Tuesday, August 30, 2011

Back Up

Back Up; the power that is, after Ilene. Unfortunately the move up over the last week is merely another series of corrective abc's; the storm global markets are experiencing is not even close to over.

 SP Active Mo. Daily
click to enlarge
Note RSI is no longer oversold. 
The -4- has retraced 50% of the -3- wave.

 SP Hourly
 click to enlarge
Minor negative divergence on the hourly RSI.
Perfect c=a on the last structure up, call it "y of -4-", as the second series of abc's. 
The thrust down that so looked like an impulse wave may be an X wave, or possibly an "a" wave an X wave if this is forced up again.
Short term looks like more downside work to do, potentially the -5- of 3 of C the current count.

Longer term this count will likely get moved down a degree, depending on whether there is an extension in the the 5 as previously discussed or not. That means it is going lower, the only question is how fast.
Does it find support above 1000 or rip through? 
Weekly

Guessing 5= .618 of 1-3 just above 1002, so that will be a very interesting point as a cursory glance across the chart will tell you.

Ultimately the C wave will have to be much lower than 1000, more like 450.


Thursday, August 25, 2011

What If

What if Bernanke announces what passes for Q E III tomorrow?
No doubt we will get a short term blow off.
The early 2009 intervention resulted in a 170% move, the Aug. 2010 Q E II announcement resulted in  62% increase in Crude Oil prices. My guess is we see much less reaction this time around, say 38% , resulting in a bounce to roughly 95 from the lows of 70.
 That will not necessarily result in a change in the primary Elliott Wave count, that WTI is in a 3 of C down.

If he doesn't announce anything substantive, higher energy prices will not be one of Obama's problems in 2012.

Monday, August 22, 2011

WTI and Brent

Active Mo. Hourly
Following a choppy, overlapping move up to 89.19, WTI has had a clear impulse wave down off the highs, "i". This has now been corrected in a clear abc pattern up for a 50% retrace, "ii".
So most likely we are seeing the beginning of the next leg down; " iii of  (5) of -3- of  3 of C" .

Active Mo. Daily
 click to enlarge

On the Daily chart the recent move up had many characteristics of a corrective counter trend move,  a rough 50 % retrace of the preceding move down that ran into trouble around the 4th of lesser degree.
Note that it DID NOT overlap the termination of  -1-  at the 89.61 low.
It may be that the low labeled (3) of -3- will turn out to be simply the -3-, but for our intermediate term purpose it is  irrelevant. Both will be followed by lower lows as 5th waves are made to complete a count down. In fact, it may well be that the 5 waves we are seeing unfold to the downside, will end up being a sub wave of the C down, rather than it's entirety.

Again for the short and intermediate term that is less critical; bounces will be followed by  lower lows.

One thing of particular note this morning has been the strength in WTI despite the Libya news (or because of it actually).
WTI less Brent
click to enlarge
Friday the spread settle was 26.23, it is currently 24.65. Obviously the explosion in Brent premium was concurrent with the Middle East disturbances and the Libyan protests that began in mid Jan.
Plenty of room for the spread to come in,  considering austerity measures and other little problems for the Eurozone.  French gasoline demand for July was reportedly down 7.5% y on y. 
The unwind can create short term WTI buying.


Friday, August 19, 2011

SP Resumes Move Down

I was scouting around the last day or two's headlines to come up with a catchy title that explained the cause of the collapse today, something along the lines of "Big Doins in Euroland and the SP", but really, it's everything isn't it?  The Philly Fed, employment, housing, deficits, PPI, consumer sentiment ....in other words it's a 3 of C.
From the Aug 8 post SP 500

"Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond."

 Active Mo. Daily
click to enlarge

Note the -4- does not exceed the 50% retrace point of the -3-. 
The SP has likely completed the corrective -4- wave, and is resuming it's downtrend, beginning the -5- of 3 of C.  The move today has been accompanied by big down volume (78%) and breadth (89% declining), tending to confirm the wave count, and the likelihood of  lower lows.
 The -5- of 3 will = .618 of -1- thru -3- @ 1035.
Keeping a close eye on the development of the -5- as it makes new lows, will be important in anticipating the 4 bounce.
Active Mo. Hourly
click to enlarge
 There is as yet no positive divergence on the hourly RSI.
The -4- wave is choppy and structured in a series of abc's. The (1) of -5- down is a very typical impulse wave.
The coming (2) wave can of course be a deep retrace back up.  This market has a nasty habit of deep 2 wave retracements, and for a discussion of that pls see the June 3 post,
SP 500 - Whats going on?
BTW you may note the consistency and accuracy of the wave count there, and the early warning of the sell off to come, in the May 3 post ; 
SP 500- Are we there yet?

Thus far no extension in any of the legs, so looking for it in the 5 wave position, which is common.
Targets
From Aug 8  SP 500
" The A wave low of 666 was a Fibonacci .61 retrace of the 1530 point move up. The C wave will have some sort of Fibonacci relationship to the A wave.
C=A @ 452.50
Also the next lower Fibonacci retrace of the 1530 point move up comes in about there;
.76 = 425
(There is also some support at 450 in the form of a 4th of much lesser degree there in 1994.)
 C=A in % terms, ie a 58% pullback, @ 590
C=.618 of A @ 804

Classically a C of Grand Super Cycle Degree, in the final 5th wave, would be expected to be accompanied by a great deal of social unrest, some of which we have just started to see.
Block Party anyone?















Tuesday, August 16, 2011

In case you were wondering

In today's NY Times; Euro-Area Economy Seen Almost Stalling 

"Economic growth in the euro area fell more than expected in the three months through June, according to official figures released Tuesday, as growth in Germany came almost to a standstill."
More than expected? Call it what it is ...More than hyped, or at least more than hoped.

And I love this..." Analysts at Commerzbank said that a warm spring meant that construction projects in Germany had begun earlier than usual, subtracting some activity from the second quarter. Without that effect, growth for the quarter would have been 0.4 percent, they said."
At least we know who's expectations were disappointed.

Average New Irish Mortgage Drops Below 200,000 Euros


DUBLIN (Reuters) - The average size of a new Irish home loan dropped below 200,000 euros (176,585.60 pounds) in the second quarter for the first time since official statistics began in 2005, data on Tuesday showed.
I think the US stat is around
Remember when you could pick up a cute cottage on the Connemara coast for 50,000 USD ? Around 1990 maybe.



Monday, August 15, 2011

Whole Lotta Hedgin Goin On

As might be expected, a few spec longs liquidated positions last week, and not just in energy.
As Bloomberg notes;  Funds Slash Commodity Bets by Most in 18 Months on Economic-Growth Concern
"In the week ended Aug. 9, speculators cut their net-long positions in 18 commodities by 19 percent to 989,110 futures and options contracts".

But check out the Open Interest in WTI;
 From Reuters (very useful Graphics: CFTC Commodities)

These numbers include Aug. 4 and Aug. 5 activity, when WTI punched through important previous lows dating back to mid February. The O. I. figures also reflect the lows made Mon. Aug. 8.
That low was the lowest low seen since late Sept. 2010, putting WTI down for the last 11 mo.s.
Specs are back to where they started and it looks like the commercial hedgers picked up some longs particularly products.






Friday, August 12, 2011

WTI Rip Redux

Awesome job Spain France Italy etc. Banning of short selling works every time; good for 1.5 cents on the Euro anyway.
Looking at the WTI rip from yesterdays morning low, it could be that anticipation of the said ban has been good for 6 good ole USD's (2 over the overnight previous high) .

Active Mo. Hourly
click to enlarge
So a slight re labeling adjustment of the (4). Clearly the move up is structured in abc's, and is a correction.
Note the repeated negative divergence on the RSI.
There is a cluster of resistance around 87.10  
The 50% retrace of the (3) is at 87.20
Oh and I almost forgot,; the 4th wave high of lesser degree is right around there.




Thursday, August 11, 2011

WTI Rips

WTI is making classic lower lows followed by corrective retracements, followed by lower lows.
From the Aug. 8 Crude Oil Elliott Wave Count
"The 3 wave can evolve and the labeling on the sub waves change rather easily. However, the most likely scenario, given the repeated series of 1,2's of lesser degree, will be for a repeated series of 4,5's of greater degree to complete a C wave down."
Active Mo. Hourly
click to enlarge
Note the RSI extreme at the -iii- of iii of (3), and the positive divergence at the low - textbook.
And so far this (4) has retraced .382 of the (3) . The iv had retraced 50% at it's highs.
We should still have the (5), -4-, -5-, 4 and finally the 5, ahead of us, for a series of 3 lower lows.
One method for targeting 5th waves is using .618 of the 1 thru 3.
If the (4 ) is complete at  84.45, then
(5) = .618 of (1) - (3) at 69.06.

Active Mo. Daily
click to enlarge
There was some minor positive RSI divergence at the lows. 
Note the 50 day/ 200 day sma crossover to the downside . The last occurred back in October, preceding a 6 month trend.
 Suffice it to say there is still a long way to go. The minimum target for the C wave is at 43.98, and it could turn out that this 5 structure is merely a subwave of the C down.  








 

Monday, August 8, 2011

SP 500

Since the Aug. 3 post,  Big Doin's in DC and the SP  that index has fallen roughly 100 SP points,  attaining the Head and Shoulders target mentioned there;
" And regarding necks....the break measuring rule targets 1130.50......
Also from that post,
" Most will agree that overlapping the "b" at 1002 will look like death.
That is still a LONG way off, but an early tell that raises the odds of that happening, would be taking out the .618 retrace point, at 1144." 
So far the SP has exceeded that 1144 point by 10 handles AND is now below both the 100 and 200 WEEK SMA.
 Active Mo. Weekly
click to enlarge

Smells like a duck looks like a duck and walks like a duck...it's a 3rd wave of the C down.
"Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond."

So hows about some downside targets;
 The A wave low of 666 was a .61 retrace of the 1530 point move up. The C wave will have some sort of Fibonacci relationship to the A wave.
C=A @ 452.50
Also the next lower Fibonacci retrace of the 1530 point move up comes in about there;
.76 = 425
 C=A in % terms, ie a 58% pullback, @ 590
 C=.618 of A @ 804

More to follow.




Crude Oil Elliott Wave Count

The current Elliott Wave count on WTI;
Active Mo. Weekly
click to enlarge
I have simplified the labeling on the B wave obviously. Of particular note was the complex structure and the extended length of time it ran, lending support to the B wave labeling rather than a 2 wave labeling. The current move down is the beginning of C.

 Active Mo. Daily
 click to enlarge
Note there is as yet no positive divergence on the RSI (though it is oversold). 
There has been an overlap of the beginning point of the last leg up; the c of -C- of B.
The move down has exceeded the .618 retrace of the -C- of B. There has been increasing volume.
It is likely that WTI is in a -3- of 3 of C. 

 Active Mo. Hourly
 click to enlarge

 WTI did get the corrective bounce Friday cautioned about in that mornings 6:20 am post, 
Elliott 3rd Waves and Crude Oil 
"Caution; any corrective bounce even a modest one of .382 will be very painful given the extent of the move. And it is a Fri. in August."

The 3 wave can evolve and the labeling on the subwaves change rather easily. However, the most likely scenario, given the repeated series of 1,2's of lesser degree, will be for a repeated series of 4,5's of greater degree to complete a C wave down.

There has been a lot of  "adjusting of expectations" by brokers, analysts etc. My analysis has consistently reflected the above Elliott Wave Count ( the rally as a corrective wave) and the expectation of major C wave down.

May 3 2010
Crude Trend Line

May 4 2010
WTI Update

May 6 2010
WTI WOW

May 8 2010
Crude Oil Targets

May 12 2010
Crude Oil Update

May 18 2010

Crude Oil Correction

May 25 2010
Crude Oil Correction Redux

June 2 2010
Crude Oil Update

June 3 2010
Crude Alert

June 8 2010
WTI Wave Count
  Crude Count Update

June 13 2010
Crude Oil

June 15 2010
Crude Oil retraced .618

June 16 2010
Long Term Crude Oil Targets

June 17 2010
For the Bulls

June 21 2010
For the Bears

June 22 2010
Crude Oil Update

June 28 2010
Neckline Backtest

July 8 2010
Crude Oil Update

July 29 2010
WTI

August 3 2010
WTI Trendline Takedown

August 5 2010
Elliott 3rd Waves and Crude Oil

The above list contains all my WTI posts since May 3rd. Have a read and have fun.
BTW "Long Term Crude Oil Targets" is still current and unadjusted.
















Friday, August 5, 2011

Elliott 3rd Waves and Crude Oil

Smells like looks like walks like...it is a 3rd wave of the C down.
"Wave C: Prices move impulsively lower in five waves. Volume picks up, and by the third leg of wave C, almost everyone realizes that a bear market is firmly entrenched. Wave C is typically at least as large as wave A and often extends to 1.618 times wave A or beyond."

I will update the count on the charts later.

Be sure to see post from June 16  Long Term Crude Oil Targets
Worth reading in it's entirety but the short version is
"The A = 114.60, so C will equal A at  23 cents. Now that seems a little unlikely ( the symmetry there is interesting though).
The A wave came off 78% from the highs, so in percent terms C= A at 25.26

The C wave =  .78 of the A  at 25.41
The C = .76 of the A at  27.70
The C= .618 of A at 43.98.
The above 43.98 = a 76% retrace of the 10 to 147 final move up in the previous structure as well. "
Personally I like splitting the the difference between 25.26 and 27.70 for 26.48.
If the C down last as long as the A wave (5.5 mo.s ) it should bottom around mid Oct."
Caution; any corrective bounce even a modest one of .382 will be very painful given the extent of the move. And it is a Fri. in August.

Wednesday, August 3, 2011

WTI Trendline Takedown

Active Mo. Weekly
click to enlarge
Only one left standing.
Active Mo. Daily
 click to enlarge

Of course the neckline measuring target is WAY down from here, like say, 72? (that s using the first one). If the current and last remaining support trendline is interpreted as a neckline it targets 63.
That would be consistent with a 3 of 3 , from the July 29 post
WTI
"All in all, it leaves the count of 1, 2, -1-, -2-, intact as the most likely Elliott Wave count.
Risk of an accelerating -3- of 3 down remains high."


Big Doin's in DC and the SP

On the macro front, events in DC of a partisan nature have very little effect on the big picture.
The seasons come and go, the precipitation and temperature are of concern only to a few for only a very short period. The massive peak in credit and asset values in 2008 was the natural expression of a 70 year growth cycle ..the grand super cycle top in Elliott Wave terms. The subsequent contraction will last a little longer than 3 years.

The above chart reflects a 7% pullback, while there have been a FEW 1 % and 2% pullbacks since 1955, this is clearly unique AND it is in spite of the huge expansion in Fed Gov. credit.

Global efforts to reduce deficit spending will unquestionably speed the contraction up, but deficit cuts or no cuts, this Grand Super Cycle contraction is unfolding and it likely will be over a generation.

A Little Shorter Term
SP Active Mo. Daily
 click to enlarge
Big head and and Shoulders neckline break and retest failure (so far).
No positive divergence on the 14 RSI (so far). 
Note how frequently there was negative RSI divergence, and how far up the market moved over that time.
The circled pattern is clearly all structured in abc's (so far) . That was to be expected on the upside, on the downside it is somewhat problematic. ABC structuring on the downside will be a pain in the neck.
And regarding necks....the break measuring rule targets 1130.50.

Zoom out:
Active Mo. Weekly
 click to enlarge
  Again the 1375 termination of the B wave was a classic abc structure, retracing .77 (basically a Fibonacci .78) of the 5 wave A  down. 
Most will agree that overlapping the "b" at 1002 will look like death.
That is still a LONG way off, but an early tell that raises the odds of that happening, would be taking out the .618 retrace point, at 1144. 
" And regarding necks....the break measuring rule targets 1130.50."
 Additionally, if you are a bull and looking at this as a 4th wave down to be followed by a 5th to new highs, you DO NOT want 1216, the top of wave 1 to be overlapped. Not that far away.