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No sir, my stuff says not an IT low

Posted by entropy, Mar 19 2008, 12:57 PM

I went over alot of 'stuff' last night, and I was doubting that wonder rally, but todays action is confirmation - no way do I believe a major low is in here, at least, not without at least closing those big gaps and effectively retesting the lows.

Here's why I don't believe it - maybe I'm just being dumb, and over confident because I've been on a roll since last November, but I'm just following my system, and trying not hedge what I say, and call it as I see it - right or wrong....otherwise why bother...at least you can get some use by fading me that way laugh.gif

Why I don't see a major low-
First, what do I mean 'major' -
1. Rally won't get back above above 1370 on SPX ( only another 3% from yesterdays closing high).
2. Rally won't last more than a 2 weeks before gaps below get closed.

Why -
The are only 2 types fo major low i've ever seen or studied, and i've studied alot of market history.
1. Washout/Panic low - V reversal off total panic - see Aug 13-15 2007
2. Exhaustion-divergance low - see Nov 19-26 2007

Yesterday was neigher, and here is why.
1. Not a Washout/Panic low
New lows didn't expand to panic, stocks below 50day ma ( NYA50 stock charts) didn't expand, trin never rose, never saw a washout candle (see yesterdays question comment), BP's never spiked down.
All other wahout -V's reversals have seen that.

2. Not Exhaustion-divergance low
Most internals had NO divergance, e.g. New high, new lows, volume etc ..and what one's there was are far too WEAK compared to major IT lows.

Absolutely sentiment supported the chance of a IT, but technicals as I read them, say it wasn't.
The rally like the preivous setup like this since Nov top, has reset sentiment to more bullish from bearish extreme, and cleared shorts out that were clogging the system - we can see how quickly folks turn bullish in the 6 pt drop in VIX yesterday, and drop in put/call....and Rydex where traders embraced this rally.

More subjective, but nonetheless I find predictive, the sentiment reaction to yesterday.
WAY too much acceptance by traders that a major low is it - especially as the same people who have been bullish bias all the way down are out again, I won't name many names but Mark Hulbert is one. He couldn't wait one day to publish again about how bullish 90% up days are - even though we've had 3 that have failed in the last 2 months!! ...one of just 6 days ago infact.

Now add todays price action. There *should* have been another big gap up today and follow through...because if an IT low, there's no way the bears would be allowed to cover...its would be squeeze-er-roo until all obvious resistance was gone.

Most don't believe ewave, but its served me very well - all I know it that move off the low isn't natural, nor impulsive...that's not a good combination for its long term survival.

We may rally some more, perhaps to 1370 to close the open gap above over the next week, but at this point, my work says we will go down to close the open gap/retest the low at minimum before chance of the 'major low' everyone is apparenly desperate for. ..and I wouldn't even be surprized to see us close those gaps today.


Mark.



Comments

  beta, Mar 19 2008, 11:38 PM

This is a great post. Your analysis of "panic lows" is esp. interesting. I agree that we move up for 2 weeks toward 1370, before the next major leg down begins.

  entropy, Mar 19 2008, 11:55 PM

QUOTE (beta @ Mar 19 2008, 11:38 PM)
This is a great post. Your analysis of "panic lows" is esp. interesting. I agree that we move up for 2 weeks toward 1370, before the next major leg down begins.


Thanks beta....to be clear, at best I could move up to 1370 the next 2 weeks, but my work is saying far more likely is we take out the lows and have a panic washout to 1180-1220 area, but if the bulls can hold the 0.618 fib retrace tomorrow ( about spx 1290) then 1370 over next 2weeks is my target........right now the 'island reversal from hell' is setting up, if we gap down big and take out that fib, I think well finally get capitulation and some real panic.

Mark.

  I Lo Li 愛樂利, Mar 20 2008, 10:55 AM

Steaming stuff. Brain needs wrap up, prevent overheating. guru.gif tongue.gif

So far this AM we escaped "...if we gap down big and take out that fib (about spx 1290)". Are we already on way to "1370 over next 2weeks"?

Thanks for many days of great work.

  entropy, Mar 20 2008, 11:55 AM

QUOTE (goflow @ Mar 20 2008, 10:55 AM)
Steaming stuff. Brain needs wrap up, prevent overheating. guru.gif tongue.gif

So far this AM we escaped "...if we gap down big and take out that fib (about spx 1290)". Are we already on way to "1370 over next 2weeks"?

Thanks for many days of great work.


Hey goflow....yep predictable bounce right off that Fib (spx didn't quite, SPY actually declined quite a bit divergently this AM to SPX and hit it dead on).....but, my matrix tells me this is just a bounce, and we are going down to close the gaps 'very soon', by monday close at the latest...in a perfect world, this bounce will end between 1-2pm and the decline resume...if we rally into the close instead above 1330 i'm wrong on the short term move here.

Mark.

 
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