Thursday, September 30, 2010

9/30 Daily Commentary

I1 bottomed today. It was a clear bottom, so no ambiguity regarding double-bottom.  If the I1 turn date extreme has a day with a value within .35 then I'll consider both days as potential turn dates, favoring the extreme day.
The uptick into 10/7-10/8 is very weak and tops below 3.25 so longer-term hold rule would apply IF critical support were taken out.  This will only occur at DJI 10,675 (1.35% below the 5-minute, 380-unit EMA). 
I'll list the I1 values from 8/25 through 10/14:
20100825 31.94079
20100826 29.52879
20100827 27.68586
20100830 26.7774
20100831 25.81199
20100901 25.28408
20100902 25.06659
20100903 25.51281
20100906 26.69725
20100907 27.91625
20100908 29.58433
20100909 31.06375
20100910 32.49334
20100913 32.15619
20100914 31.46442
20100915 29.76997
20100916 27.14117
20100917 24.71507
20100920 22.96243
20100921 22.29074
20100922 21.8606
20100923 21.19671
20100924 21.17547
20100927 20.82228
20100928 20.55654
20100929 19.79494
20100930 18.6971
20101001 19.4164
20101004 19.8343
20101005 20.45848
20101006 20.9075
20101007 21.40699
20101008 21.63835
20101011 19.81698
20101012 17.54623
20101013 13.80057
20101014 9.866532
I don't normally post I1 results for a cycle, but I've gotten a few kids posting comments about what a failure I1 is because it didn't deliver minus net over the signal. 
From the August low the travel low to high close was 9.6% SPX over 20 days. 
From the low to 9/13 close was  7.6% over 11 days (.69% per day)
From 9/13 close to 9/30 close was 1121.90 to 1141.06 or 1.7% over 13 days (.13% per day)
The weekend between the double-top I1 days produced the Basel announcement by 27-nation group-think regulators allowing banks to keep all the garbage on their books for up to 8 years.  This was very significant and tilted the investment world toward embracing risk which, of course, favors stocks and commodities. 
This was one reason why my exposure was so small initially and why I traded DJ futures rather than holding.  By trading futures I was able to recognize gains until the 30-minute M/A was broken. 
The facts are in the trade history.  This morning I had to bail out with 4-point SP futures loss and 10% SDS at 40tick loss.  This was made up at the noontime low.
All in all a frustrating period, but one producing minimal loss (approximating 1% of capital).  There is no need to change I1.  The silver lining is that the market is only 110 points away from breaking critical support at 10,675.  This is tough to do and will determine if the stock market has been in a 4th wave during the I1 decline.
I am long the dollar, switching out of short euro at no gain/loss into long the dollar index ETF UUP at 22.86.  Now that the world despises the dollar I looked at it starting several days ago.  The wave count is complete, the technical composite is on a buy, it's I1 while not hitting absolute bottom for another 2 weeks is flattening out indicating that it will have little effect.  Finally UUP is forming a head and shoulders bottom after an extended decline.  Currently at 5% I want to be in further before breakout.  

I'll be shorting the Euro in futures this evening.  While the Euro is forming a H&S as well, instead of a right shoulder building as in the chart below, it may form another head.

2 comments:

  1. Hey Chief I am looking for a nice pullback this month...Do you have some tgts...DOW 7000,8000,9000 OR WHAT.You said your system says bottom for about next 6 weeks then long from December to March sounds good and I hope you are right.Futures pretty strong this am after a big reversal top yesterday!I READ EWI and the 1 thing that bugs me is this Grand Supercycle..Elliot never talked about a grand supercycle AND is that Wave 3 ever going to show it's ugly head....thks for all your work.Jimmy

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  2. Grand Supercycle is somewhat speculative to me as well. As far as targets once risk aversion steps in things will unfold very quickly. I don't use targets much but the 2009 lows have to be broken.

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