The Presidential Debate ends in a draw with a slight advantage to Obama. The fighters are told to return to their corners until the final debate on Monday. Thus, no clear-cut winner, both candidates held their ground. IBM and INTC are hurting the Nasdaq. AAPL is down pre-market as well, by a buck. PEP earnings beat but the stock has actually leaked lower. BAC earnings were in line but a little light on top line revenue and it is trading flat right now. The big news overnight is that Moody's decides not to downgrade Spain. The European leaders must have either wined and dined Moody's, or, strapped them into a chair and beat them with a rubber hose, at any rate, Moody's decides to back off on Spain but maintains a negative outlook. The euro jumps strongly, over 131 and now at 1.3130-ish. You would expect the S&P's to be up 10 or 20 handles, but, alas, the futures are up three. Housing Starts, a key number this week, blow out expectations at 872K, that is about 150K more than the 700-750 steady pace the last half year or more. The Starts have not seen the 800's since July 2008 at the peak of the commodities bubble. Are these numbers more phoney baloney in front of the election? Paging Jack Welch, paging Jack Welch....
SWK (Black and Decker) lowers guidance moving forward which is a head scratcher since the housing data says everything is going gangbusters. The bulls only needed a smidge of green in the futures and that is in place, so a move to the SPX 1457 and 1460 resistance levels appears on tap. Watch UTIL 478.43, the bulls must maintain price above, the bears need to push utes back below which would usher in market negativity. The big jump in the euro and the positive Housing Starts should have futures up wildly higher, but the futures are flat, something is not quite right, perhaps market exhaustion? Watch your wallet. The bulls have the VIX 16.50, JJC 46.30 and RTH 44.45 on their side, all three are contributing bullishly to markets. Any change will create market negativity. Oil Inventories are important at 10:30 AM EST. China GDP is tonight which will impact copper (watch JJC closely in the coming days). The EU leaders Summit is Thursday and Friday so lots of tape bombs are anticipated out of Europe that will send markets violently one way or the other.
Note Added 10/17/12 at 10:12 AM: The opening bell rings and markets scatter in all directions. UTIL catapults higher at the opening bell now printing 483, this is very bullish for markets. VIX jumped higher at the bell and is now falling on its sword down to 15. The Dow and Nasdaq is down but the SPX is up. Tech is leading the downside which is bearish for markets today. IBM is down 8 bucks and it is a Dow Industrials stock. Use 8 as a factor to find out how any one of the Dirty Thirty stocks are contributing to the overall Dow. Thus, down 8 times 8 is 64 points. The Dow is down 7 points right now, if IBM did not have the bad news, the Dow would actually be up 57. Coal stocks are flat and uninspired so this shows that Romney did not win the debate last evening. JJC is 47.16. Copper will become real important overnight tonight. Apple is flat. The SPX moved up thru 1457, now testing the very strong resistance at 1460. It would be very bullish if price can push up thru 1460. Reference the SPX 30-minute chart posted last evening, the higher high in price is occurring and the indicators are negatively diverged. Price should flatten and weaken as time moves along. Oil Inventories may surprise in fifteen minutes. The euro is 1.3126.
Note Added 10/17/12 at 12:49 PM: The SPX punches thru 1460 to attack 1461. Price is spending a lot of time in this 1460-1461 area. SPX S/R is 1468, 1466, 1465.77 (this years closing high), 1465, 1461, 1460, 1457, 1453, and 1451. Utilities are strong. UTIL is at 485.66. How do you like that? The number of interest for all next week for UTIL is 485.67 and the bulls have now driven the utilities all the way up to this level, which is bullish for markets. Copper is strong. VIX trying to maintain 15. The VIX 20-day MA is about to cross the 50-day MA to the upside at 15.35-ish which hints at higher VIX prices coming. SPX 30-minute chart would like to see price roll over moving forward, and 1-hour and 2-hour charts appear to want to top today as well. The SPX minute charts are agreeable to rolling over. Markets may want to peak and idle ahead of the China GDP and EU Summit. AAPL is flat, tech is not leading the upside today. The Autumn leaf clean up must continue.
Note Added 10/17/12 at 2:56 PM: IBM broke 200. SPX went down to take a look at 1457 support and came back up to test 1460 resistance again. The negative divergence highlighted in the previous post pushed price lower. Looks like more sideways with a slow roll over. UTIL is over 486. VIX hangs on to 15. AAPL down four. The euro is 1.3122.
Note Added 10/17/12 at 3:17 PM: Dow Industrials turn positive. SPX is up thru 1461 resistance, see if it holds, if so, next R is 1465. The closing high for the year is 1465.77, it was tested a couple times since it occurred with price failing each time. The SPX is now only three points away.
According to ES, every problem the world has ever had is solved.
ReplyDeleteI hereby change my mind about NAAIM being silly for using Wednesday as a cutoff date. What perfect timing, this should confirm every man, woman, child, and their dog now knows for 100% certain new highs are imminent and this was just another routine pullback in the permanent bull market. The number for the top was 76.03, watch for a higher number with a lower high in price to confirm textbook wave 2 sentiment.
Now that SPX hit 1460, I sense some hesitation in the Force. Tech is not leading, but MACD and stochastics look bullish on SPX. Looks like SPX might run to 1470 by Friday, touch the upper BBs; if so, many indicators such as NYMO, CPC etc. would also spike. I am pondering a quicky-short on Friday if SPX does touch the upper BBs and kiss 1470. Not sure if this "read" aligns with EWT counts, but the rally has a slightly shaky feel. I kinda expect another shakeout early next week to shake out the hobby Bulls and build a wall of worry....
ReplyDeleteCharles, IMHO this is a wave 1 of the final wave 5 to new highs, probably in the low 1500s. Remember KS pointing out the 1525s a while back? That is where it's heading IMHO.
DeletePersonally I am very surprised to see the bulls pushing it to 1460. In other words: they needed 3 days to do 35 points move, whereas the bears needed 5 days last week... Kinda shows how's pulling the wagon still.
That said, this is wave 1 up IMHO. Why?
1) it can't be a wave C IMHO as others suggest 'cause the extension is now well-beyond the 2x, which is very, very uncommon;
2) neither is it a 4th wave since it overlapped with the previous wave 1 down (of C) down at 1453)
3) neither is it a wave 2 IMHO since the last 3 days show a clear 5-wave sequence. wave 2 is always corrective and thus of a 3-wave sequence.
Thus the logical conclusion is a wave 1 up. The TI's such as MACD, SSTO, RSI, NYMO etc all seem to suggest that as well. Wave 2 down will now commence, which should be an ABC, probably with A down starting today, tomorrow, then B up ending Friday and the C down Monday too. Just like you suggested.
So if wave 1 was from 1425 to 1460: 35 points. Then wave 2 retractes often 50-63%, so say ~20 points for simplicity sake. Bringing the SPX back to the all important ~1440 support area. Logical back test. Wave 3 should then be 1.62 x wave 1 = 1495ish. Wave retraces often ~38% of that move; down to 1475, the previous SPX high. Logical too.
Wave 5 is often around the length of wave 1, so that should bring the SPX to ~1520s.
Given the 80/20 rule, the high of wave 3 above 1480 would suggest 1520. And EWT suggest that. BUT remember it is still always a THEORY... Let's take 1 day/move at the time, and so far it's looking good for the bulls. Anything can change when you least expect it. As KS says: watch your wallet!
Yes it's a wave one, and they are currently making it difficult to catch a retracement.
DeleteAre both of you counting 1430.53 to 1470.96 SPX (cash) as B of your 4th wave with 1425.53 being C?
DeleteI have us just now hitting the top of minor 3 within the larger wave 1 that started down there at 1418 ES. If we are lucky, we can get a pullback to 1440 ish for minor wave 4, then up to 1470 for 5.
DeleteThe whole game is whether you want to go long at 1440 (if we get it) or whether you want to try to wait until the larger wave 1 completes and comes down for wave 2...
Arnie, thank you for the detailed explanation--even a dunderhead like me can understand the pattern you describe, and it makes sense.
ReplyDeleteThe utilities sector strength is really something today. UTIL 485.67 is the important number for all next week and price is already here. Markets will be bullish with UTIL above 485.67 next week. This strongly helps the bullish case and the trip to 1470 if not more.
ReplyDeleteWith China GDP and EU Summit it may be a wild ride over the next day or so. Mixed markets all day long. IBM dragging down the Dow.
I was shocked when I saw UTIL that high (already) also. The bulls mean business.
DeleteQuestion for you KS: the DOW went down real hard and fast this morning, like 65 points within minutes, but the dip was bought up manically... Neither SPX, COMP or NDX, WLSH etc etc saw this dip. Could it be HFT??? Or due to IBM? It scared the "you know what" out of me
Arnie, good call, I reckoned 1461 was the top and bought SDS. Good to have Zig confirm a 1440 target for the next little dip. China disappoints on GDP could do the trick....
ReplyDeleteKS, UTIL have leaped above the upper BBs, I can't see it holding there for long. Just a thot...
Charlie, the strength in utilities is quite a run, from UTIL 473 low to over 486, 13 handles in 3 days, 3%, moving up one percent per day. As bullish as UTIL is now, if it did fail from here, that would flip the table quickly. The UTIL 478.43 bull-bear line remains in affect for the next couple days. UTIL did reverse hard after the upper BB violations. Volume remains light, today at an 80% run rate.
ReplyDeleteI am with you KS.
DeleteCharles, please remember that EWT is always still a THEORY. So as logical as the wave calculations seem, it may actually all never happen. And nothing I post is to be construed as trading advice of course ;-). It are all just possibilities. It all also depends on ones time frame of trading and portfolio size. I mean if you can buy a 1000 shares of SDS or only 10 makes a big difference. Keep a close eye on the tickers KS mentions. Those are the real deal, the real market "internals" and what the market responds to, not some theory we can scribble on a piece of paper.
No worries, Arnie, I don't trade off other trader's comments, though I do find them valuable to either confirm or question my own read on things.
ReplyDeleteI bought the SDS because this market feels heavy to me--just a gut feeling. The housing starts should have easily blown past the IBM spot of bother, yet tech is spinning its wheels and SPX is struggling. When markets can't launch on great news, they're ripe for turning over.
Also, 1460 is a big R/S, so I would expect the first attempt to fail. Expectations are very high for China GDP and Euro summit. Any whiff of disappointment could send SPX to 1440 in no time. That's the basis of my SDS trade--a small one, to be sure....