Aug 16th, 2010: Update 6 – EOD
Posted by pugsma on August 16, 2010
5:50 pm EST: Primary count is that wave 2-[1]-P3 bottomed today at 1070, which is the 50% retrace of wave 1-[1]-P3. Waves i and ii of (1)-3-[1]-P3 were put into today. We are looking for wave iii of (1) up towards 1105 to 1115.
Alternate count is that wave 1-[C]-P2 bottomed today at 1070. I’m looking for a weak wave 2-[C]-P2 bounce to about 1092 or 1099 (38% to 50% retrace). Waves a and b of 2-[C]-P2 were put in today. I’m expect wave c of 2 reach the first target of 1092 tomorrow. There is a gap fill target of 1090.
How the SP-500 reacts around the 1090 gap and the 200-day SMA of 1088 tomorrow should provide some good information on the correct count. I’m of two minds right here in the neutral region between 1057 and 1105. Basically, the primary count would play-out as a long, slow grind upward towards 1220 to 1250 by the end of the year for the completion of wave [1]-P3. Or for the alternate count wave [C]-P2 down will be violent washout to at least the 950 area by late Sept to early Oct. Then from there, P3 up gets underway going into the end of the year and plays out to new highs in 2011 and 2012. The action in the US Treasury’s 10 Year Note Yield would seem to indicate that the alternate count is correct. But maybe all the “smart money” rusing into Treasury’s and fixed income bond funds to protect against the coming market crash this fall have it wrong. They could miss out on a 15 to 20% rise in the stock market if my primary count is correct. It’s going to be an interesting fall to chart the waves.
SP-500 15-min Chart (EOD):
SP-500 60-min Chart (EOD):
John said
thanks Steve
Jeff said
Steve, I love the logic and you succinctly spell out what levels to look out for both the bull or bear side. I gotta admit, the 10 year treasury fall into the abyss is making me cautious. It sure is a good leading indicator.
Thanks,
Jeff
pugsma said
Thanks Jeff. Love your charts and analysis too!
ronawsumb said
Hope you are right Steve, I bought 200 Sep spy calls at 1077 this afternoon, action looked good and there certainly seems to be plenty of contratian thought around. We will see, as always thanks for your succinct analysis and help.
ronawsumb said
I mean contrarian, think I,m getting senile!
pugsma said
As Cobra states in his EOD update today, we have had 5 gap downs on SPY in a row. 6 is very rare. Good chance of gap up tomorrow. But, I’m not convinced the bounce will get too far above 1092.
Peter said
Steve – not far above 1092. Is this because you are now thinking the alternate count is become more dominant or was there something else on your mind??
pugsma said
The response off the 1069.49 low this morning looks very weak thus far. We’ll need to a see a significant wave iii impulse higher tomorrow to get the more bulllish count underway.
Moe said
Steve is it possible tommorrow we hit 1057 in the morning and get a stronger bounce with more volume to the upside? Would that work out in any of your counts?
Thx
pugsma said
Moe…Jeff has a count for that. Maybe he can post a link to it. Jeff thinks we might still be in a wave iv of 2-[1]-P2 with a target of about 1090 tomorrrow and drop to the 1057 area by OPEX Friday. Then we get a stronger bounce. This is a possible count, in place of my existing primary count.
Jeff said
For inquiring minds who want to see another article how bonds have led equities, take a look at Afraid to Trade. Corey Rosenbloom does a good analysis why it pays to watch the TLT for subtle clues on market directions.
http://blog.afraidtotrade.com/
Johann said
if you have a 20 year chart of the TNX (10 Year Note) pull up a monthly, closing chart. lows in yields, 93, 98, 2003, 2008. these are all lower lows. by one “standard” means of projection one can guesstimate sub 1% yields and a time frame of 2013 for the another major low. further, there are highs (all lower highs) in 1994, 2000, 2006…if this sequence continues, then a high in 2012. yields have been on a steady decline within a defined channel for 20 years..equities have been sideways for 12 years with a couple of black swans. smart money has bought zero coupon bonds. the buy and hold equity crowd..urghh. if the bond sequence continues, rates “should” get volatile going into 2012-2013. equities, heck, is the high in the INDU, sp500, TRAN, UTIL and the subsequent correction into March 2009, enough time to correct the rise out of the 1974 low or the blast off in 1982. maybe the 2000 highs in the NDX, COMPX holds that key, or the folks in DC simply trashing the dollar. what do the bonds say about the dollar. now throw in equities and the time equation.
jeff said
Moe and Steve,
Not sure if the attachment will work, but I don’t think 5 waves down are complete.
The S&P has been seeing a 8-10 short-term cycle continues since mid-May with the last top just last week. If this short term cycle trend continues, we won’t see a sound low until 8/18-8/20. As such, I think we are in Wave IV up (38.2% retracement of Wave III) to the 1090ish before a Wave V low down to the 1050ish area later this week.
I’ll change my mind if we break above 1095 and will wait for more bullish confirmation on a break above the 1110ish area to side along with Steve’s primary bullish count.
With the TNX plummeting of late, I think it would be foolish to not keep our options open. Whatever happens, I think we’ll have some resolution to the upside or downside the end of the month.
Short-term:
1. Wave IV up to 1090 by tomorrow or early Wednesday.
2. Wave V down to the 1050ish area by the end of the week or next Monday.
3. A solid move up the following week to the 1100ish area. If we fail to move above after that, I’ll conclude a Wave III or C down has started that would punish the bulls. We do move above it and more certainly the 1115ish area, I think you gotta stay long.
Until then, I’m being nimble and staying patient.
Jeff
Moe said
Thank you Jeff.i appreciate you.
YJ said
Hi Pug/Jeff, from the way its forming up, ascending triangle in SNP? meaning it might break upwards towards 1090++ soon? or will it be considered a rising wedge and break down?
pugsma said
It broke higher.
Squeeze……
linus said
thanks pug. good call about 1070 bottom
linus
pugsma said
Thanks Linus. I hope you profited from it.
AS2009 said
Pug – based on the action here – do you think there is still chance for the alternate to play out … we crossed key areas of 1090-1092 for alt count.