Animal Spirit Forecasts

2011-07-06T04:45:00.000-07:00

This blog is superceded by the Animal Spirit Forecasts website, which includes a forum for subscribers.

Animal Spirit Forecasts is about gauging sentiment forward in time. This forecasting methodology is based on a data source which I devised starting 20 years ago. It began with research into correlations between environment and human behavior as measured in the financial markets. What began as research became conviction and then realization. I started making money with this data source 10 years ago and have been refining the analysis and improving returns ever since. The newsletter tracks my actual trades in the stock market, precious metals, and currencies (Euro and dollar).

Using the tools detailed below every trade that I have made since March, 2010 has been recorded (Trades Link) and the following $100,000 account record compiled (blue line below).

Please observe the amazingly small drawdowns (periods of negative account build) due to small positions and being consistently on the right side of the market. This is due to my data sources described below.

As a subscriber you will have access to my current positions in an Excel spreadsheet on the website in a subscriber-only forum.

The keys to my success are:

1) an index of environmental data and solar-lunar cycles that I dub I1
and
2) technical composite indexes using daily and weekly data.

The following links are learning tools for the data series that use day-in and day-out:

I1 for Investors

Learn about I1 and it's trading rules

To download I1 history for your own research into this powerful new data source:
http://asforecasts.com/I1hist.xls

I use one of the components of I1 to time trades within the longer I1 moves. This component is a variable monthly cycle calculated from various solar and lunar relationships. This short-term timing component helps me pinpoint tradeable moves within longer trends. This has it's own rule set.
http://animalspiritforecasts.blogspot.com/p/short-term-timing-component-of-i1.html

I also use a daily technical composite for the stock market which I have found very useful when it reaches extremes. It and it's rule set is at:
http://animalspiritforecasts.blogspot.com/p/daily-technical-composite.html

There are also similar forward gauges for precious metals, bonds, dollar, and crude.
Precious metals:
http://animalspiritforecasts.blogspot.com/p/precious-metals-pm1-forward-sentiment.html

Bonds:
http://animalspiritforecasts.blogspot.com/p/bond-market-us1-trading-rules.html

All of the posts prior to the subscription cutover are available as well as the Excel spreadsheet of every trade that I have posted (and made in my own accounts, delayed by 2 weeks).

I invite you to investigate the accuracy of these data sources which you will find nowhere else.

I offer a 1-week trial if you request it by emailing asforecasts@gmail.com.

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Animal Spirit Forecasts
PO Box 797
Pie Town, NM 87827

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What you will receive are:

Daily Commentary - due to the timing of the various data sources this will be e-mailed twice, once shortly after market close and again with complete data 7:30pm, while ARCA trading is still going on.

Intraday Commentary - trades arising out of the strategy in the Daily Commentary as well as stops and new situations

Weekly Commentary - e-mailed Saturday with economic issues, upcoming trades, longer-term views on stock markets, precious metals, bonds, and currencies. The oil market is coming out of period where it has been dominated by international political events, so I'll be picking up my commentary and trades on the oil market as well.

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7/5 Daily Commentary

2011-07-05T18:31:00.000-07:00

Daily Commentary - Word doc, click here.
PDF, click here.

This is the last commentary available via the blog. Please subscribe per the Sign-Up page to continue receiving Animal Spirit Forecasts. My thanks to the many readers that have signed up for subscription. Your support has genuinely touched me.
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7/5 3:40

2011-07-05T12:41:00.000-07:00

SP futures 30-minute M/A has held the first test. SPX and DJI have topped. Nasdaq is filling out it's 5th of c. I don't hold any Nasdaq shorts and will attempt to enter futures short on break of 2353.25. I'll short SP futures on a rally after a 30-minute close below 1326.

The stock market is making a head-and-shoulders top. Although the smoothed I1 declines into late August the ensuing I1 advance stays well below 3.25 which, according to the rule set in the Intro and Concepts page, means that longer-term traders can stay short. I intend to keep a small core short position but will go primarily to cash on these swings. On an even longer time frame the market declines into 2nd quarter 2012.

I want to invite readers to subscribe. If paypal then email at asforecasts@gmail.com and I will start your subscription pending mail or bank billpay payment.

7/5 2:05

2011-07-05T11:07:00.000-07:00

SPX and DJI have completed their c wave up. I have no exposure to Nasdaq and had a stop order at 2353.25 which never got filled. Meanwhile the SP 30-minute M/A crept up to the current price range. Selling 1% ES futures at 30-minute, 92-unit M/A minus .5% on a 30-minute close. Currently any 30-minute close below 1326.

7/5 9:50

2011-07-05T06:50:00.000-07:00

The stock market is finding support at SP futures 30-minute M/A.
There are 2 M/A support break points:
SP futures 30-minute,92-unit M/A breaks at any 30-minute close below 1324.50
The closer one is NQ futures 15-minute, 86-unit which breaks at 2353.25. I have an order in shorting here on a stop.

7/5 6:10am

2011-07-05T05:33:00.000-07:00

Last Friday I got the go-ahead to short the stock market. Currently we have 6%SDS, 4%DXD, 1%UCPIX (a long-term core), and 3% EUO.
SP, NQ, and DJ futures have broken their trend channels and are declining to support M/As.

NQ futures 15-minute, 86-unit M/A indicates 2353.25 as the break point. I have a short order at this level on a stop. SP futures 30-minute, 92-minute M/A is at 1330.75 and the break point is 1324.

The SP futures M/A should provide temporary support.

7/4 midnight

2011-07-04T21:54:00.000-07:00

The thing about moving averages is that they creep up on you. I'm looking at NQ 15-minute,82-unit M/A minus .32% or 2351.25 stop currently. Nasdaq looks like it completed a very small 5th wave up.
Since I'm expecting sentiment to turn from positive to negative I want to get as short as possible at this point.

7/4 10:00

2011-07-04T18:57:00.000-07:00

Order in shorting YM futures at 12,512 stop. 1-minute, 163-unit M/A -.23%.

7/4 5:15pm

2011-07-04T14:52:00.000-07:00

Futures markets re-open at 6pm EDT.
European markets fell off of their highs to dramatically underperform Friday's U.S. trading. Friday-Monday DAX was up 125 points or 1.7% with SPX Thursday-Friday was up 2.4%. I like to use the DAX to estimate trading sentiment going into the nightly futures session. DAX closed up .23% but 23 points off of it's high.
Since SP and DJ have complete wave counts I'm short Sept YM futures at 12,519 stop. SP futures closed the morning down 1 point, while NQ closed up 10 points in a 5th up.

7/4 11:30am

2011-07-04T08:30:00.000-07:00

I covered the NQ short at 2361 on a new high. SP is -1, DJ +21. SP and DJ have completed counts up but NQ is in 5th wave now, breaking out of a rectangle wave 4. I was short from 2357.50 and will use the 15-minute, 82-unit M/A less .2% as confirmation of trend break and re-entry.

I'm currently 6% SDS, 4% DXD, 3% EUO, and 1% UCPIX.

DAX is underperforming, advancing .7% Friday closing at 10am EDT, 6 hours ahead of New York. With U.S. markets up 1.4% Friday the DAX will only keep up if it closes up .7% instead of .32% currently.
Jul 1, 2011 7,374.49 7,443.20 7,357.03 7,419.44 32,625,500 7,419.44

Jun 30, 2011 7,310.34 7,378.35 7,285.44 7,376.24 32,845,500 7,376.24

Jun 29, 2011 7,230.95 7,320.30 7,230.95 7,294.14 38,853,400 7,294.14

Jun 28, 2011 7,138.50 7,187.08 7,075.19 7,170.43 37,509,000 7,170.43

Jun 27, 2011 7,101.15 7,144.44 7,079.11 7,107.90 28,088,600 7,107.90

Jun 24, 2011 7,231.73 7,273.32 7,099.22 7,121.38 40,547,100 7,121.38

In Asia, all of the markets rallied less than Friday's U.S. except for Shanghai and Hong Kong which are playing catch-up. Nikkei up .98% underperformed U.S. Friday tape.

7/2 Weekly Commentary

2011-07-02T15:38:00.000-07:00

Here is the link to the Weekly Commentary:
Click here.

Tuesday evening will be the cutover to the newsletter subscription format.
The details for signing up for e-mail delivery are at the Sign-up Page.

It's only $10 a month, $100 a year and signing up now will freeze the rate for 3 years. Charging for the newsletter, while not making me rich, keeps me motivated to produce the communications that go along with my trading method. Hope to see you there.

Steve Koteles

7/1 Daily Commentary Flash

2011-07-01T16:34:00.000-07:00

The daily technical composite is now in weak sell signal, cancelling the buy signal in effect for the past several weeks.
I put the details into a PDF and I guarantee that you can access via this link. ARCA is open until 8pm if you want to buy some short ETFs.

7/1 Daily Commentary

2011-07-01T13:29:00.000-07:00

I wanted to get out the Daily early. When all of the market date is available I'll update the post with the daily technical composite and other markets.
When the daily technical composite registers a strong buy, as it did 13 trading days ago, everything else takes a back seat. I1 takes a back seat to a rally from 2 weeks of congestion on a +24 buy signal in the daily technical composite. I was disappointed that yesterday's rally did not take more out of the sails of the momentum, taking it only from +10 to +6. As stated then I expected today to be another up day to complete the work of neutralizing the oversold condition. I nibbled at NQ shorts today but got out with tiny losses twice because the count kept extending. I am short now from 2357.50.
I have kept positions small until I see the composite this evening. I'll post it 7:30EDT in time for ARCA. If the composite declines below +4, which I expect, then I'll add more short ETFs. The combination of an oversold condition, pre-holiday with light trade, and end-of-quarter.
The market completed it's abc from last week's lows this afternoon. SP futures count it best. I have to use futures because most of this rally happened overnight. Cash counts with huge opening moves don't make sense in a strong trending environment.

Zeroing in on wave (v) the final wave in the abc shows that all waves are complete.

In spite of the huge rally over the past 2 days the dollar has stayed above the bottom made on Wednesday. I consider this important market information.

7/1 3:55

2011-07-01T12:56:00.000-07:00

SP futures rallied to resistance as seen by the range bars. It looks to be putting in a head-and-shoulders.

Range is 1334.50 to 1336.50.

7/1 2:50

2011-07-01T11:50:00.001-07:00

Shorted 1% NQ at 2357.50 on what looks like a completed wave structure.

7/1 2:07

2011-07-01T11:08:00.001-07:00

Covered NQ at 2352.75, looking for 1 final high.

7/1 2:05

2011-07-01T11:03:00.000-07:00

I shorted NQ at 2351.50. The final, tiny 5th wave has extended with wave 3 just completed. I'll buy NQ back at 2352.25 and short again on final high.

7/1 1:45

2011-07-01T10:50:00.000-07:00

Today's rally should definitely turn the tech composite neutral. I shorted at a point 30 points up on the day for NQ futures. This is a pre-holiday and window-dressing rally so it should level off and not go ballistic like for an unexpected event.
The dollar has held it's ground and gold/silver have declined, which bodes poorly for the stock market going beyond today.

7/1 1:10

2011-07-01T10:14:00.000-07:00

Shorted 1% NQ 2351.50. Bought 2% SDS at 20.15.

7/1 12:45

2011-07-01T09:55:00.000-07:00

The SP futures count is almost complete as well. The counts are clearer after this last rally.

I'm using a 1-minute, 75-unit M/A of NQ futures with an envelope of .05%, or 1.5 points to signal a break.

If NQ is in a small wave iv and goes sideways into a rectangle then this M/A will flatten and lose it's effectiveness but by then a longer M/A will catch and be viable.

7/1 12:35

2011-07-01T09:37:00.000-07:00

The count for Nasdaq is wave c is close to complete.

It looks like s4 has completed it's 3rd wave up, so I'm expecting some sideways and 1 more high.

7/1 11:45

2011-07-01T08:46:00.001-07:00

I covered the NQ short at 2344.50 for a 1 point loss. I'm going to use a 1-minute M/A to re-enter.

7/1 11:30

2011-07-01T08:29:00.001-07:00

I shorted NQ at 2343.50.

7/1 11:25

2011-07-01T08:27:00.001-07:00

I covered NQ at 2338 and am waiting for 1 more new high above 2344.

7/1 10:50

2011-07-01T07:49:00.001-07:00

I shorted NQ futures at 2337.25.

7/1 10:10

2011-07-01T07:11:00.000-07:00

Looking to short 1% NQ Sep Futures at 2340.

7/1 9:50

2011-07-01T06:54:00.000-07:00

Here is the reason I decided to give the stock market another day to top out.

Historically, when the technical composite buy signal results in a significant rally then that rally continues until the composite declines to +4 or lower. I'll run the composite again at 7:20pm EDT to verify it reached +4 today.

7/1 pre-open

2011-07-01T05:45:00.000-07:00

I generated the daily technical composite yesterday at 7:20pm EDT. Even with yesterday's big rally the composite was not able to retreat to neutral. This caused me to exit the NQ short and sell 2% SDS and 2% QID. I'm currently 4%DXD, 2%SDS, and 3%EUO. Overnight the 15-minute M/A for NQ futures climbed to the current trading range. So even if I'm wrong about a final pop today I have a re-entry for NQ short nearby. The green line is the 82-unit M/A. 10 points below is the breakdown.

I'll be shorting on a pop to 2330.
SP, DJ, and NQ futures are at 50-day M/A resistance, so what rally can be mustered should be nominal and short-lived.

Gold and silver broke down overnight. I should have shorted yesterday but instead took position long dollar. If stocks break down then precious metals should as well.
The dollar bottom looks like it is in. It did not break above it's 10-minute M/A by more than .2% (16 ticks) last night so initial confirmation is not in. I'm using dollar as a primary confirmation for stock trend change.

7/1 1:30am

2011-06-30T22:42:00.000-07:00

I covered ND short when the daily technical composite indicated that technical momentum remained. I count today's rally as a wave iii out of a triangle and the congestion since as wave iv. I'll go short again on a final spike that will exhaust the technical momentum.

6/30 Daily Commentary

2011-06-30T16:31:00.000-07:00

Today's rally did not neutralize the signal, bringing the technical composite only down to +6. This tells me that there will probably be carry-over into the morning. Consequently, I covered by NQ short at 2320 for a loss of 7.75 points. Also I sold 2% QID and 2% SDS in ARCA.

The technical composite is saying that I will short again tomorrow. While disappointed, this is part of the trade. On the unexpected decline through the ND 15-minute, 82-minute M/A less 10 points I'll short NQ again.

I have the raw data for I1, the short-term timing component, the PM1 precious metals gauge, the US1 bonds gauge, the dollar gauge, and crude gauge in an Excel spreadsheet forward for next 60 days at this link.

I've been sitting on my hands over the past 12 sessions after covering shorts near the lows and I was eager to short this market (probably a little too eager).

Today played out as a strong rally with technical momentum, on a buy signal in the daily technical composite. Yesterday I was looking for a spike today strong enough to dissipate the technical strength to neutral. Today I bought 3% DXD, 2% SDS, 2% QID, and 1% EUO. I also shorted NQ futures at 2312.25 and have a stop at 2324.25. I bought 2% SDS at the close yesterday to get a toe-hold position.

The key is the short-term timing component of I1. The following chart removes the 8 day lead for simple comparison with price. As can be seen yesterday was the signal day for this component, declining below 10.5.

Here is the I1 with the 8-day lead removed:

However, the technical condition of the stock market is sufficiently strong to delay the signal until the daily technical composite declines to +4 or lower.

I believe the dollar low is in. When the stock market turns then the dollar will rally.

6/30 3:50

2011-06-30T12:50:00.001-07:00

Bought 2% DXD at 17.14
Went short 1% NQ again at 2321.50, stop 2324

6/30 3:40

2011-06-30T12:44:00.000-07:00

SPX high 1321.13. SPX is testing this high. I stopped out of NQ at 2322.25 and am looking for another short entry. This rally will turn the tech composite neutral, so at the close is the time to short.

6/30 1:15

2011-06-30T10:22:00.000-07:00

There was a data error in my futures data source, which showed a blip to 2323 for NQ futures, but the actual high was 2322 and did not violate my original stop. The market spiked to a higher level than I thought was necessary to finish the process of neutralizing the oversold condition of the last 2 months, but that's what markets do they go beyond what's necessary. The rest of the day should be milling around at a high level. I'll post the Daily as soon as the technical composite is generated.
The short-term timing component plus 8-day lead fell below 10.5 today, indicating yesterday was top day. However, the technical composite still had not fallen to a +4 to indicate that the technical momentum was used up. It should do so today.
I'm altering the charting program for the short-term timing display to allow for an input of the number of lead days. That way the chart as displayed will reflect the 8-day lead aligned directly with prices.

6/30 12:50

2011-06-30T09:50:00.001-07:00

Bought another 1% EUO at 16.70

6/30 11:40

2011-06-30T08:41:00.001-07:00

I'm still short NQ futures. There was a 1-minute spike to 2323. My stop is above this spike.

6/30 11:20

2011-06-30T08:22:00.001-07:00

We got the (very) minor new high so the count is complete. Market should wallow around until the close.

6/30 11:10

2011-06-30T08:10:00.001-07:00

Need 1 more minor new high to complete the wave count.

6/30 11:00

2011-06-30T07:51:00.000-07:00

Taking a breath. I've been looking forward to this morning and have been sitting on my hands for 2 weeks. The stock market has bumped into 50-day M/As for DJI, SPX, and NDX.

I'm now waiting for confirmations of trend change to increase positions. What I'm looking for are:
In the dollar, 16 cents above the 10-minute M/A, which would currently be a signal at 74.95.
DJ futures 10-minute,76-unit minus 38 points. This is 100 points away from the market currently.
NQ futures 15-minute,82-unit minus 10 points. This is also distant from current market.
I'm expecting this market to remain up for the day to allow the daily technical composite to decline to +4 and neutralize the oversold condition of the past 2 months. Consequently I'm not in a big hurry to add to positions until I verify the technical composite after the close.

6/30 10:30

2011-06-30T07:30:00.000-07:00

Confirmations of trend change include the dollar 10-minute,145-unit M/A plus .2%. It's currently at 74.80, so 74.96 (16 ticks) will signal trend change. Of course this M/A is moving down over time so the signal will need adjustment. (Blue line on chart.)

6/30 10:30

2011-06-30T07:21:00.000-07:00

This morning I bought 2% SDS, 2% QID, and shorted 1% NQ futures. I expect the stock market to close up but hopefully I shorted at a spike peak. The only stop I am putting on is NQ futures at 2322.25.

6/30 10:08

2011-06-30T07:08:00.001-07:00

I shorted 1% NQ futures at 2312.25

6/30 10:00

2011-06-30T06:57:00.001-07:00

Bought 2% DXD at 17.28

6/30 9:50

2011-06-30T06:50:00.000-07:00

I bought 2% SDS at 20.70 and 2% QID at 50.89.

6/30 9:32

2011-06-30T06:32:00.000-07:00

My strategy today is to short a spike top. I expect the market to close on the upside today to get the daily technical composite to +4 or below and relieve the oversold condition.

The weekly technical composite is on a strong sell signal with a -12 trough value. This signal remains in effect until the composite returns to 0.

Jack Cyrul sent in some trendline charts. This one shows convergence of trendline and 50-day M/A for the SPX at 1317-1318 which is about the same area I'm looking for with SP futures at 1314.

6/30 9:05am

2011-06-30T06:15:00.000-07:00

You will not need to use Google to access the commentary when I cut over to e-mail subscription. The commentary and intraday posts will be delivered via e-mail. Your e-mail program should allow you to set up alerts when any of my e-mails arrive.

I have targets of 2312 and 2316 on ND/NQ futures and intend to short futures at 2312 and buy QID at 2316.

There are 2 fail-safes in case the market does not perform to expectation and declines instead. First the DJ futures 10-minute, 76-unit M/A has a lower envelope of 37 points, so any trade 38 points below the M/A will be a sell signal. M/A is currently at 12,233 so the signal would be at 12,195 and lower (blue line on chart).

A larger signal will be issued by ND/NQ futures 15-minute, 82-unit M/A minus 10 points. Currently at 2294.60, this would generate a signal at 2284.60 or lower (green line on chart below):

The dollar is poised for a 2-month rally once the stock market peaks. I'll buy another 2% EUO at ND futures 2312.

6/30 pre-open

2011-06-30T03:00:00.000-07:00

I resolved the Google access issue. The commentary is universally accessible via the link in the Daily or this link to daily commentary.
I apologize for the inconvenience.
I've lowered the short point to ND or NQ futures 2312.
You can use SP futures 1314 as well. This is the 50-day M/A.

6/29 Daily Commentary

2011-06-29T17:24:00.000-07:00

The commentary's access issue has been resolved. I'm temporarily using Google Docs, but the permanent store will be my web site. When the web site is ready then universal access is guaranteed. There will be no security, the email I send will contain a link to a document that will be unsecured. A couple of days. Sorry for the inconvenience.

I put tonight's commentary into a Word file that is in the format that I would like to employ when I switch to newsletter. (Google screwed up the logo but this is a temporary store.) The storage location does not accept PDFs but I will have this resolved shortly so that PDFs will be e-mailed to subscribers.
The last page contains a table that will contain the raw sentiment gauge data going forward 60 days. I need to create a program that accesses the various databases to build a table for this purpose. This should be done within the next few days.
Comments welcome. Tonight's commentary is available via this link.

6/29 5:50

2011-06-29T14:53:00.000-07:00

Bought 2% SDS at 21.01

6/29 3:55

2011-06-29T12:54:00.000-07:00

I'm looking at a spike overnight in the stock indexes and metals. I'll short NQ and gold on the spike tonight and buy the ETFs in the morning.

6/29 3:10

2011-06-29T12:16:00.000-07:00

ND futures are forming a triangle in their wave iv of c.

6/29 11:15

2011-06-29T08:20:00.000-07:00

Stock futures finished their wave iii highs before the cash market opened. Probable shapes are triangle or rectangle.

6/29 10:25

2011-06-29T07:25:00.001-07:00

It appears that wave iii of c completed.

6/29 pre-open

2011-06-29T05:40:00.000-07:00

DJ futures 52-day M/A is a good target, 12,329. Short-term timing component declines back under 10.5 tomorrow indicating today at close is the spot. However, technical momentum is now present and the daily technical composite is in the process of reverting to the mean by declining to +4 or below from +14 as of yesterday's close. This means that depending on the force of the rally the odds favor some carry-over after the close into tomorrow.
If we get a strong extension of the rally today I'll go short a small amount near the close.

PM1 bottoms 7/13. Gold rallying to 1520.5 gets me short, silver at 34.70.

6/28 Daily Commentary

2011-06-28T17:43:00.000-07:00

Today fulfilled the breakout scenario for Nasdaq. Tomorrow should run some more. Since the advent of an 8-day lead in the short-term timing component of I1 my focus has been on using this series instead of I1 itself, since the lead is manifested primarily from this component and it measures so precisely. I've augmented this with my daily technical composite which has a strong history of either interrupting a downtrend for several days on a surge beyond +16 or going full circle to neutral +4. Since I1 data indicated that the congestion and rally was going to last for 2 weeks, my working assumption is that the technical composite was going to point out the end of the rally. Here's how I'm putting these together.
First, the short-term timing component declines below 10.5 on Thursday. I've included a listing of this series since Jan. 1 later in this post. Ordinarily this would pinpoint Wednesday at the close as the optimal time to short.

However, the daily technical composite remained at +14 today in spite of the rally. Since all of the technical series within the composite are built around thresholds and are smoothed, very often they signal together after strong moves. I assume that this will be the case this time. At +14 it requires a 10 point drop to +4 which is a lot to ask for in a single day (tomorrow). Therefore I'm expecting carry-over into Thursday morning.

Here is the short-term timing component data with high/low/close of SP futures:
20110103, 3.5705, 127200, 125590, 126530

20110104, 2.9461, 126990, 125830, 126530

20110105, 0.9860, 127350, 125580, 127180

20110106, 0.0757, 127690, 126650, 127020

20110107, 1.2220, 127380, 125780, 126750

20110110, 2.0659, 126800, 125800, 126550

20110111, 3.1096, 127360, 126420, 127040

20110112, 3.9080, 128420, 126910, 128340

20110113, 5.6046, 128450, 127650, 128130

20110114, 6.6133, 129080, 127430, 128940

20110118, 10.9846, 129500, 128300, 129470

20110119, 11.4699, 129620, 127520, 127850

20110120, 11.8671, 128130, 126770, 127620

20110121, 11.6924, 128800, 127330, 127970

20110124, 10.6822, 128950, 127800, 128850

20110125, 11.3829, 129170, 127750, 128760

20110126, 9.0250, 129630, 128620, 129360

20110127, 7.8168, 129800, 128930, 129580

20110128, 7.8508, 129940, 127000, 127150

20110131, 3.0017, 128360, 126260, 128240

20110201, 4.8176, 130580, 128140, 130270

20110202, 2.4054, 130530, 129790, 130000

20110203, 2.0887, 130580, 129180, 130330

20110204, 3.7916, 130860, 129820, 130720

20110207, 5.4868, 132000, 130610, 131580

20110208, 5.6099, 132230, 131330, 132170

20110209, 6.0918, 132190, 131200, 131920

20110210, 7.4621, 132020, 130880, 131880

20110211, 8.7912, 132850, 131010, 132730

20110214, 14.5707, 133100, 132480, 132770

20110215, 15.3959, 132920, 132230, 132630

20110216, 14.6709, 133600, 132580, 133300

20110217, 16.4807, 133990, 132850, 133780

20110218, 15.8942, 134280, 133520, 134240

20110222, 11.2551, 134240, 131050, 131440

20110223, 9.2196, 132050, 129800, 130550

20110224, 8.7784, 131070, 129300, 130270

20110225, 7.8023, 131980, 130170, 131880

20110228, 0.9379, 132900, 131300, 132610

20110301, 0.1509, 133620, 130050, 130110

20110302, -0.4330, 131350, 129630, 130580

20110303, 0.9696, 133170, 130490, 132970

20110304, 3.0494, 133440, 131150, 132030

20110307, 6.0428, 132720, 130300, 130910

20110308, 8.9701, 132550, 130620, 132010

20110309, 9.1635, 132490, 131170, 131540

20110310, 10.6274, 131710, 129200, 129430

20110311, 10.5974, 130850, 129000, 130610

20110314, 13.9640, 130040, 128130, 129050

20110315, 13.9098, 129310, 125120, 127530

20110316, 13.9924, 128320, 124380, 125390

20110317, 15.2966, 127420, 124150, 126880

20110318, 16.7645, 128750, 126190, 127420

20110321, 19.0837, 129600, 127500, 129310

20110322, 17.8128, 129650, 128770, 128830

20110323, 14.9453, 129550, 127930, 129210

20110324, 11.1106, 130670, 128920, 130520

20110325, 8.9372, 131450, 130420, 131000

20110328, 1.3844, 131500, 130180, 130220

20110329, 1.3347, 131700, 130050, 131650

20110330, -0.3598, 132750, 131480, 132390

20110331, -0.6947, 132570, 132070, 132100

20110401, 0.6364, 133370, 132080, 132770

20110404, 5.4862, 133250, 132460, 132920

20110405, 6.4878, 133400, 132310, 132670

20110406, 7.5741, 133640, 132620, 132890

20110407, 8.4137, 133500, 132250, 132850

20110408, 11.1042, 133570, 131850, 132380

20110411, 14.7365, 132980, 131700, 131960

20110412, 14.9346, 132050, 130550, 130830

20110413, 13.2708, 131870, 130530, 130870

20110414, 11.7776, 131330, 129850, 131020

20110415, 12.9812, 131930, 130580, 131870

20110418, 12.2120, 131850, 129050, 130110

20110419, 10.2732, 131100, 129410, 130860

20110420, 7.0734, 133020, 130890, 132830

20110421, 8.0785, 133770, 132840, 133100

20110425, 1.6065, 133540, 132730, 133080

20110426, 3.1030, 134580, 132830, 134090

20110427, 2.9586, 135400, 134010, 135100

20110428, 2.8089, 135820, 134700, 135490

20110429, 3.2044, 136370, 135280, 135970

20110502, 7.1929, 137280, 135470, 135770

20110503, 7.2395, 135830, 134600, 135210

20110504, 8.9979, 135500, 133780, 134300

20110505, 10.1734, 134870, 132550, 133500

20110506, 12.1398, 135130, 133200, 133460

20110509, 13.6163, 134650, 133440, 134270

20110510, 12.9772, 135630, 133920, 135380

20110511, 13.4434, 135840, 133320, 133870

20110512, 13.0344, 134850, 132900, 134750

20110513, 12.7804, 135250, 133080, 133400

20110516, 7.6321, 134100, 132490, 132560

20110517, 6.8593, 133190, 131620, 132540

20110518, 5.7337, 134020, 132470, 133860

20110519, 2.9878, 134530, 133460, 134170

20110520, 1.6239, 134400, 132700, 132780

20110523, 1.9049, 132670, 131090, 131520

20110524, 3.4322, 132220, 131200, 131360

20110525, 4.0632, 132420, 130250, 131660

20110526, 4.4328, 132730, 131270, 132650

20110527, 4.5943, 133350, 132450, 132990

20110531, 10.4603, 134570, 132860, 134390

20110601, 11.0917, 134770, 131130, 131210

20110602, 13.2322, 131750, 130450, 131240

20110603, 11.9935, 131330, 129460, 129630

20110606, 13.9457, 129900, 128350, 128500

20110607, 13.2273, 129520, 128270, 128480

20110608, 11.7586, 128740, 127630, 127700

20110609, 11.3189, 129370, 127550, 128740

20110610, 11.7079, 128380, 126750, 126920

20110613, 9.5956, 127650, 126550, 127160

20110614, 5.8582, 128690, 126520, 128450

20110615, 3.9927, 128380, 125580, 125990

20110616, 0.0524, 126900, 125250, 126350

20110617, -0.2868, 127730, 125860, 126600

20110620, -0.9603, 127520, 125620, 127380

20110621, 0.3894, 129250, 127170, 128790

20110622, -0.2196, 129330, 127950, 127980

20110623, 0.6621, 128080, 125700, 127700

20110624, 2.6651, 128600, 126130, 126390

20110627, 8.9891, 128000, 125540, 127630

20110628, 9.3093, 129500, 127160, 129450

Silver and gold rallied today but not proportionally to the stock indexes. Silver futures at 34.60 and gold at 1520 remain my action points for shorting. They may not make these levels. Here is PM1:

With the extended formatting capabilities of the newsletter in PDF format I will daily carry the following series' raw data for 30 days forward:
I1
Short-term timing component
PM1 Silver/gold sentiment gauge
US1 Long bond sentiment gauge
If markets are compelling I'll include the dollar gauge and crude.
All gauge charts weekly and some daily/intraday depending on the trade.

So the switch to PDF will really yield a lot more usable information without a lot of increase work on my part. The blogger is a crude tool.

As part of my trading rules I took a 1% position in DXD when the DJI was 5 points away from breaking the upper envelope of the critical M/A. This was broken today and 4 tick loss was taken. This is a routine trade with tiny risk and sometimes surprising payoffs. However, the efficacy of the critical M/A and the SP futures 30-minute M/A is reduced in extended trading ranges.

6/28 3:45

2011-06-28T12:43:00.001-07:00

Targeting DJI 12,150 or the close, whichever comes first.

6/28 3:20

2011-06-28T12:21:00.000-07:00

My buy of DXD is a day trade with any DJI above 12185.25 getting me out.

6/28 2:38

2011-06-28T11:39:00.000-07:00

The count for wave iii looks complete, still in DXD, high 12188.

6/28 2:27

2011-06-28T11:28:00.000-07:00

A 10-point risk on DJI, bought DXD at 17.85 when DJI hit 12174, with stop at 12185. This is a play on the critical M/A, odds are less than 50/50 but if DJI turns down it scores much bigger than risk.

6/28 1:45

2011-06-28T10:48:00.000-07:00

End-of-quarter window-dressing in progress. Thursday is my target top. The count looks like iii of c in progress, but 3rd waves often take longer than you think.

DX futures hit 75.26 and ricocheted upward. I already own EUO so I'm waiting for the stock rally to wind up, but if you have no long dollar then look to get in on a return to the low.
Looking to short silver on a return to 34.60 (basis July) and expecting the stock market to kick it there. Gold on return to 1520.

6/28 10:40

2011-06-28T07:38:00.000-07:00

Friday is the first day that the lead-adjusted short-term timing component returns back under 10.5 (after a relatively high peak of +16). That makes Thursday afternoon my action time for shorting this market.

The daily technical composite is still at +14 so with only 3 trading days remaining they need to be strong up to get the composite back to a neutral +4.

The dollar is declining in sympathy with the stock rally. Daily M/As converge at 75.25, which offers a good buying opportunity (currently 75.31).

6/28 10:00

2011-06-28T07:03:00.000-07:00

Sitting on our hands is no fun, just like generals waiting for the time to execute an offensive. No wonder they smoke cigars! I have to let the bulls have their fun and chum it up at the watering holes after the close. Their feel-good time lasts through Thursday and until then I get to practice my panther pounce.
The Nasdaq is breaking out, so wave iv is not a rectangle but a zigzag up. See the head-and-shoulders?

I have liberty to go long but I won't because I want to keep perspective on the upcoming shorting opportunity. I won't let charts guide me, I'll let the clock do the job. I'm working on software in the interim, but keeping an eye on the indexes.

6/28 pre-open

2011-06-28T05:23:00.000-07:00

My ideal rally top is Thursday. I bought 1% QID after the close and SP futures did not exceed 1280 so I currently hold 1% UCPIX, 1% QID, and 2% EUO. We did not have weakness overnight so I sold QID at 53.75.

6/27 Daily Commentary

2011-06-27T17:15:00.000-07:00

I bought 2% QID in ARCA trading but narrowed it to 1%. The stock market is at the outer limits of the SP futures 30-minute M/A, but the short-term timing component at minimum tops tomorrow or ideally on Wednesday. I'm getting in early and will buy NQ futures if SP futures have a 30-minute close above 1280.
The daily technical composite established a buy signal 2 weeks ago and moved down a notch today to +14. +4 will negate this signal and shift the short-term technicals back to neutral.

My main focus has been on the short-term timing component of I1 with an 8-day lead. The 2 hash marks on the chart below are the secondary peak at +16 and 8 days earlier (tomorrow). So the earliest the peak will occur is tomorrow and my purchase of QID is premature. The ideal time window is the decline below 10.5 which will occur Thursday, so the time window is adjusting as we get closer to it. My bet is on Thursday, which implies an upside breakout until then.

I bought QID at the upper end of it's trading range and NQ futures are at their 18-day M/A. A breakout will confirm that the market has 3 days to it's Thursday peak.

The only reason that I started to short a bit early is that the market is at an inflection point with either a breakout or breakdown iminent and the longer-term backdrop is bearish, with the weekly technical composite on a sell signal and smoothed I1 on a downtrend until late August.

6/27 6:00pm

2011-06-27T15:03:00.000-07:00

I just bought 2% QID at 53.63. Although I'm 2 days early from optimal sell point, today marked the nominal high of the short-term timing component. I want to have more hide in this market going forward. I'll increase again Wednesday. The stop is SP futures trading above today's high (1280) on a 30-minute close. I'll cover the salient points in the Daily.

6/27 11:30

2011-06-27T08:28:00.000-07:00

Stock market rallied to DJI critical M/A and SP futures 30-minute M/A. Since the trading range has lasted for a period longer than these M/As I am not placing the weights on them that I ordinarily would. I remain in passive mode. Wednesday will transform me into a man of action, a man of steel.

6/27 pre-open

2011-06-27T05:42:00.000-07:00

End-of-quarter week. In a bull or trendless market this would add a bullish bias. Short-term timing component indicates Wednesday as peak day. Trend is then down until late August. I hold 1% UCPIX and 2% EUO.

Overnight trading saw SP futures test last week's lows before rallying. SP and ND futures are testing their 200-day M/As. It's looking like Wednesday will only see a rally to the top of the trading range. If the past 2 weeks are only a rectangle then this will have implications for a wave count. The only clear count of the decline since March has been Nasdaq, with the Composite counting (iv) in progress. A rectangle would make be appropriate for this count and, when complete, make this count almost a certainty. My tactics are to go short at top-of-range sometime Wednesday.

As expected, the dollar met stiff resistance at 76.50, but I believe that the dollar is in an uptrend. Stock strength going into Wednesday should offer a buying opportunity.

Silver traded down with stock overnight and has not rallied back with them. I'm reluctant to short silver until Wednesday, hoping it will recover back to the daily M/A or higher and give me a short point for the "risk-off" trade.

6/24 Weekly Commentary

2011-06-24T14:07:00.000-07:00

The stock market started a broad trading range 10 days ago and I've been playing defense since then. I've been using the short-term timing component of I1 over the past several weeks because the 8-day lead is easier to visualize with this series. I1 also has an 8-day lead. In the past leads have temporarily developed within I1 after traumatic events. World sentiment is "risk-off" and the markets have not fully reflected that reality.
I'm pinpointing Wednesday as the final day for this respite from an ongoing bear market.

The stock market is supported by SPX and Nasdaq 200-day M/As.

NDX and ND futures are forming a potential H&S bottom. If so then the breakout and rally needs to begin pronto to make my Wednesday top day. With no breakout then there will be a 13-day trading range with distribution throughout to propel the next down move.

Gold and silver fell on the crude news. Today silver closed on it's key daily M/A:

Gold broke it's short daily M/A and if silver and stocks recover into Wednesday then a re-test of this M/A is likely.

Ben delivered a downbeat economic assessment and is mystified why the ocean of stimulus is not bringing jobs back to our shores. Ben, the plants are gone and polishing each other's shoes is not a long-term economic strategy. The next day Obama released 30mil barrels from the Strategic Petroleum Reserve and twisted the arms of other IEA member countries to do the same amount. They have now thrown the kitchen sink at the U.S. economic rot and, like fish fighting the Keynsian hook, are being drawn inexorably to the waiting net. I'm still betting that the U.S. will change in time to avoid street riots by the left. The Tea Party members of congress are holding fast and the dems are ramping up their blame campaign. Personally, I think that holding the line at no tax increases is an economic mistake as well as a political one. A plausible debt plan is needed to prevent the market taking over. This needs to include revenue increases as well as spending cuts. We need to stop relying on supply-side economics, specifically the Laffer Curve and stim via the military. We are beyond the point where party economic voodoo will get us out of this mess. Supply-side (Reagan) economics is not Austrian economics. I think some or many of the Tea Party congressmen understand this but the rest of the Republican party is stuck in Reaganist doctrine. Draconian cuts in government spending at all levels are required, including entire departments being eliminated and the military slashed to the bone in order to implement the Austrian solution. So while Boehner is supporting Tea Party members at this point but that support has not faced the ultimate test.

There are 2 separate fights going on. One the Dem/Keynes vs. GOP/Reagan has been going on for decades. Now we have TeaParty/Austrian vs. GOP/Reagan. The American public still believes in the power of government so the Austrian school is not politic and may swing votes back to the Dems next year. If GOP retains control of the House then the American political spectrum will shift away from belief in big government.

Converting to a newsletter next month in PDF format and e-mailed. Comments welcome.

6/24 1:30

2011-06-24T10:29:00.000-07:00

ND futures are testing hourly M/A and will only break support below 2194 (currently 2218).
SPX and Nasdaq Comp tested their 200-day M/As twice in the past week. SPX M/A is currently 1263.50 and I would expect it to hold if tested again. Comp is 2652.

6/24 noon

2011-06-24T09:35:00.000-07:00

Short-term: neutral until Tuesday/Wednesday when I'll short again

Medium: Bottom late August

The broad trading range market continues. The last thing I want to do is make directional bets in a non-directional market. The weekly trend is down but that allows for a good upside pop. Tuesday/Wednesday are when I'll look for a top to short. Yesterday's market was distorted due to government intervention, but the SPX 200-day was tested and held.

I1 predicted the beginning of this trading range with an 8-day lead.

6/24 11:30

2011-06-24T08:29:00.000-07:00

Here is I1 year-to-date to mid-July. I'm using an 8-day lead with I1 and the short-term timing component.
20110103 10.65931

20110104 8.740036

20110105 6.669497

20110106 4.659269

20110107 3.130109

20110110 1.958889

20110111 2.423436

20110112 3.04538

20110113 4.081726

20110114 5.459954

20110117 7.244822

20110118 9.279465

20110119 11.4923

20110120 13.90587

20110121 16.33031

20110124 18.86588

20110125 21.5293

20110126 23.26398

20110127 24.94553

20110128 26.78996

20110131 27.08342

20110201 28.07677

20110202 28.24126

20110203 28.64861

20110204 29.44478

20110207 30.08323

20110208 30.98431

20110209 31.61372

20110210 32.7958

20110211 34.23365

20110214 37.53806

20110215 40.75786

20110216 43.77328

20110217 47.36712

20110218 50.57693

20110221 52.17321

20110222 52.59504

20110223 52.23759

20110224 52.12646

20110225 52.30561

20110228 50.78321

20110301 49.95083

20110302 48.75886

20110303 48.7545

20110304 48.60954

20110307 48.91933

20110308 50.65648

20110309 53.18327

20110310 55.83762

20110311 58.13648

20110314 61.86496

20110315 65.04965

20110316 68.23689

20110317 71.06565

20110318 74.00252

20110321 78.1513

20110322 81.3552

20110323 84.10808

20110324 85.52601

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

20110520 61.87192

20110523 59.01003

20110524 56.79882

20110525 54.87997

20110526 53.32354

20110527 51.72803

20110530 51.71783

20110531 51.27849

20110601 51.09029

20110602 50.50946

20110603 50.20442

20110606 50.04399

20110607 49.50193

20110608 49.21346

20110609 48.42033

20110610 47.9178

20110613 46.2868

20110614 44.06588

20110615 40.71006

20110616 36.21494

20110617 31.65451

20110620 27.11596

20110621 23.33733

20110622 19.82974

20110623 17.15604

20110624 15.28214

20110627 15.04184

20110628 15.07411

20110629 14.63898

20110630 14.0189

20110701 14.27377

20110704 15.38647

20110705 15.8216

20110706 16.46775

20110707 17.67538

20110708 19.54239

20110711 19.22672

20110712 18.47617

20110713 16.72833

20110714 13.80678

20110715 10.66651

6/24 11:00

2011-06-24T08:05:00.000-07:00

Stock futures are declining back to support M/A and have several days before the I1 and components turn down. I'm betting a rally from this congestion.

6/24 pre-open

2011-06-24T05:09:00.000-07:00

Sold the QID at 54.25 for 49 tick profit (less 15 for the broker). I've got UCPIX.
I'm going to let the short-term timing component guide me.

6/23 Daily Commentary

2011-06-23T17:49:00.000-07:00

I bought QID at 53.77 near the close when both SP futures M/A and DJI critical M/A were both hit almost simultaneously. I had earlier attempted to buy QID but was stopped out.
The stock market declined sharply overnight due to a collapse in commodity prices brought about by an attempt by the Keynsian authorities to get the U.S. economy going by releasing 30 million barrels of crude from the Strategic Petroleum Reserve. Other nations were brought into in under the umbrella of the IEA. The stock market found bottom at the SPX 200-day M/A and rallied for the rest of the day. Although the decline broke the envelope of the DJI critical M/A it was within the context of a trading range extending over the past 2 weeks and thus the significance of this event was reduced as trading ranges produce moving averages of length less than the trading range to flatten and lose their predictive capability. Since the DJI critical M/A only spans 5 trading days it's input is sharply reduced when weighing factors. The same rationale applies to the SP futures 30-minute M/A. Even though these M/As continue to function, their power is reduced within long trading ranges.

The ND futures 17-day M/A, however, is still relevant and came in just below today's highs. ND futures have chart resistance at 2252.50 and a rally beyond 2257.50 would indicate the rally continuation as predicted by the short-term timing component.

Consequently, I'll go long NQ futures if 2257.50 is exceeded, in order to offset my QID and UCPIX. Rallying beyond this level will break out of a H&S pattern formed during the trading range. This will also confirm that the short-term timing 8-day lead is still in control, in spite of the oil market manipulation. Using this lead my best estimate of rally peak is Tuesday or Wednesday.

A continuation of the rally will also allow gold and silver to recover from the oil shock.

I'll remain short Euro from here on.

6:23 4:00

2011-06-23T12:54:00.001-07:00

Shorting again at SP futures M/A 1279.25

6/23 3:10

2011-06-23T12:10:00.001-07:00

Sold 1% QID at 54.45 when Comp broke 2671. Still holding 1% UCPIX.

6/23 2:45

2011-06-23T11:42:00.000-07:00

By staying short here I'm betting that the SPX will break it's 200-day M/A and that the short-term timing component of I1 no longer leads by 8-days (which indicates rally end either tomorrow or next Wednesday). The above 2 events are lower probability so the odds favor the market not declining through the lows.
Holding 1% QID, 1% UCPIX, 2% EUO.

6/23 2:20

2011-06-23T11:21:00.000-07:00

A new high in Nasdaq Comp beyond 2671 gets me out of QID and indicates 5 up in progress. This would indicate that the short-term timing component is still in control of the stock market.

6/23 1:40

2011-06-23T10:41:00.000-07:00

Nasdaq new high changes count to c up complete. DJI/SPX count c up complete.
Since they are all c's I'll hang onto the QID, unless it morphs into a 5 with a decline and new high.

6/23 1:25

2011-06-23T10:24:00.000-07:00

Now that Nasdaq has a 5 up and SPX successfully re-tested it's 200-day M/A I'm selling the QID I bought earlier within the iv up at 55.20, leaving a truly trivial loss and powder for higher levels.

6/23 1:00

2011-06-23T10:01:00.000-07:00

Nasdaq is on a 5-wave up.

Currently hold 1% UCPIX, 1% QID, 2% EUO. Nasdaq returned to it's 200-day M/A and if SPX breaks 1248 there is a vacuum.

The 300-day is actually more relevant to SPX and indicates 1215 as the next support if 1248 is taken out.

Longer-term:

The daily technical composite buy signal did produce a multi-day rally, and it's minimum expectation is satisfied. A decline in the stock market producing a move to +32 would be the limit, based on it's history.

The smoothed I1 continues to decline into late August, but the short-term component with 8-day lead indicates from 2 to 5 more days upside. The SP 30-minute M/A is 14 points above SP futures at this time, but that will narrow as the M/A declines.

6/23 12:03

2011-06-23T09:03:00.001-07:00

I just bought 1% QID at 55.34.

6/23 11:45

2011-06-23T08:48:00.000-07:00

Due to the wave count of c up I'll buy 1% QID or SDS when Comp 230-minute M/A is touched.

6/23 11:40

2011-06-23T08:39:00.000-07:00

Looks like wave iii of c up is in progress.

6/23 11:15

2011-06-23T08:12:00.000-07:00

The stock market bounced a little to the 1-minute, 60-unit M/A but I'm holding out for a bigger bounce.
The good news is that we have a short in place UCPIX and a long dollar position EUO. The bad news is that we need to increase position and, since 11,900, the market is ratcheting to slightly lower lows on 3-waves. Nasdaq and Russell put in solid bottoms earlier and I'm waiting for a bounce.
Silver has big support at 34.50, a point beyond that and it's free-fall.

The dollar has stiff resistance at 76.50 and beyond that a big spurt up.

6/23 10:25

2011-06-23T07:26:00.000-07:00

Forget about the 60-minute M/A, I'll be using the DJ futures 10-minute M/A (blue line). I count the initial 5 down complete with the new low (not shown on chart).

6/23 9:50

2011-06-23T06:57:00.000-07:00

Ben talked to Obama and decided that since their earlier policy of inflating failed to get the U.S. economy going that they would try market manipulation to reduce the "bad inflation". Release the strategic oil reserve, oil falls $15, and the economy grows again, right?
Gold and silver joined oil's $4 decline, along with stocks overnight. The cash market closed right near the DJI critical M/A and opened a few points below the envelope. It then continued the decline 40 points below the 11,949 envelope, so we have a sell signal.

I'm waiting on a rally to the 1-minute, 60-unit M/A to short more.

6/22 Daily Commentary

2011-06-22T19:13:00.000-07:00

Many times the stock market charges ahead of a Fed non-event. Then, a couple of hours after the non-event occurs it gives it back. The only "news" was that the Fed acknowledged that the economy remains slow, as if Keynsian economics could work forever.
I removed a bullish leg of a spread 1% UWM vs. 1% UCPIX, thus going short near the highs. I'm sorry I did not pound the table, but the I1 components are still not peaked yet. The Russell hit Elliott 31.8% retracement, technical, and M/A resistance. I'm holding the UCPIX regardless of events. I expect further weakness overnight but the market should hold together for a few more days.

DJI declined and stopped at it's critical M/A.

SP futures broke their 30-minute M/A.

While not a requirement for a continued rally, the daily composite is on a +24 buy signal until it declines to +4. The minimum requirement for a +16 to +24 buy signal is a rally lasting several days.

The short-term timing component of I1 predicts at least 2 more sessions of upside. This is not infallible but has worked well the last several months with an 8-day lead.

Finally, gold and silver are tied at the hip to the stock market.

6/22 1:45

2011-06-22T10:47:00.000-07:00

I'm currently holding 1% double-short Russell 2000 mutual fund, UCPIX, which I effectively bought this afternoon by selling my UWM at 45.20. I still expect the stock market to continue the rally but acknowledge my fallibility, so I'm early and I know it.

The dollar is at hourly M/A support and I'm holding 2% EUO double-short Euro. My stop is .5% below the blue line M/A. If the stock market continues to rally strongly this position will be stopped out.

6/22 12:45

2011-06-22T09:41:00.000-07:00

No QE3. Rates at Keynsian 0 forever. Housing is weak. No surprise.
I sold the double-long Russell ETF UWM that I used to offset my double-short Russell mutual fund UCPIX prior to the announcement on Elliott and M/A considerations. So I'm 1% double-short Russell 2000 now. This is not to say that I believe that the multi-day rally is done, but that I'm starting to lightly step in with longer-term position.

6/22 11:30

2011-06-22T08:30:00.000-07:00

Announcement at 12:30. I'm in cash except for 2% EUO.
Russell is at 31.8% retracement level, prior wave 1 low, and at significant M/As.
Last week I bought 1% UWM to neutralize my 1% double-short Russell mutual fund UCPIX. I just sold UWM at 45.20.

6/22 pre-open

2011-06-22T05:58:00.000-07:00

All eyes on no change, but with nuance. The monthly dance with Ben taking questions afterwards.
Not much change overnight. SP futures almost at their 30-minute M/A.
The Daily yesterday gave the rally's lifespan of 3-6 days. I'm only concerned if the 30-minute SP futures close is .5% below the 30-minute, 92-unit M/A.

6/21 Daily Commentary

2011-06-21T19:07:00.000-07:00

I remain in cash, having sold the short ETFs and short mutual funds very near the lows. The DJI critical M/A was broken to the upside today, confirming that the rally has several more days of life. The daily technical composite moved down a notch to +18 from it's high of +24. The buy signal will only be rescinded by a move to +4 (preferably +3).

The short-term timing component of I1 confirmed it's 8-day lead and this indicates that the rally will last a minimum of 3 more days and a maximum of 6 more days. I'm betting on 5+ days because the trading rules for this component avoid going short until it declines back to +10.5 after reaching peak. The daily technical composite should get me short again at the top.

A rally of this duration will dishearten bearish intermediate traders.

In this week's Barron's in Market Watch there is an entry by Market Strategist that I believe in wholeheartedly. The synopsis is:
"The primary trend is governed by the business cycle and fundamental conditions (SLK and major monetary policy in a fiat world). It typically lasts for years.
Intermediate trends generally last several weeks to months.
Minor trends are the least important and last days to 2 weeks. While I know successful investors and intermediate-term speculators, I've never met anyone who created wealth trading minor trends. That doesn't mean such people don't exist; I just don't know any after over 30 years in the business."

My job with this blog is to use I1 and it's components to trade the intermediate trend and to move to cash at the advent of minor trend reactions. Unfortunately the world is full of traders who feel they need to trade the minor trends, so my following tails off when I move to cash and await the minor trend to spend itself.

I'll be moving to a subscription basis in another month, still working on the details. Monthly cost: $10.
Feedback appreciated. Traders that want to make money will subscribe and go to cash when I do; those that want to chase the minor trends will still find value by taking counter-trend positions instead of going to cash like myself.

6/21 12:45

2011-06-21T09:44:00.000-07:00

The DJI critical M/A was broken on the upside this morning, confirming the multi-day continuation of this rally. Just a few days ago, the traders' sites were full of people chomping at the bit for a crash. I1 predicted this rally and allowed me to get to cash at the bottom.
I took a trade this morning right at the edge of the DJI critical M/A envelope and exited when the envelope was exceeded and the prior sell signal in force since May 5 was negated. Now I look for daily M/As on the upside to use in conjuction with I1. SPX 1309.70, the 30-day M/A and DJI 12,396, the 50-day M/A.

Meanwhile, due to the "risk-on" environment, the dollar has declined to hourly M/A support from which I expect a recovery to sell into.

6/21 10:55

2011-06-21T07:54:00.000-07:00

DJI exceeded 12,157 and I sold DXD at 17.91 for a 6 cent loss. Even if this leg of the rally completes in another wave up, the direction over the next several days is up because the DJI critical M/A has now been broken.

In concert with the stock market the dollar has declined below the top of what could have been wave 1 up, thus invalidating a 5 up count. I'll wait for a dollar mini-rally today to sell EUO.

6/21 10:30

2011-06-21T07:30:00.000-07:00

DJI went 15 ticks beyond the prior high and I kept the DXD on an irregular top. Figure a high beyond 12,157 does it.

6/21 10:04

2011-06-21T07:05:00.001-07:00

Any new high (12,156.79 or higher) sells the DXD.

6/21 pre-open

2011-06-21T06:03:00.000-07:00

DJI rallying beyond 12,155 would break the critical M/A and extend the rally potential to the time window indicated by the short-term timing component of I1. I bought DXD at 21.97, which is the equivalent of about DJI 12,145. I'll sell if DJI hits 12,155.

The count for SPX is the overnight rally completes a 5 up which may be c up completing, but more probably part of a more complex upward impulse to complete the c in a few days.

The Comp and NDX count as wave c up ending at 2690 and 2654, respectively. NDX 2654 is 31.8% and the end of wave (iv) coming down.

6/20 Daily Commentary

2011-06-21T05:39:00.000-07:00

There is a time for action and a time for rest. The stock market is giving me a time of rest, waiting for the upward correction to complete. The short-term timing component of I1 is calling for rally lasting at least another 3 days, but the longer-term I1 is down. I trade in the direction of the longer-term trend.

The DJI critical M/A was crossed at 11,990 and projects an upper envelope at 12,152. I expect the rally to continue but buying DXD (short DJI) at 12,140 with a 12,155 stop is worth a shot. I bought 2% DXD at 17.97 this morning.

FOMC announcement Wednesday.

6/20 11:30

2011-06-20T08:23:00.000-07:00

I'm still out of the stock market and hold 2% EUO short Euro. Looking for 4 days of upside to correct the initial 5 down. I'll take on a short at DJI 12140 with a stop at 12,155.

6/18 Weekly Commentary

2011-06-18T12:20:00.000-07:00

I shifted to a neutral position over the past week, first by selling the short ETFs, then on Thursday the short mutual funds. The stock market finished the week up on DJI, SPX, and Russell but down Nasdaq.
The 8-day lead on the short-term timing component of I1 timed the end of the decline in DJI, SPX, and Russell. The Nasdaq has made and kept a slightly lower low. This component indicates rally mode for a minimum of 5 more sessions (marked "early" on the chart), if the 8-day lead remains in effect.

Meanwhile the smoothed I1 is pointing to a bottom in late August.

The transition from a capital goods economy to a service economy has been a 50 year process and has rotted the U.S. from the inside. America's bridges are a good indicator and, like the process itself, only show the rot when inspected. The average American, like the frog in warm then hot water, has not noticed the destruction of his childrens' futures because it happened in slow motion. The funds to fix infrastructure will come at the expense of new projects so the map of America will remain unchanged for 20 years. Since the Highway Trust Fund for infrastructure has been running deficits for years, what infrastructure has been built and maintained have come increasingly from the general fund. This is one more iminent problem that has been kicked down the road for decades.
Caterpillar is the primary U.S.-based construction machinery manufacturer.
Deere and McCormick are predominantly farm equipment
Joy Global is mining equipment.
Bucyrus is coal mining equipment.
Caterpillar has declined sharply since April and will be a good short sale on a bounce. China has taken over the wheel loading equipment within China and is rapidly gaining share in the excavator market (it has now mastered the more complex machining) within China. The U.S. will be running a distant third after Japan there. 10 years from now Caterpillar will have sent it's manufacturing overseas or will not survive.
Deere and McCormick are prospering due to the Fed's food inflation.
Joy is doing well on base metal pricing.
Bucyrus has prospered on China shutting small coal mines and focusing on large ones.
Nucor and US Steel are all that remain of the American steel industry and export little (the rest are small potatoes). (Nucor's exports are predominantly from it's Mexican mills.)
Meanwhile in all categories China is gaining share. The ability to manufacture equipment "good enough" to do the job at half the American price has accelerated with China's infrastructure build-out.
The 5 companies above are all that remain of the 30 companies that comprised major capital goods manufacturers 50 years ago. Caterpillar still remains dependent on U.S. government projects and this support will vanish. In addition, there will be few Caterpillars sold in China 5 years from now. This future prospect is in stark contrast with it's stock chart.

The elimination of food and base metal inflation, the elimination of new U.S. infrastructure projects, a slowdown in China, and the development of the Chinese machinery industry will be the bases for a reversal of the remaining U.S. capital goods industry. The continued shrinkage of U.S. capital goods global market share will manifest in acute problems in the above manufacturers, with the possible exception of Bucyrus (depending on coal energy production trends).