21 replies to this topic

[IYB]

Wednesday we laid out context here. Does that context matter to short term traders? Absolutely. Let's see what we can infer from this context for this weeks immediate trade.......

First, notice that the Seven Sentinels went to SELL mode on November 9, and have remained on SELL since, as despite the announcement of arguably the biggest {22 most powerful industrial nations} financial bail-out in the history of mankind.... they remained on SELL throughout and they remain on SELL today. Despite, too, the last two days' rally, six of seven are still solidly on SELL mode, keeping, of course, the IT Trend on SELL mode as well.

Notice too, the circled area on NYSI and NASI charts below (two of the Sentinels).... which shows how little that 1000 DJIA point new-driven spike impacted these longer term indicators - hardly a blip in the bigger picture.

http://stockcharts.com/c-sc/sc?s=$BPCOMPQ&p=D&st=2011-06-30&en=2012-01-02&i=p73457073284&a=225433286&r=838.png

http://stockcharts.com/c-sc/sc?s=$NYMO&p=D&st=2011-07-01&en=2011-12-30&i=p63254003913&a=225433288&r=374.png

http://stockcharts.com/c-sc/sc?s=$NAMO&p=D&st=2011-07-01&en=2011-12-30&i=p65459071667&a=225433287&r=713.png

http://stockcharts.com/c-sc/sc?s=$NYSI&p=D&yr=0&mn=4&dy=0&i=p66045800370&a=225433292&r=657.png

http://stockcharts.com/c-sc/sc?s=$NASI&p=D&st=2011-06-30&en=2011-12-30&i=p44689928407&a=225433291&r=418.png

http://stockcharts.com/c-sc/sc?s=$TRIN&p=D&st=2011-06-30&en=2011-12-30&i=p74509318536&a=225433289&r=555.png

http://stockcharts.com/c-sc/sc?s=$TRINQ&p=D&st=2011-06-30&en=2011-12-30&i=p39878420031&a=225433290&r=416.png

The current market, when seen in proper context, is nothing more or less than a plain vanilla Intermediate Term down-trend in a Primary Bear Market. Period. Here is a summary of context:

I. Rather than spend any time detailing the Secular Trend (20/40-year cycle), I'll just mention in passing that this is a Secular Bear Market since the valuation, speculation, and public participation peak of Y2000....till it bottoms sometime in 2016/2020 time frame.

II. The next level down from Secular is the Primary Cycle, and that cycle has gone to Primary Bear Market in September 2011:

III. The Intermediate Term Trend has been in downtrend mode since our November 9, 2011 Seven Sentinels Sell Signal, despite the scorching 1000 DJ point counter-trend rally from November 28 to Dec 7 which was driven by an unprecedented (both in scope and nature) 22-nation direct monetary intervention in the form of the EU bail-out:

IV. The Short Term trend is also down, but now getting very oversold, though of course can get much more so in this kind of environment (IT downtrend in Primary Bear Market):

--------------------
So now let's look at how the various trends (CONTEXT) are lining up now for this next week. As we'd said on Wednesday, the Secular Trend is down since 2000, the Primary Trend is down since September 2011, the Intermediate Term is down since November 9, 2011, and the short term trend is down since December 8. Now after the very short term bounce of Thursday and Friday, the VST trend is turning down as well, so that all trends are {or soon will be} in sync on the downside. So now what?

Now, we'd look for markets to drop very sharply into a short term low over coming days. Perhaps it will set that ST low this week - but if so, this will be a week to remember, as we suspect we'll see SPX below 1158 before even a short term bounce of significance.

Seasonal indicators had called for an up Thanksgiving week. Context, though, called for it to be down and of course it was- for the "worst" Thanksgiving week since 1932 for markets. Now, again, as many look for seasonal strength based on historical precedent, Context strongly suggests that this will be another sharp down week. Santa is a bear this year. But the traditional "Santa Claus Rally" between Christmas and New Years? Assuming we can get to and set up a short term bottom this week, as we expect, the SC Rally is probably safe again this year......but from a MUCH lower level.

So there's the Fearless Forecast from the Seven Sentinels. Agree or disagree at will. Very Best Holiday wishes to you and yours, Don

[selecto]

Thanks, Don. Many Rivers to Cross.

[EntropyModel]

Nice post Don, good old fashioned clear Fearless Forecast and reasoned TA FWIW I'm seeing the same via other methods, so, we'll see. best Mark.

[pedro]

Seeing the same here off my stuff ... essentially, we're in mini crash alert ... dailies oversold, weekly momentums accelerating to the south.

[Rogerdodger]

Good stuff Don.
I mentioned last Wednesday that we should see a bounce but that it was for selling.
"Dec. 14th: Wow. I've never heard Laundry so bearish as tonight's update.
His oscillator is getting oversold and while we could see a bounce, it's for selling."

That selling could commence immediately.
However, there is a very interesting concept in Laundry's T Theory that may give us a few more days of rally attempt.
Aside from the 5 day ARMS at +1.62 which is a bit high and could add some strength,
Laundry counts "dots" in his Volume Oscillator. It is similar to the McO except that it adds a volume component to the a/d.
I'm not sure of all of his rules he uses to draw such a small T and where to begin counting dots.
Currently he has a small T with 19 Dots on one side, 16 on the other, so he thinks we could see another day or two and a few more dots before a bigger drop.
Out of consideration for his paid site, here's just a glimpse of the dot method:

Edited by Rogerdodger, 18 December 2011 - 01:30 PM.

[EntropyModel]

Fair point about the TRIN Roger, I note - last 4 days have been low, and 5th was high 2.4'ish will drop off at tomorrow close - we had higher 5 day TRIN nov 8-14 that dipped just before the sell off - 10 day trin is still low after going very low(sell) So I can see room for some more choppy upside tomorrow, maybe into tue but would negate these weak positives if we do.

[JimBecker17]

Just looking at the structure Friday somewhat looked like a successful test of Wednesday lows if we are going to turn up from oversold. However in the greater picture it looks like we could be at a point which some Elliott analysis would call the "third of a third" if we break from here. Certainly an important juncture, with your southbound evidence looking quite possible. Of course TPTB would probably like to close the year up and they only have a few percent to move it up from here. Don't think we will see any Bull Market though until eventually they let it go and we end up significantly lower. Holding/pushing up is making a mess IMHO.

[Rogerdodger]

In my chart below the TRIN does not look excessive, however the VIX is weird here, way ahead of price.
Somebody's going to catch up.
(Frankly, if it was the other way around, I would be screaming about a big dip coming aka end of 2004.)
http://stockcharts.com/c-sc/sc?s=$ONE:$VIX&p=D&yr=0&mn=3&dy=0&i=p92561664295&a=251203294&r=7878.png
http://stockcharts.com/c-sc/sc?s=$VIX&p=D&yr=0&mn=11&dy=0&i=p24254219869&a=179964330&r=2840.png



(Frankly, if it was the other way around, I would be screaming about a big dip coming aka end of 2004.)
(Isn't it funny that after 7 years we are just still barely over 1200?)
http://stockcharts.com/c-sc/sc?s=$VIX&p=D&st=2004-12-01&en=2005-02-01&i=p18700805739&a=72107875&r=97.png

Edited by Rogerdodger, 18 December 2011 - 03:12 PM.

[fluid]

Yup.

[fluid]

Good stuff Don.
I mentioned last Wednesday that we should see a bounce but that it was for selling.
"Dec. 14th: Wow. I've never heard Laundry so bearish as tonight's update.
His oscillator is getting oversold and while we could see a bounce, it's for selling."

That selling could commence immediately.
However, there is a very interesting concept in Laundry's T Theory that may give us a few more days of rally attempt.
Aside from the 5 day ARMS at +1.62 which is a bit high and could add some strength,
Laundry counts "dots" in his Volume Oscillator. It is similar to the McO except that it adds a volume component to the a/d.
I'm not sure of all of his rules he uses to draw such a small T and where to begin counting dots.
Currently he has a small T with 19 Dots on one side, 16 on the other, so he thinks we could see another day or two and a few more dots before a bigger drop.
Out of consideration for his paid site, here's just a glimpse of the dot method:

Hlow does Terry feel about you posting extracts form a subscription site?