Botched my buy signal pre-game analysis

I said early this morning that today was going to be the final day to generate my buy signal under bull market conditions. Due to nothing other than operator error, I omitted the group of Friday closing prices nearby to Thursday's close. Here's how that projects for Monday's buy signal range:



Another view, with future prices set for a 200sma flatline:


The green line buy signal is good for a Monday closing price between 1171.17 and 1256.87.

Had I seen this setup last night, I'll admit that I would have probably had a moment of weakness, made an exception to my buy rules, and became one of today's signal front-runners.

Here's why. Like everyone else, I was seeing price action gone bonkers and suspecting bottoming. It made me question if I had overlooked something. and had me reviewing my work this evening.

So after updating my stuff, discovering my oversight and preparing these charts to present and come clean, I log on here and see the downgrade news. "Great Scott!" I shrieked as I remembered the price volatility preceding the late '08 waterfall.

Now we already know that we're going to read and hear rationalizations all weekend long that this past week's tumble has already priced this thing in. That may be true for some who already played this well, but not for the majority who did not. Floor prices will be lucky to hold above 1171.17 for more than 15 seconds after Monday morning's opening bell.

Unless of course, another card rolls out from Ben's sleeve Sunday evening. I'm not connected enough to know if that will be yet another joker, but I think folks have been counting up the jokers already played from this stacked deck. Might only be sweaty droplets rolling out this time.

Nevertheless, my buy price range will tell me what's up by the end of Monday's brutalities.

Edited by spielchekr, 05 August 2011 - 10:39 PM.

Great charts, thanks. As for: " I'll admit that I would have probably had a moment of weakness, made an exception to my buy rules, and became one of today's signal front-runners." Looking at the internals tonite,I almost got sick. The volume internals were even worse. I can't believe how many traders are frontrunning the bottom here. There seems incredibly little belief that the market has any kind of drop room here. When I look at it-I see NO reason to catch a falling knife here. Seems to me a lot of apathy in the face of a very real drop. Folks watch the market stay overbought for months-but think it can't stay oversold for ten days. Reasons to buy-too many lows, too much down volume-and many more. To me, just symptoms of an illness more serious than most think-not an immediate cure for it. Oh well, TWT.

Edited by thespookyone, 05 August 2011 - 10:52 PM.

I think the market moves higher. IWM and QQQ held up well in AH. After the bounce people will think it was priced in and all is well, that's when the institutions will sell. I did not know this was THE top for sure, I know what to do now if we get that bounce.

There seems incredibly little belief that the market has any kind of drop room here.

I figure if we are on track to repeat the same percent decline as in 2008 (perhaps after a rally early next week)

then we should be near 860 by early September...

http://www.youtube.c...;feature=relmfu

Spooky, 200 dma did not even turn down yet, it is flat. We had 150 points drop already, the oscillators are discovering new territories in the charts, if Monday sees another massive drop, it will be the end of it. I opine that it opens quite a bit lower, but somehow cannot decline further, or of course, it is crashing, NOTHING ELSE. This should play in a very binary fashion from here, gap down and kind of rally or CRASH. BTW, the prices are sitting right on the 20 monthly average, pointing up, RSI(5) on the monthly chart just touched the oversold. The last time these happened, a reversal came quickly, otherwise 1100 is next.

Edited by arbman, 05 August 2011 - 11:43 PM.

There seems incredibly little belief that the market has any kind of drop room here.

I figure if we are on track to repeat the same percent decline as in 2008 (perhaps after a rally early next week)

then we should be near 860 by early September...

http://www.youtube.c...;feature=relmfu

I believe we are talking about trying to bottom fish for the next day here. September is a different story.

I looked at the NYMO readings that were oversold and less than -90. I know NYMO is the MACD of the NYAD and yada yada....but it follows the AD...I know. Anyways, in cases where NYMO was as oversold as this one (means less than -100), there was continuation of the sell off only thrice. 1, Sept 2001 after the market opened after attacks. 2, Early Oct 2008 3, Flash crash 2010. In all other cases, there was a good rebound next day. I am only talking about the immediate next day, not the following week. You don't have to 2nd guess that in all cases, market continued downwards after a GOOD bounce day. Are we in a worse condition than Sept 2001 where national security was in question , or October 2008 when financial system blew up? NYMO ended at 115 on the day of flash crash and then next day which was friday, market went lower with NYMO closing at -125. But, the next week, market rallied 80 points.

To be honest, I didn't understand why there is sell off of 170 points straight for 10 days. No bank blew up, nobody defaulted. Italy etc etc ...problems are always there but why is there sudden jerk sell off like mass exit?

Another thing to note is among none of the 8 extremely sold NYMO days, did VIX close above the BBs for more than 2 days except in 09/01 and 10/08.

If market is "allowed" to sell off next week due to this news, then it means the US Govt will have allowed the rating agencies to have upper hand over them. Indirectly this downgrade is direct attack on the USG, do you think they will allow for the sell off? Before this news came out, I was thinking that the sell off is possible on continuation pattern (because I thought the Fed was trying to scare everyone going into FOMC inorder for them to increase the QE3 defence) , but this news reduced the sell off chances considerably.

TS1:

Yeah, I knew all about the volume problem. But I need an exercize like this from time to time to out my human frailties. And I think I would have succumbed.

On the second chart by the way, see how price rockets upward into the future? See how the 200sma remains flat for that action? Those prices, exactly as placed, define the hard and fixed boundary line that future price must exceed in order to keep the 200sma slope positive. It's just that simple. Either side (bulls or bears) can use this to their tactical advantage, depending upon the conditions of the other moving averages. With the particular setup that we currently have, we have a looming death cross that is going to be extremely difficult to prevent without yet another instant V bottom. A prolonged W bottom (the preferred longterm cure) isn't going to cut it:



The 50sma is not in good shape, as you can imagine. Future prices must exceed those that I've plotted in order to get the 50sma to slope upward. And that's the required condition to either avoid a death cross or to create a golden cross. No guesswork, just simple mathematics. The chances of avoiding a death cross lean towards the remote side. How remote? We'll need to close 1300 next Friday to avoid it. A "downgrade's over with" rally is going to do that, really? That V bottom needs to be "shock and awe" beyond extreme (full reciprocation of the dump in time and price).




CLK:

Red is a warning for the buy. Although I botched the analysis for Friday and Monday, the green buy potential is nevertheless at the end of the rope here. Knowing what to do after a red buy will indeed be critical.

Everyone else: If you have deduced that the 200sma flatline is one component of this signal, you would be correct. (I warn you that there are several other critical components in the signal. Don't go out and buy any or every 200sma flatline, you'll get slaughtered!!!). The fact that this moment was chosen (engineered?) for this announcement tells me that the Fed is probably at the end of its rope, too. I suspect we are about to witness the final battle next week. No-holds-barred action now, winner takes all.

Edited by spielchekr, 06 August 2011 - 12:02 AM.

If market is "allowed" to sell off next week due to this news,

Typo: Correct should be ...sell off on Monday next week....

"the oscillators are discovering new territories in the charts" And, why would that be, my friend? Comments like this are being made a lot on this board=in regard to why the market "has to bottom" here or there, but not truly addressed as to how we got to these "new levels" and what it implies. Spiel-Thanks for the new killer charts. Back when I first started to read your posts, it took me quite a while to "get my head around" your stuff. You were kind enough to provide that our approaches were actually not that different-and the more I understand your charts-the more I agree with that take. It has proven well worth it! Engineers-musicians, six of one, half a dozen of the other

Edited by thespookyone, 06 August 2011 - 09:52 AM.

I had thought the bounce would come and the downgrade may cause the next level but perhaps the downgrade provides the bounce. So much for Wall St saying the rest of the summer would be range bound.