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TF thread (Russell 2000) ... anything goes

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  #1 (permalink)
 kbit 
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I was just looking for somewhere to post an Ichimoku chart of TF and couldn't figure where else to post it so here I am....
If anyone want's to post anything TF, NQ, or whatever feel free.
The following are a daily and 1hr Ichimoku, I'm no expert but from what I understand when you get a flat top (729.9)on the cloud (on the daily in this case) and price winds up and breaks through it's pretty strong. Currently that is where we are. It's also at the top of the cloud on the 1 hr (actually just trying to break out as I type) so...
the TS and KS are still in the cloud so all the lights aren't green yet but will have to watch it. I guess the whole point is that 730 is an area to keep an eye on.

PS. I know it's not the prettiest chart...that's as good as it gets with Tradestation.
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 kbit 
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I thought I might throw this in too. This is a 15m chart wich shows clear skies to the upside. I know 15m is small for Ichimoku but I have found it useful so..
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The Russell is a popular instrument, but I haven't traded it in probably 3 years. So I just had to go look to remind myself of some basic info:

- Traded on ICE these days
- Formerly "ER2"
- Intraday margin is a bit more than SP500
- Commissions are about the same as SP500
- Tick value is $10
- Moves in .10 increments

https://www.theice.com/productguide/ProductDetails.shtml?specId=86

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 kbit 
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Just a look at weekly and daily to see bigger picture....you can see where we're at now and why it's a trouble spot but it's looking like we will get to the 765 area at some point. I guess I would like to see another close and hold (nice pin off a retest would be nice)over the 30 area Lines are rough drawn.

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 Big Mike 
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kbit View Post
Just a look at weekly and daily to see bigger picture....you can see where we're at now and why it's a trouble spot but it's looking like we will get to the 765 area at some point. I guess I would like to see another close and hold (nice pin off a retest would be nice)over the 30 area Lines are rough drawn.

>
Attachment 53286...............Attachment 53287

Yup, looks like it wants to move higher... but can it... how much negative news can we swallow before we puke? So we'll see what tomorrow brings with the several news events.

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 kbit 
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Yup, looks like it wants to move higher... but can it... how much negative news can we swallow before we puke? So we'll see what tomorrow brings with the several news events.

Mike

Yep, I hear ya, just seems like it never ends with all the bad news and somehow it mysteriously levitates and rises.
The only thing I can think of that supports all this is, and I know it's sounds stupid or to political is that being that the markets are forward looking , maybe Obamas departure is being priced in...

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 Silvester17 
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kbit View Post
Yep, I hear ya, just seems like it never ends with all the bad news and somehow it mysteriously levitates and rises.
The only thing I can think of that supports all this is, and I know it's sounds stupid or to political is that being that the markets are forward looking , maybe Obamas departure is being priced in...


hope you don't mind for posting this here.

it's more relevant to s&p, but counts for tf as well. one thing we should not forget, the market is pretty cheap. at current valuation, a fair value for s&p should be around 1600. now the question is what are we doing at 1200? I think the answer is, a lot of bad news is already in the market. so we should have some room for more bad news. of course this is all meaningless if devastating news would hit us. like a failure from a big bank or more greece cases in europe.

should also add, as far as trading, I'm flat now. except a small position in bac. (it's almost like an option with no expiration)

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 kbit 
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Silvester17 View Post
hope you don't mind for posting this here.

it's more relevant to s&p, but counts for tf as well. one thing we should not forget, the market is pretty cheap. at current valuation, a fair value for s&p should be around 1600. now the question is what are we doing at 1200? I think the answer is, a lot of bad news is already in the market. so we should have some room for more bad news. of course this is all meaningless if devastating news would hit us. like a failure from a big bank or more greece cases in europe.

should also add, as far as trading, I'm flat now. except a small position in bac. (it's almost like an option with no expiration)

Post anything you like...all comments welcome..good, bad, indifferent

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 kbit 
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It sounds ridiculous, I know, but similar to last night, the equity index charts really look as though each needs one last great peak up and a peak that comes so quickly and stands so far above the levels of the last few days that it will make it seem like sideways is done.

Such a potential moment may be brief, though, with each of the equity index charts looking more bearish than ever with this perhaps best exemplified by the Nasdaq Composite that nearly shows one massive and bearish Rising Wedge built of the last three months of trading.




Big Wedge or massive Wedge, the target is the same at 2299, but there is something about the look of that chart above that looks nearly explosive and presumably to the downside on the apparently bearish pattern marked in above.

Might it turn out to be the gruesomely bullish Inverse Head and Shoulders possibility with a stunted right shoulder? It could, but it seems less likely with some consolidation appearing to be what the chart of the Nasdaq Composite needs the most before it might really move up or back down.

This call for consolidation is so strong, in fact, that the peak to the Rising Wedge pattern have been put in already with only the fast fall ahead.

Should the euro-euphoric peak take equities up tomorrow or perhaps it will be Friday, it is likely to look like an outrageous spike up and come and go within hours as a volatile ending to the massive rally that began with the possible bottom put in a few weeks ago at 1075 in memorable fashion in the S&P.

Before taking a look at the S&P, let’s have a look at the Dow Industrials and Russell 2000 as well so as to see this spike up possibility but more so to see the potential and likely-to-be fast fall.


As you can see above, the Dow appears to be very close to the top of its bearish Rising Wedge and whether it spikes well out of it on a possible Pipe Bottom born of the last two days or simply falls back from today’s close, it is rather clear that this pattern is calling for a bit of consolidation to the downside before the Dow might move truly up or down.

This is true, too, of the Russell 2000 with its three days of lower highs nearly boding bearishly for this small cap index straight away.


In fact, this may be one of the more helpful signals to watch tomorrow around the equity markets even though tomorrow’s likely to be volatile enough that subtle signals may not be required, but on the whole, the chart of the Russell 2000 may suggest tomorrow or Friday and the days to follow may be just about the fall sans the potential spike up.

Interestingly, this is almost true of the chart of the S&P as shown below with its Rising Wedge appearing to have moved toward fulfillment today as can be seen below.


Such a potential move will require confirmation, however, and this, of course, turns us toward levels.

Broadly speaking,1215 and 1223 stand out on the downside and 1254 and 1260 on the upside.

And considering that events in the eurozone could easily take the index outside of this very wide range, it is probably a fine time to treat the S&P with care.

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 Massive l 
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Cool idea kbit. Maybe the ES POMO thread and this one can be combined?

I've been posting in there but there's hardly any participation.
The more the merrier...

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Silvester17 View Post
hope you don't mind for posting this here.

it's more relevant to s&p, but counts for tf as well. one thing we should not forget, the market is pretty cheap. at current valuation, a fair value for s&p should be around 1600. now the question is what are we doing at 1200? I think the answer is, a lot of bad news is already in the market. so we should have some room for more bad news. of course this is all meaningless if devastating news would hit us. like a failure from a big bank or more greece cases in europe.

should also add, as far as trading, I'm flat now. except a small position in bac. (it's almost like an option with no expiration)

Very interesting, what are you using to determine this?

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Massive l View Post
Maybe the ES POMO thread and this one can be combined?

No I think two entirely different topics and should remain as they are. The POMO thread was primarily designed to talk about the POMO's... but kind of acted as an all-things-SP500 thread for a while.

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Very interesting, what are you using to determine this?

Mike

very simple.

s&p is going to earn about $100.00 this year. at 1200 = pe of 12. average pe is about 16. so 16 x 100 is 1600.

again this is very very simple and a lot of other factors should be considered as well to determine the "value" of the market.

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 kbit 
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Daily chart, broke out of the cloud and where it goes nobdy knows...Actually that 765 area is in the cards but I dont' know if it will run straight there.
The TS and the KS are not on the upside yet so this isn't the most bullish scenario.
The TS is currently at 714.20 and from my experience if we could get a pull back in the next couple days to that area that would be a good spot to go long as it stands now. Things could/will change as time goes by but that's my take on it right now.

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 kbit 
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Just had another thought and that is that just looking at a conventional daily chart ideally in my view I would like to see a retest and hold in the 728 ish area (in a perfect world)...The Ichimoku, from my experience would have a long (safest play w/small stop)at 715 area... all depends on what you want to look at...I posted a daily and weekly a few posts back that look at it without Ichimoku

Edit: Actually I think 715ish would be ok anyway on either chart......feel free to tell me I'm wrong

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 Massive l 
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If you try a 5min chart with ichimoku, try TS/KS settings of 96,280.

This will keep you in solid trades and out of whipsaw action seen with the traditional
settings 9,26 on smaller time frames.

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 kbit 
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Well I guess we made it to 765...didn't expect it so soon but....will have to watch a little bit to see what happens next
It might come back to 730 and run up some more. I think it might go up a little more though before it pulls back...maybe 780 area.
That being said I'm pretty sure the top is in for today

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 kbit 
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Here's todays tick chart which shows a pattern that would suggest we will just keep going up.
I imagine this has a name but I don't what it is, just something I picked up on....if the low gets taken out all long bets are off. It should hit really no lower than about 761 and go up if this is going to work.
As a side note, I know some will say we will have a inside day tomorrow but, this is what I'm seeing. Also the 1hr and 15m Ichimoku support this continuation of the up move. If we do go up and for some reason get close to 800 area I expect a stalling at 97.5 regardless when that would happen.
>
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 kbit 
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Just a little note from me....it amazes me how a lot of people keep saying how bearish things are as the markets keep going up (I have no opinion either way anymore..gave up predicting).....anyway this is another take on things
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This is a situation not to be overanalyzed but treated practically and something that does not come easily to someone who admittedly overanalyzes anything and everything. However, simplicity must be respected at a time when there are nearly an infinite number of ways to look at the euro-euphoric leap in risk and at a time when the sideways trend has given way to an uptrend as short-lived as it may or may not turn out to be.

And that is actually the question right there: is sideways about to go vicious on steroids or has sideways simply gone away?

Probably the simplest and only way to have true confidence in the former possibility is if today does turn out to be what I wrote about this afternoon and that is a Church Spire Top – a Spike Top – that will basically protrude “head and shoulders above days before and after if it is at or near a Top” and something that will not be known until tomorrow.

In looking at the charts of the Dow Industrials and Russell 2000, the first half of the definition is clearly met and, again, no markings are needed with some things just speaking for themselves.




The second half of the definition may or may not become evident tomorrow, but should these indexes open and trade noticeably below today’s close, the real sign of a reversal will be if each then closes below yesterday’s close. The chart of the Russell 2000 may provide some proof of this possibility with its gap between 736 and 739 and at an interesting level for the fact that this had been the area of this index’s last recent intraday high until today.

In short, then, if the equity indexes open and trade down tomorrow and come close to going below today’s open or certainly yesterday’s close, it would seem sideways is about to get vicious as the equity indexes would probably decline to reverse some good portion of the more than three-week rally.

Such an extreme scenario seems possible only if the EURUSD starts to decline from its truly outrageous spike up and something to be discussed – or speculated – upon in another note later on.

It would seem, then, that the Spike Top that will potentially make itself known tomorrow by its “head and shoulders” protrusion would provide the easiest answer to the above.

Little is that easy, though, and this leads us to the second possibility or that today was a Runaway Day and this will be confirmed by “nice consolidation and continued volume” while “a tapering of volume will confirm the day as significant while a tapering of volume and rounding or volatile pullback will call into question its validity.”

In other words, if today turns out to be a trueRunaway Day that truly marks the end of the recent sideways trend, we’re looking for a nice Bull Pennant or Flag on decent volume before the next leg of the uptrend is put in. If tomorrow and the days to come are on weak volume or take on the look of a topping pattern at all and one that takes the indexes quickly back to about today's open, the sideways trend could get vicious yet and clearly this will take a good deal of judgment and particularly in relation to the Runaway Day possibility.

And so, the Spike Top versus the Runaway Day distinction seems to be the simplest way to answer the question of whether the recent sideways trend will pull equities back down with a vicious vengeance or whether a new uptrend has been born.

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 Big Mike 
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I am guilty of talking about being bearish recently.

But talking is talking. Trading is trading.

I always, ALWAYS try my best to trade what is in front of me. Trade what I see. Yes, I have to trade my convictions to some point. But just because I think the market is ready to just spiral out of control in a huge melt down, it doesn't mean I am short when the market is exploding higher right now. As I've said often in recent posts, there will be plenty of opportunity to get short, but no need to rush in right now until that opportunity presents itself.

There are a million ways to "frame" the market. Maybe you decide if we are in an uptrend based on how many stocks are trading above their 50 day or 100 day MA. Maybe you decide based on how many new 52 week highs are being made vs 52 week lows. Maybe you decide based on an EMA 20. Who knows, it's all subjective and all relative to the way you trade.

One thing to always remember: If all people talk about is how bearish the market is, yet the market is exploding higher, that means the bears are very weak. If the bears are weak, the bulls are strong. You may even see capitulation as the bears go "I can't take it anymore!!!", adding even more fuel to the fire and sending the market even higher.

Of course, usually after capitulation we finally see a trend reversal. It's usually not long after the majority of market participants "can't take it anymore", the max pain event, that the trend will change. That has been my experience at least

So if you are a bear, you might be asking yourself, have we just witnessed capitulation? The best bull month since 1987?

Trade well! Trade what you see!

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 kbit 
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A look at daily...nothing new really just that the TS is moved up to 722....the 1hr is still green to keep going up, the 15m is in the cloud and as we can all see anyway is chopping around.
>
This is daily

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 kbit 
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Yesterday was clearly not a Spike Top considering that it does not protrude “head and shoulders” over today’s trading as it does over Wednesday’s close.




It may, however, be the beginning of a consolidative pause, or correction if it goes longer and further than anyone could imagine, with such a possibility making itself most evident in the Russell 2000 that closed down 0.58% on the day. With this small cap index often acting as a leading index, this could be an early sign of equities declining in the days to weeks ahead and this seems particularly possible considering the gap in the Russell 2000’s chart at 736 that may try to close.

Putting aside those early signs of potential consolidation to come, it seems to make sense to explore the alternative possibility broached last night around yesterday’s spike up in the equity indexes and that is the Runaway Day. Should yesterday turn out to be a valid Runaway Day, it will push the equity indexes back toward or above this year’s previous highs while a failed Runaway Day will turn out to be a false signal around such a potential move up.

Unfortunately, it will take another few days at least to make the determination of whether some “nice consolidation” occurs on decent volume – potentially a valid Runaway Day – as opposed to a topping pattern of some sort on less-than volume – a failed Runaway Day – and so it makes sense to wait before making any sort of judgment here.

However, when thinking holistically about this situation that should only be looked at from the simplest perspective, it seems to me that some consolidation may be ahead as the S&P – and the other equity indexes – digests its enormous gains of the last three weeks before it then trends either up or down.

Such a potential pause may make sense too from a fundamental standpoint with there being something reminiscent about yesterday to May 10, 2010 even though the trading was so different leading into both days with the unforgettable Flash Crash preceding the latter. However, the S&P is not exactly a bastion of stability right now either considering the 18% plunge in August followed by a bit of up and down sideways recovery that led to the recent momentary-bear market decline that was then followed by a 10% move up in the last three weeks.

In other words, the S&P may be as vulnerable to volatile swings as it was last spring and summer depending on the data and the events as is the case now to some degree too with the hot and cold months of economic activity.

Also making the two days similar is the fact that the S&P climbed nearly 4% to the respective intraday highs each of those two days with the index trading slightly higher today as was the case for the three days following the May 2010 spike up before sliding 11% lower. Some important differences exist, though, with volume appearing less impressive in May 2010 than yesterday’s volume and a trend that continued for those three days and an immediate move into a topping pattern whereas that is not strongly evident today.

On the whole, though, there’s a bit of a similarity there and so it seems worth keeping in mind around what equities might do next and the precedent provides some reason to think there could be a consolidative pause ahead.

The possibility for consolidation is showing in technical ways too, but before turning in that direction, this possible consolidative pause, or correction depending on how far it might go, seems likely only if the S&P does not close above 1300 in the days to weeks ahead.

Should the S&P close above about 1300 in the near future, it will provide strong reason to think that the buyers are going to continue to overwhelm the sellers as managers make up for lost performance or for whatever reason the buyers will overpower the sellers and to the point that this year’s previous intraday high 1372 will be tested by the end of this year or early next year.

Behind this thinking is the band of resistance between about 1280 and 1300 (not shown) and a band that the S&P is toying with currently. If the band is breached to the upside on a closing basis, it will provide strong support for the idea that the buyers will have succeeded in overwhelming the sellers for at least a short period of time.

So moving back to the case for a consolidative pause, it can be explored only if the S&P fails to take out 1300 on a closing basis.

Reasons to think that will occur include its more bearish-than-ever-looking Rising Wedge with a target range of 1075 to 1116 along with the fact that the S&P is about 9% above its 50 DMA and this may suggest it is about to touch back down to it with most 5-6% strays in recent years resulting in such a reacquainting of sorts. On the other hand, the last time the S&P was so far above was back in May 2009 and so perhaps in an odd way this means a bigger rally is on the way.

Before getting too caught up in that possibility, though, it makes sense to look at the S&P’s Rising Wedge in weekly form.




Clearly it is severe and strong in the 6-month chart, but it is in the nearly 4-year chart that shows not only the extreme nature of the Rising Wedge but also the fact that this recent spike up appears to be missing the third supportive move down that helped to power the S&P higher in 2009 and in 2010 and this, of course, is the third right shoulder of its possible Inverse Head and Shoulders.

All in all, then, I am more inclined to believe the S&P pulls back from current levels and probably to or below its 50 DMA at about 1186 currently with it seeming as likely that a possible pullback could snap the index even lower if not a lot lower.

If so, small cap will have started that potential consolidative pause and something that will form the potential right shoulder of a bullish Inverse Head and Shoulders pattern that might give the S&P – and the other equity indexes – a real shot of testing this year’s previous highs.

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 kbit 
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Short Term Buy Signal Is In
As expected the market bounced rather sharply from its summer time plunge which took the S&P 500 to 4-standard deviations below the 50-day moving average. We had stated in previous missives and blogs that this would most likely be the case and that this would get the bulls all excited that somehow stocks were now the place to be again for the "long term".
We have discussed recently that after 5 down months in a row that a reflexive bounce was extremely likely due to the massively oversold condition that existed in the market. The rally was far stronger than we estimated, not in terms of internal strength, but in terms of magnitude. The market has now cleared to key levels of resistance and now, on a pullback or consolidation that does not lead to a reversal of this rally, allows for an additional increase in exposure to portfolios.
Again, for longer term investors, it is important to understand that this is fairly short term in nature most likely and therefore caution that increases in exposure should be in lower volatility assets such as balanced funds, equity income or defensive stock positions.
We still recommend an overweight in cash and fixed income at the current time due to inherent risks prevalent as the recessionary drag has not been eliminated by any means and the agreement struck in regards to the Greece default and the Eurozone will most likely fall apart long before it gets to the signing table.
Honestly, this urgency by the media and commentators to jump back into equity (risk) investments completely baffles me for several reasons. 1) Stocks, as an asset class, have been the worst performing asset class for the last decade. Yet investors still chase them hoping to garner riches; 2) markets never move in one direction, however, the overall "trend" is much more important than daily variations of price; and 3) while valuations based on a trailing, reported earnings are essential to long term value investing - valuation models are horrible timing devices and you can lose a lot of money before being right.
I bring this up for several reasons but primarily because there has been a litany of articles published during the last week touting everything from the yield curve, earnings yields and forward valuations as a reason to jump back into stocks now. Of course, the problem with all of these is that those measures, in a bear market, can wind up costing investors a LOT of money over time.
In recent missives we have dispelled the myths of the Equity Yield vs. Treasury Yields as an indicator of "value" in the markets. Furthermore, low interest rates and a steep yield curve, when artificially manipulated is yet to be seen as being a reason to pay a premium in terms of multiples for stocks.
Let me be VERY clear. At Streettalk Advisors, we are fundamental value investors. Fundamental value, based on trailing, reported, earnings determines "WHAT" we buy. However, the key to successful long term investing, and particularly when navigating highly volatile secular bear markets as the one we are in now and will continue to be in most likely for another decade, is the knowing the "WHEN" to buy.
Therefore, once we have determined the "WHAT" to buy we must employ a set of tools to not only determine the "WHEN" to buy, but also, the "WHEN" to sell and the "WHEN" to just stay away.
For the sake of simplicity we will focus today only the S&P 500, but this same analysis holds true for any position, asset class or market."
Individual investors do most of the damage to themselves by allowing emotions to override logical investing. There have been many articles written about the rules of investing in the financial markets and the basics of them all center around 5 important concepts:
  • Sell losing positions quickly
  • Let winners continue to win - until they don't any more.
  • Never take on more risk than you can afford to lose.
  • Always protect your capital investment by minimizing losses.
  • Buy low and sell high.
Yet it is exactly these basic rules that investors continue to ignore and violate by buying into ideas like "dollar cost averaging", "buy and hold investing", etc.
There is one major tenant that must always be honored if you are going to survive and prosper in investing over the long term - always protect your principal investment. This does NOT mean you will never lose money when you are investing - you will. If you are not willing to take losses in your portfolio - then you should not be investing to start with. The unwillingness to take losses has led to more money being transferred out of individuals portfolios than at the point of a gun. Losing money is part of the game...limiting how much you lose is what separates winners from losers.
The recent market debacle has NOT given rise to the opportunity to began aggressively investing into the markets. All indications point to weaker markets ahead. Does this mean that the markets will absolutely go lower from here - no. However, the "risk" of loss of investment capital at the current time is outweighed by the potential for return.
We use several different indicators, both long term and short term, to try and better determine the "WHEN" to invest. It doesn't always work. However, here is a little known secret - nothing does. This is also one of the biggest mistakes that individuals make when investing. They buy into one strategy that is working (usually last year's big winners) and then jump from that strategy to the next previously winning strategy when their returns suffer. This is the epitome of what drives investors to "Buy High and Sell Low".
A disciplined investing strategy is one that requires, you guessed it, discipline. That means that sometimes, even when it is not working, you have to stay with it (this is provided it is a sound investment strategy to begin with) as it will perform over the long term.

Longer Term Sell Signal In Tact
The chart shows one of our signals over the last 5 years. It has worked just as well over the last 5 decades. As you can see it generated a total of 5 signals over 5 years. This obviously is not a "high turnover" or "high maintenance" tool and even a individual who was prone to "invest and forget" could have followed this simple indicator.
By using a simple tool such as this one, the investor would have stayed mostly out of trouble during market turmoil and captured, on average, about 80% of the upside movement in the market with only about 20% of the downside losses. In other words, on a year over year basis he would have never beaten the market on the upside. However, over the last five years he would be significantly ahead of the broader markets.
This model is the very one that prompted us to raise cash and fixed income back in April of this year even as the markets were pushing higher. We were chastised by media personalities for being "bearish" at the time. However, our clients have suffered very little with the market downturn and are now in a position to capture the next advance when it occurs OR avoid the potentially recessionary downdraft that the economic numbers are telling us is coming.
This model tells us that risk is still prevalent in the market and despite the massive October rally it does not alleviate the risk at the current time. However, with our short term "BUY" signal as stated above we, and have, reduced modestly our hoard of cash and fixed income for the time being. This allocation increase is on a very short trigger due to the longer term "SELL" that is currently in place. So while we will increase equity exposure moderately on any correction or consolidation that occurs we will do so cautiously. However, notice that I said modestly and cautiously.
Let me reiterate this point. With the longer term indicator still clearly in "SELL" territory we do not want to disregard that. We saw this same event occur back in 2008 as the market rallied to a short term "BUY" signal in the midst of the longer term "SELL" signal and the resulting effect was disastrous for those who bought in to the media hype.
Here is the important point. When this longer term signal changes, whenever it changes, regardless of how we "feel" or what we "think" about the economy or markets as a whole (those are emotional biases) we will adjust holdings accordingly. This will be the "WHEN" that we BUY the "WHAT" our fundamental values are telling us to.
Investors CAN do better with their portfolios. We remain in a "secular bear market" - the same one which we have been writing about now for more than a decade. Unfortunately, secular bear markets are long lasting, generally 15-18 years, so we have more work ahead of us. The difference for most will be who survives this particular market with capital left to invest at the beginning of the next secular bull market..


Read more: Buy Signal Is In - But Move Slowly

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 kbit 
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Daily Ichimoku...top of the cloud is at 729.8 which I would not expect to hold anything but (from an Ichimoku perspective alone but, might be a good spot looking at it conventionally), is a level to watch nonetheless. The next level down is the TS ( 722) and would be a good spot for a shot at a long so I'll be watching that area. Actually probably about 10 ticks above that might be the spot. The 1hr broke through the cloud and could do anything at this point....go down or come back up...The 15m is on the downside quite a bit and is likely to come back up in my view.
>


>


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Maybe today’s decline turns out to be nothing more than a consolidative pause, or even some “nice consolidation” before a bigger move up and something that would prove last Thursday’s spike up to be a classic Runaway Day, but the totality of the charts suggests it could turn out to be a bit more and this may mean a brief correction to consolidate October’s outsized gains.

Starting out with the equity indexes that tend to lead, the Nasdaq Composite and Russell 2000 are showing small and nearly confirmed topping patterns born of the last three that could push the large and bearish Rising Wedges in each index toward fulfillment with those patterns calling for 10-15% declines from last week’s possible peak.




Today’s candle in the Nasdaq Composite’s chart above is fairly bearish and probably suggests the topping pattern will take this tech heavy index to its target of about 2615 and something that would indicate a bigger decline is on the way and an indication that would probably hold true for the S&P, Dow Industrials and Russell 2000 too.

However, as can be seen above, the Nasdaq Composite is still within the boundary lines of its bearish Rising Wedge and this is true of each of the other equity indexes after today.

Rather than complicating this picture by levels, it is probably simpler to say that if the equity indexes decline tomorrow by almost any degree that is not completely marginal, these bearish Rising Wedges will have kicked into fulfillment across the board.

On the other hand, if the equity indexes hold flat or rise tomorrow, those topping patterns may fail and today could turn out to be just a consolidative pause in the way of a bigger move up.

Such a possibility should not be ruled out in looking at the chart of Dow Industrials below considering that its tiny topping pattern has not confirmed even though its larger and bearish Rising Wedge appears to be doing so with today’s ominous candle supporting this potential drop.




The chart above also reminds us of an ultimately bullish reason as to why the Dow and the other equity indexes might decline in the days to week ahead beyond the consolidation of gains and that is to put in the right shoulder of potential Inverse Head and Shoulders patterns. The horizontal marking to the right above is probably too symmetrical to the left shoulder with it seeming more likely that the actual shoulder is put in somewhere well inside the sideways range, but even so, such a possibility speaks to a decent decline ahead.

Direction, again, tomorrow is probably the easiest way to make this determination during the day with a move up speaking to the consolidative pause and a move down pointing to some consolidative correction.

In looking at the charts of the various commodities, it seems the latter may be on the way with crude’s charts looking very bearish after today’s sideways trading and this true, too, of copper and the CRB Index Itself.

Crude is discussed in a separate note that calls for a possible 20% drop to $75/barrel even if it follows a possible brief blip up to about $96/barrel, but below is the chart of copper and the red metal seems more likely than not to decline on the combination of today’s bearish candle, its bearish Rising Wedge with a target of $3.00/lb and that Descending Broadening Formation that suggests copper could find $2.75/lb in the weeks ahead.




Interestingly and not surprising, the overall look of copper above is not so different than the look of the CRB Index with each looking similar to crude and the grains as well.




Today’s candle is pretty bearish looking and suggests a drop toward 310 and such a potential move would push that bearish Rising Wedge toward fulfillment of its target of 292.

When considering its own Descending Broadening Formation, though, along with the plateau of support between 260 and 280, it seems most likely that the CRB Index may answer its chart’s call for symmetry by dropping down toward that lower range of levels that suggests a 10-15% correction could be ahead for commodities.

Overall, then, there remains a chance that the risk assets may use the last three days of trading as a springboard to move higher and something that would make the last two days more of a consolidative pause, but the equity index and commodity charts seem to suggest a consolidative correction may be ahead.

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There will be NO announcement of QE 3 tomorrow. Why? Because the Fed has trapped itself into a corner. The first two rounds of Quantitative Easing (QE1 and 2) were viable for the Fed as inflation was running at deflationary levels in 2009 and at the bottom of their target range of 1-3% in 2010.

In both instances the implementation of asset purchase programs, which immediately juiced liquidity in the financial markets, had an immediate and pronounced effect on the level of inflation.
Today, with inflation currently approaching 4% on a year-over-year basis the Fed is not only outside its inflation mandate of 1-3% but any further cost pressures on the consumer is going to drive the economy into a recession. As we showed recently in our post on 3rd quarter GDP with food and energy consumer more than 23% of wages and salaries there is very little wiggle room for the average American.

Without access to credit, declining incomes on a year-over-year basis and uncertainty about employment there is tremendous strain on the consumer to make ends meet. The Fed knows this. They also know that without help from somewhere the economy is in trouble. The hope is that they can "talk" the markets along.
Therefore, expect no announcement of QE 3 tomorrow but lots of talk about policy tools, potential for further action and another punt to current Administration. However, there is a bigger problem brewing, and one that has been set aside due to the issues with Greece, the "Super Committee" only has 22 days left to announce the spending reduction plans before the automatic cuts take hold. This won't be good.

Unfortunately for Ben, and the Fed, they are trapped between the need to "do something" to boost the financial markets and support the economy but are constrained by their mandates to keep inflationary pressures under control. There is no help coming from a deeply divided Administration that can find no middle ground to compromise on. Furthermore, the automatic spending cuts are going to sap a portion of the 23% of personal incomes that are made up of government transfers. The consumer is tapped out, the economy is much weaker than the headline numbers suggest and without liquidity assistance from the Fed you can expect the recession to take hold in 2012.
However, we might get surprised by the Fed as they have done it before. The real question is even if they do something will it be enough to offset the damage that has already been done

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 kbit 
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1hr chart...pretty obvious we spent the day consolidating/winding up...just have to wait and see.
>

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Increasing Volatility: Prelude To a Crash? (November 1, 2011)


The megaphone pattern in the U.S. stock market typically presages a major decline or full-blown crash.

Market observers have long noted that increasing volatility presages market crashes. If you glance at a chart of September-October 1929, just before the crash that started the Great Depression, you will note the same sort of manic swings of euphoria and fear that have characterized the U.S. stock market over the past few months.
Not only are the swings increasing in amplitude, the time between each move up or down is decreasing. Think of a series of wind storms that grow increasingly more violent even as the time between storms diminishes.
In stock charts, this widening of range traces out a megaphone pattern. The S&P 500 (SPX) has traced out a classic megaphone pattern over the past few months:

Note the eleven wild swings up and down in a mere two months. Does anyone seriously believe this sort of schizophrenia typifies a healthy Bull market?
From a technical point of view, the recent euphoric three-week rally is nothing but a last-gasp attempt to regain the critical 200-day moving average (MA), another classic sign of a market about to roll over big-time.
On the weekly chart, we can clearly see how the timespan between official "fixes" and renewed declines has shrunk from six months from the first "fix" in May 2010 to two days after the last "grand fix." Market participants are losing faith in the Status Quo's ability to effect a coherent, lasting "fix," especially as the rules governing hedges such as CDS are changed at will.

Last week I reprinted this chart from The Chart Store of the uncanny similarity of the current market to the 1907 crash. Notice the "secondary" crash that occurred right about now in the 1907 chart; history doesn't repeat exactly, and analog charts are not predictions, but it is certainly interesting how recent action has closely matched the 1907 price movements. Were the present to continue following the basic outlines of the older chart, this targets an SPX level around 900.

In the real long-term, one target for the SPX is around 600. "Impossible," Bullish observers say. Perhaps. But all sorts of "impossible" things seem to have happened in the past four years, and the line between what's "impossible" and possible has blurred.
Technically, a re-test of the March 2009 lows around 666 is certainly possible, despite protestations to the contrary.

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A look at daily today, price is currently just above cloud and TS is as well. The KS is still in the cloud but if the present course continues it will come out on the up side in approximately a week. That's when things should get real interesting.

>


On the 1hr the only thing that isn't on the upside is the CS as of this posting...just going by this chart a long could be had at about 732....
>

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 kbit 
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Looking at the conventional daily...wedgy thingy going on. I'll be watching 735 (or 730) area for possible long if it gets to that area...be watching a tick chart at that point.

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These are a tick and 15m at the 735 area I mentioned in the previous post...choppy action on the way up (expected today) to 746 which is globex open on my chart

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Good trade.

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 kbit 
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I guess by the lack of participation I'm seeing here this thread is morphing into Kbits TF journal which is fine.
I was hoping to get some other views on what's going on but will be happy to keep rambling on myself.
On the topic of Ichimoku: As some of you know stops can be large and because of that reason it probably scares a lot of people away. I myself just look for the the high probablilty stuff to line up (based on my experience) and enter with comparitively small stops. Ichimoku is basically a pet project for me, my primary stuff is PASR simplton stuff. I try to identify areas where a reversal is going to happen and go from there. I might post some trades occasionally but will continue to post other stuff I think may be of interest. Speaking of that stuff, as it seemingly is always is the case, most of the articles and so forth that come from the professional talking heads is either wrong or serves to confuse guys like me....so take all the crap you read with a grain of salt as I do.

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 kbit 
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This was written by Paul Harvey...I know it's way off topic but fits in the "anything goes" part of this thread...I'll try to keep deviations to a minimum but thought this was worth posting.




THAT'S LIFE.
Can you answer this riddle?
Here is a pretty neat little thing from Paul Harvey. See if you can guess the riddle at the end.
Paul Harvey Writes:
We tried so hard to make things better for our kids that we made them worse. For my grandchildren, I'd like better.
I'd really like for them to know about hand me down clothes and homemade ice cream and leftover meat loaf sandwiches.. I really would.

I hope you learn humility by being humiliated, and that you learn honesty by being cheated.
I hope you learn to make your own bed and mow the lawn and wash the car.
And I really hope nobody gives you a brand new car when you are sixteen.
It will be good if at least one time you can see puppies born and your old dog put to sleep.
I hope you get a black eye fighting for something you believe in.

I hope you have to share a bedroom with your younger brother/sister. And it's all right if you have to draw a line down the middle of the room, but when he wants to crawl under the covers with you because he's scared, I hope you let him.

When you want to see a movie and your little brother/sister wants to tag along, I hope you'll let him/her.
I hope you have to walk uphill to school with your friends and that you live in a town where you can do it safely.
On rainy days when you have to catch a ride, I hope you don't ask your driver to drop you two blocks away so you won't be seen riding with someone as uncool as your Mom.

If you want a slingshot, I hope your Dad teaches you how to make one instead of buying one.
I hope you learn to dig in the dirt and read books.
When you learn to use computers, I hope you also learn to add and subtract in your head.
I hope you get teased by your friends when you have your first crush on a boy / girl, and when you talk back to your mother that you learn what ivory soap tastes like.

May you skin your knee climbing a mountain, burn your hand on a stove and stick your tongue on a frozen flagpole.
I don't care if you try a beer once, but I hope you don't like it... And if a friend offers you dope or a joint, I hope you realize he/she is not your friend.
I sure hope you make time to sit on a porch with your Grandma/Grandpa and go fishing with your Uncle.
May you feel sorrow at a funeral and joy during the holidays.

I hope your mother punishes you when you throw a baseball through your neighbor's window and that she hugs you and kisses you at Christmas time when you give her a plaster mold of your hand.
These things I wish for you - tough times and disappointment, hard work and happiness. To me, it's the only way to appreciate life.

Written with a pen. Sealed with a kiss. I'm here for you. And if I die before you do, I'll go to heaven and wait for you.
(Send this to all of your friends. We secure our friends, not by accepting favors, but by doing them. )
Paul Harvey RIDDLE:
When asked this riddle, 80% of kindergarten kids got the answer, compared to 17% of Stanford University seniors.
What is greater than God, More evil than the devil, The poor have it, The rich need it, And if you eat it, you'll die?
Send this to 10 people and then press shift and you will get the answer.
P.S. You won't believe this, but this will give you the answer to the riddle. Send this to others and then press shift, after you send. Once you press your shift key, you will understand the riddle



P.S. I guess I'm with the kindergarten kids...I figured out the answer without forwarding it at all...can you?

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 kbit 
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TF thread (Russell 2000) ... anything goes-ichimokuwiki.pdf

The above is a Ichimoku wiki thing for those who might be interested, I think I posted it before somewhere but as it is relevent here...here it is again.

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 kbit 
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Above is a daily chart with some areas that should have some significance on monday. If it goes down 716ish should come into play, if it goes up 759 and/or 764ish should come into play.....in either event 738 should be involved in there somewhere.....we'll see

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By Abigail F. Doolittle
In this particular case, one means the same more so than over-the-top bearish and that one bearish message is of a potential 10%+ decline showing and confirming in the intraday, daily and weekly charts of the equity indexes.

Starting out with the intraday charts, the possible Head and Shoulders patterns discussed yesterday continue to progress nicely as is shown below.




The S&P’s pattern confirms around 1215 and carries a target of about 1143. The Dow’s pattern confirms around 11600 and carries a traget of about 11000.

Turning to the daily charts, these topping patterns become a bit more ambiguous in the charts of the Nasdaq Composite and the Russell 2000 but are pretty clear nonetheless.




The Nasdaq Composite’s topping pattern confirms around 2600 and carries a target of about 2450. The Russell 2000’s pattern confirms around 715 and carries a target of about 655.

Turning back to the S&P and the Dow, each is showing a major Pipe Top in its weekly chart with ugly and bearish candles showing across the board for this week.




The S&P’s pattern confirms at surprise, surprise 1215 and carries a target of 1137. The Dow’s pattern confirms at 11630 and carries a target of 10976.

To be fair, however, the weekly charts of the Nasdaq Composite and Russell 2000 are showing, similar to the daily charts, more ambiguous possible topping patterns.




The Nasdaq’s pattern confirms at 2600 and carries a target of, yes, 2450, and the Russell 2000’s pattern confirms at 708 and carries a target of about 645.

All in all, then, that the intraday, daily and weekly charts of the equity indexes are showing topping patterns and the hallmark of a failed Runaway Day and the topic of last Friday’s daily note.

In turn, it seems more likely than not that last Thursday’s surge was, in fact, a failed Runaway Day and one that appears likely to lead to a 10%+ decline in the equity indexes and that is one bearish message

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Attachment 54145

Above is a daily chart with some areas that should have some significance on monday. If it goes down 716ish should come into play, if it goes up 759 and/or 764ish should come into play.....in either event 738 should be involved in there somewhere.....we'll see


Well it didn't play out as expected...maybe 738 will be the launching pad for a rise tomorrow. I still have the same outlook really...I'm thinking upside tomorrow

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That's a daily Ichimoku...still plugging along above the cloud, Really need to see the KS work it's way out. It's just going to take a few days but is still bullish in the mean time. Similar conditions exist on the 1hr and 15m as of this post

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With volume in S&P futures more than 20% below average, the afternoon's rumor-mill managed to juice stocks to overnight highs, well ahead of credit once again and more than two standard deviations above the day's VWAP. Interestingly, today's VWAP and Friday's VWAP were within 1 S&P point, rather coincidental given the 2% swings from high to low to high during the day.

Notably we shifted from almost 2 standard deviations below VWAP at today's lows to over 2 standard deviations at the close - though notably little real auctioning shifts happened - as the solid dark blue line shows - with peak volume trading flat from mid-morning. The dark red line is the volume-weighted average price (VWAP) for today's action (and the dashed dark red horizontal line is the VWAP for Friday). The fact that heaviest transaction volume occurred at VWAP today and that is very close to Friday's VWAP suggests that so-called Mutual Fund Monday (inflows) were not really active.

ES managed once again to handily outperform as buyers appeared into the rumpr this afternoon - with HY credit remaining notably cheap to stocks, we should be seeing it outperform if risk appetite was really back. We also note the exact same behavior on Friday that reverted dramatically overnight.
Gold and Silver followed each other tick for tick and the former almost touched $1800 into the close as the USD leaked lower on the day.

For some balance, it is worth noting that broad risk markets were not as weak as ES during the day which likely meant that correlations were implicitly dragging stocks to the upside for much of the day (imply bias to buying from the algos). The CONTEXT model shows that ES tended not to drag broad risk lower and by the close we had reverted 'up' in ES to a more broad-risk-based perspective of what was fair (based on correlations).

All-in-all, an odd somewhat news-less volume-less day that seemed dominated by algos (for a change) as opposed to real risk appetite - even though HY actually some issuance (where concessions were very high). Intriguingly, we note that the rumors of something out of Europe started to appear as ES shifted to its most weak relative to broad risk assets (oh yes we are sure the whole European crisis will be over in 1-2 years!) and then was juiced by more 'news' at around 3pmET (wow, an EFSF structured credit vehicle with external buyers...brilliant!) - were 'they' starting to worry that they were losing control?

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Something for you tick and or vwap guys. Went through monthly vwap then popped above and got immediate support then up to weekly and got support then up to previous daily and found support....little chopping around that one though but.....

You can also see pivots played out nicely today as well.....for you guys that say pivots are worthless.

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It’s All Greek To Me

By Michael Lewitt
“This is a great trap of the twentieth century: on the one side is the logic of the market, where we like to imagine we all start out as individuals who don’t owe each other anything. On the other is the logic of the state, where we all begin with a debt we can never truly pay. We are constantly told that they are opposites, and that between them they contain the only real human possibilities. But it’s a false dichotomy. States created markets. Markets require states. Neither could continue without the other, at least, in anything like the forms we would recognize today.”
– David Graeber, Debt: The First 5,000 Years

For a couple of days last week, European authorities appeared to have settled on a massive monetization scheme that would have eliminated the imminent risk of a collapse of Europe’s banking system. We wrote “appeared to have settled” because less than a week after the plan was announced, Greek Prime Minister Papandreou unexpectedly called on Monday for a public referendum on the plan. The vote wouldn’t occur until January 2012, which would extend the period of uncertainty for two more months. The market reaction to this announcement was dutifully panicked, with European bourses plunging (the DAX and CAC indices were both down 5 percent) while German bond yields dropped 26 basis points to 1.76 percent as investors flocked to safety. Systemic risk was placed squarely back on the table and cut out the legs from the rally that boosted markets out of the upper end of their trading range at the end of last week.

The markets thought they could step back from the brink on the news that the European Financial Stability Facility (EFSF) would be leveraged by 400 percent and European banks had agreed to write-off 50 percent of their Greek debt. These measures had convinced the market that Armageddon would have to wait for another day. Now the markets are not so sure. Counting on byzantine Greek politics to deliver certainty is a dubious proposition to say the least. But the plot thickened even further as money managers around the world were pulling out their remaining strands of hair. On Tuesday, November 1, shortly after European markets closed, reports surfaced that the Greek referendum was off. As I wrote to one of my friends, every time I tried to put this issue to bed, more news came out of Greece that made it impossible to know exactly what to say. At this point, I am starting to feel like Sybil, the girl with 27 personalities (and now we’ve learned –like we didn’t already know – that she was a complete fabrication in the first place). Nonetheless I will do my best to wade ahead with the limited number of personalities I have left.

At best, the proposed bailout plan would have been/will only be a temporary solution to a long-term structural problem that requires an entirely different set of solutions than monetization and leverage. Our initial reaction to the plan was decidedly positive, however. We believed it would lead to a strong rally because it would remove systemic risk through the end of 2012 even though it did not provide a permanent solution. TCS wrote the following last month: “If the plan ultimately takes the form of leveraging the EFSF, the markets will likely rally and ignore the fact that such a program would at best place a Band-Aid on the underlying wound. Even a flawed plan will be perceived to be better than no plan at all. Unfortunately, such a plan would only create the illusion of stability while allowing the underlying imbalances and flawed policies to fester”(The Credit Strategist, October 1, 2011, “Confidence Games,” p. 1). The markets were desperate for a genuine solution but would have settled for stopgap measures. Now, unfortunately, they aren’t even being granted the latter.

In terms of the substance of the plan, it is obviously designed to cover Italy’s and Spain’s collective €1.5 trillion of borrowing needs over the next three years as well as those of Greece, Portugal and others. In that respect, however, it leaves little, if any, margin of error. After all, the EFSF is not an actual pool of money but merely a collection of IOUs that have to be fulfilled by 17 European states, at least two of which (Italy and Spain) are unlikely to keep them. As a result, one can expect further strains in the arrangement and market volatility resulting therefrom if the plan actually proceeds. If the plan does not proceed, investors will be begging for volatility as a welcome alternative to what they could be facing.


As one who has written that there is little chance of a long-term solution to these problems without a radical rethinking of global economic policy, the Europeans still have little choice once they peer over the cliff to realize other than to step back and buy some time before taking the inevitable leap. For, in the end, they have no other options than to jump. If they can squeeze a favorable vote out of Greece in January, they will then face the test of trying to implement meaningful pro-growth economic policies as their banks absorb their Greek losses. Skeptics are certainly correct to raise questions about the prospects for long-term solutions, but investors were not being reckless in acting as though systemic collapse was a worry for another day. They were wrong-footed by the announcement of a Greek referendum, which came as a surprise to us and to many others. But the removal of imminent systemic risk was a reasonable short-term buy signal for those with short-term investment horizons.

European economies are facing severe economic contractions in late 2011 and 2012 with little clarity on pathways toward growth. This is not news to the markets. Italian 10-year bond yields took little time to blow back through 6 percent and have now widened by 225 basis points this year. The European Central Bank might as well thrown money down a rat hole as purchased Italian bonds earlier this year. Yet, while Italy seems to be getting most of the attention of both the media and European political leaders pressuring its Prime Minister to implement budget cuts, Spain is starting to experience alarming degrees of economic pain.

In the third quarter, Spain’s unemployment rate reached the highest level in 15 years –an abominable 21.5 percent. The number of households without any income also reached a record level – 559,900, or 3.2 percent of all families. This is a result of the exhaustion of unemployment benefits for a growing number of Spaniards. In Spain, these benefits end or decline significantly after 24 months, compared with 3 to 5 years in some other European countries. While the Spanish government is looking for ways to stimulate job growth through government spending, the European Union is pressuring the country to reduce its budget deficit from more than 9 percent of GDP to 3 percent by 2013. The struggle between the government safety net and budget discipline will be increasingly painful across the union for the next few years.

Greece is mired in a depression that is getting worse by the day as it is forced to meet its northern neighbors’ austerity demands in order to receive aid that still won’t get it out of the bottomless economic pit it has dug for itself (the country needs to exit the EU, something that may be addressed in the referendum – if there is one). Banks taking 50 percent haircuts on Greek debt will now have to raise additional capital either in the public markets (highly unlikely) or via the EFSF, which will further dilute their already washed out stocks and divert them from the business of lending into recessionary economies (see below for more on European banks). The rating agencies are licking their chops in anticipation of dunning France’s AAA-rating, and Germany is only slightly further behind on their list for downgrade (for more on Germany’s credit rating, see below). The costs of fiscal union are proving to be somewhere between excessive and prohibitive.

One of the rabbits that the Europeans succeeded in pulling out of their hats is deeming the 50 percent write-off of Greek debt something other than a “credit event” that would trigger payment under the credit insurance contracts governing Greek debt. According to The Wall Street Journal, only a relatively small amount of money would have actually changed hands had a “credit event” been deemed to have occurred - $3.7 billion. But European leaders were able to convince holders of the debt to accept a “voluntary” write-down, which does not trigger a payment under the insurance contracts (known as credit default swap contracts, or CDS). The concern raised by market participants is that CDS will lose its utility as a hedge if parties are able to negotiate around it as they did in this case. A number of bankers were fretting in the media that this would result in higher borrowing costs for sovereigns by making it harder for buyers of sovereign debt to hedge their positions.
To a limited extent that argument may have some merit, but for the most part CDS is used to speculate and not to hedge. If these self-interested bankers are really concerned about lowering sovereign borrowing costs, they should simply support a ban on naked sovereign CDS. That would leave investors with the ability to hedge, which would lead borrowers to lower their yield demands, and eliminate the pressure on rates placed by speculators who sell short sovereign credit without actually owning it. One of the reasons European leaders were so focused on not invoking a “credit event” in a Greek debt restructuring was to prevent speculators from profiting from Greece’s troubles.
European Banks

Figure 1
The Banks That Swallowed Europe

A key part of the European rescue plan is leveraging the EFSF so that banks will be able to take the write-downs of their Greek debt holdings and then access capital so they will not be rendered insolvent (although since the entire edifice is built on debt it is unclear how they will be able to pull that off: It would seem that some non-traditional financing structures are going to be required for European banks. Among the structures that should be considered are bonds with warrants and convertible securities. Lenders will be taking equity risk and should be compensated accordingly. They should also be granted appropriate covenants that limit the ability of managements to make the same kind of stupid decisions that got them into their current messes). Nonetheless, the dilemma facing Europe’s banks is truly formidable. Banks represent a much larger presence in European economies than they do in the United States, as Figure 1 illustrates above.

In an appearance on CNBC’s Squawk Box and in an important essay in the Financial Times, Oliver Sarkozy, the half-brother of France’s Nicholas Sarkozy, laid out the challenges facing the sector. (Oliver Sarkozy, “Europe’s dithering over banking risks 2008 again,” Financial Times, October 25, 2011, p. 9.) Mr. Sarkozy notes that Europe’s banking sector has $55 trillion of assets, four times larger than the U.S. sector. As a result, European banks are funded through institutional (what he calls wholesale markets, which he describes as much less stable and much more fickle than depositors. European banks rely on institutional markets for about $30 trillion of their funding, about 10 times more than U.S. banks.
In the third quarter, this market was essentially closed to European banks, leaving them with only internally-generated sources of cash to repay institutional funding as it rolls off. Institutional funding has a three-year average life, so European banks need to generate more than $800 billion each month to fund maturing institutional borrowings. This is, in Mr. Sarkozy’s words, unsustainable. And the markets are saying so. The CDS market for European banks is back at or above the peak levels seen during the 2008 financial crisis. While Mr. Sarkozy does not come out and say it, TCS will – the likely future for European banks is Dexia SA, which was nationalized by France and Belgium when it ran aground a couple of weeks ago. Figure 2 below shows the horrible performance of European bank stocks over the past few years and since January 2011(readers will note that TCS has been recommending that investors short European banks all year).
Figure 2
The Heart of the Problem

Mr. Sarkozy suggests that European banks will require $2 trillion of recapitalization, twice the amount that is provided for in the plan announced by European leaders.TCS would like to ask what type of financial prestidigitation is going to be required to transmogrify EFSF borrowings into bank equity. Either way, the problem is enormous and is unlikely to be solved by what the Europeans have proposed thus far.
U.S. Economy

Fears of a double dip recession can placed on the back burner as the U.S. economy grew at a respectable 2.5 percent annual rate in the third quarter. After six months of below one percent growth, this was a welcome recovery. The main contributors to growth were personal spending, which increased by 2.4 percent (adding 1.7 percent to annualized GDP) and business fixed investment (which added 1.5 percent to annualized GDP). Inventories subtracted 1.1 percent from GDP growth and government spending was flat. If readers are puzzled by the contribution of personal spending in the face of 9.1 percent unemployment and a persistent housing crisis, we are too. The will-to-spend of the American consumer is something to behold, and apparently the addition of even a disappointing 100,000-125,000 jobs per month is sufficient to keep it afloat. But it should also be recognized that personal spending remains below the levels of previous recoveries (as does pretty much every other sign of economic health). Business spending is responding to decent demand in the emerging world, but there are indications that this is starting to slow. The point to be taken from these numbers is that the U.S. would do well to maintain growth in the 2.5-3.0 percent range going into 2012. This is a growth rate that is going to have to be proven; it is not something to bank on.
The Global Debt Albatross

In a late August interview on Bloomberg television with Tom Keane, I argued that one of the major factors suppressing economic growth in the U.S. is the enormous weight of debt throughout the economy. Debt service is a drag on economic growth today because much of this debt was not incurred with respect to productive activities. Instead, much of this debt is related to either housing (which is an unproductive asset) or financial speculation in the markets. Accordingly, economic actors are required to commit their capital to service debt that didn’t contribute to productive economic growth.
Figure 3
A Civilization Built on Debt

There is also increasing evidence that the sheer amount of debt has reached the point where it is retarding growth and that additional debt will place additional downward pressure on the economy. TCS came across confirmation of its argument in the always indispensable writings of our friend Christopher Wood. Mr. Wood wrote in the October 6, 2011 issue of GREED & fear that: “the evidence increasingly suggests that the Western world has now reached a point where further increases in total aggregate indebtedness are bad for growth even if it is assumed, optimistically, that the authorities are successful in triggering private-sector deleveraging.”

Mr. Wood cited a Bank of International Settlements (BIS) Working Paper written by Stephen Cecchetti, M.S. Mohanty and Fabrizio Zampolli entitled “ The real effects of debt.” This paper was presented at the August meeting of central bankers in Jackson Hole, Wyoming. The authors of this report analyzed data for 18 OECD countries for the 30-year period 1980-2010. Their findings are disturbing (though hardly surprising). First, the ratio of debt-to-GDP (total government, corporate and household debt but excluding financial sector debt) has risen from 167 percent to 314 percent during that period. Second, regression analysis showed that debt becomes sufficiently large to slow economic growth as follows: government debt – 85 percent; corporate debt – 90 percent; household debt – 85 percent. Needless to say, the United States has exceeded those levels today with no diminution of the debt burden in sight.

U.S. government debt is at 97 percent and household debt is 95 percent. Only corporate debt, at 76 percent, is below the threshold. Figure 3 above shows these statistics for all of the countries studied. It is not a pretty picture.
One thing to focus on in Figure 3 above and in Figure 4 below is the fact that Germany, the country on which the economic fate of Europe largely rests, is itself heavily indebted. Germany carries a total non-financial debt-to-GDP ratio of 241 percent (government – 77 percent; corporate– 100 percent; household – 64 percent). One can see why it is far from certain that Germany will have the economic or political wherewithal to bail out its weak European neighbors even if it musters up the political will to do so.
Figure 4
Germany– Going, Going, Gone?

One of the other points made in the BIS paper – something TCS discussed in the Introduction to The Death of Capital – is the enormous impact that aging populations will have on countries throughout the world. Figure 5, which appears on the next page (it appears on page 24 of The Death of Capital), was developed by the International Monetary Fund to show that spending on the 2008 financial crisis, which was in the trillions of dollars, is dwarfed by the projected costs of caring for aging populations. On average, aging populations will cost the advanced G-20 countries 14 times more than the financial crisis.

The point made in both the BIS study and my book is that it is incumbent upon advanced economies to bring their debt under control. Otherwise, the world is at risk of not having the resources to deal with the problems that they are going to face in the future. These problems include natural disasters (like Japan’s tsunami); environmental degradation and climate change; nuclear proliferation; terrorism; military conflict; pandemics, and hunger and poverty. Each one of these poses a potential threat to human survival (and is precisely the type of Black Swan for which most investors are not prepared). To continue to run our economies like a bunch of drunken sailors is incredibly reckless in the face of these future challenges.
Figure 5
Debt May Kill Us Before Old Age Does

It should also be noted that China, the Great Hope of the global economy, is hardly a paragon of fiscal rectitude. China’s total non-financial debt-to-GDP ratio is 174 percent (government debt –44 percent; household debt – 19 percent; corporate debt – 111 percent. This does not include the massive amounts of debt hidden on the balance sheets of opaque Chinese banks. China is concealing its own debt problem and the opaque nature of the situation renders it a bit of a wild card in the global economic picture.

Zuccotti Park
The “ Occupy Wall Street” movement has received more than its fair share of media attention. There is no doubt that the protestors are emitting a primal scream against the system of “ capitalism for the poor, socialism for the rich” that characterized the steps that both led to the 2008 financial crisis and those that were taken to stem it. A growing percentage of the citizenry is coming to believe that a system that privatizes profits and socializes losses lacks legitimacy.

At the same time that protestors are railing against the current capitalist regime, and European leaders are doing everything in their power to perpetuate it, legal authorities in the United States are doing their part to insure that little will change. The recent insider trading prosecutions have properly attacked a flagrant and distasteful underside of the capital markets, although someday it will have to be explained how it is not insider trading when a well-known investor is permitted to accumulate a position in a company before publicly disclosing it and watching it soar in value. Leaving that aside, however, there is another legal assault that raises far more important systemic questions that the insider trading prosecutions. TCS is speaking of the lawsuits against the nation’s largest financial institutions for their sales of toxic mortgage securities. Last August, the Federal Housing Finance Agency sued 17 major Wall Street and European banks for selling more than $200 billion of these mortgage securities to Fannie Mae and Freddie Mac. At the same time, a number of state attorney generals are suing mortgage servicers for various abuses. Finally, there are a number of specific ongoing investigations (and a lawsuit or two) against specific underwriters for transactions similar to the Abacus abortion that brought so much shame on Goldman Sachs (and might one say that the Gods have exacted their revenge this year on John Paulson for his profiteering from that dirty business?). Where these legal proceedings will ultimately end up is anybody’s guess (although one can say with certainty that they will enrich the attorneys working on them).

TCS would like to raise a broader issue. The people camping out in Zuccotti Park are evidence of societal unease about the legitimacy of the current form of crony capitalism that has contributed to this country’s economic difficulties. Contributing to this unease has been the often-heard complaint that virtually nobody has gone to jail for causing the financial crisis. There is a very good reason for that, however. And that reason is not the one we heard from the U.S. Attorney with respect to its failure to bring charges against the incompetents who ran Washington Mutual, that the evidence did “ not meet the exacting standards for criminal charges.” Of course there was no evidence of criminality – the perpetrators of the conduct are on the same side of the table as the prosecutors! The reason that blatantly dangerous and unethical behavior cannot be prosecuted under our current system of laws is that there is no independent, third party, arm’s-length arbiter of behavior for the system. The system is worse than one in which the fox is guarding the henhouse. In our system, the fox is the architect that designed the henhouse!

Our justice suffers from a design flaw. It requires an independent investigative/prosecutorial arm that is part of the judicial rather than the executive or legislative branch of government. The only individuals that have truly stepped up and challenged the status quo that governs the political-financial ascendancy are federal judges such as Jed Rakoff. Judge Rakoff has given hell to the Securities and Exchange Commission over its bogus settlements with the large banks over settlements that are obvious political accommodations rather than true holdings to account. The judicial branch, which is certainly less beholden to large financial interests than the legislative branch (our bought-and-paid-for Congress) and the Executive Branch (our bought-and-paid-for President and Justice Department), is well positioned to serve as an independent arbiter of financial wrongdoing. It therefore offers the best opportunity to restore legitimacy to a system that has lost any right to judge its own conduct.
The Devolution of Wall Street

During the final segment of CNBC’s Strategy Session (which TCS will miss), David Faber made a very compelling comparison between two financiers – Michael Milken and John Paulson. Mr. Faber made the point that when he began his career as a Wall Street journalist (he started in the same year that I joined Drexel Burnham Lambert, Inc. –1987) the most highly compensated financier of the era was Michael Milken. Today John Paulson wears that crown. Mr. Milken famously earned $550 million in1987 (which pretty much sealed his legal fate regardless of the validity (or lack thereof) of the charges brought against him) while Mr. Paulson earned an astounding $5 billion in 2010 (and a couple of billion more in 2009 from his bet on subprime mortgages).
Mr. Faber then went on to point out that Mr. Milken created the high yield bond market, which has expanded into a major economic force that financed many new businesses such as telecommunications (MCI), cable television (John Malone), and casinos (Steve Wynn and others). In contrast, Mr. Paulson has created nothing and instead profited from mere speculation. The difference between how these two men made their fortunes not only says a lot about how Wall Street has devolved over the last 25 years, but also how the U.S. economy has deteriorated

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Nothing new on the Ichimoku front....same old stuff. On the conventional daily chart it's breaking out of the wedgy thingy and is pointing up. It is interesting however that recently the floor trader pivots seem to be respected very well lately as evidenced by the last few days trading. The vwaps have also been playing a significant role lately as well. On the ES the bottom was had right on the weekly vwap. As you can see on the attached chart the vwaps played a role on the TF as well but not as significantly....

>
As far as the levels I have been keeping an eye on, The TF has not been behaving itself in this regard. The 740 level might be the bottom tomorrow if things play out the same as the past few days but now that I know what they're up to it will probably change....Anyway some of the spots on the up side to watch are 767, 771, and 775.
Based on recent action however somewhere just around 769 might have some significance...we'll see

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The apparently contained correction of late July through early October resulted in a sideways range that produced what could be a left shoulder and a head to a good Inverse Head and Shoulders pattern and one that would propell the S&P significantly higher as had happened in 2009 – 1 – and 2010 – 2 – if it could find a right shoulder similar to those other time periods.

For some reason around this time last week it struck me that the trading around 3 does not look so much like 1 and 2 anymore and this reminded me of 1998 and a year that had appeared to be a decent compare back in Auguest when lots of charts were reviewed for obvious reasons.

Low and behold, 2011 looks a lot like 1998 and particularly on a monthly basis as last Friday’s note pointed out but now it seems that maybe the daily comparison is growing stonger too.




In fact, maybe the recent congestion compares to the underlined area in 1998 and one that led up for 16 months.

After all, the intraday Triple Tops pointed out last night failed as did intraday Pipe Tops today while the Russell 2000 confirmed the move up in equities today and something that did not happen yesterday.

The entirety of this picture is beginning to point to the idea that what had appeared to be Head and Shoulders patterns are turning into bullish areas of congestion that will support 5-10% moves up in the equity indexes unless today turns out to be a false breakout to the upside from what go back to being a daily Bear Pennant of sorts.




That’s a pretty bullish candle in the Russell 2000 above, though, and it makes it seem as though tomorrow will be about more gains ahead as do the other indexes with the S&P and Dow having a touch of an Ascending Triangle comprising the last several days of trading and a pattern that tends to be bullish even though the Dow’s area presents a bit bearishly.

Turning back to the S&P as the barometer, it is nearing important resistance between about 1279 and 1300 and it is back above its 200 DMA on a closing basis.




Interesting about its 200 DMA is the fact that the right part of the neckline from last year’s IHS pattern took out the 200 DMA briefly before plummeting back below it for a few weeks. Even more interesting, perhaps, is the fact that the peak separating the two troughs to comprise 1998’s Double Bottom touched its 200 DMA then only to lead to a plunge for a few weeks as well.

What seems like a technical positive right now, then, or the S&P, Dow and Nasdaq Composite trading above the respective 200 DMA of each index may not be as positive as it seems on first glance.

So in order to believe the rally born of October 3’s Bearish Band-Aid Rip will cause little to no pain in the weeks ahead, the S&P must rise above 1279 and close above 1300 and the Russell 2000 needs to trade above its 200 DMA as well at 777 currently.

Should the S&P close above 1300 and the Russell 2000 take out its 200 DMA on a closing basis – something that did not happen until January 1999 – then it seems 1998 Part 2 will come without the third right shoulder that made sense to me in looking at the charts of 1998 and May 2008 together. In other words, my expectation that the recent sideways trend would grab the equity indexes back down to put in a right shoulder to a possible IHS pattern that would then send equities 20% higher will prove wrong as equities simply shoot 10%+ higher from current levels without the move down.

On the other hand, maybe the S&P fails to take out 1279 and 1300 and its trading of the last three months proves to be the first part of something that will turn out to be closer to a massive Double Bottom and one that will send the index back down into that sideways trend for a 10% decline before propelling a 20%+ move higher.

Should this scenario play out, 1998 might be coming early but in an entirely different way and one that will take the S&P significantly back down before springboarding it higher and as unlikely as this probably seems, it is made a bit more likely by a sideways trend that could get truly vicious yet.

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Wild and crazy.
I guess there is no point on focusing on technicals to much since we are subject to ridiculous moves from all the headlines. I guess I'm turning to the daily Ichimoku however to tell me that there is still upside potential despite the news coming out of Europe. Todays candle basically came down to the top of the cloud and dragged the CS in the cloud. This could of course go either way but as it sits now I am not giving up on the bulls just yet. I have been just looking at intra day stuff and trading of my tick chart exclusively ....safest way to deal with this stuff.
>

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I just had some more thoughts I would post. I don't know about the rest of you guys but unless the TF breaches the 700 level and stays there I will not give up the bullish notion. Really in the bigger picture it could dip down to 680 ish and spin around ...who knows, time will tell. In the nearer term I want to see what happes around the 710 area, it should give a clue

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Above is 2000 tick chart....for those of you that just trade what you see notice the nice pinbar off yesterdays low( bueb on 1597). I took the ride up to 730 but even if some would have dumped it at the 726 area it was decent.
Take note that no indicators are required for this...simple PASR. I will say the trade management does require some experience but the entry on this stuff is pretty simple.

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I'm kind of interested to see if 732 to 738 is going to be a problem on the upside. If we get through that area, somewhere short of 750 should happen (aroud745 ish). those are just areas to keep in mind.

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From Charles Smith:


If we dispense with all the fancy stuff, we end up with a simple see-saw with the euro and global equities on one end and the much-hated U.S. dollar on the other.

If we scrape away the ever-hopeful headlines predicting a new figurehead lackey or another vote will magically fix Greece, Italy, the euro, Europe's crumbling banks, etc., the global stock markets can be distilled down to one chart. And here it is: a see-saw with the U.S. dollar on one end and the euro and equities on the other.

I know the mind rebels at such simplicity, and so does the entire buy-side Wall Street edifice: if it all boils down to this, then there really isn't much value added by the endless reams of fancy reports and analysis, is there?
But let's presume for a moment that it really is this simple. Where does that leave global stock markets? The answer can be had by glancing at two other charts: one of the euro and one of the dollar.

Now that the cargo-cult chiefs are openly talking about the euro splintering into euro 1 and euro 2 (i.e. business class and steerage), something I proposed as a possible "face-saving" step in the devolution of the euro 18 months ago ( Why the Euro Might Devolve into Euro 1 and Euro 2 March 2, 2010), then the common-sense question is: why is the euro worth 36% more than the dollar? The answer is that it isn't worth 36% more, of course, and for a bit of technical support of that we turn to a simple chart.

There's not much to support Bulls' claims of euro strength here and much to suggest the euro is in a leaky barrel floating helplessly toward Niagara Falls. Classic wedge broken decisively to the downside, check. Uptrend decisively broken, check. RSI declining but not oversold, check. MACD declining and below the neutral line, check. Price below the critical 200-week moving average (MA), check. Price below the equally critical 50-week MA, check.
The last time these conditions occurred (April 2010), the euro cliff-dived from right where it is now around 136 to 120 in a few weeks. Technically, there are numerous reasons to consider this a high-probability scenario and essentially no support for the notion that the euro is about to storm higher.
And as the euro goes, so go equities.

Meanwhile, the chart of the dollar is unsurprisingly the inverse of the euro: it's loaded with bullish bits. RSI rising, check. MACD rising and above the neutral line, check. Classic wedge broken to the upside, check. Downtrend decisively broken, check. Classic A-B-C-D pattern visible, check. Price above the critical 50-week moving average, check.
In another classic move, price kissed the 200-week MA, retraced to support, and is now rising back to break through the resistance offered by the 200-week MA.

Without getting too fancy, the obvious targets for the euro are 120 and parity with the dollar at 100. This could also be seen as reversion to the mean. The targets for the DXY (dollar index) are correspondingly 88-90 and 100-105.
As for what this means for equities, it's a free-for-all limbo dance: how low can you go? The S&P 500, currently around 1,240, could easily limbo down to the psychological 1,000 level, pause to towel off the sweat and then repeat its 2008 swan dive to 666. Or maybe not. The only thing the see-saw tells us for certain is the euro and equities are on one end and the dollar is on the other. If the euro tanks, equities tank, too.
I know, I know, the dollar is doomed, it can't possibly rise, blah blah blah. If you insist on a fundamental reason, then read this: banks are short currency, long assets (Zero Hedge). And what's holding up the euro again? I'm getting a lot of static in the answer.

charles hugh smith-Weblog and Essays

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I'm kind of interested to see if 732 to 738 is going to be a problem on the upside. If we get through that area, somewhere short of 750 should happen (aroud745 ish). those are just areas to keep in mind.


We're at 738...this is the spot...keep an eye on it

Edit: I got a close above it but a little to soon as of this update to say....would just look for 738 to hold/get retested.
That's all for today since I'm likely talking to myself anyway.....

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>
That's a daily Ichimoku, looks like the KS is about ready to come out on the upside of the cloud. At that point I will monitor closely the TS and KS relationship (and where price is in relation to the KS) to determine an entry for a long. It's to early to say anything yet but it's getting closer. Once it gets close I will move down time frames and so on and fine tune an entry.....stay tuned

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Sometimes I get really frustrated with hindsight analysis.



The bottom chart they circled "prepare for liftoff". We have:
a) RSI moving higher but below 70
b) MACD cross above 0
c) Price trading above SMA 50
d) Price trading on or near SMA 200

Then on the top chart, they conveniently forgot to circle nearly the exact same conditions:
a) RSI moving higher but below 70
b) MACD cross above 0
c) Price trading above SMA 50
d) Price trading on or near SMA 200

Here is how the charts look in real time, in other words the only time that really matters - when you are ready to make an actual trading decision:





Now I am not saying you can't find other reasons for/against trading, but I just felt compelled to talk about the inconsistencies between the two charts using hindsight analysis.

When you look at the right edge of these two charts (my clipped version above) then you can see the "conditions" are nearly the same from a technical standpoint of what these two charts show, yet the outcome is massively different from one chart to the other.

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Sometimes I get really frustrated with hindsight analysis.



The bottom chart they circled "prepare for liftoff". We have:
a) RSI moving higher but below 70
b) MACD cross above 0
c) Price trading above SMA 50
d) Price trading on or near SMA 200

Then on the top chart, they conveniently forgot to circle nearly the exact same conditions:
a) RSI moving higher but below 70
b) MACD cross above 0
c) Price trading above SMA 50
d) Price trading on or near SMA 200

Here is how the charts look in real time, in other words the only time that really matters - when you are ready to make an actual trading decision:





Now I am not saying you can't find other reasons for/against trading, but I just felt compelled to talk about the inconsistencies between the two charts using hindsight analysis.

Mike


Good eye Mike, I didn't notice that. A lot of this stuff I run across I just zip through because like I said a few posts ago, much of the stuff we run across contradicts each other and so forth. I, like you I suspect don't put a lot of wieght on all these "opinion" pieces. I do like to just get a general idea of all the views out there.

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kbit View Post
Good eye Mike, I didn't notice that. A lot of this stuff I run across I just zip through because like I said a few posts ago, much of the stuff we run across contradicts each other and so forth. I, like you I suspect don't put a lot of wieght on all these "opinion" pieces. I do like to just get a general idea of all the views out there.

Sure, no prob - I appreciate the posts and commentary from outside sources, but sometimes I feel these outside sources aren't trading their own charts. We've all marked up charts in hindsight that look awesome, myself included.

But I don't want people to focus on the wrong things.

What really made me spend a few minutes to do my "tear down" of his charts was the cockiness of his commentary "any questions?" lol. I mean it's all in good fun, and I get that, but it motivated me to put together the view from a real live trader, trading from the far right edge, and show how the two setups looked nearly identical on his charts yet had vastly different results.



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Sure, no prob - I appreciate the posts and commentary from outside sources, but sometimes I feel these outside sources aren't trading their own charts. We've all marked up charts in hindsight that look awesome, myself included.

But I don't want people to focus on the wrong things.

What really made me spend a few minutes to do my "tear down" of his charts was the cockiness of his commentary "any questions?" lol. I mean it's all in good fun, and I get that, but it motivated me to put together the view from a real live trader, trading from the far right edge, and show how the two setups looked nearly identical on his charts yet had vastly different results.



Mike


I see what you mean....larger point that is. I have a habit of going "all over the map" . I will try to maybe just post things that I screen a little better and agree with what my outlook is.

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I see what you mean....larger point that is. I have a habit of going "all over the map" . I will try to maybe just post things that I screen a little better and agree with what my outlook is.

Hey I wasn't aiming anything at you. I appreciate your posts and helping bring in external commentary.

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Hey I wasn't aiming anything at you. I appreciate your posts and helping bring in external commentary.

Mike

I understand, thanks

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By Abigail F. Doolittle
In looking at the charts tonight, the one thing that is clear is the fact that the equity indexes are about to move and move big. Considering the challenges faced by yours truly around timing, “about” may actually mean about as in Monday or it may turn out to be the Monday a week later or two later, but when the equity indexes start to move out of the consolidation of the last few weeks, the “move” will be unmistakable.

At this time, the charts continue to tell me the “move” is more likely to be to the downside, but the potential upside move is not out of the question and will be very much a likelihood if the S&P closes back above 1279 and then 1300.

The two-year chart below shows the S&P’s Bullish or Ascending Fan Lines that can be used to monitor a possible reversal of the S&P’s 4-month downtrend that is clearly demonstrated by the top and most important Fan Line.




Its current level is right around a critical band of resistance between about 1279 and 1300, and thus 1279 remains the level to watch around whether its recent consolidation will power it higher in the weeks ahead and followed by 1300.

Probably the simplest way to watch this situation and something that’s been drilled into my head letter after letter by my favorite market letter editor, Dennis Gartman, is the power of the trend of lower highs.

Until the S&P reverses its clear trend of lower highs that began on April 29, its intermediate-term trend is a downtrend and this is true today and its power can be seen in the chart above or even better in an unmarked two-year chart that is not shown here but is worth looking at. It will show you what nearly appears to be a giant Rounding Top and something that would play well into the thesis of those who believe the S&P’s current trading is similar to that of May 2008 and could lead to similar results.

However, the clean chart of the S&P shows me something more similar to what happened in 1998 but in massive form and that is the set-up for a huge Double Bottom.

Specifically, the chart on the following page shows what could become a giant Symmetrical Triangle and the very pattern that the S&P has been trading in over the last few weeks as can be seen by the markings.




Interesting and not a coincidence of the mathematical sort is the fact the smaller Symmetrical Triangle’s target would take it to the bottom trendline of that potential larger Symmetrical Triangle right around 1150 for a potential touch that would serve to validate the bigger Symmetrical Triangle.

From there if “there” should come, the S&P could continue moving down in 2008-style to break the bigger Symmetrical Triangle to the downside. More likely, though, is a move back up to least the top trendline if not significantly higher on something akin to a Double Bottom or an Inverse Head and Shoulders pattern.

Right now, though, it makes the most sense to think about the smaller Symmetrical Triangle and whether it will take the S&P to its minimum target of 1328 and a huge hurdle of resistance for the S&P or whether it will break to the downside.




The weekly chart above strongly suggests to me that the trendline marking the S&P’s downtrend shall contain it once more and this means the smaller Symmetrical Triangle will break to the downside to take the S&P back below its 50 DMA and toward 1150 if not closer to 1100.




It is for this reason that the “S&P’s Price Target” chart has been pulled out to show the S&P’s bearish and more than 5-touch Rising Wedge that has led to this Symmetrical Triangle “of “doubt” awaiting clarification” over Italy, Greece, France, QE3, the true state of the US economy and so much more and something that will entail enormous elucidation of the most encouraging sort in about a week, two tops, for the Symmetrical Triangle to break to the upside and for the Rising Wedge to fail.

Otherwise, it seems the desired “clarification” will come in the form of more of the uncertainty and fear to mark much of this year and something that should cause the Symmetrical Triangle to break down toward its target 1150 and the Rising Wedge to break down toward its target range of 1075 to 1116.

Another reason to bring out this chart is to reiterate my near-term target for the S&P of 1120 within a near-term range of 1120 to 1220 and something that has not been done since introducing each a few weeks ago. The trend of lower highs, the bearish Rising Wedge and the two Symmetrical Triangles support this target and target range and enough so that each seems worth mentioning at this time.

Whether or not this target and target range will prove to be accurate is to be seen, but the charts shown tonight strongly suggest that the S&P is about to see stars and the sort that come from being beaten up by the bear.

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>

Todays Ichimoku showsthe KS is out of the cloud but the CS has dipped back into it.....just have to let some more time go by before I can make a decision on this. The 1hr briefly dipped (price) into the cloud but popped out and is currently hugging the top... basically still a waiting game for all the stars to allign.

On the tick charts there was a trade later in the day, a pinbar off S1...ended up working its way back to the vwap.
It wasn't the greatest spot but obviously worked.
>


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For the first time in weeks, various asset class charts appear to be aligning toward a sudden shift and one that appears more likely than not to be toward a round of risk-off.

Starting out with equities, each of the indexes is showing a Pipe Top that should produce a 1%+ decline tomorrow as shown in the chart of the Nasdaq Composite to the left and a pattern that will take its topping pattern defined by its lower highs close to its initial confirmation at 2600.




One sign that the Nasdaq’s pattern will confirm and a pattern that could bring about a 5-10% decline as is true for the other equity indexes is shown in the nearly confirmed pattern in the XLF to the right.

Worth noting is the fact that it was the XLF’s Descending Triangle that confirmed and began fulfilling first back in May after this year’s current peak in late April. Should that precedent prove pertinent in relation to the current trading action, the XLF’s nearly confirmed Descending Triangle may be a bearish signal – a very bearish signal – for equities in the weeks ahead.

Turning to the CRB Index, it is trading in the all-too-familiar Symmetrical Triangle showing across the equity indexes and individual securities and this pattern carries an upside target of 330 and a downside target of 300.




One reason to think it will chase the lower target is shown in the bearish Descending Trend Channel to the right.

Clearly its top trendline has acted as excellent resistance over the last 6 months in a demonstration of the intermediate-term downtrend showing in the commodity complex.

Should this top trendline remain resilient relative to its resistance, expect the bottom trendline of the Channel to assert target-like pull and bring the CRB Index down to at least 300 – the level of an inner unmarked descending trendline – if not closer to 280 and a level that is truer to that bottom trendline and to a longer look at the CRB Index’s charts.

Commodities, then, appear ripe for a fall as is the case for equities, and thus it seems that there is a round of risk-off ahead.

However, let’s take a quick look at the – relative – safety side of the equation in the form of the US dollar and Treasurys and starting out with the dollar index that appears to be trading up toward the top trendline of its Symmetrical Triangle in what may turn out to be a bearish Rising Wedge in a few weeks but should act bullishly for the dollar index in the days to weeks ahead.




It is unclear how high this pattern might take the dollar index before potentially dropping it back down but 80 seems like a fair ballpark estimate considering that is the rough target of the bullish Falling Wedge that it is fulfilling currently along with a weekly Pipe Bottom as discussed this morning.

Overall, then, the dollar index does seem to support some sort of flight of fear through a flight to safety – relative safety – in the days to weeks ahead and this is consistent with the message of equities and commodities about risk-off in the near-term.

Turning to Treasurys and consistent with what was written over the weekend about SHY and TBT, it does seem that Treasurys – short and long – may strengthen in the days to weeks ahead.




As can be seen in the charts on the following page, the yield of the 1-Year looks set to drop close to 0% with yields trading inverse to price as the 10-year appears ready to move back down toward 1.75% again.

Both potential moves would be made on bearish appendage patterns that will confirm if each yield drops below 0.09% and 2.00%, respectively.

Should shorter and longer Treasurys strengthen alike, this will have nothing to do with Operation Twist and everything to do with investors desperately trying to rotate out of risk and into “safety”.

Why one would give the US government one’s money for nothing is beyond me, but at least it’s a bps or two better than paying the government to hold your money as has occurred – astonishingly – with some of the really short bills in the not-so-distant past.

Should this moment be upon on us, though, when the 1-year does sink closer to 0% as equities and commodities decline 5-10%, it would seem to be the very definition of risk-off.

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Todays Ichimoku, everything is above the cloud today so things are looking good. I suspect it won't be as easy as it looks but I will focus on the 32 -33 area for a long. Might/should happen tomorrow so I will be on a tick chart to see better how things play out.

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Nice bull flag? or pennant?

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Nice bull flag? or pennant?

I'm still favoring the bullish scenario on the TF but.....?

Here's the PT take on it:

Hopefully it won’t be me getting hit by this call being made without the buffer of a question mark, but the charts look bearish. Even the charts that “should” look bullish look bearish and so it seems a bear slap born of lower highs is on the way.

Rather than turning this into a charting bonanza, though, let’s keep this somewhat brief and focus on the leading proxies for risk or small cap, tech and copper and let’s throw the financials in the mix too too considering the sympathy trade going on there around the banking and sovereign debt crisis in Europe.

And starting out with that sympathy trade, it seems to me that Italy’s pledge to get a government in place – now there’s an idea – followed by some austerity – ask Greece how that’s working out – may keep the crisis contained for about as long as the October 28 vision for a plan to save Europe and that was four days including a Saturday and a Sunday.




Specifically above, the XLF is showing:

- A nine-month downtrend as demonstrated by the Descending Trend Channel in blue,
- A three-and-a-half month uptrend with a strong sideways component shown by the Ascending Trend Channel in green with a bottom trendline that the XLF is currently using for a high bar routine that it might fall from, and,
- A Descending Triangle in purple that is about to break and conceivably to the downside as a pattern with more bearish tendencies and despite the possible Bull Flag Pole.

Overall, then, the XLF’s chart can be described by a lot of “d” words including descending, down and decline and this would seem to lead to the “b” as in bearish.

However, perhaps the XLF uses that bottom Triangle trendline to fly higher and so levels are the way to watch it and if the XLF, breaks $12.83 at all, consider its chart bearish and probably on the way to the downside target of about $11.50 while a move above $13.37 can be taken as a sign that it might climb above its 9-month declining trendline to $16 or so.

Considering that the XLF used the last two Descending Triangles in red to move down, through, there is reason by way of pattern repetition to think that this Descending Triangle shall break down too.

Now and quickly, let’s look at the Russell 2000 and quite frankly, this chart does not look as bearish as that of the XLF.




As can be seen, it does appear that the current period of consolidation in that Symmetrical Triangle could lead to a continuation of the nascent uptrend – rocket relief rally – to precede it.

However, it is important to remember that the consolidation – the picture of doubt looking for clarification – comes on the top of a bearish Rising Wedge that is calling for a 10-20% decline from current levels that will be signaled by a potential downside breaching of 708 while a possible move above 769 would signal that a nice move up was in store.

Turning to tech, this chart of the Nasdaq Composite just does not look good to me with its lower highs atop a possibly massive and bearish Rising Wedge that is also calling for a 10-20% decline.




In some ways, the chart of the Nasdaq Composite looks as bearish as the XLF’s charts but the levels to watch are 2753 on the upside and 2602 on the downside and a breaching of either should serve to tell what direction it will travel in by 10-20%.

Lastly and there is more detail on this in a note from this afternoon, the chart of copper is on the cusp of a break and a break that is likely to be big and probably down.




Specifically, copper appears to be fulfilling a bearish Rising Wedge to the downside through a bearish Symmetrical Triangle that has taken copper below the possible Ascending Trend Channel born of the last month.

Unless copper pulls itself back into that Channel by rising above $3.55/lb and a move that might signal copper will find $3.75/lb, it seems more likely that copper will continue to fulfill that bearish Rising Wedge by dropping toward its target of $3.00/lb.

In turn, it would seem that copper’s lead around fulfilling its Rising Wedge to the downside in the guise of some tight sideways trading might be the best signal that it’s time to get ready for a bear slap.

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I can see the bearish case, but another index to consider is the Nasdaq 100, which has worked through most of its resistance already and is only only 3% away from making new highs for the last 10 years. If it breaks out, it could pull the others up with it. Although they've got a lot more resistance to work through, so might not break the highs themselves.


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 kbit 
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Mid day update...things could as always go the other way but I'm still favoring the bulls. It's beginning to look like a breakout is imminent, if 733ish holds should be good. I do acknlowledge the possibility of it dipping down past that but would like to see the 740 area hold at this point. I will take another look later on.
>


>
Side note: as of this writing things are looking like a pullback of some kind is happening so I'll be focused on the above mentioned areas probably sooner rather than later.....

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I don't have a Russell chart up. But on the SP500, volume has definitely been on buy side. Only problem,we haven't taken out yesterday's high --- but we did take out yesterday's low.

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 kbit 
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Really looking top heavy at this point, still could spin around but....
CS has dropped to the middle of the cloud, the 1hr (not shown here) has gone entirely below the cloud so the wait drags on for a daily trade. As some of you that viewed Mikes webinar w/chris Capre know, Chris was of the opinion on the ES (which is more or less what we are dealing with here big picture wise) that a extended period of consolidation or even a drop could occur looking at the present Ichimoku chart. so we'll just have to wait it out some more.

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Well it has taken three weeks for the invitation to be accepted if it should be at all, but the observation was made here on October 27 about the possibly bearish connotations of the S&P being 9% above its 50 DMA with its past dalliances leading to a bearish reconnection on the downside.




Now nearly 21 days later and it seems likely this dance will occur after the S&P’s two bearish smooches with its 200 DMA and this leads to the question of whether it might dance nicely with its 50 DMA as was the case last November and this past April, May and July or whether it might try to escape that step by falling well below it as occurred last August and this past March and, of course, this past August.

None of those previous crosses is really a good comparison with the possible exception of last August as can be seen above to the left and this means it is probably wiser to look at the S&P’s current patterns to see what each may say about the outcome of this possible rendezvous.

Starting out with the Symmetrical Triangle that the S&P confirmed today with its drop through 1225 and then safely with an intraday move below 1215, it seems likely that the S&P will move through that 1215 tomorrow and perhaps even to its 50 DMA at 1206 considering the ominous look of today’s candle.

If so, it makes sense to look at that pattern’s target of 1150 as there will be a good chance that is where the S&P will find itself in the days or weeks ahead.

This turns our attention to the bearish Rising Wedge in red that carries a target range of 1075 to 1116 and something that would certainly seem to exercise some sort of target-like downward pull over the index to the 1150 target of that Symmetrical Triangle if not to its own target range.

Summarized and this applies to the Dow, Nasdaq Composite and Russell 2000 too, it appears that the Symmetrical Triangles that each has confirmed to the downside today is calling for a 5% decline whereas the bearish Rising Wedge pattern in each index is calling for a 10-15% total decline from current levels.

Should the broader indexes follow the XLF and the nearly 7% decline it has put in over the last five trading days, it seems that some portion of those bearish patterns will be fulfilled.




This potential for a round of risk-off, a bear slap and some consolidation coming further undone is nearly confirmed in the chart of copper too as shown below.




It has declined 6% in the last 6 days and its apparently bearish Symmetrical Triangle is confirmed and will find safe confirmation should copper crawl beneath $3.35/lb.

Overall, then, there are many reasons to think that the Symmetrical Triangles in the equity indexes will bring on a 50 DMA dance but that those Rising Wedges may ensure it will be bearishly brief.

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 kbit 
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Was just thinking about this coming week and honestly don't see how the market won't drop with the inevitable failure of the "debt commission" or whatever the label is. So I guess I'm looking for a good spot to look for a short....and I've come up with the 733 area. Seems like a decent spot, though I could see a probe type situation happening to BS some of the longs. Anyway that's my thought on it at the moment....

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 kbit 
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Todays Ichimoku....Obviously it dropped today, in my previous post I was hoping it would run up a little before this happened but....looking like the TS is going to cross the KS pretty soon so that indicate some more downside likely but we are still above the cloud so it remains "interesting".

Looking at the daily conventionally I'd like to see a pullback to about 709.5 for a short. 714ish could be another spot, hard to say but those spots are worth watching if they get visited.

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With my newfound Ichimoku knowledge (lol), it is still above the Senko Span, so no shorting right?

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With my newfound Ichimoku knowledge (lol), it is still above the Senko Span, so no shorting right?

Mike

Looking back at the chikou span, you can see it's on support from 26 periods ago.
Of course price is going to do whatever it wants regardless but that's not an ideal setup for Ichimoku.

Yes, with price on top of the kumo, the trend is bullish and if/when TS crosses below KS, it will
be considered a weak sell...watch for cloud support/reversion to the mean (KS).

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 kbit 
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Here's todays chart, nothing exciting to report Ichimoku wise.(refer to Massive's post above for what's might happen)
Just looking at it generally and seeing how things have been playing out I almost expect it to top out around the 698 level. I know that sounds wrong but as lame as the bulls have been I am not convinced the can go much higher but in case I'm wrong I would watch the 702 area should it get there. My official guess is the high will happen overnight...we'll see.

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 kbit 
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In fact, there are so many ugly charts right now that this could turn into one of those 15 page charting bonanzas of yesteryear, but in an effort to not go there – again – let’s focus on three risk asset charts that just look bad.

Starting out with the commodity complex, let’s take a look at crude with it having been tough to choose between it, copper, coffee, cotton and corn but with crude seeming likely to draw the most interest and after the four trading days, its daily chart suggests crude will be at $88/barrel in the not-so-distant future.




Its chart above is showing a bearish appendage pattern marked in purple to give it the benefit of the doubt of breaking to the upside on what could be a spiked bottom of some sort from yesterday. Should this unlikely bull case occur, the pattern needs to take crude above $100/barrel to confirm and something that may deliver crude to an upside target of about $105/barrel.

Turning to the more likely bear case of the bearish appendage pattern hanging from the Bear Flag Pole with it seeming that bear plus bear should equal at least one bear if not two bears, it confirms if crude crosses below $95/barrel and carries a target of $88/barrel.

Such a potential decline would take crude to the bottom of that Ascending Trend Channel as seems likely under the target-like pull of its lower trendline and such a drop could come quickly as in within a week or so.

Should crude drop by 10% in a week, it would seem to qualify as one of the uglier charts out there in risk asset land.

Turning to equities, let’s take a look at the sector that signaled yesterday’s equity index break was coming and this means, of course, the financials that had been trading in sympathy to the eurozone sovereign debt and banking crisis but may start heading lower on the Fed’s intentions to stress test a few of the big banks around that crisis.

Another possibility is a pop higher if investors digested that stress test exercise as a signal that the “situation” is under control and perhaps it will be soon, but the XLF is unlikely to use those two free-floating and bearish candles to reverse higher.




What would propel such a potential move up is a long shadowed candle with a short body on top and something that would serve as a Spike Bottom of sorts.

Might this happen tomorrow? It could if that spike down is put in with that Descending Triangle in purple wanting to pull the XLF down to about $11.50 before giving it a shot to move higher even though it seems that such a potential spike down might be put in somewhere between $11.50 and $12.00.

Either bottoming scenario is real enough whether it might come tomorrow, Friday or early next week and its hallmark sign will be a one-day deep decline with a close well off the low.

In the meantime, the XLF’s chart remains ugly until it finds support, if it finds support, between $11.50 and $12.00.

Lastly, let’s look at the Nasdaq Composite and this chart is so potentially ugly that it’s not even clear what to make of it exactly.

As you will see on the following page, its two-day free-floating Island is tough to assess with it seeming most likely that the Nasdaq Composite will somehow need to find a way to anchor those candles before a move higher is possible.

In looking at the index’s past trading history, such gaps up and down are typically a part of a multi-gap move and so perhaps the Nasdaq Composite will gap down again tomorrow before some sort of a Spike Bottom is put in and probably the only kind of bottom that could support a move back up.




In fact, even though its decline potential is less than that of crude with the Nasdaq Composite’s chart above talking about a move to some level between 2300 and 2400, its chart is ugly, really ugly. Oddly, it’s so ugly that from a technical standpoint it is almost beautiful in its own truly whip-sawing sideways way with it being unclear what move it might pull next.

When putting it together, however, will all of the other ugly charts that abound, it seems likely to produce a move down.

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 kbit 
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Pathetic...no upside at all , aiming for 680ish maybe 676 area.

Missed it on TF but jumped on 61.8 retrace on ES and the sluggish 6E is a gimme. Hope some of you guys got something out of this..I think it was Dexia news : Dexia Bailout On Verge Of Collapse, Threatens To Take France AAA Rating Down With It | ZeroHedge


Edit: out of ES...6E will let ride

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A Glimpse Into The Future Of The Stock Market And Dollar
The "accident" many have been waiting for has finally happened, and it's called Europe. That doesn't bode well for the U.S. stock market.
A lot of technical analysts and financial pundits are expecting a standard-issue Santa Claus Rally once a "solution" to Europe's debt crisis magically appears. There will be no such magical solution for the simple reason the problems are intrinsic to the euro, the Eurozone's immense debts and the structure of the E.U. itself.
We can fruitfully start a speculative look into the future of the U.S. stock market and dollar with a quote from John Mauldin's book Endgame: The End of the Debt Supercycle and How It Changes Everything:




Economic theory tells us that it is precisely the fickle nature of confidence, including its dependence on the public’s expectation of future events, which makes it so difficult to predict the timing of debt crises. High debt levels lead, in many mathematical economics models, to “multiple equilibria” in which the debt level might be sustained —or might not be.

Economists do not have a terribly good idea of what kinds of events shift confidence and of how to concretely assess confidence vulnerability. What one does see, again and again, in the history of financial crises is that when an accident is waiting to happen, it eventually does. When countries become too deeply indebted, they are headed for trouble. When debt-fueled asset price explosions seem too good to be true, they probably are. But the exact timing can be very difficult to guess, and a crisis that seems imminent can sometimes take years to ignite.
The accident has finally happened, and it's called the euro/European debt crisis. I see a lot of analysts trying to torture a Bullish interpretation out of the charts, so let's take a "nothing fancy" chart of the broad-based S&P 500 with five basic TA tools: Bollinger Bands to measure volatility, relative strength (RSI), MACD (moving average convergence-divergence), stochastics and volume.



If we use Technical Analysis 101 (basic version), a number of things quickly pop out of this chart--and none of them are remotely bullish.
1. This market is not even close to being oversold. Bulls are hoping that the selloff has created an extreme of negative sentiment, which would be a reliable indicator that the market is about to rally. But there is no evidence of such an extreme, and the VIX/VXO (not shown) is also not at an extreme.
Rather than an extreme of negative sentiment, we see complacency, and a long way down to reach extremes in RSI and stochastics.
2. The 200-week moving average (MA) has offered picture-perfect resistance and support. The entire August-September period of wild swings of volatility can be seen here as a struggle around the 200-week MA.
In a classic retracement, the SPX shot up and recovered the 50-week MA, but failed to hold that level. Now it is heading back down for another retest of the 200-week MA. Only this time the chart is significantly weaker than in September, and the low-volume "oversold/hopium" rally in October was technically underwhelming.
3. Another clue that supports the notion that the 200-week MA will fail to hold this next text is the beautiful (to technicians) complex head-and-shoulders pattern which is made up of a shallow HS triple top formed from March to August of this year, and a second outer left shoulder formed in November of 2010.
The corresponding right shoulder was traced by the October rally that just rolled over. This completes a long-term head and shoulders topping pattern.
4. The MACD is extremely negative, being well below the neutral line and rolling over into a bearish cross. Coincidentally, the stochastics also rolled over in a bearish cross.
5. Price tends to alternate between the Bollinger bands; rallies will rise to the upper band and push it higher, while declines will fall to the lower band and ride it down. Thus the lower band is a reasonable initial target for this decline. The problem for Bulls is that this target is well below the 200-week MA, meaning that hitting the lower band will mean the 200-week MA will be decisively broken.
If price does fall to the lower band, we can anticipate an oversold rally back up to the 200-week MA, followed by a renewed plunge to new lows.
An insightful technical analyst who prefers to be known only as "Chartist Friend from Pittsburgh" shared two very long-term charts of the Dow Jones Industrial Average (DJIA) and the U.S. dollar. As I have noted here many times, the current era has seen the DJIA and the dollar on a see-saw, meaning a falling dollar has corresponded to a rising stock market, and voce versa.
These charts are remarkably self-explanatory:



The implications of this chart are not exactly Bullish, as it targets a long-term bottom between 1,000 and 600.
Turning to the U.S. dollar, our Chartist Friend observed, The monster decade long head & shoulders on the DJIA is well documented, but I have yet to see anyone other than myself make a connection between the DXY mid-90's bottom and the bottom that it is forming today."







Our Chartist Friend from Pittsburgh has noted how a classic 5-point pattern may be repeating, which targets the 86-88 level in the DXY near-term. Longer term, this chart suggests a rally of much greater duration and vigor than most analysts dare extrapolate in the current dollar-Bearish climate.

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 kbit 
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Here's a shot of todays chart, Ichimoku wise nothing exciting going on.
Looking at it conventionally you could say we have a reversal here...not real pretty but...

687.5 could be a nice spot for a shot at a long but could possibly drop to 682.5 to 683.5 area as well.
That being said I think it might actually go up to the 700 area from a touch off 695 and then drop..in which case I would want to play things differently.
Depending on where you draw fibs from, in one case anyway today it topped out at the 50% level so just have to see what happens.
On another note, I don't know about the rest of you guys/gals but the market sucks lately....don't like the PA and the way the order flow is. I am still doing alright but just don't like it, hope things change a little so I am more comfortable with it at least for a few days. We have expiration coming up and then christmas.....so we have to try to make the most of the good days because it's likely to be crap until the middle of January in my view(based on past experience).

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 kbit 
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Well clearly that wasn’t too painful for anyone who was long today, but now the question is whether today’s rally will reverse the recent rout in risk or serve as a signal of another stop down. Not having a crystal ball, let’s turn to the charts with most looking more bearish than not even with the distinct possibility of there being a little upside trading ahead.

Starting out with the intraday charts, the bull and bear battle here is the one pointed out ahead of the close and that is the distinction between an intraday Descending Trend Channel and an intraday Inverse Head and Shoulders pattern.




Clearly the Descending Trend Channel shown in the intraday chart of the DJIA to the right is a good bit simpler in its singular call for a decline than that of the daily Falling Wedge and intraday Inverse Head and Shoulders pattern marked up in the S&P to the left.

Interestingly, the best and only way to call the winner between the bullish IHS that will take equities 5% higher and the bearish Descending Trend Channel that will take equities 5% lower is the top trendline of the Channel. Should it be breached to the upside at 1199 on the S&P as a proxy for the other indexes and particularly on a convincing spike up, it should be taken as a very strong signal that the Falling Wedges will take the equity indexes 5% higher within days.

Should, however, the top Channel trendline continue to contain each of the equity indexes as was true today, then, there’s a pretty good chance the Descending Trend Channel will remain in effect for a 5% decline in the days ahead with this possibility appearing well-supported by the strong Bear Channels in small cap and the financials shown below.




In other words, the intraday charts seem to be more about those Bear Channels than the bullish Rising Wedge and IHS pattern combos but many a mid-move reversal has been staged on that latter mixture and so let’s take a look at the daily charts and limit it to the most bullish and the most bearish.

Interestingly and perhaps encouraging to the bulls, the most bullish looking daily chart is the sometimes-leading-Russell 2000 and the only index to have fulfilled its Symmetrical Triangle to the downside completely so far.




Perhaps offering it that more encouraging look is Friday’s low candle and something that could continue to propel a move up to help that potential IHS pattern confirm at about 800.

Oddly and probably not so encouraging to anyone wanting to feel good about equities is the daily chart of the DJIA.




Accounting for that bearish look is the Dow’s failure to take out Thursday’s high and a failure that set up the possible start of yet another Bear Pennant marked in purple and one that confirms at 11232 and carries a target of 10430.

Interestingly, beyond interestingly, in fact, is the fact that 10430 is very nearly the precise target of the bearish Rising Wedge in red.

Coincidence you ask? Well there is no such thing except for the mathematical kind when “…two expressions show a near-equality that lacks direct theoretical explanation…” and in that case, yes, it would seem to be a coincidence that the Dow’s new potential Bear Pennant carries the precise target of its bearish Rising Wedge born back in the beginning of October and one that might bring about the “near-equality” of those 10430 targets.

It seems, then, that one way to distinguish whether the bullish Falling Wedges or the bearish Descending Trend Channels will win in the very near-term is to watch whether today’s high in the Dow holds.

Should 11562 be breached to the upside, equities will probably bounce higher for at least a little bit. Should 11562 hold, there’s a chance things may get very bearish in a few days and perhaps for many days as in weeks if not longer.

And it would seem that the latter scenario would suggest that today’s relief rally will not reverse risk up.

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 kbit 
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No chart today...basically just garbage. Did get a couple trades but still don't like this stuff, the boat will be rocking tomorrow but would be on the watch for a trap of some kind. My thought is we will get a reaction at the 687 area or maybe 684.5 area(where it should go) but hard to say what .....

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 kbit 
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Seems like they don't know what's going on like the rest of us ....
>
>
Leaving all superstitions behind with yet another note into the bell, the S&P and DJIA are up on the day with the intraday Inverse Head and Shoulders patterns in each index flirting with confirmation after having secured confirmation earlier.




Interestingly, the Nasdaq Composite and the Russell 2000, and indexes that tend to lead the S&P and DJIA, along with the XLF are in the red with unconfirmed IHS patterns.




Whether this discrepancy will amount to anything is unclear, but it seems worth pointing out as equities turn ambiguous but the COMP, RUT and XLF lag below.

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 kbit 
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I guess there was a reaction of 687....lot more than a bounce obviously. going into lunch now but this 727 area could be the top for today, I don't want to short it however, it might hover around here for a while. With NFP coming up though they might drop it down a bit to get a better posistion to run up some more.....how much ? don't know but I'm thinking around 715 area at the moment. I will take a look at the end of the day to see if I can get a better idea.

As far as where this tops out this week....maybe around the 740 area before a downmove (to 708 area maybe)...to early to say...just a guess

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 Massive l 
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Yes, with price on top of the kumo, the trend is bullish and if/when TS crosses below KS, it will
be considered a weak sell...watch for cloud support/reversion to the mean (KS).

You like?
textbook cloud support, reversion to the mean (and then some)


Here's TF.
Price did close below the kumo, but with KS staying flat the next open and above the kumo, there
was no reason to enter short.

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 kbit 
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You like?
textbook cloud support, reversion to the mean (and then some)


Here's TF.
Price did close below the kumo, but with KS staying flat the next open and above the kumo, there
was no reason to enter short.


I had the same view...I like how it based off the top of the cloud today for the run up....I factored in some other stuff but did take the top of the cloud (687) into consideration...very nice

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 kbit 
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Based on the magnitude of the euphoric excursion into bullish fantasy land that happened I don't see much downside before the highs get higher.
It may only drop to around 730 or the 723 area....overnight will tell us a lot as to what's in store tomorrow, just have to see where it may bottom out tonight to get a grip on where we go.
Earlier I thought 740 would be the top some time this week but didn't think it would be so close today so I might have to rethink where a top might be before we get a decent pullback.

Edit: I know some will say tomorrow might be an inside day and it may be, just have to play it by ear.

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 kbit 
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Todays chart....interesting spot (730) it bottomed out at today, the question is wether it's strong enough to hold up tomorrow. It's basically came down to the trend line it broke through on the way up (not shown).
Really, it could easily drop through it without much trouble...if it does I'll be watching the 718 area or the 710 area if it goes that far. With NFP tomorrow it could be interesting....if it's a good number there is a chance they will sell into it so just be aware....that being said my guess is it might stay up here for a few days more....we'll see

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 Massive l 
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I'm looking for some more sideways movement, reversion back to the mean (KS)
after completely blowing past it two days ago.

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 kbit 
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This is a dangerous interpretation considering that it is coming in the face of a one-day 4% surge, but it is that spike up that has somehow lent a look of total instability to the S&P’s daily chart that is highlighted by its bearish pattern of lower highs.




Unless the S&P rises above 1275 today, its longer-term and bearish trend of lower highs will remain in place while its unmarked near-term trend of lower highs will hold if the S&P fails to rise above yesterday’s high.

If, however, the S&P does rise above 1275 today and particularly on a closing basis, it should be taken as a very strong signal that the S&P is going to break the long-term and unmarked Rounding Top showing in the chart above and fulfill its unmarked Inverse Head and Shoulders pattern.

Otherwise and this will be a day-by-day watch with the level to take out each day moving down slightly with each day, the S&P’s chart is bearish and growing more bearish by the day and something that brings me to reiterate my near-term target range of 1120 to 1220 for the index along with my near-term target of 1120.

What makes this interesting to me and just as color for you, my conviction in that range and target is growing as the S&P trades with less upward momentum in its up-and-down volatility that reflects investor uncertainty about the fate of the euro-zone and the status of the global economy and more downside velocity as demonstrated by the trend of lower highs.

And until that trend of lower highs is broken, if it should be at all, the S&P’s chart is bearish.

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 Big Mike 
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@kbit, can you remind me who PT is?

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 kbit 
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@ kbit, can you remind me who PT is?

Mike

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 kbit 
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Looking like a drop might happen soon...I think I would look for some kind of bounce off the 726 area and gauge reaction there. At this point I'm seeing around the 719 area as a point that has to hold to keep us up in this area....if it goes below it could really drop good. It could still set new highs but just have to see how it holds up in the area we are now....a dip to 726ish might shake out a few longs and be enough for a run to new highs but just have to see how it plays out...there is also a possibility that the low on friday could hold but it's not likely in my view at this point....it's too easy if you know what I mean.

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 kbit 
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The buoyancy of this market is amazing. S&P tried to drill a hole in the boat but they came to the rescue and half plugged it up. I really am thinking that the Euro and the indicies won't really crash at all.....I saw in a post by Mike saying that if you see the market trying to go down and can't it will inevitably have to go up....the funny part was that I was going to post the same thought in that thread but noticed he beat me to it.
All that being said I would still like to see a drop at some point to the 715 area for a long..bigger picture wise.
In the mean time is anybodys guess as to whether it chops around or whatever....I haven"t looked for potential levels to look at but will try to post some later



On the Ichimoku front we are potentially getting close to having green lights to blast out of here, it's still a bit of a waiting game though so.....

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 kbit 
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Just a few spots to watch if they get visited ....735 and lower around 728 on the upside 765 should give a reaction.
There are a few other spots but these should be a little more significant.

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 Massive l 
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I'm still expecting it to trade sideways and revert back to KS before moving up (if santa rally holds true).
Points of interest are the relative flat SSA and SSB. I've seen price revert back even with
TS/KS bull crossing when price has deviated more than 1 sd away. We'll see...



Intraday, I'm neutral as price is back to development after today's move out
of the standard auction for the breakout play.

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 kbit 
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Wow, what boring crap we have to deal with today. Looks like a slow motion ping-pong match.
I guess we might have to wait til thursday when unemployment claims and the ECB meeting are sure to rock the boat.
As it stands now short term anyway the TF is trying to work its way up to 747.8 .......I did get a couple trades but they where educated guesses because no decent PA has presented itself to me.....just a boring day

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 kbit 
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There's 747.8...you MP guys out there were probably in on that...IB low to high deal.
would like to see a drop to 746.5 (and hold of course) though ideally for run to 51.5 or more...we'll see

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 kbit 
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just looking again now that I'm awake again....46.5 is probably a bit optimistic but I do see a good chance of a pullback to 47.8 happening....we'll see

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 kbit 
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Oh well, no pullback...hit 51.5

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 Big Mike 
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Usually quite slow this time of year. Time to go read some good books

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 Zondor 
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On the emini-watch.com website, Barry Taylor explains how changes in the Average Trade Size often occur near reversal points. He refers to bars with unusually large values of Average Trade Size as Professional bars, and those with unusually small values of Average Trade Size as Amateur bars. The theory is that larger average trade sizes indicate activity by bigger and more influential, i.e. more "Professional" traders.

I coded a GOM based trade size tracker to see for myself. The results were interesting, to say the least.

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