Nov 11th, 2010: Update 4 – EOD
Posted by pugsma on November 11, 2010
5:15 pm EST: Today the SP-500 saw a re-test of the 1204 low set on Thursday. The SP-500 dropped to 1204.49 to remain just above the 1204.33 low for Thursday. It should be noted that the DOW-30 and Nasdaq did make lower, lows today. This is a negative divergence with the SP-500. Also we saw a lower, high made at 1215.45 vs 1218.71 on Thursday. The SP-500 is in a clearly defined downward channel since the Nov 5th high of 1227.08. Everything that has happened since that high looks corrective. I believe 1227 was the top of minor wave 3-[1]-P3. It fits on a number of levels (i.e. minor W3=1.62W1, Minute wave (4) triangle target, etc.). Thus the SP-500 has been in a minor wave 4-[1]-P3 correction since Nov 5th.
If anyone tells you they know exactly what this corrective mess is off the 1227 high, they are full of … , you get the idea. I do however have 3 counts that look reasonable for the correction. We know that minor wave 4-[1]-P3 should be a complex corrective (i.e. double or triple ZZ, triangle, etc.) to satisfy the rule of alternation with minor wave 2-[1]-P3 that was a simple Zig-Zig (ZZ) down from 1229 to 1040 back in August.
Primary count (white): The SP-500 is tracing out a double ZZ, with wave c-(y) of the second ZZ headed towards a target area of 1196 to 1200 that should be hit tomorrow or Monday. This count would fall to near the mid-channel line of the long upward channel shown on the 60-min chart. Any break above Thursday high of 1218.71 will invalidate this count.
Bullish alternate count (blue): The SP-500 is tracing out yet another ascending triangle. The (a) wave of the triangle was put in yesterday at 1204.33 and we are working on a (b) wave up to the 1227 top of the triangle. This count will play-out between 1227 resistance and 1204 support over the next two weeks. The key to watch with this count is that the (a) wave low of 1204.33 has been put in, and it should not be breached to remain a valid count.
Bearish alternate count (red): The SP-500 is tracing out a triple ZZ that will occur once the second ZZ completes and should target the 23% retrace (of 3-[1]-P3) area of 1184 over the next 2 weeks. This will play-out in the declining channel with lower, highs and lower, lows continue to be made. Again a break above 1218.81 invalidates the double and triple ZZ counts.
SP-500 5-min chart (EOD):
SP-500 15-min chart (EOD):
SP-500 60min chart (EOD):
mikey said
Say we have the Bullish Count play out on Friday.
What would be the levels of resistance?
R1 = 1229 { Double Top }
R2 = ???
R3 = ???
Thanks !
pugsma said
Resistance 1: 1215 to 1219 (remaining gap fill and 1219 pivot).
Resistance 2: 1227 Pivot
Resitance 3: 1257 Pivot.
Support 1: 1204 (double bottom)
Support 2: 1196 (triangle break-out)
Support 3: 1187 Pivot
Michael Pitre said
Steve the dollar looks to have put in a bottom on the weekly…don’t know if will continue to rally for sure but it is doing so while the indicators are coming off bottom.
http://stockcharts.com/h-sc/ui?s=$USD&p=W&yr=2&mn=8&dy=20&id=p73046128134&a=209934179&listNum=9
BJ said
Michael,
The bottom IS infact in place. http://www.cashthechaos.com/blog/?p=422
Tmf said
Looks like a wave 4. Just like market.
mj said
Just an observation about POMO. I have read a lot of comments, in various places, how the charts are meaningless now because of POMO. However, just because primary dealers are cashing in their bonds does not mean they are immediately putting the money into the US stock market on the day they receive it from the Fed. In fact, it does not mean they are/will putting/put it in at all. There are a lot of places it could go. Regardless, I don’t think the bank traders are stupid and are just going to throw cash in, because they have it, regardless of the technical indicators/sentiment. Therefore, I would think TA/EW is still relevant. Anyone have any thoughts on this ?
pugsma said
Agree. It’s going to tricky up here for a few weeks.
Ratbastrd said
Agree that all the money exchanged via POMO will not necessarily flow into equities, 3 points to consider however.
1) It is the stated intent of the Fed drive investors into riskier asset classes, out of treasuries and PM’s and into things like equities. They will accomplish this via “shock & awe” Let me repeat, the mission is to drive investors into the equities market.
2) Given the overwhelming quantity of POMO dollars that will be employed (think 5x previous POMO’s) it is likely that greater dollar amounts will end up in equities + other inflows as a result of these actions.
3) Next week is also the GM IPO. The Fed will want to see that IPO launched in as bullish an environment as possible.
Thus it my expectation that we will see greater POMO effect then previous operations.
Thoughts?
mj said
Point #2 has merit. In fact, I think a lot of the effect on POMO days has been the result of non-POMO traders being enticed into the market. I don’t think point #1 has merit. The Fed may have the goal of supporting equity prices through QE2 but that does not mean it will happen since they cannot force buyers in. After all, another goal of QE2 is to improve the economy and in my view it will have the opposite effect. Point #3 is something I had not considered and is kind of intriguing. I’m sure Treasury would like to see this as well.
Dave said
I think Ford is a better buy. May retest 14.50 as support.
john said
thanks Steve
john-b said
Steve, thanks much for trying to sort out some wave counts in this jerked around mess. I do not think anybody can chart this with any certainty. Excellent attempts. When that happens I rely more on TA analysis as the guide. It all say still UP trend and that for all the jerking around today it was actually a quite internal market day. No passion, just a 30 minute after hours drop on low volume.
The MM’s used the Cisco thing as an excuse to do their down mis-direction day for options. So DOWN thurs mean often UP in OPEX week. Scare people get some to drop their calls. Posted a number of gloom and doom articles. Al a perfect setup.
Everything still looks corrective. DOW and NDX bot have nice clean three waves down patterns thanks to CSCO. And some old school Ewavers like me say the DJIA makes better cleaner wave patterns. You often get more motive force and movement in the DJIA. S&P is rigged to too many things.
So we had the AAPL excuse to drop the market. Now the CSCO excuse to drop the market on another low volume holiday.
Bottom line: Clarity will be apparent some time next week maybe. And we are always smarter looking back than looking forward.
As long as the squiggles stay in the upper acceleration channel I am just happy as can be. The strong channels on DOW and S&P have not been broken.
Only thing I will be looking at is the USD next week. we maybe are putting in a triple top in the 78.5 area. Aug-Sep we put in a H&S instead of a triple top. I think the time and pattern is just about mature for USD. Needs a few more days to test around the 78-78.50 area I think.
—enjoyed my free vets lunch and then went for bike ride in possibly one of the last warm and nice fall days.
pugsma said
Good stuff as your usual John.
Michael Pitre said
spx hourly and obv…
OBV hanging in there so far…I suspect unless that breaks down we will not drop very hard…day to day thing.
http://tinyurl.com/2d8o6wx
scoca1 said
Mike,
That is not OBV on your chart. It is the 34 period EMA. You cannot plot OBV on SPX intraday charts since volume is not demonstrated on SPX. Now, if I switch it to SPY, you are correct, OBV is hanging in there (actually making higher highs).
Steve
Michael Pitre said
Steve thanks I was mistaken on that. Looking at to many charts. Mike.
Michael Pitre said
Yes here it is for spy hourly.
http://stockcharts.com/h-sc/ui?s=SPY&p=60&yr=0&mn=1&dy=15&id=p15645773673&a=213959632&listNum=30
Lunker said
Hello from the Mouse House. I think there’s one maybe two strong downdrafts left. There’s gotta be some way to shake out more longs. It can’t be this easy.
stockyard262 said
another view to a slight decline…loooks like a descending triangle form on 5min
chart from 11-9-10. still…down break measures your 1196 area. just one more clue.
pugsma said
S262. Yes, I could see the decending triangle idea here.
Grand said
Very nice post Pug.
I have conceded that Minor 4 is upon us. I do have a slightly different take but still too early to tell.
http://waveprinciple.blogspot.com/2010/11/111110-eod-update.html
pugsma said
Thanks for sharing your counts Grand. Always well thought out work.
Instigator said
Appreciate all the counts Steve. I’m putting my nickel on the Triple Z since the EURO met downward trend criteria today and a Complex $NASI Top is almost complete…
http://instigator928.blogspot.com/2010/11/took-some-mouthfuls-of-tza-euo.html
Jordan
pugsma said
Thanks for the chart.
Chrys said
Looking at the EURUSD chart the Euro appears to be close to bottoming in a complex c-wave correction. The c-wave should bottom tomorrow or during Sunday night trading. A rising euro is bullish for SPX. This correction started a month ago (doesn’t appear in attached chart.
http://www.screencast.com/t/qT9ol2JIdT
pugsma said
Thanks for the Euro chart Chrys
sagmd said
Steve,
I greatly appreciate your blog! I hope you continue this blog for a long long time!
Quick question: According to your primary count, if we hit ~ 1196, then this could possibly end 4-[1]-P3, right? And if so, we should go up from there (if we break the falling trendline). If we end the wave 4 tomorrow, that would only be only 6 trading days to trace out the wave 4 (if it began on Nov 5th). Is this too quick and if so, does this make you lean more towards a triple ZZ down to 1184?
Thanks
Sagar
pugsma said
Yes, I really the triple ZZ count both for time and price. I do think the lower channel line needs to be tested in minor wave 4-[1]-P3. But let’s see the double ZZ play-out first before thinking too much abou the triple ZZ.
One other possibility that I talked about with subscribers is a similar type scenario to how mid-Nov to mid-Dec 2009 played out. Remember how the SP-500 was trapped in a rectangle trading range from 1070 to 1115 during that time frame. Maybe the SP-5000 gets trapped between the 1177/1187 pivot support and 1219/1227 pivot resistance for a few weeks in wave 4-[1]-P3.
stockyard262 said
so be it …. there’s still $$$$ to be made. GREAT work as per usual. hope
you never get that “taken for granted” feeling. thanks
Aka2106 said
Some fireworks in e minis. Can see us testing that 1196/1200 range tomorrow.
Lunker said
Pug is right mostof the heavy lifting and dropping is being done w futures. Question, does it take less money for a major player to move the Es market as it would w the Cash market? I’ve always wondered this.
Tony D said
Pug, I appreciate that you are not just a blindfolded bull and that you do see those down waves as they occured this past week. In other words, Nice to see that you are looking at both sides of the pendulum swing.
pugsma said
Thanks. The asolute #1 goal of this blog to help traders make money! So my analysis takes all views in consideration as I try to predict the highest probability next move of the SP-500.
john-b said
Hey that is my number one goal also – make money consistently. I am not a bull or bear – just a pure trader trying to filter this mess out on a regular basis. And in my own analysis I always have bullish and bearish counts with their likelihoods for each. You have to keep an open mind and then trade your highest probability but be aware of your “worst nightmare” situation and have a plan for that.
Dave said
Steve,
Excellent post !!!
Dave said
Looking forward or PUGfest next year
Dave said
to not or