Sunday Afternoon Post

I hope everyone survived last week's action.  It was dramatic indeed.

One of the market psychology themes I had been harping on was the concept of NOT BUYING Good News accompanied by a market rally and NOT SELLING Bad News accompanied by market declines.  It's been a recipe for "whipsaw" the last few months.  Market declines are more believable when they occur on a "positive headline."  Last week, after Congress finally agreed to a Debt Limit deal, the market fell pretty hard.  For me, that was the first time the market FELL on seemingly "positive news."  It was our first clue that the market character was changing.

Indeed, the wave analysis strongly suggests that 1345 will serve as a Market Peak for the next few years.  There's still a good chance we get a z-wave that gives investors a chance to get out of this market.  But, the message of the market is now clear.  Good rallies should be sold.  

I'm expecting and hoping for some more QE3 banter or discussion ... that sort of talk will likely levitate the market one final time as we attempt the emulate the failed Japanese experience of the last few decades.

You're doing a heckuva' job Bennie!


QQQQ said...

Thx AT (Awesome Technicals!)

Thumbed thru it, nice compendium!... will digest more when time permits... possible 800 huh.

cv said...

Looking at WEEKLY candles... This was the first WEEKLY candle close 'under' the famous LEHMAN WEEK candle (after we crossed back over it back at the beginning of the year)...

Just saying...

There also happens to be a WEEKLY candle GAP (down near 1108, I think)...


Full disclosure: I may or may not believe in the Easter Bunny

Anonymous said...

nice Charts, AT~

I like that ~Idea, up from here, on 'oversold-edness' -- Mr. & Mrs. MutFund will breathe a sigh of relief, then Dow-n, again..


ben22 said...

thanks AT

one interesting thing from the 06-08 period was watching things put in peaks at different times

RRE peaked first, then stocks, then commodities

within the stock space I'm going to guess that in the Z wave,....which I also still expect and I think should take at least 2-3 months to complete

I'm thinking healthcare and utilities "hold up" better relative to the market, how long it takes the commodity complex to peak is anyones guess but I think that will shock a ton of people if it happens in which case it might get real violent

because I'm still a buyer of the idea of a Z wave I'm still looking for constructive charts for long positions to couple with what will likely evolve into a net short positions on the overall market in the coming big lesson for me in 08 was how long it took a lot of stocks to peak out......June/July 08 and lots of stocks were still blowing off to new highs

Outside of waves, I'm way far in agreement with you on the idea that long term holders (like 401k/403b money especially) should be selling into any strength and getting into safety

I wouldn't take Dow Theory lightly for those folks, the track record speaks for itself and a textbook Sell signal was given on 8/2/11, last DT sell signal came on 11/21/2007, the last buy on 7/23/2009

last two before that were to short 9/23/99, long 6/6/2003

Considering putting together a plan given my confidence in this outlook that involves some LEAPS

ben22 said...


My Neo Wave book is at work


Is there a 9 leg variation of a triangle in there at all? Orthodox book shows the running variation that gets labeled a-b-c-d-e-f-g-h-i
anything like that possible for this X wave?

I really should have just stuck trading this e wave interpretation in relation to the a wave.....annoying.

REgardless I think you have to leave room for the Z since a triangle always occurs in a position prior to the final actionary wave.

Also, assume for the Z wave you'd just favor a basic 5-3-5 pattern/zig-zag? perhaps .236 or .382 of Y?

Anonymous said...

also, for my own Sense, to be clear, I'm not looking for 'this' to be the "bottom-tick", at this juncture..


ben22 said...


any chance you'd call that D wave an X wave instead?

In that case you'd call the a-b-c and expanded flat the D an X and this leg the start of something else

I don't know though.....that C leg you'd probably have to force five waves on for a 3-3-5 flat

My only "fear" in making big trading plans is the worry that this leg is going to take longer than I expect, as will the Z did the entire rally that started in March 2009.

AmenRa said...

Futures open. ES open 1167.25, now 1165. Gold open 1681,70, now 1693. YM open 11159, now 11115. WTI open 85.71, now 84.67. Let's get ready to rumble!

Andy T said...

Nice little overnight open...

Smooth little 30+ move down on the S&P....


AmenRa said...
Muni Market Prepares for Lost AAA Ratings

The $2.9 trillion municipal bond market is preparing for “hundreds and hundreds” of downgrades after Standard & Poor’s lowered the U.S. one level to AA+, the first-ever reduction for the country.

S&P is likely to cut its ratings on municipal debt secured by the federal government, such as pre-refunded bonds, tax- exempts backed by U.S. agencies, and credits that are most dependent on federal spending, Peter DeGroot, head of municipal research at JPMorgan Chase & Co. (JPM), wrote in an Aug. 5 report distributed after the federal downgrade. The New York-based ratings company said it would release a statement on state and local issuers today.

“There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence,” Matt Fabian, a managing director of Concord, Massachusetts-based Municipal Market Advisors, said in a telephone interview. “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about.”

Andy T said...

You almost can't make this shit up....tiger woods' first tournament back after firing his long time caddie, and his long time caddie wins the tournament with Adam Scott.


Andy T said...

"My only "fear" in making big trading plans is the worry that this leg is going to take longer than I expect, as will the Z did the entire rally that started in March 2009."

Agree with that sentiment. waves always take longer to complete than you think.

ben22 said...

thats going to be an interesting gap created on gold

Andy T said...

it's a gap that will be filled in the next few days....

mcHAPPY said...

Nice interpretations Andy.

Neely has certainly been on with his trades but the trading service is not showing short term labels. It is a daily plot going back to the end of 2008.

Obviously there is a difference of opinion between the counts but given his very large stop-loss I think it is a given this count is not lost on him.

Since I missed this decline by less than 2 points of an entry - and then kept thinking there has to be a bounce here somewhere, lol - I hope this count plays out. I'd love to get another shot at 1308.

ben22 said...

it looks like an exhaustion gap AT

but I'm not about to get bearish gold

ben22 said...

not sure what to make of this...there is just a huge amount of shorts:

AmenRa said...


SKEW jumped over 5% on Friday. So there was a ton of OOM put buying.

AmenRa said...


I don't know if that is an exhaustion gap on gold. A quick look back through 2001 doesn't have any gaps. Todays open is the first real gap in ten years.

Andy T said...


From previous thread, the list you cited from one of your favorite EW Theorists from 2003:

"7. Films will break new ground in horror, probably with themes that include suicide and torture. "

Man, not sure if it's just recency bias, but my 8th grade daughter's last two book series, that she read very quickly and multiple times, were the Twilight series and the Hunger Games.

I'm half through the Hunger Games and I can't believe the content. I would have suggested it's more appropriate for 10th graders...

Themes of the book are:

1) Oppression
2) Death/Killing/Near Suicide
3) Rebellion/Revolt

It's pretty rough material ....

I've seen the Twilight movies and I'm still pissed at my wife that she allowed my daughter to read the books at that age. I did NOT realize the full content of those books. Was not appropriate for middle-schoolers, IMO.

Long story short....

I'm sort of shocked at what young'ins are reading and watching....

It's pretty heavy topic matter.

Matthew said...

The gold short is the most stalwart widow-maker that I have seen in a long time. I'm sure someone has made money doing it, but it is way too fast for me to catch hold. I have a lot of respect for anyone who has been able to get in and out on time on gold shorts, regularly (I don't know anyone like that).

Re: Ratings downgrade:
You might have missed me posting about this last week, so here are the points I remember making (might be missing one).
1. Many funds treat tsys as a separate asset class (along with any security backed by full faith and credit), so the ratings of those securities are irrelevent to a large block of investors.
2. many constraints reference the median rating (which is AAA because Moodys and Fitch re-affirmed).
3. The main problems could come from ancillary downgrades, albeit I suspect that this will be de minimus because the spreads appear to be right for anything at risk, in my opinion.
4. What is the purpose of the ratings agencies? Outsourcing of credit research by funds/regulators. For example, a state regulator might say insurance companies can hold a portfolio with weighted average rating of AA (you know, the lazy, "dumb" regs that some people decry).

Another note: One of the compliance sign-offs at work almost weeped for me on Friday as they signed off on a leg-in of a risk position for my personal account. We'll call it a reasonable punt with (1) downside protection and (2) sensitivity to the next roud of easing. I suspect that I will be crying in the short term, as every fiber of my being screamed not to jump in shark-infested waters. Hey, when you have an overly restrictive personal trading policy, you just have to do 3-month outlooks and bite the bullet on the vol.

Same time tomorrow,

Matthew said...

PS: Re: point 4 above about ratings agencies:
I meant to add that the main purpose is so that regulators and fiduciaries can wash their hands when they do a shitty job. For example, if a bunch of subprime loans go bust in a pension portfolio, the manager can just say, "They were rated AAA. This is S&P's fault;" that, instead of reading the prospectus and earning the egregious fees they effectively charge fund beneficiaries.

State regulators ditto.

Matthew said...

OK, last thing (I swear):

From AP syndication:

"Interviewed on CNBC, Geither said that U.S. Treasury securities were just as safe now as they were before S&P announced its downgrade."

This is [accidentally] the most accurate thing this man has ever said. You see, these securities haven't been AAA safe for many years. Also, the statement is true of any security following a downgrade or upgrade or outlook change; the rating is simply a latent recognition of credit risk. The actual risk has been in flux the whole time, whereas the rating is a discrete measurement

72bat said...

at -
my daughter (21) has been at me to read hunger games since the first book came out in 2008. she dismisses twilight as 'not worth reading."
when she was a pre-teen, we read out loud to each other any number of series of fantasy/magic series in which barely adolescent female protagonists dealt with issues of emergent sexuality, male aggressivity, female empowerment, safe sex. etc.
imho, better one has knowledgeable pre-teens/teens with whom one discusses hypotheticals presented in literature and film than "protecting" them from real-world issues which they encounter daily in media and with their peers, out of one's earshot.
i highly recommend exposing them to the "our whole lives" curricula before they are too very mis-informed by their peers and one misses the opportunity to be the primary sexuality educator in their lives.
just sayin'...
(note: the curricula was developed jointly by uua and ucc, but is available and presented in non-sectarian format).

Andy T said...

@matthew 11.27

"This is [accidentally] the most accurate thing this man has ever said. "

spot on.

72bat said...

at -
btw, thanks totally for your original and insightful posts & charts.

72bat said...

"This is [accidentally] the most accurate thing this man has ever said. "
spot on. what ben says all the time, such "exogenous" downgrades/pronouncements/news/comments are already baked in the markets/sentiment cake.

AmenRa said...

Au 1701.60 and rising...

AmenRa said...

Bloomberg interview with John Chambers & Peter Orzag

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