Brief update...

I won't be much active during the holidays. So to most of you I wish you a Merry Christmas and a happy new year.

Let 2010 be full of happy and good things to all of you.

Anyways, I couldn't help myself to not leave here a brief picture on USD Dollar.

As I warned a few weeks back, the trend has changed. In terms of TA we've got all requisites of a trend change, a trend change that EW was long awaiting around the 74 level as I wrote here back in July.

For those that have a short memory: http://www.mybullmarket.org/2009/07/usd-update.html

;-)

 I don't think I got too wrong on it. Let's see how the rest of the prediction rolls out. Which is right here:

 I think a strong bear market rally has started for the US Dollar that will drive it up above their 2008 highs or it could be the beginning's of a new bull market. We'll track it along to see what may be in the cards.

Now, a curious fact is USD rocked up, EURUSD plunged everyone awaiting for S&P to plunge AAANND... nothing.

What I've said many times before in here that I was expecting was that Dollar, etc could go in their 1st wave down (EURUSD) or up (dollar index), while the stock indexes remained intact. My view was, these assets (currencies) could lead on the way down on their first waves and then rebound for their Wave 2  correction and stock indexes getting their tops during a lower high in currencies. It's pretty common since no asset has 100% correlation. The same happened in 2008 with oil, indexes and currencies. EURUSD topped when indexes were making their minor wave 2, while Oil topped when indexes were making their intermediate 2.

It would look something like this:

 I think I made my point. We'll see what the new year brings. But my opinion it will be what most don't want. I think 2010 will be much more like 2008 than any other year. But that's just me...

Today's post is a bit different and what I've been working on lately.

I've extensively been backtesting the LMT Portfolio premises. I have composed 100 random portfolios in which the stocks composing them all would fit within LMT parameters. The data totally beat the S&P. Both buy and hold for S&P, as well as passive investing with S&P (buy and hold + adding 10% of equity into the market every year).

Both got crushed from LMT. All 5 year rolling periods are positive for LMT unlike S&P.

Here are both charts worth taking a look in my opinion. One might say that the portfolio took advantage of the roaring 90's. True, but even so, starting a portfolio under the same characteristics at 2000 top, while S&P managed to pretty much be flat, LMT would manage 16% per year and that's taking into consideration the bear market.

This first chart does not add 10% of new cash into S&P Buy and Hold. But they don't differ much... the dash green line is what ~I consider an excellent long term goal.

This pretty much sums to a 20-to-1 harsh beating of LMTP versus the market. Should we take a large margin of safety, I would say a 5-to-1 would still be excellent.

Don't forget to check then, December 26th some of our stocks will be replaced by newer ones.

I'm gonna need my sleep now.

BTW, last night I experienced my first earthquake ... a 6.1 Richter scale quake. It sure was daunting...

Very late update...

I apologize for the very late update but I was a bit busy lately so I didn't have much time focusing on doing an appropriate update.

In regards to the indexes, not much has been going on... We've been in this boring range tight market for almost 2 months. What I said before still stands. We should be rolling over soon.

In fact, the dollar seems to have changed to the beginning of an uptrend. This reinforces the possibility of the indexes following suit soon.

EURUSD has definitely changed the trend... in fact wave 5 seems to be extending. Euro may find support in the 1.43xx area.

USD Index seems to have broken out of the downward channel it had been for almost 5 months. It also broke it's Long term trendline. Add this to the fact that the Elliott Wave Structure looks complete now, it has a very high degree of possiblity to begin quite a rally here.

First target will obviously be the 221 MA.

Although USD Index is very correlated to the indexes it doesn't mean they move in exact tandem. In EW terms for example USD Index could now be in the beginning of Wave 1 up, while the indexes (S&P and DOW) are in the midst of the final wave. This happened in 2008 in a lot of assets (ones being already in wave 1 down while others still upward). EURUSD for example should correct soon a bit, this could be a catalyst for new highs on the indexes (for their final wave) while Euro failing to make new highs (which i find very unlikely).

Gold and Silver seem to have started the downward move as well....

To me, this seems to be the long term picture...

EDIT

Also we're almost making changes in our LM Portfolio. Again, if you followed the portfolio, I hope you took my hint of starting the portfolio on November 1st due to seasonality. Long term, it shows that buy ins starting November have a statistical edge over other periods. It may not happen one year or another but long term it seems to be this way, so this was the reason on my own portfolio I did the same as I stated before the September 26th buy in.

This seasonality chart shows the reasoning behind it:

   As you can see, most the buy calendar periods fall in either trending up periods or after a big correction (August-October period).

I will go further in detail on this, once we make an update of LM Portfolio

Correction looming?

EURUSD has now what appear to be complete 5 waves. So a correction may be in the cards very soon.

A target for longs would have the 1.4850 as the minimum target.

Coawabanga...

Hello everyone. Not much to add regarding the indices front. They remain at the same juncture pretty much and long-term I am still bearish. There are a few developments though in other assets like EURUSD, Gold, AUDUSD and the Dollar Index, which to me is becoming the most relevant asset to merit a close watch. As I said a few weeks ago, it's all about the dollar...

S&P remains the same juncture... just under the 50% Fib and look at the divergences going on - this is a different indicator than the last few weeks:

 EURUSD sports the same divergences, and also broke the trendline that was supporting it a few days ago...

 Add that to the major sell off last week, but most importantly the characteristics of the sell off... Classic textbook Elliott Wave form with 5 waves down as you can see in the picture... so at least a deeper correction is on the cards... a correction would dump EURUSD into the 1.43 area, while a reversal would be the start of the decline under last year's low.

AUDUSD has many resemblances to EURUSD. In fact, AUDUSD was the first pair to sport 5 waves down a week or more ago if I recall correctly. This too, should have more downside potential. A trading plan here, alike EURUSD would be to short on the rallies like a 38 or 50% Fibonacci retracement of friday's decline.

Now, let's move to GOLD. That little shinny yellow object that most of us love. Who doesn't ? :-D

Anyways, here to we have MAJOR divergences, and for the first time in a long time we have a textbook Elliott Wave form decline, sporting 5 waves down. It can't get cleaner than this. Again the plan here would be to wait for a little rally into the 38-50 Fibonacci area and then getting in.

Oh I almost forgot... one more thing. Remember my charts on USD Index? I've been favoring a big rally coming on USD. Lately, it seems USD has found a bid. Let's see if it can continue this strong. It's imperative to remain strong and break those resistances. But here's what I prep for you guys...

An ABC flat looks like this:

Now let's take a  peek into USD Index...

Now tell me I'm not seeing things... any resemblance with real life is purely coincidental. :-D

EDIT:

I want to make an update on something I forgot to talk about. Last Friday's Non-Farm Payrolls. I saw a lot of cheering because the report was so much better than expected and how the unemployment dropped from 10.2% to 10%. Well, I don't see a reason for cheering such numbers. And why is that?

We have to take into account the season we're in. I don't know how it is in USA - well actually I do - but here in Portugal, stores during November start to recruit a lot of workers for the Christmas season, but then what? They get dumped in January pretty much. So I don't see much reason to cheer... the drop in the numbers of NFP were ONLY because of the hiring due to the TEMPORARY hiring companies ensued for Christmas. Wal-Mart alone accounted for the creation of around 65,000 temporary jobs! So we know how this will be once all those temp workers get dumped for unemployment again...

And we all know how BLS tracks unemployment figures ... here's something you should watch:

Are you unemployed?

Keep preaching it...

I keep preaching the same on and on at these levels... Today's market price action seems to be at least a top for a sizeable correction.

In Foreign Exchange markets -currencies - the USD is very strong. I could argue for the bottom to be in for USD. We'll see...

Further developments will be made during this weekend where I expect to pour a lot of graphs so I can make all bulltards see the light :-D

Distribution keeps ongoing...

Just as the title says, the sharks in the ocean are distributing the hot potato to the little fish.

Let me be blunt, topping processes do take more time than bottoms actually. While bottoms can happen in a spike or so, tops usually don't. The reason is people tend to pertain on hope, so while there is still hope from the intervenients there is a struggle in the prices.

What I see in most indexes is actually topping patterns. Let's make a quick summary of the world's indexes.

Pretty much all indexes remain lower than their highs from October. This stands true for ALL indexes except for S&P, Nasdaq and Dow Jones Industrials. Every other index is making lower highs and lower lows now.

This stands true for Russell 2000 and Dow Jones Transportation. Take special attention to the major divergences going on, especially in the indices that still haven't activated them (NQ, SP and DJI).

If we take a little road trip around the world, we'll see the same things as Russell and DJT. From Europe to Asia all indicates the same:

The curious thing is, the index that carried both S&P and NQ to new highs was the DJI. Remember in October when we had that strong sell off, and the DJI was able to maintain strong during the drop? Well now, the DJI is way higher than it's high in October while both SP and NQ are pretty much in tandem with that October high. Curious thing is while DJI was making highs after highs, 75% of the 30 components that make up the Dow Jones Industrials are (guess what?) still below their October highs ! Can we say big big divergence? You can figure it out why this is the case... the Dow calculation is something utterly stupid (the companies that have more weight in the index are the ones that have higher share prices instead of their total value...go figure).

Cheers

P.S.: Don't forget to have a look at http://friendly-traders.blogspot.com/ ... there's a nice database of programs there :-)

Your dear beloved is back...

Hail to the king, for I am back. :-D

Finally! This week I didn't do any update, what a shame... Probably it may have missed to some of you, but last Sunday I got through the hospital and was diagnosed with H1N1 flu. Nothing to worry about, it's just a mere normal flu, oh but the headaches, those sure were a pain in the ass to go through. And probably the major reason why I didn't feel like looking at monitors, computers, etc.

Well I am back, fresh as a fresh salad and I will be posting lots of good stuff this weekend.

For appetizers, here's a website with lots of resources from trading programs, books, webinars, seminars, software management, software testing, etc.

The blog belongs to the former owner of www.friendly-traders.com which was a great website. Feel free to have a look overthere. The link is: http://friendly-traders.blogspot.com/

I will now begin working on tomorrow's post. It will be a whole new level of mathurbation of graphs and other things

Cheers and have a nice weekend...at least what's left of it.

Update

I'm sorry to everyone but I won't be delivering the update I promised. I have major headache and I don't feel like thinking much, and overheating this special brain of mine eheheh... :-D

I know in the end, swine or no swine flu, that little bastard will be a pig on a stick, señor

A pig on a stiiiiick....

Swine What?

Indeed... Your beloved host is the latest victim from those piggy bastards. Hence the lack of posting during this weekend. Last night I spent 5 very boring hours at the hospital only to arrive home at 2AM.

I will try to do a more thorough analysis throughout the day. You know where I stand, I think we are close to rolling over, and Ze' Manel already issued a sell signal. So far futures are ramping higher, but there's a nice little graph from Fujisan, a guest host from SOH, and she is very knowledgeable and I've learned a great deal from her posts. I found this graph very interesting.

It seems peaks have been happening at New Moon dates and bottoms around Full Moon dates. I'm not much into these kind of cycles, but I know new/full moon cycles have a very good hit rate in statistic terms, so I guess there may be something going on there...

Rolling over?

S&P rolling over?

 For the first time since the bottom at 1030's a few weeks back, we now have a sell signal. Let's see how this one develops.

Meanwhile the dollar is strengthening. Today there was a glitch shooting the USD Index up almost 10%. I wished it were true I'd be up like 200% in a blink of an eye eheheh...
Anyways, here too the bottom seems to be rolling up.

A lot of divergences going on, extreme bearishness from the public and market participants, and also the EW count calls for a move up. As you know I am expecting a big rally for USD, maybe as strong as +50% on the Index.

Of course, although I'm very bullish on the dollar I will only start buying once it passes through the 76 area or whenever I get a signal from my systems (which on the short term I already am long the dollar).

Weekend update

Not much to add after last week. We're still under the 1100 resistance area in the S&P500. In EW terms, I cannot make at this juncture a count.

There are times when we need to step back and wait a bit, for more information in order to make a correct assessment. Trying to force perspectives into our counts is foolish. One should know when to step back and admit that for now there's no need to try to come up with a count that has a low reliability.

To me, we're still in a topping process, especially with the recent market correlations that are kind of broken right now. I'm talking DAX and other european indexes, as well as the higher beta US indexes such as the Dow Transports and Russell 2000.

DJT is considered to be the leader of the market, and so far it has struggled and is still far away from its' highs. This week is utterly decisive.

As far as Ze Manel goes, well stay with the trend... this is an intraday chart:

These are the German DAX and the PSI-20 (the portuguese index)... both are more than lagging the current uptrend on the S&P and the DOW JONES.

 As far as the higher beta US indexes go, here's a snapshot of Russell 2000

Cheers!

P.S: I want to thank you for the adherence to EWI's free week. Definitely I wasn't expecting such a surge on participation. I hope you all took advantage of it and gathered some of their premium services. Don't worry, now that it's over you still have a lot of free stuff inside their members page, so to all of you that missed it you can still register and have access to their free stuff. And the free week from EWI is a common occurrence from them, so keep your eyes open.

Chaos reign...

No I am not talking about the markets, but my home actually... Absolute chaos in here. Still very primitive, and so many things we need to place into the right spots... one room is still with renovations ongoing. Same goes for the kitchen. Furniture is pretty much all confined to the living room and that thing is worse walking around than an elephant at a porcelain shop !!

Well, moving on, I now have internet, may I say super dupper fast internet connection with fiber optic with a symmetric 150Mbps both download and upload... oh yeah.

Meanwhile the markets... although both DJI and S&P have risen to new highs, I see the market very weak. I think we're about to roll over.

While DJI and S&P made new highs, all higher beta indexes failed to do so. I'm talking Russell 2000, Banking Index, Dow Jones Transportation and so on... they are all within the 61.8 Fibonacci expected from a correction.

The european markets are also very weak and failed to make new highs. German DAX fell 10% during last week's decline from the highs to the bottom while S&P declined by 7%. So with this rally the DAX is still 5% away more or less from the highs while the S&P just made a new high today...

This kind of divergence among several markets usually happen at tops, meaning a lot of distribution is being made from strong hands to the weak ones.

It is my opinion we are near to roll over... supporting is once again the USD Index, which made new lows during this past week while the major pairs all failed to make new highs - i.e. EURUSD, GBPUSD, USDCAD (didn't make new lows).

So some pretty nasty broken market internals going on...

Now here's a chart, although I don't trade this time frame, it does indeed look promising, with a sell signal around the 1097 area:

Update

I don't have a graph today...

Today's move fits yesterday's alternative, which from the graph I posted last night, where I had placed [2] it is wave (a) most likely... therefore this current run up is wave (c) within wave [2].

Also, I won't be able to be here tomorrow since my family and I are moving into a new house, so a lot is going on. I don't know also if I will be able to post the weekend post, I will try though but cannot promise anything...

If I am not able to come I wish you all good trades. See you Sunday (if I can).

Do not forget it's FreeWeek down at EWI.

You can check more here: http://www.mybullmarket.org/2009/11/blog-post.html

Wednesday FED'ish rubdown

I think today got more clear...
The following graph is what I think is most likely to happen. I forgot to put up the arrows of direction for those that don't understand EW, but if this is correct it means that tomorrow and into next week we should fall hard !

Today's little sell off into the close sure is yummy and may be a beginning, but I will look for more confirmation. Bears really need to show up here and take a stand.

 Ok this is what I have for today.

NOTE:
Also don't forget today EWI opened its' doors, so you might want to check them out... Today is an update day for them so they'll issue 12 page update which they do every Monday, Wednesday and Friday apart from the monthly newsletters. It's totally free, and you can always help this site (yes I get little commission, so at least you'd be helping me support the traffic costs and domain costs, not that I don't mind I do this for pleasure). If you do register please do so through one of the banners on the site or through here:

ELLIOTT WAVE 

Have a good night everyone...

EWI FreeWeek is here !!

Hello folks... EWI has opened its' doors. Freeweek is here.

You have access to the most recent newsletter where it is detailed on what is more likely we can expect from now on with the markets. Lot's of insight.

I am a subscriber myself, and although I can do my own EW analysis I am always anxious to get their newsletters in my mailbox. But you're wrong if you think they're all about EW. They're not. Be it TA or FA, there is always tremendous research going on in there, and one of the things I like most, is their psychology market analysis. Definitely worth the read.

Besides, it's free ! Just click the image below, register for EWI club (which it's free by the way, and just that entitles you to lots of free stuff outside the contents from FreeWeek, be it reports, tutorials, and so much more) and then you'll have access to this month's newsletter (120+ pages issued this weekend), as well the previous months' newsletters. There is also the Short term update, being a 3x weekly update of the markets - today is an issue day.

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What's more, these are just two of the incredible free resources you get during this week only. You will also have completely free access to the most recent Theorist and Financial Forecast archives (September and October issues for each publication are currently available.) as well as the tri-weekly Short Term Update, which is designed to keep EWI's subscribers up to date between the monthly issues above.

Please don't delay. This special, limited-time offer from EWI is one of the most valuable free offers we've ever written to you about. It expires Nov. 11. Please follow the link below; sign up to join FreeWeek for free; print out your free reports; read them at your leisure. Do not miss this exciting opportunity.

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Mental brainiac tease

Wasn't today a bummer! I'll keep tonight's post very brief (really don't have much to say)

I don't have much perspective after today, the whole trading session was very messy, apart from the 1 min charts where some structures were very clear.

At this point, this is my best guess, a leading diagonal of the correction... either (a) of minute 2 is complete or this is only subwave 1 of (a).

Let's wait for a better view and then use it to our advantage.

This all feels very "wedgie" so we may undercut the bottom support, which is common on leading diagonals and continue up north our way into 1060's. Have a good night everyone...

Cheers everyone

Gapdown tomorrow....

Well, I missed the damn call for a sell off to the close today. In terms of wave structure it looks exactly the same.

It just hadn't much time to overcome my forecast, since structure is still in place I call for a gapdown tomorrow and continuation of the decline, at least until we make a new low under 1026. That may be the place, around the 1020's where a reversal can occur for a wave 2 rebound.

But going against the main trend is nuts, so my goal is not to find bottoms but tops so I can short the rallies. I don't intend to exit positions at possible bottoms in risk of losing the train.

I leave you the chart of today's close that served as forecast:

  Well, look at that !!

Australian Central Bank raised the rates by 25 basis points, nothing that we haven't foreseen.

Cheers!

Selling off into the close?

Just an idea across my mind...

It looks to me corrective this movement no?

It's all about the dollar...

It's all about the dollar folks.

In my opinion the dollar seems to have bottomed, and that is the requirement for the indexes to start to decline as well. Patience is key most investors say. And the Dollar really tested my patience since July ! It's been surrounding the 77-75 levels for 5 months now almost, without any decisiveness on a turnaround.

Now, it seems very likely a bottom in the dollar has occurred and this will serve as a catalyst as well for the indexes to follow suit.

On the larger time frame, this is either a Wave C or the beginning of a 3rd Wave. For the mid-term projections it doesn't have any implications, the difference is, under Wave C this is just a rally under a larger degree bear market, with a 3rd Wave sky is really the limit, and for all I know, the index under a 3rd wave could really go to 120+ or something.

Here are the graphs regarding the USD:

 Regarding the indexes, this last move up was what is called under EW terms as a expanding ending diagonal.
According to the book Elliott Wave Principal it states that ending diagonals occur  when the previous move "has gone too far too fast". This surely fits into the current scenarios after a 65% rise in little under 7 months.

Nothing that couldn't be seen under EW as you can see here and here, whatever critics may say.

Again EWP states that near-term, diagonals are ending patters and they imply on thing which is "dramatic reversal". So one more argument for the bearish stance.

Here I lay some more charts:

 Not to mention, this last week the down days were very very big, achieving on Friday 95% of the volume was for the downside, with 10 stocks declining for each rising stock.

Also the German DAX, that most the times works as a "forecaster" has already declined 10% while S&P has declined 6% from the top, causing a market divergence, so I expect the S&P and the DOW to catch up with the DAX in brief order.

Also, take note at the above picture... 5 waves declining. Anyways I'm expecting in brief order some kind of bounce during the following days, maybe we open negative, catch support at 1020 and go to 1060-1070 for wave [2] (yellow box is the target)? That is, if indeed what we're seeing now isn't a 3rd wave extension. I guess we'll see...

Cheers ! (on a side note, how much do you want to bet the Australian Central Bank will raise interest rates this Tuesday? Either Tuesday or next month I bet it will raise the rates... so keep an eye on pairs related to AUD...)

Update:

Should I mention VIX?

Update 2:

Also VIX is on the 1st step of a buy signal for equities. Remember the steps in order for a valid signal:
- close outside the BB 2.0
- close back inside the BB 2.0
 - and a lower close that previous day

So this could support again the scenario of wave [1] being almost done, hence the rebound scenario expected.

Weekend waves...

Some other waves other than EW were ripping this week in Portugal. The best 45 surfers in the world took their chance against the hawaiian's Pipeline twin lost brother eheheh...

Here are some highlights... Enjoy !
 

Yippie-kai-yay mother...

I hate so much when I'm right :-D

I'm getting more convinced by the minute this is P3. If it is there's no need to jump the wagon just yet if you're conservative and may want to wait for more confirmations.

As for the intraday charts this is what I have, sorry they're already outdated

 This is the view of yesterday's graph, and is only blue wave 5 going to [1]

P3 ongoing...

P3 is ongoing my friends, that's what I see of this movement...

Remember this chart I posted 3 weeks ago? I said after the break of the wedge line we needed to retest it and then kiss goodbye.

 I though we'd retest it in a more faster manner, but what the index actually did was this:

It went up and up bumping up every time against the resistance, trying to regain the wedge area...it failed and to me is a kiss death goodbye. Sayonara bulls.

P3 is ongoing folks, as I see it... of course I'll look like a damn fool if I happen to be wrong, which may well happen.

Just pity the fool:


On similar fashion, the USD has broken it's long term trendline... it looks I picked the right night, the other day on USD since that so far was the day of the low... The trendline was also retested and reacted positively, so it all looks good for a trend reversal...

 On a short term basis, and regarding S&P, we're now oversold, and we have a few important news coming up for the next 2 days, so volatility should come knocking. A bounce reaction to those news may happen and they would actually help to clear some of the oversoldness... And the structure calls for a bounce as well...

See the following graph: