Thursday, March 31, 2011

3/31 Daily Commentary

Jobs report is tomorrow.  Consensus is 185,000 and 9%.  Going in with 4% SDS and 1% ZSL. 
I1 is down through 4/5.  If SP futures have not broken their 30-minute M/A by the close tomorrow then I'll go flat.  Currently on the buy signal, this M/A will flash sell on a 30-minute close .5% below it.
The daily technical composite is dead neutral (0), but the weekly has declined below -12 which is an unqualified sell.  The market is on borrowed time technically.
Meanwhile, industrial inflation presages shrinking profit margins worldwide as well as worldwide monetary tightening to head it off.  Industrial prices have risen over the past 2 years at almost a record pace.
I have to stay short during the I1 down periods, but the odds favor a mid-May shorting opportunity.

3/31 1:10

SP futures have respected their 30-minute M/A.  Break point is any 30-minute close below 1315.50.
I'll be shorting silver on any hourly close .7% below the hourly M/A (red), currently at 37.20:
The Euro would complete 5 up with another high.
However, if DX futures rally to a 90-minute close > .55% above the blue M/A then it is a buy.

The daily M/A (green) concurs with this:

3/31 11:00

SP futures flash point is a 30-minute close below 1315.25.
I1 bottoms 4/5 - 4/6.  The subcomponent of I1 that I use as a trading cycle bottoms at the close tomorrow.  If SP futures have not broken their 30-minute M/A then I'll exit at the close tomorrow.  Otherwise, I'll let I1 play out to the 5th.

Here's I1 raw data to 5/19 (divide by 10).
20110325 86.05031

20110328 84.2088

20110329 80.85115

20110330 77.50088

20110331 74.00951

20110401 71.06763

20110404 69.29059

20110405 68.73553

20110406 68.67549

20110407 69.01423

20110408 69.86341

20110411 71.74323

20110412 72.75928

20110413 73.53452

20110414 74.50368

20110415 75.42561

20110418 75.75021

20110419 75.82787

20110420 74.98482

20110421 73.93522

20110422 72.83012

20110425 70.41042

20110426 69.04103

20110427 67.59607

20110428 66.00279

20110429 64.49185

20110502 63.22179

20110503 62.82848

20110504 62.18758

20110505 62.08893

20110506 62.9663

20110509 63.92375

20110510 64.97942

20110511 65.74902

20110512 67.37486

20110513 68.54961

20110516 68.66193

20110517 68.03191

20110518 66.38432

20110519 64.59079

3/31 10:00

10am is the key time of day for the day prior to the jobs report.   Currently the 30-minute M/A is 1321.50, making a 30-minute close below 1315 the ringing bell.
I brought my SDS down to 4% on the 30-minute tap at 20.92 and will increase once the 30-minute M/A is broken.

3/31 9:25

I got charts!  The above is a sub-component of I1 and I use it to confirm a trading cycle.  You can see that Japan caused a market decline during an up-cycle but did not invert it (the market bottom did not correspond with a cycle top).  This cycle has 3 trading days to bottom.
Next is I1 itself.

The next chart sets up the intermediate-term horizon.  CRB industrial spot on a 24-month smoothed rate of change. This is what Fed economists and foreign central banks are really concerned about.  They know that industrials precede PPI and CPI.  By the way, contrary to popular belief, the stock market hates inflation when it is accelerating toward an upper bound.

3/31 pre-open

Still holding 6% SDS (at 21.39) and 1% ZSL (at 24.22).  I'll need to be short during the periods when I1 is down until mid-May.  The market is discounting the end of QE2 and rallied yesterday to discount a bullish jobs report.  The claims number was a non-event, but the trend after 10am should hold all day.  I'm betting it's down.
Google's server is still rejecting my uploads.

Wednesday, March 30, 2011

3/30 10:45

SP futures marched right into the highs of early March.  The abc up is in wave iv of c, with only a final stab higher to complete.
I still cannot upload graphics.

3/30 pre-open

SP futures hit the resistance range 1320-1325.  6% SDS at 21.39 average.  1% ZSL.  The market rallied back to the tops of March 7-9.   I1 has 6 down days left.  The shorter-term trading cycle has 4 days to bottom.  The Japan crisis distorted the natural cycle in the market and it is now taking back the downside of that crisis.
Google's blogger will not allow me to upload graphics, so I'll do so later.

Tuesday, March 29, 2011

3/29 Daily Commentary

I came in this morning with 2% SDS and 1% short NQ.  I took profit on the NQ and waited to add to SDS at 21.39 and 21.28.  I'm still holding SDS with SP futures resistance at 1320.  NQ futures resistance is at 2328.50 to 2330.  Everything has rallied in 3's today.

3/29 2:40

Silver shows a 5 down and 3 up today on the 5-minute chart. 

I bought 1% ZSL at 23.20.  I'll buy another 1% on a .7% hourly close below the red M/A below:

3/29 11:50

Silver declined to it's 90-minute M/A and has rallied with stocks.  I'll short silver again on a 90-minute close .7% below this M/A (blue).

3/29 11:23

Just bought another 2% SDS 21.28.

3/29 11:15

DJI critical support M/A is currently 12,165 and rising.  It's 1.35% break point is 12,000 and rising.
I'm short 4% SDS.

The dollar is running into key 90-minute resistance that will currently be cleared above 77.

A daily M/A runs through 77 now, but the dollar is finishing an ending diagonal.  The rally out of the diagonal will be accompanied by a stock market decline.

3/29 10:25

Bought another 2% SDS at 21.39.  SP futures hit their 30-minute M/A at 1308.  Market is sell mode until a 30-minute close above 1314.50.

3/29 9:50

I have an order in buying 2% SDS at 21.35.  Mini-rally in place.  Covered NQ at 2295

3/29 pre-open

Got back from handling family affairs in Detroit last night.  Jack and I got together up there and got caught up.  I stayed at 1% SDS while I was on the road but increased it to 2% at 21.51 in ARCA trading.  NQ futures hit a cluster of M/As so I shorted 1% at 2308.25.   Currently my stop is 2305.25.
I1 peaked Friday but as happens often when it peaks Friday the stock market actually peaked 10:30 Monday morning.  SP futures broke 30-minute M/A so the first hurdle is passed. 
I'm working on an inflation model for longer-term timing of stock market trends.  We haven't had to concern ourselves with inflation for decades but now we have Ben.  In a couple of days I'll roll it out.

I1 is down for the next 6-7 trading days and I'll go flat then. 
Silver has hit support and I sold ZSL at 24.64.

Monday, March 28, 2011

3/28 2:35am

Shorted 1% June NQ futures 1308.25, stop 1313.50.

3/28 10:50

I have an order buying 3% SDS when SPX hits 1324.85.

3/28 9:20am

Dollar futures have risen to a key resistance M/A, the 90-minute, 280-unit.  A 90-minute close higher than .55% above this M/A will be the buy signal.  There is a trendline on the daily.

The SP futures' 30-minute M/A is currently 1309.32, so a 30-minute close below 1303 will be a sell.

3/28 pre-open

Sold 3% SDS at 21.26.  I'll be online at the hotel until noon EDT.  I'll finally be home for some better analytical tools this evening.
SP futures are in a trading range with the 30-minute M/A having caught up to price overnight.  I'll buy SDS again on a rally in cash SPX to 1325, where there is a cluster of resistance.  If stock indexes don't rally from here then I'll go short again at the 30-minute close lower than .5% below the 30-minute M/A in SP futures.
The short silver trade is working out fine, with further downside ahead.

3/28 7:30am

Overnight SP futures touched their 30-minute M/A and are trading like a 4th wave so I'm changing the count to look for a 5th wave spike from a rectangle.  I'll cut back to 1% in ARCA at 8 EDT.  When I1 peaks on a Friday (the peak occurred 3/25) then about half the time the actual peak occurs Monday morning.

Sunday, March 27, 2011

3/27 Weekly Commentary

I flew to Detroit on family business.  While I was there I was deluged and unable to get the time for analysis and commentary.  In Albuquerque now and the hotel is great.  I1  p-eaked Friday at the close but I bought a trivial position in SDS and SLV (1% each) at the close Wednesday because I knew the trip would be hectic.  This is an important turning point so I bought another 3% SDS at the close Friday at 21.33. 
The count is an abc for XMI, COMP, and DJI and a double-zigzag for SPX. 

I will keep SDS at 4% unless Monday opens higher, then I'll buy another 2% at 10:30 OR until the DJI critical M/A is broken by 1.35%. Currently this M/A is 12,110.
Gold and silver should retreat into the first week of April when I'll close out my silver short ZSL.

Wednesday, March 23, 2011

3/23 Daily Commentary

Only 2 more days until I1 peak.  I1 and Elliott wave remind people of the free will vs. destiny debate that targets any investment approach.  (I substitute "exogenous" for free will to make the analogy with theology).  Academics, almost to a man, subscribe to the random-walk thesis, that future prices are not discernable from past events.  That's because academics have bad investment records and they are unaccustomed to intellectual failure.  In the current context Japan is the exogenous event that triggered the stock market decline and my change of count away from 5th wave new highs.  Not looking to new highs by Friday's close is liberating, in that I can now focus on completed upward abc's to determine high-probability short entry.  Further rally beyond today's highs will get me out and flat.  I bought a trivial position of SDS at 21.83 on what I perceive to be a completed abc up.  Similarly I bought 1% ZSL short silver at 23.85. 

Early this morning SP futures broke their 30-minute M/A envelope with a 30-minute close more that 5% below.  The rally today did not reverse this sell signal and will not do so until there is a 30-minute close .5% above the 30-minute M/A.  This is one reason I went short earlier than the I1 peak.

DJI completed a 3 up from last Wednesday's low.  A decline 1.35% below the 5-minute, 370-unit M/A will confirm that the top is in.

 SPX came up to it's 55-day M/A and the DJI hit it's 50-day M/A, both indicative of short-term trend:
After the close Portugal decided to spurn reduced spending and seek external financing to support their current spending levels. Bearish the Euro. This is another exogenous event, but I still believe that Euro has a shot at fulfilling the count by making a nominal new high.

If cash Euro declines below 140.40, the wave 1 high then the top is already in.

I'll be on the road tomorrow, but I'll be online tomorrow night and periodically Friday.

3/23 3:45

I went ahead and bought 1% SDS at 21.83 2 days ahead of I1 peak because the indexes traced out what appears as a complete abc up.  I also bought 1% ZSL at 23.86 short silver because of it's wave count. 

3/23 2:00

Stock market is going according to script.  Blue chips showing relative strength, which indicates underlying uncertainty by big money.  SPX has been showing overlapping so it has a different count than DJI.  SPX has over 50 points to achieve a new high, so it is unlikely by the close Friday.  I'm also counting Nasdaq as in an ABC up
If the Nasdaq does not punch through 2700 and takes out today's low then the top is in early.  I'll be in flight tomorrow but will have a metric in place to enter short in case the top is in prior to the ideal I1.

Tuesday, March 22, 2011

3/22 Daily Commentary

A ho-hum day for stocks and almost everything else.  I'm not going long into the I1 peak Friday.  The Euro has one more high, nominally higher than it's high Nov. 4, before it's count is complete for Primary 2.  I like the new high scenario because it finally destroys the dollar bulls.

I1 peaks on Friday and the DJ critical M/A is in buy mode.  I will be in sell mode starting Thursday on a break of the SP futures 30-minute M/A.  Absent this event I will sell at or near the close Friday.  Bonds and the dollar revolve around the stock peak. 
My count on SPX and DJI is wave iv of (iii) still in progress.  This count will be invalidated on YM (DJ) futures declining below 11,850 or DJ cash below 11,925.

I'm working on software and research tonight and do not intend positions prior to the I1 peak.  In addition, I consider the bond market to be manipulated and want to avoid it after the first week of April.  The Fed will probably keep buying through June but when they stop I expect softness.

3/22 11:15

The stock market may have just completed wave iv of (iii).  This will be followed by a wave v to complete wave (iii).  3.5 days remain to complete an impulse wave up.  SPX declining below 1288.8 will change the count and increase the probability that EWI is right and that the top is already in.

The Euro has finished a wave (iii), so a down and up will complete the big C wave that marks the top of primary 2.

3/22 9:45

Only 4 days left until the start of the cycle.  The initial decline from 3/25 through 4/6 will occur while the headwinds of monetary ease are blowing so the decline will probably not be large.  If my count is right then there is a nominal new high ahead and the initial decline will be a first wave.  However, if the stock market does not make new highs by the close Friday then the decline will be a third wave.
Before the market can run it needs to escape the 50-day M/A, which lies just overhead.
My count is that the DJI and SPX are in iv of (iii) up. 

Monday, March 21, 2011

3/21 Daily Commentary

How many times have you heard that investing is a matter of being in the right place at the right time?  You make this statement and your audience will always agree with you.  It's a truism.  It means something different to me.  Seeing a large trend that goes on and on at the inception is worth waiting for. When I'm waiting for the start of the trend I am putting in my market trades, not just preventing losses but the psychological impact of losses, focusing my energy instead of dispelling it in the ordinary trades that I put on regularly.  The number of trades this month has been dramatically less than normal and it's not just Japan creating a news market. I'm preparing myself for several markets that will turn and put in long trends.
The 2 Weekly posts this past weekend have been laying the groundwork for my action plan.  There are 3  time periods that I've determined are vital to catching a big piece.  First, a smoothed I1 to show the approximate timing of the tidal wave of risk.
Although not shown on the chart and lacking the fine precision of I1 closer to the present, the bottom of the upcoming wave is followed by recovery that is decidedly under 3.25.  Bear markets in the past have been defined by smoothed I1 with such muted peaks followed by renewed downmoves.  The anticipated bottom is not until next May.  The smoothed peak is in between raw I1 peaks, so it can't be used to pinpoint with certainty when the tide will turn strongly downward, either 4/19 or 5/16 (which is the formal I1 sell signal date).

From this point on I'll be shorting all downswings in I1 with increasing amounts of capital, but I'll be covering these shorts when I1 bottoms until the 5/16 high where I'll be putting in permanent positions.  The double-short ETFs for the SPX, DJI, and Nasdaq 100 show a little slippage (they have fallen slightly more than their respectively indexes have risen).  The less liquid ETFs show more slippage over the medium term.  On 5/16 I intend to place a portion of capital into the ProShares double-short funds which, while they subtract modest fees, show no slippage (or any I can detect).

Meanwhile, today's stock market rallied in what has the look of a 3rd wave, then traded sideways in what has the look of a 4th wave.  EWI is calling the rally kaput here, but I1 says more to go.  If it is wave iv then there is little incentive for me to buy here, as prices will retrace to around this level after the upcoming wave v rally completes.

Precious metals benefit the most from Fed ease and I'll wait until mid-May to entertain entering short. This would only occur on a break of the 145-day gold M/A.  Absent this I'll short April 28th. I'll be confirming silver's move with the 10-week rate of change of monetary base and M1.   

3/21 3:50

Stock market is more than likely in a iv wave with a pop ahead tonight/tomorrow, only to come back to near the wave iv bottom, 12,010 DJI.  No reason for me to get long until then or until a decline takes it back to 11,860 (less likely). 

3/21 2:10

Stock market is going sideways in an apparent 4th wave.  I'll be able to buy on the retracement after a 5th completes at around this price level, so I'm not in a hurry to buy.    SPX is bumping against it's 50-day.
The following chart is weekly monetary base 10-week ROC vs. silver.  The latest data point is March 9 and the base is moving sharply higher.  The correlation between Fed asset purchases and monetary base is imperfect so I am not assuming that the rate of change of monetary base will coincide with the end of QE2.  Rather, I am assuming it's ascent will slow prior.  When the ROC declines below 10% that will be the top in precious metals.  Since the data is released only bi-weekly we probably won't see this happen until after the silver top.

3/21 11:30

An alternate count is now equal probability with the 5 up.  The iii wave below is longer than i.  If the market goes into a triangle/rectangle and stays above wave i then this count is validated.  If the market deeply retraces back to below 11,920 then the original 5 up is valid.
As for precious metals, they peak concurrent with ROC of monetary base and this will not peak in March and maybe not in April.  The weekly base numbers are strong so far in March.    

3/21 9:45

Today's rally pierced DJI critical resistance and overlapped wave 1 so the trend is up.  It also completed a 5 up from last week's lows and I will buy on a pullback to the 4th wave range.  I expect traders will sell on this approach into the 50-day M/A.

3/21 pre-open

Slow progress by TEPCO, but the market anticipates that they will turn it around.  I1 peaks on Friday and I'm taking it slow on the final leg up.  Stock futures are coming back up to their 50-day M/As (1300 in the SP futures) and approaching their wave 1 lows.  DJ futures wave 1 is at 11,964, vs. 11942 currently.

Cash behavior means more to me than the futures, so the DJI cash wave 1 low at 11,984 and the envelope of critical resistance at 11,987.  The DJI 50-day is also at around this level so it is key resistance. 

I'll post responses to the comments for the Weekly later today.