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Market Thoughts and Analysis: ..... Wow.

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July 15, 2009 – Comments (35)

.....Wow. That was quite the surprising day. I am stunned, but not speechless (hey, when will binv ever be speechless). Props to the bulls. And for us bears, what is to be done? First: Don't panic. Easier said than done :) Next the impossible counts have to be discared at the alternates have to be used. And I (of course) have my opinions.

Here I will discuss my new preferred count (since my old preferred count is broken ... well, more like smashed). I also need to exit out of my current shorts. I did not do so today, but probably will soon. Also I will finish the rest of the post in the comments section, since links in the main post are still broken

.... continued in the Comments section ....

35 Comments – Post Your Own

#1) On July 15, 2009 at 6:46 PM, binve (< 20) wrote:



I am going to try to start posting a few thoughts on a semi-regular basis. I have written a lot of "special topic" mammoth blog posts in the past when I had time on the weekends. This post will not be a tome, nor will any in this series of regular updates. Just a few thoughts on the Fundamentals and some charts that I watch on a regular basis. It will tend to be broad market / equity focused. I will save gold, commodities, and in-depth Dollar analysis for special more focused posts.

Here is a list of most of my in-depth market analysis posts:

- This Rally was Pure Weapons Grade Balognium Jun 22, 09 - LINK
- Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog Jun 17, 09 - LINK
- Market Thoughts and Analysis: The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure) Jun 15, 09 - LINK
- More Thoughts and Analysis: Timeframes - Bearish, to Bullish ... to Bearish May 17, 09 - LINK
- Still Bearish: FA and TA on S&P500, Observations on the Economy May 10, 09 - LINK
- Technical Investing Themes: MacroTrends, USDX, Oil, Gold, S&P500, etc. Mar 27, 09 - LINK
- Is Natural Gas Potentially Bottoming? Mar 23, 09 - LINK
- Update on Oil, Gold and the USDX Mar 19, 09 - LINK
- Short Term Oil Jan 7, 09 - LINK

Here is a list of very good commentary posts that discuss inflation / deflation / monetary policy / macroeconomics, etc.

- Steve Saville: Market Value, Money and Credit - Good layman's description of TMS and its importance
- Quantitative Easing Explained - Just a good funny article on QE
- Steve Saville: Why We are Gold Bulls - A good inflationary summary
- Steve Saville: Money Confusion and Inflation/Deflation - Good discussion as to what consitutes money and why some monetary discussions are invalid
- Zeal: Big Inflation Coming 2 - Good discussion of inflation and deflation.
- Mises: TMS - Good Definition of True Money Supply (TMS).
- Saville: Inflations New Upward Trend - Misuse of the Velocity of Money concept
- John Mauldin: The Endgame - Very good deflation arguments.

Purpose and Background

Hmmm.... I thought I was going to be able to get rid of this section. Unfortunately I was questioned regarding the same exact points in this rant (and all of my other rants) twice in the comment section of my last post. ... So it stays. Please read before asking any more inane questions like: "How can I be convinced of the validity of your analysis" or "EWP is a set of rules, is not your guess as good as mine?". The answer to both of these questions are below and in comments 10-13 and 31-36 of my last post.

First I am not trying to convince anybody of anything. You may hate TA and think it bogus. Fine. You may think Elliot Wave is garbage. Perfect. You may think my fundamental stance is idiotic. Good for you. I am quite literally fine with all of those responses. I am sharing my thoughts. That's it. Maybe it is useful to you, maybe it is not. I have nothing to sell. I am not trying to wow you with prognostications, nor am I trying to indisputably prove that TA works. I am sharing my thoughts. Nothing more, nothing less.

I have written several posts and many have come to appreciate my thoughts and / or my writing style. And many of you disagree with me. And that is perfectly fine too. In fact, the discussions from these disagreements are some of the best discussions I read on CAPS. So even if you don't agree with me, please rec my posts if you appreciate my thoughts, candor, or analysis and the time I take to write them.

Regarding my analyis and Elliot Wave counts specifically: Read this RANT. I will not regurgitate that rant here. I have done it many times already. Please read my rant first before questioning the validity of my analysis, or presuming that I am stating my analysis as more than a guess.

Many of us EW Technicians have what we call a “preferred count”. This means the count and analysis that is the most likely to happen, in our opinion. We may have several different counts that are viable based on the unfolding price action (because ultimately any pattern is incomplete until it is in the past). But we select one that is most likely, the “preferred” one. And per the observation made above, any good analyst knows that even the best guess is still a guess. So even the analyst who makes the count does not put an absolute 100% likelihood of occurrence on it..

Okay, that out of the way, lets get to the good stuff!



Yes indeed, this is binv's Tin Foil Hat Area! Acutually many people don't agree with my fundamental analysis, especially regarding inflation / deflation. And even less agree with my TA, especially my Elliot Wave Counts. So if you find yourself actually agreeing with what I write, then might I suggest wearing a Tin Foil Hat? I will gladly sell you one for just $19.95! (plus shipping and handling of course) .... :) (just kidding). On to the analysis!

Fundamentals

No big update on the fundamentals. Everybody is ga-ga over non-GAAP earnings (which are BS). But because I think they are BS means jack squat. The market wants to have a rally, so the market gets a rally. Okay. You can tell yourself that things are getting better and that the economy is improving, but I don't buy it. I stand by my statements regarding the falsity of earnings and the weakness of the economy that I have made in the last several blog posts.

Technicals

Okay, first things first. My preferred count is completely broken, smashed, wrecked, trashed. The 1-2, 1-2 dream is over, as fleeting as it was beautiful. We have to turn to a (much uglier) triple zigzag as the most realistic possibility. abcxabcxabc. Blech. All those stupid X's. Oh well. What I think is pretty is irrelevant. Based on the move the last 3 days (and confirmed today), we have a new impulse move up, which is completely at odds with my old count. The count I am about to show you is the "alternate count 1" from my last sets of charts, or "option count 3" that I posted in the CIL several weeks ago. This was the "game" that I asked everybody to play with the associated poll. This count is based on Daneric's count. Definitely read his blog, it is full of good insights.

Regarding my exit strategy: I went full short again on June 22. Since my old preferred count was broken today I am now looking for an exit spot. Why didn't I exit today? Because the 30 min and 60 min technicals are completely overbought (see charts below). I think the most likely count since 869 is a large 3 of 5 so far. I think based on the move today, we need to see a pullback tomorrow, and that would be consistent with Wave 4. Chances I will exit tomorrow, and not wait for this 5 wave to complete A and ride B down. Too much uncertainty now. This is not advice, just sharing thoughts on my own moves .

As a proxy, my go-to index is the S&P 500, and I present much of my analysis in that one. But you will see in my charts below, that I always look at the S&P 500, Dow Industrials, NASDAQ Composite, and Russell 2000 for all my counts and analysis, even if I show the SPX predominately.

Medium and Short Term Count for the SPX:

The count is dead, long live the count. Old one dead, new one rises to take its place, blah, blah, blah.

Here is the new preferred count of mine



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Look at the old count and the "alternate" count (which is my new preferred). I didn't change any of the chart annotations, just let the price action unfold on top of the projection lines. It hit that 875 support line, bounced a bit and then turned right back around. Props to Cabot and geno who called this.



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Here is my trendline chart. You can see today that it smashed several trend lines which should have served as large resistance. Yeah for the market. Too bad for binv.



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Short term, micro, and micro all-indices. READ THE NOTES ON ALL INDICES!! I am seeing a lot of invalid counts that violate the Nasdaq (the 1-2 at the bottom). Just my $0.02



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Sector Analysis:

Ouch. Yep, pretty bullish. Dollar making a stand this afternoon, and could carry into tomorrow. But it just broke through the last support level today.



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Please feel free to comment, disagree, discuss. And even if you don’t agree with my conclusions, please rec if you appreciate the effort or the explanation of my thoughts, even if you use them draw different conclusions than mine.

The binv standard disclaimer: This in no way constitutes investing advice. All of these opinions are my own and I am simply sharing them. I am not trying to convince anybody to do anything with their money. I am simply offering up ideas for the sake of discussion. As always, everybody is expected to do their own due diligence and to ulimately be comfortable with their own investing decisions.

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#2) On July 15, 2009 at 8:20 PM, PrestonCheek (32.96) wrote:

binve, great stuff buddy.

I hope things will look up for us bears, or down should I say. :)

Have a good night and I will talk to you tomorrow.

Preston

 

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#3) On July 15, 2009 at 9:10 PM, binve (< 20) wrote:

PrestonCheek, Hey Preston, thanks man. Hopefully us bears will get a nice exit tomorrow and then an nice re-short entry after Wave A ends. Thanks bro :).

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#4) On July 15, 2009 at 9:15 PM, ChannelDunlap (< 20) wrote:

Thanks for one of the most intelligent & insightful blogs of the day. 

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#5) On July 15, 2009 at 10:15 PM, RootnToot (30.44) wrote:

B,

WOW is right!

Six munce ago I coodnt spelll bare, now I arr one!!

Once again, thank you for the energy and dedication that you put into your posts on this site.

A rec for your effort!

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#6) On July 15, 2009 at 10:17 PM, divman1 (< 20) wrote:

Well we had another big rally. Wondering is the worst behind us, or are we setting up for the mother of all head fakes? www.compdivplan.com

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#7) On July 15, 2009 at 11:42 PM, mistermiranga (88.99) wrote:

thanks binv...today was the back breaker...the way things are going we might not get an easy exit. CIT can't even help us now...I got Cramer on in the background and he says we are in a Tech Bull market...I think he finally won me over. ; )

I am closer to capitulation than 956 for sure...even starting to buy the inflation argument. 

someone talk me out of covering!

A lesson from blackjack can help all of us. When the deck is running hot its time to double up and go heavy...when she is cold it is time to get up and walk. there is no way to beat a cold deck or in other words, don't fight the tape.

Blackjack is more fun though... 

 

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#8) On July 15, 2009 at 11:51 PM, binve (< 20) wrote:

ChannelDunlap, Thanks, I appreciate that!

RootnToot, LOL! Thanks man :) Unfortunately, the bulls have hijacked this Dodge Caravan of a stock market and looking to redline it. Thanks man, I will keep posting my thoughts as long as they are considered valuable. So thanks man, I appreciate that :)

divman1, Hey, it depends on the timeframe for the headfake, but yes, I think this rally up, however long it takes, is a relief rally before the bear market continues. Just my take. :) .

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#9) On July 15, 2009 at 11:56 PM, binve (< 20) wrote:

mistermiranga, LOL! Yeah, backbreaker is certainly the sentiment I would use. Like I said above, I will probably cover tomorrow. I think the market will correct down for at least part of the day tomorrow before resuming an upward trend. But once we can count 5 waves up in the current run up from 869, then I will re-short from the top. This will not be a long-term short, just to ride down the larger correction. We will see how that pans out.

A lesson from blackjack can help all of us. When the deck is running hot its time to double up and go heavy...when she is cold it is time to get up and walk. there is no way to beat a cold deck or in other words, don't fight the tape.

Awesome. Perfect statement. :) Thanks!.

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#10) On July 16, 2009 at 12:13 AM, ralphmachio (29.37) wrote:

I think they quit manipulating the market in the same way they were every day, and now they wait to dump money on special trend breaking days.  Now the momentum of this may continue.  Maybe not.  

With any wave theory, if a correctly timed and sized impulse is added, it could have lingering effects later on down the line.  

 

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#11) On July 16, 2009 at 12:18 AM, mistermiranga (88.99) wrote:

...or maybe this is the type of day where GS blows out the shorts and hops on for the ride downstream. Along the way they pick up CIT for pennies on the dollar...

I knew I could talk myself into holding my dirty shorts. :)

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#12) On July 16, 2009 at 2:10 AM, AWF (< 20) wrote:

So the market rallied into resistance--

Probabilities favor the "Elliott" zig-zag or rectangle in TA--

No counts valid --- until either 961 is taken out on the upside or 880 on the lowside.

Why do zig-zag or rectanglres occur?--Indecision--

sometimes the fundamentals have to catch-up.

sometimes the "true believers" have to wake -up.

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#13) On July 16, 2009 at 8:53 AM, binve (< 20) wrote:

ralphmachio, Very possible :) That the market is manipulated is beyond doubt, and I may be trying in vain to count it :) But regarding the impulse wave, I agree. If the wave shapes up the way it is headed, then it has some very serious implications, and it has been big enough so far to break a lot of counts, including my old one. Thanks!

mistermiranga, LOL! Maybe man. And hold shorts here might be the best call, but it might also be the worst call. The technicals say to me a lot more *potential* (since everything that is in the future is just potential) upside. So when I look at risk/reward here I do not like what I am presented with, which was the point of this whole post. I am looking for an exit spot today and will find a safer one in the coming weeks. My $0.02. Thanks man!

AWF, All of those are reasonable statements.

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#14) On July 16, 2009 at 12:52 PM, binve (< 20) wrote:

Trade Alert Action has been a Wave 4 today. But instead of pulling back, it is consolidating pretty tightly in a triangle. I am covering my shorts that had open since June 22. We may get a double-top break down .... or we may get an explosive breakout of this triangle. I think the pattern in unclear and I think the risk/reward stinks (both short and long). I will sit in cash until something clears up.

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#15) On July 16, 2009 at 3:21 PM, madcowmonkey (< 20) wrote:

Ahhh. Cash in hand is always a good thing......as long as it is in your hand and not somebody elses.

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#16) On July 16, 2009 at 3:24 PM, binve (< 20) wrote:

madcow, yeah, I was glad that I got out before that mini-stampede the last few hours. Still took a big loss though :( oh well. I am waiting to see where this current bull run ends up before I make my next move. But yes, it feels good to be in cash right now :)

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#17) On July 16, 2009 at 3:34 PM, StopLaughing (< 20) wrote:

The earnings on balance (Enron accounting aside) are better than expectations. I suspect Friday will be some profit taking as traders get out for the weekend. However, if there is a big earning surprise/confirmation, the market could run some more.

The economy may not be getting much better, nor improving fast but better earnings due to quick adjustments to costs (prior to March) is enough to jump this market.

It is beginning to look like many companies can turn a profit even in a flat poor economy. The economy is also showing slow signs of bottoming. That is enough to create a sideways to bull market.

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#18) On July 16, 2009 at 3:42 PM, anticitrade (99.65) wrote:

A lot of work went into this blog.  I have always felt a certain school rivalry for the TA guys, but I have to give you credit for:

1)  A huge time investment into sharing your experience.

2)  Admitting that things didn't exactly go as you had planned.

As I have begun working on backtesting my model, I have wondered about backtesting your approach to EWT.  Do you think it's possible to set up a program to accuratly simulate the rule based trading preached by TA traders?  If so have you done it?  (I am sure someone has done it, and probably had amazing results!!!!  But then again, only the winners talk about their results.)

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#19) On July 16, 2009 at 5:21 PM, binve (< 20) wrote:

StopLaughing, Hey man, thanks for the comment. I agree with most of your statments above. Earnings are better than expected and the market is reacting postively line. But like I say above in the Fundamentals section in the main post, most of the real earnings "blow outs" come from non-GAAP numbers. And I think those are ulitmately BS, which is why I am still fundamentally bearish. But because I think they are BS doesn't mean anything. The market will react positively to the news and the action is definitely bullish for the near term. I personally think it is much too early to call a bull market based on truly increasing fundamentals. Just my $0.02. I certainly recognize that many people do not see it this way, and I can appreciate that fact. Thanks!

anticitrade, Thanks! I have read your comments elsewhere and I do realize that you have a "healthy skepticism" of TA :) But I really do appreciate the recognition in your comment. Thank you.

When I am wrong, I certainly don't mind admitting it and I certainly share in the blogs when my opinion changes on a current trend or pattern. I definitely won't get all my calls right. That is the only thing I am 100% sure of :)

Regarding backtesting: The whole concept of EW was born out of back-testing and statistical analys (wave size and time proportionality, impulses, correction variations, etc.). And when you have the price data in front of and behind the pattern, you can always identify it.

The problem is using EW currently, you have past price data, but not the future price data. So any count is ultimately a guess, because you have no way of knowing ahead of time if impulses or corrections will extend or truncate. This is exactly why I have the rant section above and in all of my analysis posts. Becuase all TA is ultimately a guess. Here is a comment that I wrote in another blog post that describes my philosophy on this. This is not directed at you specifically, just excerpted from another response:

Don't think and ask "does EWP predict the future?". "What is the next step in the pattern with 100% accuracy"

Instead think: "What is the new prevailing trend", "Where is the next junction between an impulse and a corrective wave *likely* to occur", "what is the risk/reward associated with that setup", "where is a good place to set stops (physical or mental) based on nearby support/resistance", "what are good scaling levels based on S/R".

People are so hung up on "Can TA predict the future?", and I think that is dumb. It is a meaningless debate that is a huge distraction. Because price tends to cluster in areas and in patterns. We see it all the time. I am interested in finding *probable* outcomes to those scenarios. The question of a *definitive* outcome is academic and irrelevant to me.

So I fully admit my projections are guess and I want to emphasize to anyone who reads my posts that they should ready my projections as guess. I am trying to figure things out and I am sharing my thoughts as I go :)

Regarding a trading program: There is a variation of EW that has been developed by Neely to make it more automated. It evaluates the wave progress and does sampling / decision making at each direction change. I am not very familar with it, but it sounds interesting. It is a neowave.com.

Thanks antic, I really appreciate your comments!.

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#20) On July 16, 2009 at 6:00 PM, anticitrade (99.65) wrote:

Thanks for your help.  Even a fundamental investor like myself recognizes that the ability to predict market timing is the holy grail of investing.  Consequently, I have had many a sleepless night thinking of how to adapt some elements of TA into my model.  Currently, I am thinking of focusing on the individual stock trends in the output of my model.  I am hoping that this will remove the noise created from moves of the broader market. 

I haven't read a book about the subject in an effort to protect my ignorance (I tried to think of a good way to explain that last sentance, but couldn't find one that didn't make me sounds stupid or lazy).

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#21) On July 16, 2009 at 6:37 PM, rexlove (99.56) wrote:

Interesting post binve. I gotta give you a rec for all the work you put into it. Can't say I give too much creedance to EW but I can appreciate the time you spent on this.

I think there is a great amount of effort into being able to predict the market mathmatically (and for good reason). But the problem is that the market is probably as much psycological as it is mechanical. Good work! 

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#22) On July 16, 2009 at 7:25 PM, CrackerHockey (< 20) wrote:

Important correction to your wave count with important consequences to the out look on P2. Your alternative count may not be the case!!  The larger A-B-C correction P2 with (B) to 720 may still be in effect!!

see Kenny's blog: Follow the money dated July/15/09 http://kennystechnicalanalysisblog.blogspot.com/

and this link to charts:

http://2.bp.blogspot.com/_goypolxEFd4/Sl9ANtGmgbI/AAAAAAAABTM/GepWjqVshy8/s1600-h/Dow60minEWU.png

http://4.bp.blogspot.com/_goypolxEFd4/Sl7qbAGnAtI/AAAAAAAABTE/eXwXGStMEOA/s1600/uup%2B60%2Bmin.png

http://kennystechnicalanalysisblog.blogspot.com/

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#23) On July 16, 2009 at 11:25 PM, binve (< 20) wrote:

anticitrade, No worries! I tend to be a macroeconomic investor myself (I look at treasuries, the dollar, equities, gold, metals, commodities, etc.). I like both fundamental analysis and techncial analysis. If you want to be exposed to technical analysis, you are always more than welcome in GoodVibe's CIL. It is a chatroom where we discuss the market, trading ideas, share charts, etc. The current CIL is in this post, comment #54. Please feel free to stop by anytime!. We like to chat during non-market hours but try to keep it focused on TA during market hours.

As far as books, there are lots of good ones, but here are the two I would recommend most: EWP by Frost and Prechter and Master Swing Trader . But even before that, I would to to stockcharts.com and browse through their technanical analysis section to get a feel for these concepts. I hope that is useful!.

I haven't read a book about the subject in an effort to protect my ignorance (I tried to think of a good way to explain that last sentance, but couldn't find one that didn't make me sounds stupid or lazy).

LOL!, No worries, I certainly wouldn't have taken it that way :)

rexlove, Thanks! I understand that many people are skeptical of EWP or that it is not their cup of tea. That's okay :) I hope the other TA and fundamental analysis thoughts in my post add value too :) But what is interesting about EWP is that it is much more psychological based than mathematical based. Take a look at this link and flip to page 19 / Chapter 1. If you peruse the book, you might find some things that pique your interest. :) Thanks!

CrackerHockey, Thanks for the links at the thoughts! I see the main count there, and while I do agree it is technically possible, I don't know that I would say it is a likely count. It has a really big B overshoot if you count 666 as a B wave which makes Primary 2 an expanded flat. Again, this is not impossible, but based on the magnitude and importance of this wave, I think it is more likely to be a zigzag, which normally occupy the Wave 2 position. This one keeps extending, so it is a triple zigzag. My old projections called for a more traditional looking larger zigzag, but the move the last 4 days have all but invalidated that count. Thanks for the thoughts! ..

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#24) On July 17, 2009 at 10:53 AM, CrackerHockey (< 20) wrote:

I was actually referring to your 5 wave count up to wave A of P2 as you missed counted a wave 3 and 4. See Kenny's Dow chart.

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#25) On July 17, 2009 at 10:59 AM, CrackerHockey (< 20) wrote:

I agree with you, it is not a (C) wave, but an (A) wave up of P2.

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#26) On July 17, 2009 at 11:55 AM, CrackerHockey (< 20) wrote:

I think your "old prjection" "traditional looking larger zigzag" is still in play!! Whe just havent finished the (A) wave up yet!! Put an (A) there on Kenny's Dow not a (C).... 

http://2.bp.blogspot.com/_goypolxEFd4/Sl9ANtGmgbI/AAAAAAAABTM/GepWjqVshy8/s1600-h/Dow60minEWU.png

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#27) On July 18, 2009 at 1:12 AM, binve (< 20) wrote:

CrackerHockey, I have a fairly detailed count from the top in 2007 to March 9 2009 and I count a complete 5, including all the extensions within the 3rd. I see what you are saying, but I don't agree. I think my count is a very defendable one. Furthering the evidence that my count is the more probable one:

Lets assume that March 9 marks B of Primary 2 (P2) instead of the end of P1. When I do analysis on the large counts and even the small counts, I always compare against the the S&P 500, Dow Industrials, NASDAQ Composite and Russell 2000. This is because these indices all represent sampled cross-sections of the economy (all contain healthcare, finanicals, energy, consumer services, retailers, etc.).

The classic signal / signature of a Wave B is that it is unconfirmed. It is very manic with little breath across the economy. This is precisely the reason why the end of the bull move since the great depression ended in 2000, not 2007. 2007 was higher than 2000 by 30% on the Dow, made a double top on the S&P, and was 50% lower on the Nasdaq. It is this highly unconfirmed nature that just screams B wave.

However, when you look at SPX, INDU, COMPQ and RUT, *all 4* made new lows on March 9! This move was confirmed on all 4 major indices. This makes a likely end spot for P1.

So while I agree that the charts in the links you provide above are technically possible, I find them very unlikely counts when I consider Wave personalities and confirmation / non-confirmation among the major indices.

Hope that was useful. Thanks!.

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#28) On July 18, 2009 at 1:19 AM, binve (< 20) wrote:

Interesting Chart: I was playing around with a chart based on a conversation in the CIL tonight. Here is an interesting chart and I will throw in my long term projection for good measure :)

Fib fan for large count (inspired by AC and Col), utilizing the triple zigzag Primary 2 count.

Very compelling. Average target for P2 is ~1050 for Sep-Oct. The recent resistance has been right around the 38.2% Fib Fan line, and using 200day MA as support. This projection would take P2 to 61.8% Fib Fan line and between 38% and 50% Wave 1 retracement.

Wave 1 = 17 months
Wave 2 projection = 7 months
41% (~38.2%) time proportionality. Seems reasonable. Proportionality also looks good when compared against Waves 1 and 2 of Primary 1

Enlarge

Enlarge

 

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#29) On July 18, 2009 at 1:15 PM, AdirondackFund (< 20) wrote:

Hi Binve.  Not your best post, now is it.  Let's just take a look at the third chart.  You have a purportedly 'broken' trend channel.  At the same time you have massively overbought readings in Trix and MACD in Intermediate term.  Unless you are expecting those readings to break through the upper bar line of the graph and jump onto the graph above....this rally is now finished.  On another point.  If you look back on your graph to the first week of February, you will see the same condition of trendline breaks on all of the same indicators, RIGHT BEFORE THAT BIG BROWN SPOT in the middle of your chart.  You are reading the same mistake which occurred in February. 

If you were at the Cil and read my postings there, you would have seen that the tactical trade (which ignores all of this wiggle stuff) was to close shorts on the move down, which was done, and then to reshort on the next massive move higher WHICH HAS NOW OCCURRED...and to watch as they put up a skyscraper.  The idea of trading is to trade, not to 'guess' at outcomes.  The market will tell you where to place your buy and sell orders, just as easily as it will tell you where to close them.  This is not a matter of opinion, it is a matter of fact.  I do write things down so that you can go back and read them after the fact. That alone should tell you something.  Referrences to things like 'assassination' are being followed through carefully in the MJ case, simply because something there was spoken there at the Cil.  Somebody, not speaking at the Cil, is paying very close attention.  Why?

I am so glad to see that GV has returned from vacation, having slipped out at the exact wrong moment declaring 'I don't know, could go either way' and is now 'teaching'.  Old Wall St. saw for you. "Those that can do, those that can't teach".  Perhaps you have never heard this admonition before, but you should know it now. 

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#30) On July 18, 2009 at 2:34 PM, Londamania (48.07) wrote:

Hey Bin - I reflect a lot on your writings and hold them in very high esteem.  Of course, as you point out, the market isn't reflecting your thesis lately - nor any of the bears going back to March really.  So here we have a head fake beark market rally that is going on 5 months in duration, has had a correction period, and is back to rising up.  Getting a bit old that one is.

It's time to start questioning some of the assumptions here I think.  Bear arguments are increasingly obvious variations of "I'm right, I know the truth, and the market is just stupid."  I am sure you know this is folly and rarely true.  Unfortunately for the bears the market missed a big one last Fall (I think it's understandable when you throw an executive oversight branch that was completely asleep at the switch with new derivative trading products that few people understood and no one had a long history with) and that has emboldened the attitude that an individual (or small group of them) is right and the market is just dumb no matter what the evidence.

And this economic time is a tough one.  Their are arrows in all directions pointing to whatever economic outcome you care to favor.  Plenty of ammo for all sides.

I think the chink in your thesis if their is one (i.e. if you turn out to not be correct) is the earnings.  GAAP is a misnomer because they are just not Generally Accepted at all.  And their are very good reasons for this.  The bottom line is that accountants don't know jack sh*t about running a company and I have worked in them and around them for over twenty years to know this.  And the GAAP methodology forces companies into gyrations that make no sense to them.  Their is no global conspirancy by most all companies, news media, and many investors to dupe everyone else and trade on fantasy earnings.  The market uses the earnings process it does because most of the people involved have determined it's more accurate than GAAP.

Run all of your thesis but change one thing - that the S&P right now is trading at a earnings multiple of 13 (other recent posts did a good job of establishing this as a legitimate multiple given the earnings data that everyone uses).  I think this would be very good to do even if you wan't to stick to your GAAP guns because it's very important to trade the market you are in, not the one you want, and the market is trading based on non-GAAP earnings.  IMO it will take a large economy or world shaking event to change this so until that happens any thesis based on this assumption is much more valid until (if) that happens.  Then at least you can chart out a more accurate tin foil hat near term at least I think :) 

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#31) On July 18, 2009 at 7:51 PM, CrackerHockey (< 20) wrote:

I don't think you got what I was saying. Forget all of Kenny's ABC labels (not what Im interested in!). I agree that the March low is the end of Primary Wave 1 down in five sub-waves. What I'm saying is that from the march low at 666 are five wave's motive up and wave four and five haven't completed as per your original "old projection" and similar to the five waves up on Kenny's Dow chart. As you said, the counts for the DOW, S&P and Naz should be similar and Kenny's five on the Dow up from the march low of 666 are convincing.

The small little blue 5 on your chart: http://farm3.static.flickr.com/2647/3704851569_188cac3f15_o.png is actual wave 3 blue next to the pink{A} not 5 blue, and four has just completed and we are just in the beginning of the wave 5 blue up to end the pink {A} wave of your original projection.  Therefore the up coming top may still be the pink {A} wave of P2 as per your original projection.

See also Bulkowski's statistical work on H&S patterns.  http://thepatternsite.com/Blog.html#P16

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#32) On July 18, 2009 at 7:59 PM, CrackerHockey (< 20) wrote:

Also see Fujisan's post here about the H&S (it may not be over yet): http://evilspeculator.com/?p=9308

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#33) On July 19, 2009 at 9:05 PM, binve (< 20) wrote:

AdirondackFund,

Not your best post, now is it.

.... uhhhh, thanks.

First regarding the 'purportedly' broken trend channel. There is nothing purported about it. It is broken. There have been 3 sucessive closes above it. Now, whether or not this is simply OPEX games, or is it real, we will see next week. But I think it is real enough and serious enough that I have changed my preferred count. Am I right, are you right? I don't know. I acknowledge that there is not a defined outcome here, only probable ones. If you want to claim there is a defined one, power to you man.

Next you talk about tactical trades shared in the CIL. ... okay. Maybe you have the most brilliant calls in the world. If so, then that is great. However, I do not nor can I watch the CIL all the time. Nor do I go back a read everything I missed. There is too much information and way too much chatter. Making a strong call on the CIL is not a very effective way to share you calls.

Instead a better use of time would be to share your calls on a blog post, they are easier to see, document, and point to. I believe it will be more effective. However, something that is not effective is coming on to my post and disparging my calls. I don't believe that is helpful to anybody, and is certaintly not effective in making your point, whatever it might be.

I felt the recent price action was strong enough to invalidate my intermediate term preferred count and I shared my alternative. If you don't agree, then that is fine. But I acknowledge that an projection, even if it is a very good guess, is ulimately just a guess based on probable outcomes. But don't come on to my post and trash talk my stance because you believe the market it completely determinable. Unless you actually do wish to discuss these topics, instead of just hurling statements. Then there are much more effective ways to go about it.

Londamania, Thanks! I appreciate that.

Regarding my thesis: What happens in the short and intermediate terms is not always driven by fundamentals. My *thesis* is the second chart in comment #28 above. That is that despite the inflationary evironment that we will be coming into, market fundamentals and earnings will be terrible over the next 10 years. The inflation will prevent a drop on the equivalent of the Great Depression move (which would be an S&P value of 133 at the bottom) because it will prevent earnings from being as bad as they otherwise would.

Now the fact that you say that the market is not behaving according to my thesis cannot be determined yet, becuase it is a very long term projection. Monetary policy and economic activity the next several years will either prove or disprove that.

Regarding my intermediate term projections: I agree, the market is not behaving according to my original projections (second chart in comment #1). I thought that we would get a significant retest before reaching higher highs. But I acknowledged that would be reaching higher highs *months* ago, see this blog post: More Thoughts and Analysis: Timeframes - Bearish, to Bullish ... to Bearish May 17, 09 - LINK

Regarding rethinking my assumptions: I don't think I need to, because nothing has occured on the economic front to invalidate them.

I did see you post recently on backing up the truck. I already acknowledged that the market was going to go higher going in to the fall both in my original intermediate projection as well as my new intermediate projection. But near term market activity, even for 6 months, doesn't factor in long term effects. I maintain, as I always have, that this is a bear market rally / correction nothing more. I believe we are in a secular bear market, and this rally is nothing more than a relatively short term (in the bigger scheme) counter-trend move.

Regarding earnings: I really disagree with you here. Okay, accountants do not know how to run businesses, I agree with that. But it is the *general accounting standards* and bookeeping that is important. Non-GAAP is completely amorphous. You can do absolutely no historical comparison using non-GAAP numbers. With GAAP accounting, even if it is not the clearest picture of the health of a company (which I do not buy to the level you talk about above), it at least provides a level of historical comparability, so that you can use it to find similar level where the market has bottomed in the past in terms of valuation. My $0.02 at any rate.

Regarding charting my tin-foil near term: Like I said above, my tin foil hat projection always predicted higher prices in the fall from where we are now, I just thought we would be getting a more substantial retest before that. You can compare that to my new projection (charts 1 and 2 in comment #1).

Thanks for the comments, discussion and thoughts! I really do appreciate them! and I enjoy our discussions :)..

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#34) On July 19, 2009 at 10:09 PM, binve (< 20) wrote:

CrackerHockey, OK man. :) I see what  you are saying. I was carrying a 5-wave count up to 956 on the S&P. But I do not think that the price action since March 9 can be counted as a 3 of 5. Maybe you can make it technically work, but I do not believe it is a likely count. That is simply my $0.02. And if we have a difference of opinon on this, than so be it. I have laid out my alternative in my preferred count above, and this comes from looking at the action on the SPX, INDU, COMPQ, and RUT. I could be wrong, and if I turn out to be, I will fully admit that. But I have to go with what I think is the most likely count, and that is the one I lay out above.

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#35) On July 20, 2009 at 10:59 AM, CrackerHockey (< 20) wrote:

Binve:

just pointing out the possiblity, was hoping for a bigger B wave drop too so i could make some ching on the final ride to top of P2 in my 401k....

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