for checking in.
Good Luck, Good Trading
EVENING UPDATE FOR DEC. 9, DEC. 10 TRADING DATE
Not much to add from Tuesday night's update. The futures closed at 1185, up from our hourly cycle bottom yesterday evening. The market is ready to break one way or the other, and right now hard to say which. I would like to see one more day or two push higher to feel more confident, but there are several indicators that point to a break down. First, the opening to closing price from the S& P futures contract narrowed to within 3 points. Second, heavy volume today without much further price advance. But I could make an arguement for a sudden, last gasp burst higher as well. The 5-day cycle low that occured yesterday should continue up pressure over the next day or so. There are a few other components that are pushing UP, while the larger term components are solidly DOWN. If we do break out to the downside, it could be a whallop. My gut feel, many times wrong, is that we will see one more push up to take out all remaining shorts. I really have no technical basis for this at all, just a hunch. I am only batting 50/50 on hunches lately.
The 60 min bollingers are pinching tight. a break out above 1188 early tomorrow could see a test of the 1206-1220 by Friday/Monday. A break below today's low on the SPX cash should lead to another test of the 1150 low made last week. The daily stochastics are still not into overbought territory, which leads me to believe another push up might be about to occur. If it is, it should last into Monday, the 14th. The next important date will be the 22nd-23rd, which I believe will be a low.
MACD DAILY SLOPE - FLAT
WEEKLY MACD SLOPE - DOWN
OVERBOUGHT/OVERSOLD INDICATOR - .57(NEUTRAL)
CALL/PUT $$ RATIO - 1.47/1 (NEUTRAL)
TOMORROW'S PROJECTED RANGE FOR THE DEC. S & P FUTURES CONTRACT: HIGH - 1191 HIGH - 1180 LOW
The projected high for today hit the mark, again the projected low was not approached. I am recommending short and intermediate-term position traders to just stand aside. Traders who have to see some action the only highprobability trade I see is to short a break of the 1171-1173 futures area for a target of 1154. For a reasonable risk/reward trade to set up over the next few days I would have to see a spike higher into resistance into the 11th-14th with poor technicals, OR a push back down to the 8800 area on the Dow/1150 futures to set up a good long trade. Remember the goal is PROFIT, not to take every trade that comes along.
DAY TRADERS PATTERN
The pattern for today is very unpredictable until we get either a good overbought/oversold reading from our daily indicator. The 60 min bollingers are pinched tight, so trade with the break out.
Good Luck, Good Trading,
MORNING UPDATE FOR DEC. 9
The lowest-risk entry should come from either the 1166 or (what iIprefer) a test of yesterday's low at the 1173 level. From that point I would have to think we would at least get a test of the 1187 level, with a good possibility of a re-test high. Watever high is made should be in place by Thursday evening, Friday morning latest. When an hourly low holds it should be safe to step in longs. Again, position traders should just remain on the sidelines until my reversal model signals a short entry.
EVENING UPDATE FOR DEC. 8, Dec. 9 TRADING DATE
If there was any doubt as to how this market is going to begin reacting to the downside over the coming weeks, today should have made you a believer. After making a run at the highs on the December futures contract, the market quickly and abruptly sold off to the 5 day cycle low before the close. If an hourly low holds tomorrow, which I suspect it will, then the 5-day cycle is in and should remain bullish over the next day or so before it puts in another top in conjunction with the 10-day and 21-day cycles. What follows should be another round of selling into their next cycle troughs, due by Dec. 22. The alternate scenerio is that we will see a low made on the 11th-14th, and a cycle high on the 22nd. My FEELING is that the market may hold its own on the upside into the weekend.
I made a point this morning of warning traders about the long side. When this thing really breaks in earnest, and it will, the selling will be just as fast, only the scale will be much larger. Day traders should be looking to take advantage of these swings. I am adding a 'pattern prediction' for the next day's trading, to be updated every night. I have had several requests for this, mostly from day-traders who are looking to trade a specific pattern and want to know the liklihood of the high/low being made first, and which direction/price to look for.
MACD DAILY SLOPE - FLAT
WEEKLY MACD SLOPE - DOWN
OVERBOUGHT/OVERSOLD INDICATOR - .53(NEUTRAL)
CALL/PUT $$ RATIO - 1.62/1 (NEUTRAL)
TOMORROW'S PROJECTED RANGE FOR THE DEC. S & P FUTURES CONTRACT: HIGH - 1188 HIGH - 1166 LOW
Traders today got a full ride. I mentioned last night and this morning to sell longs on a TEST of the 1196 futures area. The actual high today was 1195.70. If you moved out in that vicinity from yesterday's entry at 1178.50 you bagged a nice 17 point profit. If you had a limit sell in at 1196 you then were stopped out at 1177 for a loss of 1 point from the entry. Traders who sold at the test of 1196 were instructed this morning to remain FLAT upon termination of this position. I personally moved out when high upticks were being recorded at the 1194.70 area. I am flat now also. Position traders should take a vacation for a day or two as we await my reversal model to issue a sell signal. Aggressive traders who have the ablility to trade multiple contracts might look to begin scaling in shorts on a re-test of the 1196 futures level. The minimum downside target remains at 1118.
DAY TRADERS PATTERN
The pattern for tomorrow should be a low made first in the first hour of trading at the 1166-1173 area. This may be the best spot for a long entry. I expect a test of the 1185 - 1187 area tomorrow, with a re-test of today's high at 1195 to be a possibility. The longs were taken out of the market today just as the shorts were last Friday, which should set the stage for a decent rally attempt. The 5-day cycle low should be in and should also buoy the market tomorrow. Traders looking for the least amount of risk might look to wait for an hourly low to hold on either the cash or futures before initiating any long day-trades. The daily range is about 20 points from high to low, so a low at 1173 might very well allow for a test of today's high. Use your technicals to confirm. If instead we gap up open towards the projected high, look for a selling opportunity and a test of today's low or the projected low.
MORNING UPDATE FOR DEC. 8
After posting my update last night, and looking over yesterday's technicals I ran a test. I went back over data that I have kept for several years to see, if any, there were any similarities between what is going on now, and any other important highs that were followed by big declines. I have to say that I am terrified of what I saw. The indicators are in nearly the EXACT same place they were prior to the declines of October 97, and July this year. I received several more responses on sentiment last night as well. Three more for the bull camp. I think the longs are being set up for the slaughter, as the shorts were last Friday. The huge stop run on Friday into Monday took out the majority of shorts that were left. Meaning real-buying has to take this market higher, and THAT I just do not see. We will stick with longs for now and use 1177 on the Dec. futures contract as our STOP. That is slightly below our buy point today. I am recommending that traders liquidate longs on a test of 9150 DOW and/or 1196 on the Dec. futures. Remain FLAT. I want to see a reversal signal on my short-term reversal model before declaring an official short be taken.
If I have any comments to make I will post them at 3:45 today before the close.
The Nasdaq closed at a new all-time high today, and both the Russell 2000 and S & P cash indexes closed with a good % gain relative to the Dow. Short-term, this is a plus for the market. All systems are still go on the upside for now. There is STIFF resistance at the 9150-9160 area on the Dow, also at 1196-1198 area on the December S & P futures contract. Two days of intraday overbought readings, plus a 5-day cycle low and a 3-day cycle low due tomorrow, should lead to some selling after an early high. But the 10 day and 21 day cycles remain bullish into the 11th-14th, so they should overshadow any selling we may see tomorrow afternoon. As long as we remain above today's low of 1177 Dec. futures, we will remain bullish.
There are two things that worry me still, and should be made note of. The number of new lows again were above 40 on the NYSE. On the Nasdaq they moved to 80, with only 93 new highs. Also, even with the 37 point advance on the Nasdaq, decliners outnumbered advancers. In a market hitting new highs, that is something you simply don't want to see. The 'Titanic Indicator' is triggered when the Dow or the S & P close at a new high and the number of new lows is greater than the number of new highs within a few days after that close. Something to watch out for. This next move to the downside will be at least as sharp and as deep as the one we saw last week. A break of 8800 could lead to a move back towards the October lows. So be on guard and be ready to reverse over the next few days.
Gold made an attempt at a comeback today by rising nearly 4 points, then falling back near the close. The cycle low is still forecast for December 15, at which point we will begin using technicals to find a spot to enter into additional positions.
MACD DAILY SLOPE - UP
WEEKLY MACD SLOPE - DOWN
OVERBOUGHT/OVERSOLD INDICATOR - .84(BEARISH)
CALL/PUT $$ RATIO - 1.71/1 (BEARISH)
TOMORROW'S PROJECTED RANGE FOR THE DEC. S & P FUTURES CONTRACT: HIGH - 1194 HIGH - 1180 LOW
The projected high made today we tested and broke solidly through and the projected low was never really approached. This tells me that short-term the bulls are in control. I have to admit at not being comfortable with the long side right now, even though it the path of least resistance for the time being.
Traders should have reversed from short to long with the test of the hourly moving average this morning at the 1178 area (futures), giving us a nice profit for the day. So far so good. a test of 1196-1198 and dow 9150-9160 is imminent. If we open strongly higher tomorrow to these areas, look to EXIT longs. The hourly cycles are due by 2:30-3:00 tomorrow afternoon. Re-enter longs when the HOURLY LOW holds anytime after 3:00, OR 1185 area Dec. futures, whichever comes first. The pattern says that the high should be made FIRST tomorrow. Traders who have a 1/2 position long should look to add the balance on a pullback to the 1185 area.
Thanks for checking in. Check in at 9AM, I may have a special update.
Good Luck, Good Trading,
WEEKEND UPDATE FOR WEEK OF DEC. 7
Intermediate-term cycles started to exert down pressure on the markets last week. From the high at Dow 9370, by Thursday we had fallen to the 8870 area, a drop of nearly 500 points. The furious rebound on Friday was something unforeseen, by myself and for many other analysts as well. I knew we would get a nice bounce from the close on Thursday, but the buying, particularly after the index closes at 4:00 pm, was something powerful indeed. The good news is that we had nice profits from the trade the night before. The bad news is we gave it all back and them some by the close on Friday. But, as I have been saying, ANYTHING GOES here, and what happened is to be expected from time to time.
In getting some preliminary feedback from several traders over the weekend, sentiment is split down the middle. This leads me to believe that technicals will take over. Also I have to expect a choppy market over the next week. Day-traders this should be a good week to capitalize on. I made the comment last week that we could expect the normal technical indicators such as daily stocashastics, MACD, etc., to perform well over the coming weeks. Cycle pressure, for the time being, is in near EQUILIBRIUM. Since we are still oversold from Thursday's close, we should now focus on a rally into the 11th-14th for the next important high to be made. It would take about 4-6 days of an upwards trending market to move back to the overbought level, so longs are favored into those key dates. The Donald Bradley indicator also points to the 11th as the next key date for a swing high to be made. Even though longs are favored short-term, traders should use CAUTION, and take trades with a smaller % of capital that you would normally trade with. We will look to be more agressive on the short-side if we get a rally into next Friday, and we move back into overbought territory as well.
My minimum cycle projection for the dow remains at 8760. I still favor a move to 8160, but that is not LIKELY to have a chance until after the first of the new year. Also I have reason to believe that the dow may have seen it's highs. The 9400 area is a key Gann number. Gann's statement that when time and price meet, look for a change in trend. Time and price met perfectly at Dow 9370 on Nov. 23. This was also the cycle turn date, which signified a change in trend. So far that has been the high for the Dow, though the other indexes made higher highs later that week. WHAT I BELIEVE will take place into January 19 is a larger degree A wave. Wave four was complete at the September low in the Dow, wave five we are still working on, but possibly it may already be complete (check with Travis' section for the wave count). A wave B rally should take us into early February to March. From that point it should be down hard into Summer. Traders with a little longer time frame should take a SHORT position on the next rally up to test the highs on the Dow. I recommend the Dow Jones futures contract. Look to hold the contract for a minimum target of 7800 on the Dow by next summer. One a one-contract basis, that would net a profit of $16,000 per contract, on about a $4,000 margin requirement. Not too bad. Odds favor we may even go lower, but I will stick with that as a minimum target for now.
Before a good new bull-leg up can begin, we must first make a re-test of the lows. Technicals at this time are much closer to what are seen at market tops rather than new bull markets. The number of new lows again were over 40 Friday, even with the big close to the upside. This is DANGEROUS. If you do decide to play the long side, do so carefully, and with less risk $$.
The status of several trading systems that I use remains a mixed picture. The longer-term fundamental model is mildy bullish at this juncture. The cycle model is in sell mode. The shorter-term model remains in sell mode from the close on the 23rd. The reversal model flipped to buy mode with the run-up we saw on Friday. I like to see three of four turn to one direction before being really aggressive in taking a trade in that direction. Last week three of four were down, and the move, for the most part, was one-dimensional. I want to see the reversal model turn down before I take the next big trade on the short side. And this could happen any day, so be on the lookout over the next few days for this to occur.
The close last week leads me to believe that we will see the low for the week to be made first. There is mild resistance just overhead, if we pull back from this area Monday early I would expect to see a low made sometime Tuesday afternoon, when several hourly cycles come together to form lows. The 10 day and 21 days cycles have turned higher, and should top out 1/3 the timeframe of the 21 day cycle, or 7 trading days. That also puts us at the 11th-14th to look for the next high. The 50 trading day cycle is still moving down, as is the 18-week cycle. These will show their dominance again sometime after the 21 day cycle makes it's high. The 10-day cycle will top out 2/3 its timeframe, or in about 7 trading days. This also points to the 11th-14th.
There are several key things to watch for when trading an oscillating market, as this one is expected to be over the coming weeks. The first is to see the daily slow stochastic run up to the overbought area. Once that is set up, then I like to see an opening to closing range on the S & P futures contract to narrow to within 3 to 4 points. I would also like to see a close near the high for the day. Even better if the move is on low volume. More on these as the week progresses.
Gold/gold stocks are moving down towards our cycle low target scheduled for December 15, the 24 week cycle low. What follows this move should be a very strong rally into next year. What I am looking for next is for a weekly low to hold on the XAU and gold stocks before adding to our position in ASA mining. Again, aggressive traders/investors should look to purchase shares of DROOY over the coming weeks. The cycle high forecast is for a target of $5 a share by Spring.
MACD DAILY SLOPE - UP
WEEKLY MACD SLOPE - DOWN
OVERBOUGHT/OVERSOLD INDICATOR - .79(BEARISH)
CALL/PUT $$ RATIO - 1.75/1 (BEARISH)
TOMORROW'S PROJECTED RANGE FOR THE DEC. S & P FUTURES CONTRACT: HIGH - 1187 HIGH - 1169 LOW
Traders should close out the short taken at Friday's open and reverse to long sometime tommorow into Tuesday. Watch Globex for clues. On a down opening look for a test of the 10 period EMA on an hourly chart to reverse. I use quote.com along with the symbol ES98Z, set my chart to 60 minutes, and set indicator on the bottom scroll to the bollinger band. After setting up for the bollinger bands, set the LEN (to the right) to 10 instead of the 20 setting they have. Look to close out shorts there. Enter 1/2 longs there. Traders with a strong stomach might wait until Tuesday for the hourly cycle hottoms to form before reversing. If you take a 1/2 long tomoroow, enter another 1/2 position Tuesday when the second pullback is likely to occur. I recommend that you commit to these long positions about 1/2 to 2/3 your normal position. I want to reserve the largest % of capital for the next sell signal. Options traders should use a higher dollar option for this trade, to better simulate futures trading. Lower dollar options of $3 or less are likely to have a tough way to go if we get the choppiness that I am expecting. Small capitalized option traders might wait to reserve all their funds for the cycle low on Tuesday, or may just choose to sit this one out until the next sell signal. WHATEVER you do, do not enter in all your funds tomorrow. The put/call $$ ratio is still VERY high here, so risk is great. Reserve at least half for Tuesday.
Check in 9 AM for any other comments/trades.
Good Luck, Good Trading,