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#1 Stickan

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Posted 15 January 2007 - 09:21 AM

On Aug 15 2006 the market promptly reacted to a US report, which I covered in a long post on FF.
http://www.traders-t...mp;hl=bear trap
the 2 interesting charts from the post is here. It was when on Aug 15 the market broke out from a 9 month long trading range and downturn.
This is what europe looked like .
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And this is the chart where Nasdaq gapped up for 2 days
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Last thursday, we had a similar incident. After a month of consolidation in the US and Europe, England announced a surprise rate hike, wich "should" have led the stocks lower and it did - all European bourses fell for 10 minutes!
Then they all took off. Completely disregarding the news or rather using it for going higher.
Bull move on bear news!


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Tgursday and Friday, Nasdaq broke convincingly out to new highs as did DAX and SPX on a closing basis. Dow Industrials broke out to a new all time closing high.

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SPX also broke out of a bullflagg, indicating higher price in the future and ending Friday with a bullish engulfing weekly candlestick as well (not shown)

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A similar picture in the Trans. Powerful break out of of falling Pitchfork in what my ewave count suggests, is a wave 3 impulse wave.


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Switching over to a weekly chart and we can identify a possible "continuation H&S pattern".
But what is more important is the red wedge which is complete
As I have pointed out before, upside breaks of rising wedges are some of the most bullish pattern you can find.
This is a perfect, textbook pattern.
1. The breakout takes place at the end of the wedge.
2 The breakout line is tested twice.
3. The second one just one day away from the apex of the wedge - just plain perfect.
4. Wich is is also at the 50% retracement level of the last move to the top.

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Check out the Broker/Dealer index, moving to new all time high while breaking out of the resistance line from the 2000 top, as well as the median line of a steep rising Andrews Pitchfork.
We are seeing break outs all over the place.

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To get a picture of what is actually happening, it might be a good idea to compare four important indexes. In the chart below we can see that Nasdaq and SOX have been th orphans.
We have shown that Nasdaq did break out and will now perhaps be trying to catch up with SPX and DOW.
And what a catch up it will be! So far we have only seen a 33% retracement of the bearmarket from the 2000 top.
Check out the red trend channel - we are now marginally above the upper line and a further move will probably be an acceleration of the trend. That pattern I call a "storm flag".
Normal (bull)flagpatterns are down sloping patterns. What we see is a RISING flag, which indicate a pattern with lots of energy in it, which will be released when we break the 33% retracement level (which is actually marginally done...).

So what about the SOX index. It seems to be in the middle of a trading range.
Well, it depends on how you look at it.

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This is a weekly SOX chart.
There are several things we should take notice of.
First, is the struggle bettween the two blue lines. Looking at this chart we don't know the outcome, but a break through any of the two lines will indicate the next big move and the clue is the break down below the blue arrow.
This break down can be one of two things.
a
1 "Pre" break (if the next break is down then the true direction is down and a long move will probably follow)
or
2 Failure break.(The down break was wrong. Failure breaks are usually followed by powerful, volatile moves in the other direction).
A solution is about to take place before we reach the apex.

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So let's move over to a daily chart. We are now charting SMH instead of SOX, in order to be closer to the market.

Instead of usiing highs and lows to determing support resistance we are using trendlines and a pitchfork.
We are using the first three tops to draw the red trendline. That this is the true trendline is confirmed by the blue Andrews pitchfork, since it's lines are parallel to the red trendline.
as we can see, we have had a couple of "pre" breakes before Thursdays' break which I now consider a true break. The reason for this is the way price jumped thrugh the "black hole" which is where two trendlines form and X. Such an X is usually heavy resistance/support, since it is the product of two trendlines.
However, once in a while you see price cut trough that resistance/support without effort it just glides through as if it was an emergency exit, which is what happend here on "break out day" , last Thursday.
"Energy" was produced by the blue/green fibonacci spiral (vertical lines). And observe the strong support just above 33, which is also the neckline of an inverted H&S pattern.
With that break I don't, anymore, think we will be trading below 33.

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Ever since the the bottom in 2002, many of us have been considering this uppturn as a correction (at least I have). The question that now comes to mind - could it be that the 2000-2002 downturn was the correction. And that a final move in a gigantic bullmarket, started in 2002?

Hmmmm ..........Let's look at a few charts.

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With my new glasses I see what I didn't see before.
1.When we broke the neckline of the inverted H&S pattern we also broke the 50% retracement line - a sign of strength.
2 After the neckline was tested, volume characteristics changed: Rising price on gigantic volume. This is not short covering - not distribition, rather accumulation.
3.The read trend channel - is a STORM flag, indicating greeat power behind the move and it's now broken upside.
4.The 78,6% retracement level is broken. That level, if broken, is usually a sign that we are aiming for a new high

Let's put on the binoculars and take a looong view.

Below is S&P from 1970 and we are at the structure of the market - is it the same or has it changed.
We use Time and Direction.
Time: we use the 1974 low and the 1987 high, which represents ENERGY. it takes energy to move a market. If we add that time period into the future, we see that 50% and 100% represents enegy (B1) stopped the move before the up crash started)
The question now, is: Does the 150% energy point represent turnaround or acceleration energy. Of course we don't know yet, but the H&S chart above clearly suggest the coice is acceleration.

Direction. Here we use points A1 and B1 to draw a trendline (bottom 1987 to top 1994). We then draw 2 parallel lines. One from the 1974 bottom. Note how well it fits with the 1987 and 2000 top. I would say that this is THE trendline we should watch. Here lies the true direction of the market.
The right line is connected to the 2002 bottom and it was tested in the beginning of 2006. Before that line is decisively broken I think the trend is still up.

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The next chart is from the 1950ies. What i did, was to make a price projection of the 1974bottom-1987 top move, from the 1987 bottom. I did this last summer, when I still thought the move from 2002 was a correction and the 400% level might stop the move. But with the recent break of the level, the chart looks more bullish than bearish
Pleae note the 100% level which points to the feb 1995 break out point of the up crasch to the top. This is a point in time and price, I have found it very useful in other (fib) time and price studies.

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The next chart is a rather curious one. I have noted before, that one can actually make Fiboncci price studies on a log chart using line scaling in the fib study.
If you look at the correction to the 1974 low , you will find that the 2000 correction is just as long and my thought on that, is that it is not the beginning of a new down turn, but rather another correction in a gigantic bullmarket.

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So where should we get all that energy from?

How about the Galactic Center (GC)?
Funny - right?

Ok let's have some fun. :) :) :)

Last thursday the Planet Mars was Conjunct the GC.

In the charts below I have marked, in time when this has happend before. (The reason we have 3 lines in 2001, is because Mars went retrograde and passed över GC three times. the second time at the top.

Please note the "Storm flag" that preceeded the "Mars conjunct GC" incident in 1999 and the following upmove. Similar to today.

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This is the 1987 crash wheMars was square GC

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Square Mars

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Opposite Mars
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Square the Sun
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Info on GC:

http://www.mpifr-bon...aff/hfalcke/bh/

#2 securelstmile

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Posted 15 January 2007 - 10:13 AM

I don't think there is a trader on this board that can combine various pieces of data to succinctly provide us with such an adept big picture view. Some people see the trees, some see the forest. It is rare to find someone who can put the two together.
The harder I work, the luckier I get.

#3 mortiz

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Posted 15 January 2007 - 10:30 AM

Stick, All I can say about this very detailed and complete analysis is "great stuff!". You not only provide an extensive array of charts to back up your case, but explain clearly your interpretation of those same charts... concise analysis lacking in too many posts. Thanks for taking the time to collate all of this... and there is further evidence found in several internals tools to back your analaysis. Randy

#4 esther231

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Posted 15 January 2007 - 10:34 AM

Beautiful work. I learned alot from it. Thanks for posting it. :)
When I see an adult on a bicycle, I no longer despair for the future of the human race. ~H.G. Wells

#5 PorkLoin

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Posted 15 January 2007 - 10:52 AM

Stig, :clap: I looked for a smiley doffing its hat. That's one heck of a post. Lots of trees in a big forest. Thank You, Doug

#6 airedale88

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Posted 15 January 2007 - 11:11 AM

stickan, excellent work and i would say that even if it did not agree with what i've been seeing in the cyclic picture since the low of early 2003. we are in a major trend bull market.
airedale

Outspeaks the Squire, "Give room, I pray,
And hie the terriers in;
The warriors of the fight are they,
And every fight they win".

Ring-Ouzel, England

#7 eminimee

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Posted 15 January 2007 - 11:12 AM

I'm in the forest now and don't know my way out! Great stuff Stick.

#8 phloat

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Posted 15 January 2007 - 11:34 AM

thank you very much for sharing bulltrap of the century was my favourite read of all 2006 !! Congratulations ! regards

#9 eminimee

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Posted 15 January 2007 - 11:38 AM

......that was "Bear" trap of the Century....

#10 Stickan

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Posted 15 January 2007 - 03:49 PM

Thanks guys! A reason for doing the work and posting here is the great feedback you give. It's fun! I would also like to give credit to Fib1618 and Randy. They are doing great work in another TA department over at Technical Watch. Their work was actually the foundation for this post. What happend last week was just the missing clue. Suddenly it looked so clear. Let's see how long it lasts......... stig