Yesterday evening I started tracking a butterfly on YM. I made two trades one to the upside for the butterfly pattern to finish and one to the downside as soon as the pattern finished. Two good trades based on commonly understood patterns.
Setup of the pattern. You can see the various legs of the butterfly are proportional.
Following GLD [here]. Looks like we are still in a wave B mess to the upside. Expecting wave C downwards so I can get into the calls. I will also get into the calls if somewhere in the messy chart, we have put in the wave C already.
GLD should find support at the 61.8 retrace and for a Leading Diagonal, at 78.6 retrace. Time is running short for GLD to turn up so I would give only a day or two when the market opens to start working upwards.
 In the earlier post, I called the wave 1 a diagonal. That was based on a quick look at the daily chart. Looking at the 15 min, it is clear that there was no 1,4 overlap. So, wave 1 is a straight 5 waver up.
In my last post on TLT [here], I identified an opportunity offered on Treasuries to the upside. I have not yet changed over into treasuries in my 401k as I want to 'time' the market and get in at a better price. I believe we are done with what looks like a wave 1 to the upside. I am waiting for wave 2 down next week to load up. The daily Stochastic is overbought and should provide a brief opportunity to get a better price.
I have been tracking GE for some time now [here]. Some chart patterns [here] and technicals make me bearish on GE. The butterfly pattern on the weekly I identified earlier is updated and presented on the chart below. As identified earlier, losing the SMA 5 and divergence on daily Stochastic brought about the expected price decline in GE.
The butterfly pattern can bring continued weakness in GE. With the market setting all time highs, GE usually leads into the decline.
The conditions are becoming normal on GE right now. The daily Stochastic is way down with the selling of the last few days. However, the weekly Stochastic is still up in the overbought zone.
Here is one way this may pan out -
The DA leg is 123.6 extension of XA right now. Ideally, we want to see the price touch 127.2 extension of XA at about 24.08 if the market continues to rally in April (I expect SPX to touch 1580s [here]). This should also set a divergence of Stochastic on the weekly chart, which brings weakness at weekly level (long term).
Of course, GE may continue with its current course downwards.
Closed my GLD puts yesterday morning. 60% profit. In the futures GLD seems to have finished a wave A. It should put up a wave B to the upside on market open today followed by a wave C to the downside. I expect the wave C to finish prior to market open tomorrow.
Of course, none of this may pan out at open today and GLD may start rising right away. It bounced off the Bollinger centerline yesterday. I will wait for GLD to break over the recent highs for a long trade.
With a LD, the wave 2 retrace is usually pretty deep. I am looking for 61.8 retrace at around 153.31 or so at least.
GLD seems to have put in what look like an LD or ED. Can't say which, though I am bullish gold overall. For the next couple of days GLD may see some weakness. I purchased puts on GLD that I plan on closing by Tuesday/Wednesday. From the chart below, I am hoping/expecting a wave 2 down and then start of a wave 3 up.
Stochastic is ready to turn down and the GLD lost its SMA 5. Both should bring weakness in the near term, up to 5 days, that I expect to exploit with the puts.
In the previous post on GLD [here], I expressed my concern that GLD is not doing what I typically find with such a chart. I had been expecting GLD to skyrocket and all it could muster was a pump overnight followed by selling during regular hours. Not a very bullish chart.
I wanted to see buying during regular hours. Buying in the face of sellers. The chart below shows what I mean. Start low and rise during the day.
After watching today's action, it appears at least that the weak shorts are trying to cover. The current pattern should be followed by a strong day tomorrow as the daily candlesticks grow longer in a wave 3. I am posting some of my targets in blue rectangles. These are based on fib extensions. Though GLD has not been tracking the extensions to pennies, it is close enough.
How long will this go on? If consider Feb 20th as the end of the correction, could go 160+ before the price starts retracing.
I have been watching and playing GLD for the past couple of weeks. It should have sky rocketed by now. It has been lethargic, moving up in fits and starts. It could be that GLD is in a triangle as shown in the chart below. The points that led me to believe upside in GLD are still valid but it should have been on fire by now. I closed all my GLD calls yesterday in the morning and am sitting on the fence to see where it goes from here. Today's action should be a tell.
As expected [here], GE gapped down hard this morning along with the rest of the market but bounced off the 161.8 extension marked in the chart. Now it is trying hard to close the gap marked on the chart so it does not become an island reversal. Good place to take a short for another wave down.
Closed positions in GLD. Per my post [here] 155.78 looked like a good price to take profits and watch how GLD behaves from here. Counting waves, we are definitely in wave 3 so I do not expect an opportunity to ge on the train again maybe till 156.7x
Profits were handsome and about what I was expecting. I do not know if this is corrective or not so a bit quick in taking profits.
I have been tracking [here] what may be a top in GE. I don't know if it is long term or interim but the opportunity to take profits in GE appears ripe. A 5% correction from the top of 23.90 should get us to 22.70.
22.65 should close the two open gaps so there is a good chance we may see at least that if one is bearish on GE. In the chart below, the two gaps are marked in red with some fib extensions marking the targets.
The targets in blue are what I like immediately with a final target near 22.60. If this turns out to be a 5 waver down, then I would infer that GE has a lot more to go down long term. If it is a three waver, most likely the lower gap would not get filled and GE would continue to rise after the stochastic touches the bottom and curls up.
GE seems to be trying to make up its mind. In an earlier post [here], I presented the possibility for GE to take a dive. Since then it has put in what looks like a 1,2 and should dive faster in the 3rd wave down.
In a previous post [here], I presented the case for SPX to rally to 1582-86. Looks like it is well on track to reach its target. Some had a figure of 1560 but I think we blow past that into 1580s. Need to set a new high.
Since SPX avoided the Wolfe wave at 127.2 extension. Getting into 1580s will bring it close to another point from where the Wolfe wave can start - 161.8 extension at 1602.
GLD has been holding up pretty well so far but it is not out of the woods yet. On Monday, I expect it to shoot up as in a wave 3. If it does not, there is no mojo in GLD and it would be best that I close the calls I purchased for whatever profit I have left in them.
Just to be clear, from similar patterns observed in smaller time frames, the price shoots up around here so I am very bullish on GLD. However, if it looses the SMA, it does mean we are in for one more trip to 150 and below testing the bottom of support at 148 or so.
The daily stochastic is not looking very happy.
An IHS has formed on GLD in the last 4 days of trading. Target is 155.65. I like some more targets at 155.78 and 156.72. Frankly, where we go depends on whether we gap up or down on Monday. GLTU.
GLD instead of blasting off into space in the blue count mentioned here [link] chose to take the orange count where it will burn some Theta. If you are bullish, this is your best bet.
On the other hand, one can also see a triangle develop now that could be the 4th wave before the 5th wave takes the price down further. If so, it could be well into April before GLD turns back up again.
Based on price movements, I see two high potential paths GLD can take. The path in pink is the most bullish path which will take GLD above the upper bollinger band very quickly in a '3' wave and the bollingers will expand to accomodate the accelerated movement of GLD. The other path is were GLD will find resistance at the upper bollinger band (it may pierce it but will not hold it). Then a '2' wave would follow to the downside, followed by a wave '3' to the upside as presented with the orange lines.
The orange path will allow GLD to burn up more time (and options holders) than the pink path. From a weekly perspective, the orange path is more likely/seen more often.
The day started, at least the morning, as expected. As soon as the clock stuck 10:30EST, GLD started dropping! Haven't looked at the news to try and correlate events with the drop in GLD but I am sure MSM will come up with something.
GLD found support and pretty much stayed above the support all day. With today's action, there is an unfilled gap leading to possibilities of island reversal if the futures were to drop overnight which would be very bad for GLD bugs. I do believe we seem to be in a sort of 4th wave which should resolve to the upside tomorrow.
Right now, gold futures seem to be finding support at the red line. I am hoping the support holds overnight. I have seen this pattern before and usually it is bullish (gap up and go). Let's see how it goes tonight!
In a previous post [here], I pointed out why I was bearish on GE. Adding to that is a bearish butterfly pattern [definition]. With Stochastics overbought on both weekly and daily and divergence on the daily, it may be time for GE to take a breather.
Looks like GLD has been beaten pretty badly in the last two years. Since peaking in September 2011, it has languished in a range.
I present a weekly and daily chart that offer an opportunity to the upside in GLD at least in the short term. Long term, I don't know but I would guess that it looks good for GLD regardless of where the market goes. This is because it should spike as an inflation hedge or as a safe haven during a crash.
In the weekly view, we see the stochastic oversold and curling up and the price coming up against what has been a good support these past two years. So, from a weekly perspective, I would imagine GLD bugs taking a stand here.
The situation is similar on the daily front. Lot of selling the past few months and what looks like a 5 wave down (or a double zigzag, take your pick). Regardless, the stochastic are oversold again and the price is at support (same as the weekly). I will buy on Monday. It will be good luck if we spike down on Monday to allow me to pick up cheaper. Typically, you find a reversal for 1-2 weeks at this point in the chart (could be a correction to the upside or a trend change). With options next week and the week after that in GLD, this would be a good call buying opportunity IMHO.
In a previous post [here], I used Fib extensions on impulses in the direction of the trend since 2009 bottom to arrive at a possibility of 1583 being the end of the road for this rally.
In this post, I apply the same methodology on a shorter time frame, specifically since Oct '12 to see if it validates the conclusions from the previous post.
In the attached chart, you see at least 5 waves in the direction of the predominant trend marked A, B, C, D and E. There is another wave C* identified in Red. I will go into details later.
You can see that -
B is 161.8 extension of A
C is closest to 127.2 extension of B (but misses by 20 points leaving me to question the relationship)
D is 127.2 extension of C
And we are now currently in E.
If E is 127.2 of D, then the end of the road for this rally should be around 1582.
However, I do not like the large gap in the fib extension between B and C. Perhaps, it is because B and C are not related. It is quite possible that C, D, E are waves in a larger wave C* that holds a relationship with B.
If so, C* should finish at 1586 or thereabouts.
So, we have two targets 1582 and 1586 from this post and 1583 from the previous post. Targets are taken from different timescales and they line up. All indicating that 1582-86 could be the end of the road for this rally.
A few months ago, I presented my research into Fib Extensions [here] and how I found 127.2 and 161.8 extensions to be pervasive in the direction of the trend. A point to note is that more often than not, the next impulse in the direction of the trend peaks/ends at 127.2 or 161.8 fib extension of the previous wave.
In the chart below, I identify 4 waves in the direction of trend marked A, B, C and recently D. You can clearly see that B ends at 127.2 fib extension of A. That C ends at 127.2 fib extension of B. Will D end at the 127.2 fib extension of C ? Will SPX turn back after hitting 1583 and setting an all time high?
Earlier today, I pointed out [here] the megaphone pattern is asking for SPX to turn back from slightly below 1600. This coupled with 161.8 extension and 127.2 extension confluence as shown in the chart below, could be indicating that we are close to end of this rally. We should set an all time high as DJIA30 has already done. SPX typically follows DJIA.
Though this pattern has been successfully demonstrated in short time frames (days/weeks), I think we are about to see it in a decade long setting.
The past decade(s) has been nothing if not volatile. If this pattern holds, we are in for a lot of doom and gloom. Does SPX turn around near 1600? Are we in for a few years of stock market decline? Perhaps till the next election?
Five and half months ago, I posted about the weekly inside bar [here] and commented that it may dip and then reverse again based on a previous occurrence. It was not all fluke. It was based on observations on smaller time scales.
So, how did it go? Pretty much what I said. The following week's bar was red which was then bought and reversed in the week following that.
Of course, there was a deeper retracement to follow after the knee jerk reaction. But that is for another post.
It feels so good to be refreshed and back. Took time off the market as I felt the addiction was getting too strong. I was spending way too much time away from what matters most in life. Needed to step back, relax and enjoy.
This weekend, the urge surfaced again. So, here I am, with some commentary on what I see happening. Some research and mostly SWAG (Scientific Wild Ass Guesses!).