12 replies to this topic

[NAV]

In my last update

We came close to 15 points of breaking the March lows and generating a LT sell. If the big boys were to defend the LT uptrend, it would be here.

The big boys came in right where it mattered, as usual. 1249 was defended preventing a LT sell signal.

Now here's the big question. Is this just a dead cat bounce before the 1249 levels get taken out ? Only if the market characteristic has changed. Recall during this entire bull market from March 2009, every time a daily sell was generated and the market got oversold, it was time to buy. Bears who used to take the sell signals on the daily charts used to get clobbered. In other words the daily sell signal and oversold conditions in the market was a accumulation point for the big money. If we have entered a bear trend, then that characteristic would reverse. That is, every overbought condition with a daily buy signal would be used as a distribution point by the big money or in other words a daily buy signal would mark a top instead of creating a buy-the-dips context.

But given that the 1249 level is intact, the bull market remains intact for now. So i would give the benefit of doubt to the bulls here. But to avoid the trap i mentioned above, in case the market character has changed, i would avoid any breakout type of trades and focus on buying only the dips.

And if this is a legitimate buy signal, we would start seeing the usual set of events on TT. Bears will start shorting every rally and call market tops everyday, blame the Fed on each rally and hoist the flag of "free market forces" on every 10 point decline. And as the trend matures, the usual suspects will reappear, extolling the virtue of trend trading. From a technical perspective i would like to see a drop in VIX and my weekly turn into a buy, while keeping the 1249 March bottom intact. If my weekly flashes a buy, then new highs are virtually guaranteed in SPX. I will update if and when i see that happen.

When i posted the ominous RSI divergence on the weekly charts and a daily sell in early May, fib_1618 comment in my thread was "Patience". After a 100 point drop and a subsequent daily buy, his comment on my thread is "Bear hater". From a sentiment perspective, that's an interesting comment.

Good luck trading !

[inamosa]

NAV, Fib was being sarcastic with the "Bear Hater" comment, just FYI.

One of my two intermediate-term models went bullish today (the other one on Jun. 13). The one that went bullish today operates similar to your "Daily Model". I will trade my models and not what I'm feeling, as I'm sure you do and as should everyone (except for a small gifted few - I believe properly programmed computers trade better than most people), but what I'm feeling is that it won't be long before my models go to neutral or bearish again. I estimate that there is a 60-65% chance that a re-test of last week's low will be made later this month or early next month. After all, usually the first up week in a multi-week correction precedes an eventual re-test of the prior week's low, if not a break of that low. If I'm right, I wouldn't at all be surprised by a brief break of 1249 before the next multi-month rally really begins in this cyclical bull market. Most multi-month rallies start after breaking a much-watched pivot, after all. You can see that from looking at the action in July 2010 and March 2011, for example, when the SPX broke major pivots everyone was watching (1040 and 1275, respectively) before quickly turning around and rallying hard. Go and have a look. These types of moves are known as Pivot Reversals (reversals after the technical violation of much-watched pivots). As they say, from false moves come fast moves the other way. I see it happen again and again when it comes to corrections in cyclical bull markets and tops in cyclical bear markets.

But, I follow my models and not my personal forecasts. At the end of the day, we can talk all day about what can happen or should happen. The only thing that matters is what does happen and whether our models are able to help us take advantage of it.

Edited by alysomji, 21 June 2011 - 08:44 PM.

[NAV]

NAV, Fib was being sarcastic with the "Bear Hater" comment, just FYI.

Hmmm...Ok


alysomji,

The only time a weekly pivot was broken in this entire bull run was in May 2010. But that break happened when the weekly RSI was still making new highs. With the current divergent weekly RSI structure, a break in 1249 weekly pivot would mean the end of the bull market, by my definitions. I am not betting on 1249 to be broken. If it does, i won't be betting on a bull resumption

But, I follow my models and not my personal forecasts. At the end of the day, we can talk all day about what can happen or should happen. The only thing that matters is what does happen and whether our models are able to help us take advantage of it.

Amen !

Edited by NAV, 21 June 2011 - 08:56 PM.

[inamosa]

The only time a weekly pivot was broken in this entire bull run was in May 2010. But that break happened when the weekly RSI was still making new highs. With the current divergent weekly RSI structure, a break in 1249 weekly pivot would mean the end of the bull market, by my definitions. I am not betting on 1249 to be broken. If it does, i won't be betting on a bull resumption

All I'm saying is that much-watched support levels often are temporarily broken during cyclical bull market corrections to help create enough bearishness and support for new multi-week to multi-month rallies. The much-watched support levels I'm talking about are just that, and may or may not meet your definition of a weekly pivot. What is your objective definition of a weekly pivot, by the way?

1275 was a much-watched support in March 2011 and it price briefly broke below it followed by a multi-week rally. 1040 was a much-watched support in July 2010 and price briefly broke below it followed by a multi-month rally. 1250 is a much-watched support right now and it wouldn't surprise me at all if price briefly breaks below only to be followed by a multi-month rally.

[NAV]

The only time a weekly pivot was broken in this entire bull run was in May 2010. But that break happened when the weekly RSI was still making new highs. With the current divergent weekly RSI structure, a break in 1249 weekly pivot would mean the end of the bull market, by my definitions. I am not betting on 1249 to be broken. If it does, i won't be betting on a bull resumption

All I'm saying is that much-watched support levels often are temporarily broken during cyclical bull market corrections to help create enough bearishness and support for new multi-week to multi-month rallies. The much-watched support levels I'm talking about are just that, and may or may not meet your definition of a weekly pivot. What is your objective definition of a weekly pivot, by the way?

1275 was a much-watched support in March 2011 and it price briefly broke below it followed by a multi-week rally. 1040 was a much-watched support in July 2010 and price briefly broke below it followed by a multi-month rally. 1250 is a much-watched support right now and it wouldn't surprise me at all if price briefly breaks below only to be followed by a multi-month rally.

Well, i am not talking about supports. Supports can be broken without altering the trend structure. I am talking about pivots and in this case weekly pivots. The weekly pivots are those higher lows that you see on the weekly charts.

[thespookyone]

While I always remain open to changing market conditions-I do not expect 1249 to be taken out. At this point, I'd say 1260 will be about as close as we get to it again. The building internals structure is very reminiscent of last summer-and I expect the same result here. Structure has been of a corrective nature from the bell here, imho-and I feel it so far is playing out in textbook fashion. Nice positive internal divergence between the A and C wave-and if it turns out to be an ABCDE as I'm seeing-the divergence should provide quite a nice liftoff from the bottom. I like your reference to character, NAV, it is something I try and get through to my students every day. It's very important in knowing probablilities in a market. When you correctly ID the character of a market-as I believe you have here-you can escape the "it's different this time" syndrome. I appreciate your well taken thoughts, and the sturdy style of your trading-very solid. What you bring to this forum is quite valuable-and much appreciated. Also agree with Aly that Fib was being sarcastic. I've been with him in chat for many years, and know him very well. One thing, he knows a good trader when he sees one-and I'm quite sure we share the same view of you, a high one.

Edited by thespookyone, 21 June 2011 - 09:39 PM.

[NAV]

While I always remain open to changing market conditions-I do not expect 1249 to be taken out. At this point, I'd say 1260 will be about as close as we get to it again. The building internals structure is very reminiscent of last summer-and I expect the same result here. Structure has been of a corrective nature from the bell here, imho-and I feel it so far is playing out in textbook fashion. Nice positive internal divergence between the A and C wave-and if it turns out to be an ABCDE as I'm seeing-the divergence should provide quite a nice liftoff from the bottom. I like your reference to character, NAV, it is something I try and get through to my students every day. It's very important in knowing probablilities in a market. When you correctly ID the character of a market-as I believe you have here-you can escape the "it's different this time" syndrome.

I appreciate your well taken thoughts, and the sturdy style of your trading-very solid. What you bring to this forum is quite valuable-and much appreciated. Also agree with Aly that Fib was being sarcastic. I've been with him in chat for many years, and know him very well. One thing, he knows a good trader when he sees one-and I'm quite sure we share the same view of you, a high one.

A couple of other points which calls for new highs are - a lack of a divergent A/D line at the April top and a irregular top i.e a 3-legged wave structure from the March 2011 lows. Like you, i am always open for changing market dynamics and if 1249 breaks, the above mentioned points will be overridden.

As for Fib_1618, on a different subject, i would like to give credit where it's due. I remember this guy Blizzard having a signature line in 2010 which had a tongue-in-cheek reference to Fib's statement that a bull market top will not be seen for the next 1-2 years. Since Fib made that statement, it's been more than a year. So congrats Fib_1618

Edited by NAV, 21 June 2011 - 09:58 PM.

[thespookyone]

"A couple of other points which calls for new highs, lack of a divergent A/D line at the April top. And a irregular top i.e a 3-legged wave structure from the March 2011 lows. " Fully agree. Also many of the MCO's are about to bust out through the recent highs-setting a new, higher target. Additionaly, ya kind of have to like the texture put in at the lows-a nice foundation to build forward on.

[inamosa]

The only time a weekly pivot was broken in this entire bull run was in May 2010. But that break happened when the weekly RSI was still making new highs. With the current divergent weekly RSI structure, a break in 1249 weekly pivot would mean the end of the bull market, by my definitions. I am not betting on 1249 to be broken. If it does, i won't be betting on a bull resumption

All I'm saying is that much-watched support levels often are temporarily broken during cyclical bull market corrections to help create enough bearishness and support for new multi-week to multi-month rallies. The much-watched support levels I'm talking about are just that, and may or may not meet your definition of a weekly pivot. What is your objective definition of a weekly pivot, by the way?

1275 was a much-watched support in March 2011 and it price briefly broke below it followed by a multi-week rally. 1040 was a much-watched support in July 2010 and price briefly broke below it followed by a multi-month rally. 1250 is a much-watched support right now and it wouldn't surprise me at all if price briefly breaks below only to be followed by a multi-month rally.

Well, i am not talking about supports. Supports can be broken without altering the trend structure. I am talking about pivots and in this case weekly pivots. The weekly pivots are those higher lows that you see on the weekly charts.

Well, the "weekly pivot" of 1250 also happens to be a much-watched support so far during this correction - and that is because of the false upside breakout in the SPX in late April / early May. If the correction is over, no need to worry about 1250 being tested. But, if correction is not over, I think a good chance 1250 will be temporarily broken before a new multi-month rally. Something similar happened in July 2010 when 1044 (the weekly swing low and bottom from Feb. 2010) was broken.

I can definitely see a good case for why the correction is over, and that is why I still gave 35-40% chance it is over. Heck, my intermediate-term models are still bullish for now.

Just that, in my personal opinion, it's very rare for the first test of the 200-day SMA to mark the bottom of a correction and also very rare for the first up week following the start of a correction to also be the end of that correction without any re-test.

Little doubt new highs are coming in this cyclical bull, just a question of when.

P.S. Spooky, a test of 1260 would be okay with me because it would be a second test of the 200-day.

Edited by alysomji, 21 June 2011 - 10:29 PM.

[SemiBizz]

Today was a classic bear market spike type of day.

Lately these "sharp" advances are being followed up by even sharper and LONGER declines.

(Compare the #days in the legs up vs. the #days in the legs down from May)


Both SPX and Nasdaq are on CANDLE TREND SELL SIGNALS.

We're just setting up for another May 31st FAKE OUT.

Edited by SemiBizz, 21 June 2011 - 11:36 PM.