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Trade the Bollonger Band Squeeze

Archive through September 16, 2010

Chart Forum » Hilarius' Hall Of Fame » Elliott Wave Watching » Archive through September 16, 2010

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paint
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Tuesday, September 14, 2010 - 10:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ken,

Re MM's post - I'll have a stab.

The odds are basically the ratio of calls to puts

For example: FAZ.....3.62 to 1......Calls, 20,924......Puts, 5,788.

The FAZ odds are 20,924 / 5,788 = 3.62

The number of calls and puts I'm guessing relates to the open contracts for each for a certain series. As the calls out-number the puts there is more interest in the call contracts, therefore creating the ability to determine 'bullish' odds.

The other info relates to the activity for certain series and how far away for the current 'at the money' price the activity is taking place. If the activity is deep out of the money then punters are betting on a big price swing (while others are betting against it - ie those selling the contracts).

Hope that makes sense - happy to hear other opinions - my 2c worth


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p3t3
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Tuesday, September 14, 2010 - 11:22 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




market_mad wrote on Tuesday, September 14, 2010 - 07:15 am:

Current odds of further market deterioration by the close of business October 15, 2010, according to gambling action in October 16, 2010 options, were, as of the close:




paint has posted an answer while I was preparing this, and has covered most of the content. I've elaborated the detail a bit.

Ticker Call/Put Calls Puts
Symbol Ratio Number Number
FAZ 3.62:1 20'924 5'788
TZA 10.31:1 12'091 1'173
QID 9.55:1 4'260 496
BGZ 3.86:1 1'077 279


Call/Put ratio = Number of calls divided by number of puts


quote:

Eye-opening was the heavy wagering on out-of-the-money VIX October 20, 2010 call options. These were traded all the way up to a strike price of 65. In contrast, the volume for VIX October 20, 2010 put options with a strike price under 20 was 359, the handle being US$5,385.




Currently the VIX sits at 21.21, so the 65 strike (settlement price for the contract) is a very long way away. But a spike in volatility, even taking the VIX to the mid-thirties in a very short period of time, would increase the premium on the 65 calls very significantly indeed. A small move would have much less effect on premiums. The interest in far-out-of-the-money-calls shows strong expectations of a substantial move in the VIX, and hence (downwards) in the underlying equities indices. The much smaller level of open put contracts shows a heavy bias in the expected direction of the next move in the VIX. A spike in the VIX is caused by a sudden drop in the SPX, DOW, NASDAQ etc. I don't know what the "handle" refers to.


quote:

FAZ October 16, 2010 call options were traded all the way up to a strike price of 35. Its put options for that expiration date saw a volume of 52 for strike prices below 11, the handle being US$312.

TZA October 16, 2010 call options were traded all the way up to a strike price of 61. Its put options for that expiration date with strike prices under 23 saw a volume of 18, the handle being US$1,656.




FAZ is the 3x Bear Financials exchange traded fund, currently at 12.84 The interest in far-out-of-the-money calls shows the expectation of a substantial move lower by the Banks (especially) and other components of the Financials index.

TZA is the 3x bear Small Cap exchange traded fund, currently at 29.62 so the 61 strike suggests a very strong move up. The weighting in calls up to 61 and the lack of interest in puts under 23 shows expectations of a strong move down in Small Cap stocks. billt has an open long position in TZA (not the options), hence his interest.

Sorry for all the edits - keep getting my inverteds inverted....you see.

(Message edited by p3t3 on September 14, 2010)

(Message edited by p3t3 on September 14, 2010)

(Message edited by p3t3 on September 15, 2010)

(Message edited by p3t3 on September 15, 2010)







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p3t3
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Tuesday, September 14, 2010 - 11:42 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




paint wrote on Tuesday, September 14, 2010 - 10:38 pm:

If the activity is deep out of the money then punters are betting on a big price swing (while others are betting against it - ie those selling the contracts).


The sellers are usually the market makers, who have to provide a spread (a bid and an offer price) to "make a market" and fill their brief.

The market makers are usually the biggest banks and broker/dealers. The large directional bets usually come from the Hedge community, though some Mutual Funds do buy puts for insurance if they are particularly concerned about current market conditions. The short time to expiry (October) and the nature of the buying do suggest Hedge Fund positions being established.


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rdumas
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Wednesday, September 15, 2010 - 07:27 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

You definitely get the E'Dubya award of the week for sticking with the POG. With Bernanke's printing presses running hot it would appear that the big investors feel that the only safe haven is gold. Well done mate. Fortune does indeed favour the brave. May you make a motza on your TZA stocks soon.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Wednesday, September 15, 2010 - 07:34 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Guys

Thanks Rudy for the EW wave pattern reminder. It will be interesting to see how this now unfolds.

The input on TZA/FAZ Put/Call numerical was extremely useful. Thanks for that guys.

Bearish Reversal Candlesticks on the SPX, DOW & RUT overnight. Lots of divergence setting up, and overbought positions. Daily MA’s still inverted . Otherwise much the same comments as yesterday.

However CHART OF THE DAY goes to my old mate POG - it had a momentus night!




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billt
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Wednesday, September 15, 2010 - 07:45 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Now to the technical picture in (POG) gold –

"Fund buying came in such torrents that it overcame the bullion bank wall of offers near and just above $1,260. As those crumbled, opportunistic shorts that like to piggyback the banks were forced to cover. Their buying engendered more fresh buying allowing gold to not only take out $1,265 but run past $1,275 setting a new lifetime high in the process.

Open interest is at a relatively low level even with this breakout meaning that this rally has legs.

We are now in uncharted territory for gold so resistance levels are being projected by other means of former peaks. It appears that we should see some efforts to stall the rise near $1,282 – $1,285. Failure there and gold will be at $1,300 before one can blink.

The US Dollar crashed through what should have been a floor of support near the 82 level as if the boards were made of rotten, termite-infested timbers. It is now headed to 80, where if it fails, the ill winds of inflation blowing through the economy are only going to intensify."


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rdumas
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Wednesday, September 15, 2010 - 07:52 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



S&P500 Price Action Last Night

Further to the chart I posted yesterday (refer below.




Last night the indexed topped out at 1127.36!!

However the bears shouldn't get too excited about that because this hot air balloon has still not broken down through its ascending trendline just yet.



I would not put it past this index to have one more go at that 1128.25.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Wednesday, September 15, 2010 - 08:00 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



You know it will do it Rudy - 1128.25 intra day then the crash....

$USD crashing, POG soaring, and the big sell off at the close, hmmmm something is going on!


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rdumas
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Wednesday, September 15, 2010 - 08:22 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

The inverted head and shoulders pattern did always have a future target of between $1300 and $1350. What was not obvious though was when this would be achieved. This breakout certainly puts these levels within reach now.





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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paint
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Wednesday, September 15, 2010 - 09:42 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi P3T3,

Just wondering what the obligation is for market makers to make a market so far out of the money, and how would they hedge these positions?


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rdumas
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Wednesday, September 15, 2010 - 09:56 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



ETF GOLD

Hi Bill,

Based on the current POG and AUD pricing, your ETF GOLD should open somewhere around $131.82.

Pity that the AUD is also climbing otherwise you would really be rocketing.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, September 15, 2010 - 10:06 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Billy Boy,

I can just sense your anticipation about an impending turn in the market. As you can see by the chart below, the SPX is testing this level for the third time and the lower 1040 level has been tested 5 times!!!

If this baby turns down, there is no way that I can see the 1040 level holding.




The bulls are on the increase and the bears are hurting. I couldn't think of a more opportune time for Mr Market to start turning. I would suggest that the sudden move into gold last night was no accident.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, September 15, 2010 - 10:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

With expiry happening tomorrow, I'm expecting strength in our market today with a possible ramp up into the 4690 region. If it gets there then I will be loading up on my XJO index shorts at that level.

I believe we are extremely close to a big turning point. Money is flooding back into US T-bonds which usually signals equity weakness is around the corner.

Cheers
MM


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rdumas
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Wednesday, September 15, 2010 - 10:30 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

I have slightly different potential targets to you depending on where I take my wave equality base levels from. I do however agree with the concept you are suggesting.





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, September 15, 2010 - 10:58 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hey Rudy,

My actual target is 4699, so much the same as you. I just don't want to get to greedy trying to time the shorts just in case it doesnt get there!

I don't suppose you could post that email that you sent me onto here Rudy? I'm sure there a few others who would get something from it?

Cheers
MM


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rdumas
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Wednesday, September 15, 2010 - 11:05 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

I also sent it to Bill as well.

The title of the article is "Market Still Deluding Itself That It Can Escape The Inevitable Dénouement"

Readers can find it on http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2010 /09/13/market-still-deluding-itself-that-it-can-escape-the-inevitable-d-233-noue ment.aspx

As the link spans more than one line readers may have to do a cut and paste job.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, September 15, 2010 - 11:20 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Rudy!


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billt
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Wednesday, September 15, 2010 - 01:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I am keeping an eye on VIX at the moment. On the VIX Daily, price has fallen below the BB bands which previously was a very bullish sign. We now have two bullish candles which suggests an imminent move north. On the VIX 60 minute there is considerable MACD Divergence, RSI trendlines broken, and bullish crosses in place.

On the SPX 60 minute, 15 minute & 5 minute we also have a bearish set up of divergence.

On SPX 5 minute I am looking for prices to break the trend line, breakthrough the MA (200), and break the previous low at 1115.58. We have overhead resistance at 1129/30.

On TZA, prices seem to be carving out a Stage 1 Base. Prices have broken the 3 day and 2 day trendlines to the upside. Bullish divergence has set up, and the MACD is close to moving into positive territory. I am looking for the 15/30/60 minute EMAs to fully align - my normal buy in position. On the 15 minute chart the 10 has crossed the 20.

My buy-ins yesterday at the close look like the current price bottoms. Everything is still set up for a reversal on the SPX to my mind, so we will see what happens tonight.










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p3t3
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Wednesday, September 15, 2010 - 01:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




paint wrote on Wednesday, September 15, 2010 - 09:42 am:

Just wondering what the obligation is for market makers to make a market so far out of the money, and how would they hedge these positions?


Hello paint...

The obligation comes with the role of market maker, which has lots of "insider information" type benefits attached, along with effectively zero execution cost - though salaries and bonuses have to be accommodated. With large positions well out of the money often there is telephone negotiation between the two entities (the market maker's and the Fund's respective execution desks) to agree prices before the transactions are processed through the market, so they only appear on real-time screens for a split-second.

The market maker often (for large positions - usually) has a hedge strategy in place for the transaction before it is executed, and a large range of hedging instruments are available. First the overall position of the desk is assessed - i.e. sometimes part of the position is already hedged by existing market operations. Otherwise long or short futures positions, direct long or short equity positions, positions in other derivatives markets - options on futures, options on equities, other exchange traded funds and options thereon - all could have a piece of the hedged position, depending on prices available.

Caveat : I haven't worked in the industry, have just been a long-time observer.


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paint
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Wednesday, September 15, 2010 - 02:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi P3t3 - many thanks for your response


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rdumas
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Wednesday, September 15, 2010 - 03:17 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

I sense that we are possibly nearing an interim top for the AUD at this point in time.

The daily chart is showing that it is nearing the upper boundary of a steeply ascending channel.





Couple the above daily chart with the weekly chart below and we can see that we are nearing a strong long term overhead resistance level. Both indicators appear to suggest that there should be a deceleration as of about now in the rate of climb.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Wednesday, September 15, 2010 - 03:26 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy,

Looks like our 4690-4702 target is well within the sights for this afternoon.


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rdumas
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Wednesday, September 15, 2010 - 03:38 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

Even closer if you use my lower figure of 4675.1 which is the one that I favour at the moment.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ken
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Wednesday, September 15, 2010 - 03:45 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Rudy and all,

The XJO equivalent on IG Markets has just done a little overthrow above a rising wedge. Could be ending now - The high was 4672.



The dates go lost - the chart covers back to 25 August, and the vertical line in the left half is the start of September. The ascending triangle we talked about in the SPX has morphed into a rising wedge, an ending pattern


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billt
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Wednesday, September 15, 2010 - 03:47 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



hi Rudy

If we sell a big sell off in the equity markets, I cannot see $AUD not falling off it's perch too...

It is great to see all these various indices reaching a 'decision' point together...fun stuff!

POG might be heading a lot higher than we think - perhaps a run up to its overhead trend line is a distinct possibility?

Perhaps wave V of SuperCycle III? - what ya' think Rudy considering a new POG high is in....Yanks printing greenbacks like is confetti!




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rdumas
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Wednesday, September 15, 2010 - 03:58 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

I wounldn't discount anything but will use the lower target for the POG for the time being.

Going back to the VIX, the technicals look interesting. We have formed a nice ending diagonal and we're at the LBB with the %R indicator starting to move up.






I still expect the SPX to shoot up first tonight but it may be all over by the time we wake up.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, September 15, 2010 - 04:00 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks for that Ken.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Wednesday, September 15, 2010 - 04:27 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Here is one you did earlier I think Rudy - I guess we can move the count on, as perhaps 'blue 1/2' has only now just completed? We could be in wave blue 3 of yellow wave 5, heading for red 3 @ usd$1500!




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rdumas
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Wednesday, September 15, 2010 - 04:34 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill,

Yep, that looks about right. I'll compromise with the final target for that last move up. Let's say somewhere between $1300 and $1500.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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billt
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Wednesday, September 15, 2010 - 04:40 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



If you drill down with the microscope - look at the price pop out the bottom!!




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paint
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Wednesday, September 15, 2010 - 06:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,

I'd like to put this out for discussion, I understand there are many other factors that suggest that the market is topping, but it appears that an ascending triangle (AT) has formed on the XJO.

Usually the AT is seen to be a continuation pattern in an uptrend because of it bullish characteristics, however StockCharts.com states: " There are instances when ascending triangles form as reversal patterns at the end of a downtrend, but they are typically continuation patterns. Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation."

The pattern seems to have formed to the letter, although volume throughout the pattern hasn't entirely. StockCharts.com states: " As the pattern develops, volume usually contracts. When the upside breakout occurs, there should be an expansion of volume to confirm the breakout. While volume confirmation is preferred, it is not always necessary." (The importance of volume in patterns is also questioned by others)

In relation to the price, it has broken out 2/3 through the pattern, as per definition. This breakout has taken the price through the 150/200SMA, of which the 150SMA no longer appears to be in decline.

It would be interesting to hear your thoughts?

Cheers




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sway
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Wednesday, September 15, 2010 - 09:02 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Brave paint,

Please be patient. It hasn't even been 3 hours since your post.

Perhaps Prechter, Roubini or Faber might have an answer?

Cheers
Sway

(Message edited by sway on September 15, 2010)

(Message edited by sway on September 15, 2010)


This is not a recommendation or advice. As they say .... DYOR.

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rdumas
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Wednesday, September 15, 2010 - 09:36 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Paint,

I normally shut off the computer at around 5pm each day but had to send out an email and noticed your post on ascending triangles. Rather than reinvent the subject, one site that discusses the various types of triangle (wedge) patterns is the following. He goes into quite a lot of detail on the various types of continuation and reversal patterns that are found in the market and how to qualify them.

http://www.trending123.com/patterns/


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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paint
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Wednesday, September 15, 2010 - 09:52 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Thanks Rudy - I'll check it out


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p3t3
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sway wrote on Wednesday, September 15, 2010 - 09:02 pm:

Brave paint....


Onya sway....and paint

human groups are much too susceptible to group-think, and contrary thinking is to be encouraged by all seekers of "truth" - whatever that might be.

Members of other threads are seeing the commentary in this one as way too one-sidedly bearish. They might be right, and certainly have been for the last ten days or so. I'm encouraged that contributors to this thread are taking their time to weigh the evidence provided by paint. I'd be much more worried by an instant defensive response - which would suggest too great a commitment of ego to a particular market view (fatal to clear-sightedness).

We are to see quadruple witching on Friday's close in the US - expiry of contracts for futures, options, options on futures and single stock futures. Mutual Funds, and some Hedge Funds, are notorious for "window-dressing" into quarter end. Might the price behaviour on Monday be significantly different from that seen in the last few days into derivatives quarter-end? Possibly.

Do patterns in general, and triangle patterns in particular, give false signals? Oh, yes.....sadly. Many patterns are not much better than 55:45, but they do provide a good place to put a stop when such a failure occurs - that is their power.

So, is paint's evidence suggesting a continuation of the rally into next week? Certainly looks that way for now, thought there will be more evidence to be considered in the next couple of days.

Will that move continue into, say, October expiry and on to the end of the quarter? Perhaps. Too soon to tell, for me.

Just my view
Pete


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sway
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Pete

Coincidentally just after I posted that (admittedly a bit cheeky) remark about Roubini etc I happened to catch the prof on Bloomberg TV http://www.bloomberg.com/tv/ . One recorded interview in Italy about a week ago and then live. He sounded fairly bored on both occasions, repeating the same views almost word for word. That was until the interviewer had a little jibe at him about how wrong he was back in March last year when he called for the S&P500 to go to 600 this year (it went to 1200 instead). He got a bit narky about that as you can imagine. In the end he kind of backed away from calling for a big fall now. Bloomberg's caption was something like "Roubini flags slow rise or sideways market" or words to that effect (don't quote me there).

Roubini followers should be able to find the clip on Bloomberg soon.

Cheers
Sway


This is not a recommendation or advice. As they say .... DYOR.

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paint
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I have read through the site Rudy provided (which seems to be a comprehensive site), and the main issues with the existing AT formation on the XJO are that the inbound trend is of short duration and the breakout hasn't been confirmed by decent volume.

P3t3 - it will be interesting to see, post witching and window dressing whether the 200SMA acts as a support level.

I guess a retreat below the top horizontal line will definitely weaken the strength of the pattern - false breakouts are common, and the pattern itself will start to become over-ripe. While an increase in positive volume would tick all boxes, suggesting a reversal.

Time will tell..... SPX futures down 33bps

Sway - I'm watching that clip now - interesting


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market_mad
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hi all,

One thing that has really grabbed me recently was that there was a huge buyer on our futures market around 4350 a few weeks back. It appears that this buyer has been holding our market up, buying into closes and generally pumping it up. We have expiry of the Sept futures contract tomorrow and it is based on the ASX200 open print. Therefore it is in the best interest of this buyer to push the index up as much as possible to get the maximum cash settlement for all of the buying he has done over the past few weeks - think about it, if the price at 10.10am tomorrow when the cash market is fully open is at a higher price than it has been over the past 3 weeks then this buyer will not lose out on ANY contracts he has bought (presuming he is cash settling and not rolling over into Dec contracts and going by the action it appears to be that he is).

Therefore, I am fully expecting that once this buyer is gone, we will see some serious selling back into our market. We are up about 9% over the past couple of weeks so a pullback of some sort is definitely on the cards.

But do keep an eye out for a big spike up in the morning to 10.10am then I expect we will peel back for most of the day.

Food for thought anyway

Cheers
MM


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p3t3
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Wednesday, September 15, 2010 - 11:48 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)




market_mad wrote on Wednesday, September 15, 2010 - 11:10 pm:

Food for thought...


Interesting, thanks MM. I'll certainly be watching.

We are yet to see how BoJ intervention in the currency market plays out over time. Previously the unwinding of the decade-long JP¥ carry trade was causing not only strength in the ¥en but also significant selling in the Banks and Big Miners - see MarketWatch Article :

Carry trade: borrow JP¥, sell to convert to, say, AU$. Buy risk assets, mostly Government Debt but also large cap equities. Result: weaker ¥en, stronger AU$, stronger equities.

Reversal: opposite of the above, but in a shorter time-frame, so momentum traders piggy-back the move.

BoJ intervention: momentum traders are frightened off, so renewal of features of the carry trade, except in US$ as the preferred currency in place of JP¥??

No shortage of variables to consider. Interesting times indeed.

Just my view
Pete


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billt
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billt
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Roubini said the US 'economy is barely growing' and the stock markets 'will go SIDEWAYS or DOWN'.....NOT a 'slow rise'!! He also reconfirmed his opinion of a 40% chance of a Double Dip....

Roubini spent 3 minutes providing a rapid fire list of US economic woes....a consistent performance from the good Doctor. He is only repeating what the economic printout has been since April 2010, and the forward projections.

The main thread of his concern to the Stock Market is that he feels that USA GDP will dip to 1% or under and he stated concern that this has not been priced in.

SPX has traded sideways between 1130 and 1010 for about 5 months. GDP is currently dropping and at an annualised rate of 1.6% in the last quarter. The market has known of that figure now for about a month. Any further drop in GDP below these levels will put downward pressure on the bottom of the trading range.


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billt
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Thursday, September 16, 2010 - 08:27 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



hi Rudy

Please excuse my last post - it had nothing to with EW, but I needed to correct an earlier post by others.

I try to post any non-EW commentary on ODB, and anything linked to EW and 'related' TA analysis here on EWW.

The clue is in the title! EWW...

It seems there is some commentary to the fact that there is 'too much bearishness' here on EWW. It seems to me that a lot are missing the point of this Thread which is to provide an analysis and commentary on Elliott Wave along with the assistance of your valued 'educational' help. The majority of EW practitioners are predicting an imminent collapse of the markets. It only follows that at the moment there is 'bearish' sentiment on the majority of Elliott Wave sites.

I appeal to those that have no interest on Elliott Wave to post on ODB.

I will continue to post on ODB non-EW items as and when they arrive.

Rudy, do you have any thoughts on how your Thread should work and what posts belong here or on ODB?

cheers

Bill


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paint
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Good morning all - interesting to note that on Fast Money CNBC this morning there is still concern that European credit spreads continue to widen...

Gavin Nolan of Markit detailed the move across Europe this afternoon:

“Sovereigns continued to underperform in a nervous market. The Markit SovX Western Europe index is now almost 50bp wider than the Markit iTraxx Europe, the widest difference on record. As usual, the SovX was driven by the peripherals, which were significantly wider across the board. Unusually, however, Greece’s spreads held up well compared to its peers. The country successfully sold EUR1.17 billion of six-month treasury bills with a bid-to-cover
ratio of 4.54, an improvement from the last auction in July. The yield was slightly higher but this was to be expected given the widening in spreads over the summer.”

You can view the figures at : http://www.benzinga.com/10/09/473161/credit-spreads-in-europe-continue-to-widen


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paint
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Thursday, September 16, 2010 - 08:47 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Bill - you are right - I will post non-EW content on ODB going forward.

Thanks for all your analysis and commentary - I am enjoying learning bit by bit.

Cheers
Paint


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rdumas
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Hi Paint,

What is very clear to most analysts is that there are 'lines in the sand' drawn for the SPX sitting around the 1130 and 1040 levels. Most bears would have their stop loss settings above the 1130 level which is why any break out would naturally lead to a 'breakout pop' in price and the logical level as suggested in Corey Rosenbloom's site (http://blog.afraidtotrade.com/) would more than likely lead to a trip to the 1170 level.

As you will have noticed, the current level is causing a lot of concerns for both bulls and bears and this battle will act like a spring to propel any breakout into a large range move.

If there is a large range move to the upside bulls would have to be very careful that it was not just a breakout pop that took out the bears' stop losses before plummeting down into a large decline.

Technical analysis is not about 100% guarantees about future direction of the market. It is a game of probabilities and the more that we open ourselves to as many views as possible, the better our chances are of succeeding in share market investment.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Hi all,

Latest from EWI

More signs are emerging of a market that is at or near the end of a rally. The current push started in late August, early September and has been relentless. The S&P is up 9 out of the past 11 days. Today's internals (breadth and volume) were muted and are consistent with a rising trend that is tiring. The next phase of selling pressure is near.

The May 3 Short Term Update showed this chart, which is our version of one that was published by our newsletter colleague Alan Newman of Crosscurrents. Back in early May, the 5-week average of the NASDAQ/NYSE volume ratio had just soared to a new 10-year extreme, surpassing that which occurred following the tech-bubble's burst in 2000-2001. We said in the Update that night that this push was a manifestation of intense speculation by market participants and was "a great setup for a significant downside reversal." As it turns out, the market had put in its top five days earlier on April 26. What's striking about this updated picture is that the speculative intensity reflected in this indicator is almost as strong now as it was in late April, early May, yet prices are still 9% below the April high at 2535. This is classic "second wave" psychology (see EWP, chapter 2).

As with all technical indicators, context is key. In June 2009, the ratio surged to comparable levels yet stocks continued to rise. But that extreme occurred after the index had fallen 56% over the previous 17 months, investors were relieved that the world was not ending and Primary wave 2 (circle) had yet to even retrace a minimal 38.2% of Primary wave 1 (circle). We were expecting the stock market to continue higher back then, with a stated upside target of 10,000 for the DJIA (see March 23, 2009 Update). Now, the indicator is reaching a second extreme over a 4˝-month time span, with stocks lower over this period. It's a good snapshot of the extent to which optimism still holds sway over traders' outlook for the market.

But that's not all. Peter Eliades' Open 10 Trin (the ratio of 10-day advances divided by 10-day declines to 10-day up volume divided by 10-day down volume) has literally dropped off a shelf. In just 13 days, Open 10 Trin has fallen from a relatively oversold 1.353 (Aug. 26 close) to an extreme overbought .744 (today). During Primary wave 2 (circle) from March 2009 to April 2010, there was one slightly more overbought reading, which occurred on August 13, 2009 at .721. But that materialized only after a 1300 point DJIA rally over the previous month. The current overbought is occurring after a 500 point advance since the start of this month. The only greater overbought extreme during Primary wave 1 (circle) from October 2007 to March 2009 (i.e., the previous Primary-degree decline), occurred on September 24, 2008 (.666), which was just prior to wave 3 of (3) down.

There's more. The Daily Sentiment Index (trade-futures.com) of S&P traders pushed to 83% bulls, the highest percentage since April 26, the day of the market's top. The final extreme reading during Primary 2 (circle) came on April 14, when the DSI hit 92% bulls (matching the Sept. 16 level). The current level of optimism is now in the area that has accompanied previous highs, making the rise from late August, early September vulnerable to a reversal.

Finally, today was the sixth trading day since the near-term VIX "sell" signal that occurred at the close on September 7, when we started the "countdown to a high." At the start of this year, the market made a near-term high four days after the January 12 signal, while stocks topped nine days after the April 13 signal in late April. So the market is in a similar time window to the previous two near-term signals. Moreover, today's VIX close of 22.10 is the highest since last Thursday, with the DJIA 158 points higher (close). So the VIX may be providing a clue that the "risk on" trade of the previous two weeks is reversing to a "risk off" trade of falling prices.

Yes, stocks have held up and carried higher than we originally anticipated when this rally started in late August. And there are indeed times when overbought extremes remain overbought, as prices continue higher. The current extremes are occurring however, in conjunction with a high level of optimism (DSI) and a VIX "sell" signal, which, when taken together, suggest a trend that is nearing a downward reversal. Keep in mind Bob Prechter's discussion of the psychological underpinnings of second waves in the May issue of The Elliott Wave Theorist. "Hope" should hold sway until "the last second wave is over and the last cycle has topped, just before the center of the declining structure." In my opinion, the market's push has the earmarks of a second wave rally, a countertrend move that will be completely retraced. A closed under 1109.55 in the S&P, the open gap from last Friday, would be a strong sign that a decline lasting more than just a few days has started. If this occurs, confirmation of a more protracted selling phase will come when the market traces out "five down," a change that will indicate that the one-larger degree trend is lower.

In terms of Elliott waves, the structure is not as clear as we would like. Both the Dow and the S&P made new closing highs today, but not new intraday highs, which remain during Monday's session — 10,588.30 in the DJIA and 1127.36 in the S&P. The DJIA has slightly exceeded its down-sloping trendline and remains points above the 78.6% retracement. The Dow's gap at 10,644 (Aug. 10) remains open and if wave 2 has indeed ended, it would be ideal for this gap to remain unfilled. A rise by both the DJIA and S&P above their respective August 9 highs — 10,719.90 and 1129.24 — would introduce varying options for the wave structure, which we would have to assess based on the strength and structure of any such break.


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billt
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Thursday, September 16, 2010 - 09:39 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



thanks MM for the EWI notes. These EWI guys are getting very, very keen for a dip. Check out this guys EW analysis:




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billt
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Thursday, September 16, 2010 - 09:53 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



hey Paint

I'm learning bit by bit too!

Bill


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rdumas
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Hi Bill,

I agree with your point. Regarding Pete's comment below:

Onya sway....and paint

"human groups are much too susceptible to group-think, and contrary thinking is to be encouraged by all seekers of "truth" - whatever that might be."


I had no problem with Paint's post but as usual Sway couldn't help himself but showing everyone more about his own personality rather than anything useful technically. I would prefer that Pete didn't encourage that childish behavior. Anyone following this thread would know that genuine posters are not ignored but are treated with respect. The fact that the great bulk of us turn our computers off at a particular time of the day would be understood by reasonable people.

As you say Bill, this thread is specifically oriented to increasing readers knowledge about EW analysis. I have no problems with other technical analysis views being expressed to assist in better determining the correct EW count in a stock or index. I have huge problems with childish comments that are meant to inflame rather than to assist people in gaining knowledge. Sway has TA abilities but he doesn't use this thread to demonstrate them and hence his type of posts are unwelcome. If he ever has a technical view that helps develop a more accurate EW count then they are more than welcome.

Pete,

I have to comment on your views about the bearishness of this thread.

Prior to the market top in November 2007, I was accused of being a bull. When Ody and I pulled out of the market in December 2007 because we felt that there was a large decline in the market coming I know there were quite a few others who followed us out and have continued to thank me for the warnings because it saved at least one reader hundreds of thousands of dollars.

So at that time we were bearish. I should add that at the time Sway was undertaking some really indepth Weinstein analysis which went for some period of time in which he attempted to convince readers that there was no real bad decline coming. So even the great Sway gets things wrong sometimes.

Anyway, in the latter stages of the decline I started pushing my view on the ODB thread that the end of the decline was nearing and that it would be followed by a multi-month rally. This was stated during the very worst part of the decline and of course there were many readers who thought i was nuts but that is what my EW analysis told me would happen. I think that you would admit that a rally that lasted from March 2009 to April 2010 could be considered to be a multi-month rally. So you would have said that at that time I was a bull. So my point here is that I am neither a bull or a bear. I am what I believe the market is telling me at the time. Once this (what I believe is a) corrective move is completed in October, I will become a bull once again.

Every technical analyst uses pattern recognition as the main part of their analysis methodology. Whether that is the use of Head and Shoulders, Cup and Handle, Bear Flag, Pennants patterns, channels, trendlines, Fibonacci levels, etc it is pattern recognition that is the overwhelming methodology in our analysis. Do all these patterns work 100% of the time, of course they don't. But does that mean that we shouldn't use them, of course it doesn't mean that.

Success at investing in the share market is a game of probabilities. This is a fact of life and the more methodologies that we have available to 'cross check' each other then the more accurate our analysis will be which in turn will lead to better investment decisions.

Elliott Wave analysis is the largest and most comprehensive pattern recognition methodologies that I am aware of. If someone knows of a more comprehensive methodology then please tell me about it. Elliott Wave patterns operate at every level and in any time frame of share market price action. Is it simple to use......the answer is no and this is because within corrective patterns there are impulsive patterns and within impulsive patterns there are corrective patterns. That is why level confusion is the biggest problems facing an EW analyst.

Many patterns have similar sub pattern formations early in the larger pattern and that is why the whole basis of the EW methodology is that you must have a number of scenarios on the table that meet the requirements of these earlier patterns. As the price action unfolds, it eliminates invalidated patterns. For EW critics to criticise EW analysts when they 'change their count' shows a complete lack of understanding of the methodology. When an EW count is invalidated, the next most likely scenario comes into play. That is the process.

There is no question that we will always have a preferred pattern which will be based on the personal views of the analyst. Some EW analysts make the mistake of becoming married to that pattern. Prechter has fallen in that hole on many occasions and it has been that practice that has given EW analysis a bad name amongst people who haven't got a clue about the methodology.

At present I have consistently stuck to my preferred EW count for the XJO which is the Triangle pattern for a Minor wave B. For reasons that I have posted previously I don't accept Prechter's count of a Minor wave 2 which would imply a much more bearish outcome. At this stage neither view has been invalidated so either could be correct.

There is a bullish EW count for the SPX provided by Anthony Caldaro which believes that we commenced the next bull market in March 2009. I believe that count was invalidated very early in the piece because his sub wave 1 of the 5 wave move that took place between March 2009 and April 2010 was not impulsive. It is for that reason that I don't believe that his count is correct however there is always the possibility that he may be correct. I was particularly delighted when my friend Randall articulated an excellent post on his thread in which he argued the bullish case for the market. He is an excellent technical analyst and successful trader and it is because of this that I greatly value his input. If people would stick to technical discussions instead of childish sarcastic comments the IC forum would be a much better place.

So back to your comment that appeared to criticise that this thread is too bearish. The reason that it is bearish at this point in time is because the great bulk of EW pattern scenarios point to that view. This is not to say that this higher probability scenario (from an EW perspective) is correct but only the future price action will clarify that.

I have absolutely no problems with people providing bullish EW scenarios, in fact I welcome it. You should know that I attempt to provide opposing views in my Weekend Market Wraps. I have already witnessed the downside of doing this when Dolphin thought that I was doubting my own views.

I know this post has been rather convoluted but it was so because I was attempting to cover a number of topics. So let me summarise.

1) This thread is dedicated to increasing readers knowledge of Elliott Wave Analysis and therefore I don't want the non EW stuff to swamp the EW stuff. By all means, provide non EW TA stuff (whether TA or FA based) if it enhances our ability to get a more accurate EW count.

2) People who have no interest in EW analysis or in fact have aggressively anti EW should start their own thread instead of attempting to disrupt the thread with sarcasm and vindictive comments. They are simply not welcome here.

3) I encourage EW counts that represent both bullish and bearish views at all times.







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Well said Rudy!

Cheers
MM

 
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Elliott Wave Watching » Archive through September 20, 2010rdumas50 20-Sep-10  03:40 pm
Elliott Wave Watching » Archive through September 17, 2010rash50 17-Sep-10  09:55 am
Elliott Wave Watching » Archive through September 14, 2010market_mad50 14-Sep-10  10:20 pm

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