Tuesday, August 28, 2012

Wolfe strikes again!

Great start to the morning. 3 Handles brought to you by Mr. Wolfe.

Tweeted an opportunity

Look how it turned out.

Update: Bold Predictions

In the post on Bold predictions, I was tracking a Wolfe wave and corrective moves on SPY based on fib relationship. So, how did it go?

Not exactly as I planned! I mean, we got a dip in the morning and all and I posted a chart in the morning where I thought we may have finished the wave but I did not buy it myself.
However, after adjusting the chart for yesterday's move, I get better fib ratios. So, as charted below, will the Case Schiller reading disappoint? It's up at 9:00am EST and the market opens 9:30am EST.

Monday, August 27, 2012

Update: Divergence on the hourly

So, how did the divergence pan out so far? The ellipse at the bottom shows what happened on Friday after we have divergence hinting a move up. That is quite a few handles!

The previous post that about the pending move is here.

Divergence on the hourly

Good morning. Another divergence on the hourly. On Friday, the divergence lead to a big upside. Will this divergence do the same to the downside?

This time, the divergence is against the predominant trend. Don't expect miracles! If you check my other post from Saturday, I am expecting some weakness in the morning but if it pans out as I mentioned in the 'Bold Prediction', then I will be a buyer in the morning dip.

Sunday, August 26, 2012

Another Shot? Maybe not

In the previous post I presented a possible Wolfe wave. I am no expert and I did present some misgivings. I have not read anywhere on the net that the extension ratios have to be same on both the legs (3 and 5). In that post, 3 is 127 extension of 1 and 5 is 162 extension of 3. I was asked to chart Wolfe wave on IWM which brough me to an interesting observation. One that potentially blows away the previous count.

It appears that a similar pattern presented itself on IWM a few weeks ago. Leg 3 was 127 of 1 and 5 was 162 of 3. It failed as shown below.

So, what of the 'Another shot'? All I have is this one example of failure right now. If I dig more, I may find more such examples. Either this means that we cannot mix ratios or that Wolfe waves can fail (Oh! the tragedy).

BTW, it did seem to work (pretty close) later on another setup. Note that 5 is 100 extension of 3 and not 127 or 162, the only mentioned extensions on the web. Is this even a legitimate Wolfe wave? I don't know.

Trade carefully!

Another shot at Wolfe

A couple of weeks ago, I was tracking a Wolfe wave that would have taken us down quite a bit. It did not pan out (marked on chart). We are close to another opportunity now. I have some misgivings as I noted on the chart. This setup is void if we blow well past 143.51.

Without further ado, here is the chart. 133 is also the 61.8 retrace of this move up since June.

In an earlier post I had used different peaks for measurement and the target was different (more ominous). I do not like the numbers, especially that 127.2 fib at 3 is not quite up to the mark. I post it anyway as I have no way of saying that it will not pan out at all.

127 is right where we started in June.

Saturday, August 25, 2012

Bold Predictions

Long time ago, I gave up my abilities to predict anything but what my most short-term indicators suggested. I am talking in minutes here.

Once in a while I do like to venture into the big 'prediction' world where the time horizon stretches into hours or maybe even days. I have a post on my thoughts on a very long (weekly/yearly) time horizon.

This weekend, I have a chart that spans 1 day of moves for SPY. A few things lined up that made me bold enough to put this chart out.
1. I use a special indicator that is indicating a downward pressure on the daily SPY chart but enough volatility/chop for 2-3 days.
2. The fib ratios presented in the chart occur more frequently in my recollection. ABC moves typically have 23.6, 76.4 and 61.8 fib relationships amongst various waves, especially in the form I show.
3. There is a good setup of Wolfe wave which has become my favorite
4. The Wolfe wave jives with the fib ratios of ABC moves.
5. AAPL got awarded a billion dollars after market close on Friday that should bouy the market at least till the open.
6. Institutions seem to want to sell as much as they can without bringing the prices down. I guess they will sell into the AAPL euphoria.

Now, none of this may come true and Monday morning will be a tell. This chart is almost ouf the window if we go lower than where I have marked 4 by quite a bit. But there is a chance so here goes.

Bold Predictions:
1. We gap up Monday to the 61.8 fib retrace of 8/21 to 8/23 down move labelled as WXY. This area is in blue. It also happens to be a great spot for the 5 of the Wolfe wave. I am guessing we will be there in the early part of the day. This also serves as the 'A' leg of the ABC retrace to the upside. SPY target for A is around 142.
2. The Wolfe wave line meets the 23.6 fib retrace in the crimson area. This would be a good spot for B to stop. It also happens that B = 61.8 fib retrace of A at this spot. B should be around 140.90 or thereabouts.
3. From there C starts its move up to finish off at 76.4 fib of the WXY wave which is around 142.40.
4. It goes down again and either stops at Y or lower to finish the correction over the next 2-3 days giving my special indicator time to finish off with the downward pressure on the daily SPY chart.

I will be keenly following the progress and will update the charts with what I see.

Friday, August 24, 2012

Update: Potential EWT Count

Earlier this month, I shared with you a potential EWT count calling this bullish move may be close to its apex. At the time, the stochastics were midway and on the move up. It has been about 3 weeks since that call. The market has marched relentlessly towards its peak. The stochastics on the weekly are above the overbought zone. Too many things lining up calling for a top.

But, can a Jackal call top? No. The wolves will when they will. The weekly stochastics are slowly pinching but no damage has been done yet. We do not have a weekly lower low even though this week finished in red.

However the warning is there for everyone to see. As I mentioned then, I am sitting in cash in my long term accounts which I believe will be more valuable than equity if the market follows what looks imminent from the count.

Divergences are rare on the weekly but they do happen. I think there is room for one in this case too.

I lost a sizable portion of my 401K in the 2007 meltdown. These 5 years have taught me to be careful. Be safe!

Final: Divergence playout

Another touchdown. Divergences work. That is quite a few handles if you played it. We have the touch of the upper channel line. So, is the tape back to the bullish trend? Too early to say. The wolves stop the tape at just the right places. ES opens on Sunday. I am thinking some bad news on the weekend (just cause I am partially long). We will see what the next week holds. I may have more charts on the weekend. GLTA.

This was the post that started it in the morning.

Update: Divergence playout

Wow! Did Jimi have anything to do with this?!

Divergence playout

So, how did the divergence play out? Here you go -
Divergences on a time scale that imply getting back into the higher level trend have a very good risk reward ratio. In this case, the daily trend is up and each time we had a divergence on the hourly, there was a swift move to the upside. 

The tape is still in a downward sloping channel and will meet resistance at the upper channel line. That will be the tell of whether the bigger trend is intact or not.


It's over. Usually, this means some retrace. Here is the chart.

The original chart is also attached.

Update: Divergence and Wolfe

In the previous post we were following a Wolfe wave and a divergence. Look at the update!

Is this close enough for you :-)

Divergence and Wolfe

Following a couple of opportunities to the upside after we put in what looks like an ABC correction. The first chart is a potential Wolfe wave on SPY 5 min chart. Target is a touch of the blue line. The second chart reinforcing this view is the divergence I see on the hourly ES chart.

Wednesday, August 22, 2012

Another wave of bull

In the previous post I highlighted a potential for a bearish move. We did have the follow through this morning but after the Fed minutes, the market reversed direction again. The short signal is now negated. We had a green close on ES after the bounce from the Bollinger center line. When ES opened again after market, it took out the previous day's high. This is pretty bullish. Most likely, we should see more upside in this wedge before it breaks down again. In EW terms, we saw the 4 wave today and should go higher to finish off the 5th.

Most likely this wedge will top out at around 1430-40, a number thrown around on the web. It should also setup a nice divergence on the Stochastics by then. I am playing on the bull side till then.

Tuesday, August 21, 2012

Rejected above Bollinger

We have a long wick on ES today. The price went above the bollinger but was rejected and closed in Red.

I show previous examples in red where the market went down quite a few handles after a long wick to the upside. We also have a crossover of the Stochastics lending to bearish possibilities. All we need a confirmation of a lower low.

There is one example, in blue, where the market should have turned down but there was no confirmation with a lower low. Right now, ES seems to have double bottomed at around 1408. If the tape breaks below today's low, we have a good chance for more downside.

Saturday, August 11, 2012

Is a Wolfe on us?

Did some research on Wolfe waves and whether proportions have to be absolutely accurate or not. Firstly, on a daily chart, this pattern is not very common. I mean, once in 2 years or more. Secondly, it is also more likely to occur in choppy patterns/ corrective waves. We are in big choppy mess right now so it would be a great place for this pattern to materialize.

Let's look at the latest one which I believe is almost ripe.

Here are some from the years before. Notice, in most cases, the market reverses at this point. So, if we dip now and touch the line, we may reverse and go on higher. What would cause that on a macro-economic level?

Friday, August 10, 2012

ABC Friday

Last night, I followed an ABC move down. In a post at Cobra's blog, I cautioned folks that what goes down comes back up. In this case, I was expecting an ABC move to the upside.

The move started at about 1392 this morning and then spent most of the early part of the day in a choppy B wave. At around the time the C wave was to start, I shot out the following chart

I have been feeling poetic since the morning so I composed a small poem in anticipation of the C wave to the upside

Cometh the happy hour
Hail the HFT power
Stops popped, the sheep rollover
Wolves rule, game over.

The day ended with the wave C to the upside in its full glory. Love short squeezes.

So, here we are. Is the wave C finished? I was really looking forward to 1404+ as would complete what I see as an Ending Diagonal allowing the markets to come down from the skies. Nothing, other than EWT to say that there is a possibility for the market to come down. It could happen that this last wave extends but for some reason, I am not feeling bullish.

BTW, that means nothing, as I try and trade the tape rather than feelings.

Thursday, August 9, 2012

ABC Update

I had identified A and B of a potential ABC move on ES futures in an earlier post. The move panned out as expected. The C wave is continuing downwards as I write. The C wave will end when it will but I have generally seen 78.6, 100, 161.8 fib ratios between C and A. Corresponding possible targets on ES are 1393, 1391 and 1384 or anything in between :-)

I closed my shorts as I am off to bed. Let's see what tomorrow brings.

ABC correction

Here is today's price action on ES futures. I can see a simple ABC correction on the chart with A and B done and C to follow to the downside. I believe A=C is around 1389.

Wednesday, August 8, 2012

Following the Wolfe

I only recently became aware of the Wolfe wave. Here is the first 'win' using this pattern.

I posted this chart of ES futures at Cobra's website this morning. The ratios checked out at 127% on both legs so I made the following post -

Link to the post

I had put up the following chart. As we know the target is the touch of the line connecting 1 and 4 (blue line in the chart).

In a few hours, the target of 1400 was met

Wolfe wave works!!

Tuesday, August 7, 2012

Wolfe wave update

Still tracking the Wolfe wave. The hump suggested by the attached article is complete. If break back into the yellow channel tomorrow, the target is the red line. The chart also presents it as a flipped Gartley which may give an indication of the actual target.



Monday, August 6, 2012

Wolfe wave

If we fall down hard tomorrow, it may be because of the Wolfe wave.

Sunday, August 5, 2012

Potential EWT count

Now, I am not a doomer gloomer. Being a Jackal, I live on scraps left behind by the wolves and try not become their next meal.

Having said this, it is clear that Europe will lead the world down this time. I don't think Ben will print in Sept. It is too close to the elections and will barely have any impact. Spain, Italy and others in Europe are too big to be 'too big to fail' so they will get what is due to them and with them, the rest of us.

Based on this premise, the following chart shows us close to finishing up the corrective wave to the upside since the bottom in March 2009. In EWT, corrections are zig-zag (5-3-5) or Flat (3-3-5). It is tough for me to say whether the previous downleg was a 3 wave or a 5 wave structure. Needless, we have a good 3 wave structure to the upside as presented in the chart. If it pans out as shown, we should top out at less than 144 on SPY. The downside should last at least well into 2014 while the world deals with the situation in Europe.

I am out of my long-term longs and am sticking with daytrading a few handles up or down on ES till this situation is sorted out.