S&P 500 ~ EOD Update ~ 6 June 2012

Wednesday, June 6, 2012

S&P 500 ~ EOD Update ~ 6 June 2012

We got a huge rally today. Basically all stocks closed higher. Yes, even Facebook. Go figure!

As already mentioned in my earlier update I expect a rally to 1330-40 (probably even to 1360 though):

I'd like point out that in 2011 we also got what appeared to be five waves down. It turned out not to be the case though. So if we get a rally into that 1330-60 area I'd like to see some kind of a reversal first before considering to go short.


You probably noticed that in my big picture update I showed the five wave move down only for the SPX and the Nasdaq. The reason is quite simple: there is no five wave move down for the Dow:

As you can see it will be very interesting to see what happens at SPX 1330-60/ Dow 12600-12800. If we reverse, another sell-off into late 2012 should follow. If we break it, a huge rally similar to late 2011/early 2012 should occur.

So short-term it looks like the most recent lows should hold. Medium- to long-term though the situation remains very unclear.

S&P 500 ~ Intraday Update ~ 6 June 2012

The SPX broke 1300 early in the morning indicating that wave [v] is completed:

We should now get a rally towards 1330-40 over the next few weeks.

Gold ~ Update ~ 6 June 2012

After a few days of consolidation around the resistance at 1630, gold is now above it. I'll turn medium-term bullish again if we get a close above this level.

Wednesday, June 6, 2012

Elliott Wave Update ~ 6 June 2012

The primary count is that the market is in Minor wave 2 up and will retrace a good portion in price of the total decline from 1422 SPX to 1266 as in any normal wave 2.

WAVE COUNT & STRUCTURE:

1.  The wave count passes the common sense test. When viewed from afar on a daily index you can see 5 waves.  5 waves can also be seen clearly on a weekly. 

2. The entire move from 1422 SPX to the recent 1266 low resembles a wedge shape. This may portend that Minor 2 will be very sharp and fast. Certainly today was a sharp up day and supports that notion.

3. The entire decline was 156 SPX points which is sufficient to form a Minor wave 1.  For instance Minor 1 in P[1] down in 2007 was 170 points in length.  

4. It could be that this is merely Minute [i] of Minor 1 down. Its too early to denote those kinds of things. Wave degrees can be changed. Its form that matter most and there is 5 waves down on the SPX, Wilshire5000, INDU, Transports and NASDAQ.

SENTIMENT

1.  This blog cannot continuously post sentiment data from proprietary sources night in and night out.  However from time to time I post "fair use" data from sources such Sentiment Trader and Elliott Wave International.  My point is that Minor 1 down of 156 SPX points should form a significant low in sentiment and the current data had backed this up.

2. Using the sentiment data to time the price low of a 170 point move is always the tricky part. Sentiment can always get more extreme or even diverge with the final wave low. But if sentiment is extreme in conjunction with a completed 5 waves, and a sharp rebound occurs such as today, we can judge that a wave 2 retrace is probably underway. Hence the primary count that Minor 2 up is likely underway.

3. EWI posted some extreme "Daily Sentiment Index" (DSI) numbers via Trade-futures.com  in their Monday update.  Some extreme examples they gave were the following:  Stock market: 5%  Oil: 5% CRB:8%  Euro 5% These are extreme numbers and a counter rally is always expected to shake these numbers out. Today's rally no doubt had that effect.

4. Sentiment Trader also posted some items that were extreme. Their proprietary Intermediate term (multi-week./month sentiment data) was very extreme bearishness.

5. The point is that these extreme numbers occurring at a wave 5 low is perfectly normal and a confirmation that a wave 5 low is in place. It is now wave 2's job to move these numbers back to a position that is not extreme bearishness. Its not that these numbers have to go to a bullish extreme. They don't. But they should at least go back toward a solid neutral. It takes price to get them to move the other way off their lows and today's price action likely did wonders to do just that.

TECHNICALS

1. Today was an 87% up issues ratio and 91% up volume ratio on the NYSE. The NASDAQ was 82% and 92% respectively. Pretty darn close to an overall across-the-board 90% up day for the market.  

2.  Today's candle is what I like to call a "key price marker" candle day to keep in mind for the future. In other words a close under today's candle and yesterday's closing price of  1285 is a "line in the sand" for bulls.  Why? Because an extreme amount of buying energy went into today's bullish buying binge. A close under today would nullify this binge and be very bearish. 

3. Think of it this way: If you are a boxer and come out swinging as hard as you can in the first 2 rounds and your opponent takes the blows with no visible effect, you are likely to lose the fight in the long run.  The stock market can work the same way. If stocks come out swinging as hard as they can (today) and yet if bears can manage to close under this price range sometime in the near(er) future, you have just signaled to the market that its best shot was taken and it failed.

4. The market has regained 1292-1296 resistance. It must of course hold this range on any pullback. 

5. The market's next resistance is likely 1356-1370ish roughly.  This is where a Minor wave 2 would be expected to fail.

S&P 500 Analysis after closing bell

• First chart shows price violating the resistance line of the falling wedge. Bulls need follow up buying.
• Price is moving into 20 Day SMA which has to be crossed on closing basis to extend this up move. 1334 the recent swing high too will act as resistance.

Wednesday, June 6, 2012

Bullish reversal

The market managed to bust through the 200 day MA as well as the Trend Average and if I were to take a guess now, I'd say we'll probably get the trend reversed to the bullish side in the next couple of days. The market has set itself up for an potential inverted Head and Shoulders so watch the area around 1298 level as it can a nice long set up there. What wave is this in the intermediate sense it's hard to tell just yet, I have to sit down and look at this with time. One thing that I assume is that this whole thing has been a correction within a bull market and that will remain the case until we get a "death cross". Some people have been debating the usefulness of wave counts and like everything else nothing is 100% when it comes to predicting the stock market. However, I follow a clear system here that follows 3 basic trends based on moving averages and trend averages. The long term, intermediate, and short term. If the long term numbers are pointing up, there is no need to be Nostradamus and call for massive crashes at the first hint of a correction. I rather be late at the party than miss the party altogether. The trend is your friend!

One on my next projects will be to publish returns for the long term and intermediate confirmation signals. They are obviously behind in terms of market turns but at the same time one avoids whipsaws that happen with shorter term signals.

06/06/2012

SPX Monthly Candle

Looks like a very nice candle having formed ( see green arrow ) and is very promising


My apology for not having written and article since some time but HEY why ? Everybody here on OT & Chin Wag Room knows we are long Miners having accumulated in May and we stay long. No need to update actually until it is deemed necessary to report change of portfolio longs.
Good Trades as always

SHORT TERM: market rebound is now a rally, DOW +287

MEDIUM TERM: downtrend may have bottomed

LONG TERM: bull market