Wednesday, May 30, 2012

SP 500- Trend Resumed

OK, hopefully everyone's on the right side of all this. There was ample opportunity.
Pls see the previous post from Mon. May 21st. Opportunities Abound
in which  the slight corrective action of last week was both anticipated and qualified. 
More to the point.... what now?

The equities markets look ready to make new lows, after a pretty classic consolidation, and the only question is by how much.  On the daily and weekly charts they are not even oversold, let alone showing positive divergence.

Daily
 click to enlarge
The bounce DID retrace  .618 of the preceding leg, quite unusual for a 4th wave, so potential for the bounce to be another (2) wave of lesser degree has to be considered;  that would imply considerable downside as the 3rd wave unfolds.
Weekly
click to enlarge
Keeping it simple lets say the bounce was a 4th wave of something.
Note how SPX found support at the .382 retrace of the Z wave as labeled in the preceding post
New lows for the 5th wave of -1- of 3 might find support at the 50% retrace of Z, around 1248.

But whether 1250 or 1150, between Europe/ China/  JPM .and the very long term Elliott count, corrections from oversold conditions at this point should be eagerly awaited as the increasingly rare opportunities they will become.

From the April 16 post SP500 Alert

"The 50% retrace of the last move up from 1078 is around 1248.
The .618 retrace of 666 to 1422 is at 955."



Monday, May 21, 2012

Opportunities Abound

All the markets I cover are experiencing some corrective reversals after hitting various resistance / support points ( discussed in previous posts).
Notice I say corrective. In most cases it is far from certain that the first initial impulse structure is complete,  whether Wave 1 or A, and hopefully the extent of this retrace will shed light on that, and by implication, the evolving structure of the move.

 SPX Weekly
click to enlarge
Please note the RSI and MACD just committing to the move with plenty of room to go.
SPX hits the .382 retrace and lightly overlaps the bulls hoped for 1st wave high ( my label a).

SPX Daily

 click to enlarge

 If the SPX is in a -3- of 3 count then retraces will be minimal, likely limited to 50% of the preceding subwave, or in this case 1325.
An overlap of the 1343 area would negate that count, and overlapping 1360 suggests potential for a new high. However the long term count shown above on the weekly chart, strongly suggests that no new highs are coming.

USD

Basically the same count as the SPX but up not down obviously, and has the same issues regarding the development of the count.
Daily
 click to enlarge
RSI is overbought , but not diverging.
The thrust up is most likely an impulse wave out of a triangle formation rater than the -c- of  b  wave
within larger correction; that would be characterized by low volumes and chop.
In fact the thrust can be counted as a 1, 2, -1- (maybe) implying a minimal pullback to like 80.80 followed by a rip through the double top. Keeping it simple an initial 1 up could pullback to test the .618 retrace around 79.80 or even the break out line, so how far back it goes will help define the count.
Euro short interest is of some concern but.
Weekly
 On the monthly there is plenty of room to go on the RSI etc.
The 50% retrace of previous structure down is well penetrated and the USD yet to reach the .618 retrace .
There is justification for a long term bottom in place.
See May 8 post
 USD Strength

More on Natty and Crude later but see Thur.s Gasoline post Gasoline -corrective bounce due?
on this theme.





Thursday, May 17, 2012

Gasoline -corrective bounce due?

Short term it looks like it might be.
After carving out what can be counted as 5 sub waves down for a 1st wave, hitting the Fib. .382 retrace around 2.82 , and driving the RSI into oversold territory....
yeah it might be.
Daily
click to enlarge\
But this is one bounce you want to fade... around the 4th of lesser degree at 3.15 and  the .618 around 3.18.
Why? Pls see RBOB Top? from May 2nd.

Natty and Chesapeake

I've been traveling so this update is a little late but....
Natty has likely achieved 5 sub waves up from the 2.44 low to the 2.63 high, and the .62 retrace is at 2.50.
Watching that point closely to see if this retrace back down is of larger degree, potentially carrying further for a 50% or even .62, of the entire move up is key.
15 min.

  click to enlarge
It's not easy to count 5 full impulse waves up from the 1.90 low yet, but if that were the case a 2 back can be deep. It would however, likely be followed by at least another structure up,  a C wave, even if this move up were to be followed by fresh lows. 
BTW the 2.63 point represents a Fibonacci 38% move up from 1.90 low.

All in all higher targets are expected as discussed in Natural Gas Catches a Bid
 from May 1st. So 2.27 and 2.20 can be seen as excellent opps for entry especially if the move down is choppy.
 Daily

Chesapeake Energy;
The Chesapeake situation has had so much negative coverage it's begging for a closer look from the buyers pov.
 Daily
 click to enlarge
Note the positive divergence on the RSI above.
Can be counted as an abc.

Weekly
click to enlarge
No positive divergence but oversold RSI.
 The move down from the 35 area can be counted as 3 series of abc's
Like Natty, even a corrective bounce that retraces a minimal .382 would represent a significant % increase in price. A 50% retrace of 35 to 13 is a target of 24 or an 85% return
click to enlarge
The entire move down from the 2008 high COULD be seen as an abc structure with a and b certainly complete.
 If this move down is a C wave, then when is complete, whether at 13 or 9.90, upside targets would include new highs exceeding the 08 high.

 So CHK is now either completing a C wave or an X wave, with risk to the upside very high.
Can it go lower? And the answer is, as usual, of course; the classic zig zag pattern would call for a low under the A wave 10.00 low. But.
Don't be short this stock.


Monday, May 14, 2012

SP500- On the Precipce

The current short term bounce can be counted as the -2- of the 3rd wave of larger degree; as such
short term risk of an accelerating -3- of 3 down is high. Pls see SP 500 Update
15 min

 Note the lack of any positive RSI divergence so far.
Though not labeled, the pattern can be seen as having -1- of 3 down ending last Wed., the -2- of 3  ending Fri., and -3- of 3 beginning today with the move to new lows, as discussed in the prev. post.
Daily
 click to enlarge
Although somewhat oversold, the daily RSI is not exhibiting positive divergence.
A clear settle below the prev. low and .382 retrace around 1340 will be a very negative close and suggest high risk of further downside.
Weekly

 click to enlarge
Here the RSI and MACD can be seen to be just getting started, let alone showing any positive divergence.
An overlap of the 1289 area, the termination of what might be labeled 1 by the bulls, and the .382 retrace point , would confirm the end of the 7 mo. long structure up. That would make the move down the beginning of  either the long awaited C wave, or alternatively and more moderately, an X wave.




 

Thursday, May 10, 2012

SP 500 Update

 The SP500 has very probably completed 5 subwaves down from the May 1 high of 1415.
The big question: is it a c wave in a corrective move down (buying opp) or the first impulse sub wave, -1-  of a 3rd wave of larger degree ( beginning of the end).

Daily

click to enlarge
There is a lot of support just under yesterdays lows, not least of all the .382 retrace of the previous big move up. Additionally there is near equivalency in the a and c waves as well as support from what might be a 4th of lesser degree. If you are a buyer this is where you step in.
On the other hand the arguments for a long term top at 1422 are strong, see last SP 500 post, SP500 Alert  from April 16\.
If the bounce is contained by 1380 area and SP subsequently puts in new lows we will know the answer.

Tuesday, May 8, 2012

USD Strength

The USD is on the brink of signalling a potential resumption of the rally off the long term lows of 2008. 
The chart is borrowed from Jesse's American Cafe, the Elliott notation is mine.
The move up off the C low, is even more constructive than the move up off the A low.
Weekly
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A triangle is typically found in the 4th wave position. Whatever the count up, 5 impulse waves or an ABC structure, breaking out to the upside targets the top of the range, around 89.
 Daily
click to enlarge
Check out all the double bottoms on this chart. There is a minor penetration of the upper resist line.
Note the MACD crossover
Hourly
This actually looks like it needs a little more time to break high....another day or so.
So interesting to see if it happens in here.

Thursday, May 3, 2012

WTI/ Brent Update

Looks like a little breakout today above short term resist.
WTI Brent Daily
click to enlarge
-c- equals - a- around -7.35
Also roughly a double top against the 1 or A wave, characteristic of a flat correction. 
It looks like the spread is in the middle of the 2 wave or perhaps the B wave of greater degree.
 WTI Brent

While it is likely that the spread will return to some more historically normalized level
it may take awhile to exceed the previous high, labeled "1 or A", at -6.82 in the above chart.
The low labeled "a" appears to follow 5 waves down, hence the expectation that this move up is the middle of a consolidation, rather than the beginning of an eventual 3 or C wave up. That will follow.
 It is important to note that the 1 or A was good for over 22 and an eventual 3 or C could easily equal that..

Wednesday, May 2, 2012

RBOB Top?

Gasoline has likely seen it's high for the year. The spring seasonal high is, on avg., May 15 (27 year of data),  13 of the data points occurred in April, 7 in May, and 4 in March. The recent April 3 high is par for the course.  Both 2010 and 2011 peaked in the first week of May.
Weekly
 click to enlarge
Note the negative divergence on the RSI and cross-over of the MACD following negative divergence.
The above labeling depicts a double zig zag WXY, potentially completing the B wave up from the 2008 low of .78. The initial A wave down from 3.63 was a clear  5 waves .
The fact that the B wave has retraced 92% of the A wave move , makes the structure of the correction a  "flat " type.

If the B wave up is complete,  then the C=A comes in at .58,
The .78 retrace of the entire move up from the 1987 low of .30 comes in at .82, essentially a double bottom against the .78 A wave low. Double bottoms are characteristic of "flat" type corrections.

If the B wave is not complete, it is still possible to get another zig zag up for the the max allowed "triple zig zag", after another X wave down.
The first X wave retraced a modest 38% of the W. 
AS shown in the above chart a similar 38% X wave retrace of Y targets 2.40
So at the very least serious intermediate term downside risk, potentially catastrophic long term risk.

Daily


The Daily chart looks oversold shorter term, so a little consolidation, limited to a 50% retrace of the
last leg , around 3.22, would be consistent with expected continued weakness.
Taking out the Fibonacci points above will of course increasingly reinforce the negative   interpretation. 







Tuesday, May 1, 2012

Natural Gas Catches a Bid

OK it's up; and not unlooked for. See previous post Natural Gas Hits Long Term Target.
And it's got more to go, probably a lot more.
Daily
 click to enlarge
The last leg down from 2.79 has a 50% resistance point at 2.34. Taking that out will no doubt signal a challenge of the previous high at 2.44, and the small gap at 2.45 ( also the .618 retrace).
Additionally it is likely that this retrace, even IF corrective, will achieve at least the 4th of lesser degree around 2.79.
 Note the increase in volume since the lows, and lack of negative divergence on the RSI.

Weekly
click to enlarge
If the leg down from 5.00 is a complete 5 count, then a .382 retrace to 3.09 would be a modest expectation, EVEN IF this is merely a corrective upswing.
And there is reasonable doubt that this is corrective; again see  Natural Gas Hits Long Term Target
Note the weekly RSI and MACD have lots of room to continue moving up.

PS the .382 retrace of the entire ABC move down from 15.78 to 1.90 comes in at 7.20
Is that likely? I wouldn't have thought 13,300 on the Dow likely 2 years ago.