BullBear Trading: Stock and Financial Market Technical Analysis

Keeping You on the Right Side of the Market

I just sent out the following message to members:

 

A message from Steven Vincent to all members of BullBear Traders on BullBear Trading :: Keeping You on the Right Side of the Markets!

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01/05/11 BullBear Update:


Last night I told you that I was not buying (or selling) the "imminent correction" hypothesis and that we should not sell out our long positions because we are in Wave 3 and that it will be difficult to get back into position. Indeed, it seemed that world markets had begun a round of heavy selling. But here we are with US indices pushing towards new highs.

The Euro has traded to support and may be a good speculative buy here. I would be very careful with it however since we may be seeing a long dollar, long equities trade emerging. Maybe.

DollarYen has broken out with a massive rally. The reemergence of the Yen carry trade is the last component of the full-on bull market in risk assets. Once that is firmly in place (and it appears that is close at hand), then the Wave 3 juggernaut will advance with little pause.

Gold may be at the tipping point. The key psychological point here is that most market participants have been viewing gold in terms of an inflation hedge or anti-dollar. The reality is probably that since the 2009 low it has been trading primarily as a fear/safety play. Since we are getting ever closer to "safety off, risk on", gold, as a safe haven asset, will suffer along with bonds.

Well those are my current views. As you know I always remain open minded and ready to change when the market tells me to. But this is what the market seems to be telling me right now. As most traders and "analysts" see what they want to see in the markets, like dreamers seeing shapes of animals in the clouds, I try to see things as they really are. Most are seeing "big correction" or even "bear market" because that's what they WANT to see. That's why I have been heavily discounting all the talk of a sentiment top. When you scratch the surface most market participants, even those who say they are bullish, are really bearish.

Well, more to follow soon....

 

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SPX appears to be starting iii of (iii) of 3 of (3).  This powerful wave should unfold over a period of weeks with little interruption.

 

 


Here's my 12/27/10 BullBear Update to members of the BullBear Trading room at TheBullBear.com.

 

At this time there is no reason at all to exit any long positions held from lower levels.  The possibility of a short term pullback to support exists but if it occurs it should be very brief and shallow.  It would be a buying opportunity, not the beginning of a bigger selloff.

Here's my preferred count of SPX at this time:

The market is potentially at or near the top of the first wave of iii of 3 of (3).  It has achieved the reverse head and shoulders target at 1148 and a minor pullback, perhaps to the 1128 former high, seems likely.  After all there is, as we are constantly reminded by the permabears, a lot of bullishness out there, and some of that could be worked off in a brief pullback.  Many markets have recently broken out to new highs but it would be somewhat normal to see these initial breakouts fail with a pullback to retest and consolidate before the next major move.  My current analysis is that when and if this should occur it will be the best buying opportunity that we will see for some time as Wave 3 plays out in all major markets.

Here's the SPX futures chart which shows my current short term view and the possibility of a pullback:

Yes, the bearish long term count is still in play.  Yes, we could be near the tail end of a C wave off the 2009 bottom.  But having taken out the 61.8% Fib retracement of the decline from 2007 is a signal that that is less probable.  We have had scares over European debt and US Municipal debt and the markets have refused to pull back.  Last night China raised interest rates and the financial media announced that markets would sell off sharply and they did not.  Everyone "knows" that there are just too many bulls and yet no selloff.  This "tape action" is bullish and typical of Wave 3 as new money coming into the market is buying any and all dips and the shorts are forced to cover over and over again.

Here are some more signals that make a resumption of the bear market in asset prices less likely:

Nasdaq 100 is mere points away from surpassing its 2007 high.  It is showing clear signs of being in a Major Wave 3 of 3.  Fibonacci projections target 3200 and then the former all time highs.  Tech stocks back to bubble peak again?  The chart says it can happen.

 

Financials have broken out for a second time from a reverse head and shoulders formation and have made substantial new highs.  If the world financial system were really teetering on the brink of insolvency I doubt we would be seeing such bullish action here.

 

Crude Oil has taken out the former resistance at $87.25 and made several fresh highs after a triple bull EMA cross.  A pullback to test the breakout would be normal at this point and would make a great buy point.

 

Corn has broken out to new highs.  A slight pullback into the former range would be normal here.  The chart of corn is fairly representative of the general Ag sector. It is showing a clear Wave 3 in progress and the rally after the next pullback would start a iii of 3.

 

Australian Dollar has broken out and then retested the breakout and is consolidating for the next move.  There will most likely be a C wave back to the black trendline again to complete the correction.  When it bottoms it may be a signal that the next wave in asset prices is ready to commence.

 

The Value Line Arithmetic Index shows broad participation in the market and it is making new all time highs.

 

The Wilshire 5000 Total Market Index to Dow Jones Industrials 30 Index ratio has broken through several lines of resistance to new highs and is not far from the 2007 highs.  This shows broad strength in the markets.

 

Russell 2000 Small Caps Index to Dow Industrials ratio chart is also very strong and making new highs continually.

 

SPX to 30 Year Treasury ratio is showing a historic, major, very strong breakout that has gone virtually unrecognized.  Capital is flowing from safety to risk.

 

Equity option players are buying puts into the rising market, which is generally bullish from a contrarian perspective.  So much for excessive bullish sentiment.

 

I could go on and on and on with more charts that show strength, resilience and the emergence of Wave 3 structures.  Is anyone else showing you such evidence of a viable bull market?  Probably not.  If so few are willing to look at the mountain of bullish factors, then how bullish is sentiment really?  Not very.  The fact is that the predominant sentiment is still heavily bearish with the public entirely on the sidelines waiting for the next "big collapse".  That's the Wall of Worry that the bull market is climbing.

Remember, I am not a bull and I am not bullish.  The market is a bull and the market is bullish.  I am just telling you what the market is telling me.  If it was telling me that a decline to Dow 1000 was around the corner I would be happy to make money on the downside.  Could I be hearing the market incorrectly?  Sure!  But I will be watching for signs of that and ready to change if the market tells me to.  Maybe we could start with at least some kind of a selloff before pushing the panic button.

Those who panic and try to pick tops based on soft, spongy, interpretive data like "sentiment" are actively looking for an excuse to get bearish because they have an innate bias towards the short side and deeply desire to see a disaster unfold.  Emotional and mental attachment towards an ingrained, biased view of any kind is absolute DEATH in trading.  When that mental and emotional dam is finally broken, Wave 3 will flood the market and shock all participants.  If you have a position, hold it.  YOU WILL NOT BE ABLE TO TRADE IN AND OUT SUCCESSFULLY DURING WAVE 3.  The best we can do is add to our position when and if the market is kind enough to give us a pullback.  Hopefully there will be such an opportunity soon.  But it may not happen!

Earnings season starts on January 10th.

 

Merry Christmas, Happy Holidays and Happy New Year!  Let's have a PROFITABLE 2011!



 

 

01/02/11 UPDATE:

 

Looking at the charts, tape action, intermarket action and trader sentiment, I am leaning away from the expectation for any kind of correction at this time.  We are already in Wave 3 and we are probably going to start iii of 3 of (3) here (or may already be in it).  Here's a view of the SPX futures:

 

Most traders are sure that there will be a correction here.  My research is telling me that sentiment is not excessively bullish and that much of the technical divergences being noted by most analysts are not being interpreted correctly and the data is largely faulty.  Things remain quite bullish.  A trader needs to stake out a claim in the market and then hold on for the ride during Wave 3.  Trying to trade in and out will not work.



 

01/03/11 UPDATE:

 

Powerful market move across the board to initiate wave iii of (iii) of 3 of (3).

The minor corrective wave was an ultra bullish running flat sideways over the last days of December.

 

Fibonacci projections for completion of Wave 3 of (3) takes the Dow about 1000 points higher.

There should be a correction by the third week of January, probably some sell the news profit taking after the second week of earnings season.  That would correspond with wave iv of the current move.



A message from Steven Vincent to all members of BullBear Traders on BullBear Trading :: Keeping You on the Right Side of the Markets!

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01/04/11 BullBear Update:

We're seeing some "organic' (not news driven) weakness today in stocks and commodities are getting hit quite hard.

The damage in stocks is quite dispersed; the Dow is almost flat but Small Caps are down 2%, the Nasdaq is down .8% but Nasdaq 100 is down just .3%.

You can bet that permabears are jumping to the conclusion that this begins a big correction (or new bear market). Yes a deeper correction could be starting. But I wouldn't bail on your long positions just yet. I'd like to see some technical targets taken out before I get bearish here.

I also see very real potential for EuroDollar to make a big bullish breakout move above major resistance soon. That's what I am seeing on the chart and in the tape action. If Euro does bust a move it will likely get bulls buying again.

The precious metals bull market could be in trouble here. There was a potential breakout into a wave 5 extension set up but it failed big time.

DollarYen may be at a good buy point, with EuroYen and AussieYen potential candidates.

I'll be looking at these markets hard after the bell and will post some updates tonight. Hang in there. We will stay on the right side of the markets!


A message from Steven Vincent to all members of BullBear Traders on BullBear Trading :: Keeping You on the Right Side of the Markets!

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01/04/11 BullBear PM Update:

Just a quick note to BullBear Traders regarding the current situation of the markets. I have been doing quite a lot of research and although the tape action the last two days has been rather soft, I still am not convinced that we are on the cusp of a significant correction. At this time I would say this weakness represents a buying opportunity (although a minor one, not one to load up the truck).

There seems to be a nearly unanimous consensus that of course there will be a correction now. It's possible those who believe that are seeing what they want to see. As I look at the technicals I don't see any compelling reason to exit my long positions...yet. I still hold to the thesis that we are in Wave 3 and if we exit our positions we will have a really hard time putting them back on again. That's how Wave 3 acts as traders compete for shares and bid the market up.

The Euro seems ready for a BIG move and I think that move will be UP. That's definitely not something we can bank on however. The setup lends itself to a downward break as well. If it does break higher I think most risk assets, particularly stocks, will follow along in another big Wave 3 push. A downward break could usher in a deeper correction. I will say that asset prices have been trading rather independently of the forex market over the last couple of months. That usually happens when the intermarket relationships between assets and currencies is about to undergo a big shift. In other words, we may see a strong stock market together with a strong US dollar.

Gold could be on the cusp of a dramatic selloff. There is a strong technical argument for a big retracement of the entire bull market since 2000 or at least the last wave since 2009. I would be very careful with gold and silver long positions!

I'll try to post a more detailed analysis as things clear up a bit. But at this time I would still encourage you to HOLD your long positions. If that changes I will send out another email update.






 

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