Weekend Update #2

DOLLAR INDEX The dollar took a few days to retrace some of its gains, but finished strong on Friday with an bullish engulfment candle.

As stated last week, it appears that this witch has put in an important bottom. The ultimate objective will be to take out the 11/19/08 H of 91.212.

It's not going to happen overnight folks. It will take time and there is a lot of overhead resistance that she will need to overcome.

Notice how price broke the channel and came back and backtested it.

Here is what the intraday looks like. It appears that minute [i] and [ii] have completed. If that is indeed the case, then [iii] should be in full force next week.

The first objective would be the high of [i] at 79.515. [iii] = [i] at 80.30 and the 161.8% projection of [i] is at 81.533. The 78.305 L should not be breached.

The worst case scenario is that this is a zigzag corrective and we only get 5 more waves up. Remember, 5 waves can not be a full corrective.

If my interpretation of structure is correct, short bets against the dollar or long bets via crosses, may prove painful.

GOLD The yellow metal appears to be close, if not already, to completing a minuette (ii) leg.

If this is the case, gold has set itself up in a [i] [ii] , (i) (ii) situation. This is where you make your money - the sweet spot of a (iii) of [iii].

Price action needs to confirm by definitively breaking the channel (notice how it has supported it) and the 942.10 L. The next objective would be to take the 930 L.

(iii) = (i) at 930.90, while [iii] = [i] at 887. (A)(B) = (C)(D) way down there at 641.30. I don't know that price gets that far, but I also don't know that it doesn't.

I will be looking to short this market via puts early next week with a channel break. Where do I know that I'm wrong? If price takes the wave [ii] high at 974.30. My stop will be a breach of that level.

I have mentioned this previously, and I'll mention again - it sure has the look and feel of a triangle. Not to mention, an inverse H/S on a bigger picture. Lets see what price action brings next week.

Please do your own due diligence before placing any wagers.

30 YR BONDS The bond complex had a nice week to the upside.

When drilling down to a smaller time frame, it is clear to me that there is a 5 wave structure down off the 121'11.5 H. It's also clear that we had a 3 up from the 114'30 L. And equally clear we had 3 down from the 119'8.5 H.

What does this mean? An expanded flat for minor 2. Expanded, because [b] went beyond the the price extreme of [a].

Based on the subwaves, it looks like price should move a little higher early next week to complete the minute [c] leg, however, it should not exceed the 121'11.5 H. At that point, price action should resume to the downside.

I talked about the possibility of a triangle tracing last week. This is still on the table.

Weekend Update #1

SOYBEANS The bean market sold off hard on Thursday and Friday. I'm still not convinced that my original count is wrong. Check out the new near month, which is November.

The price action off the 1113.25 H looks very impulsive to me. This implies that minor 5 finished, therefore, arguing that the top is in.

Notice that the mid-line on the channel could not hold as support. This further supports that minor 5 finished (or that this was nothing more than a primary [2]nd and the continuous contract screwed us!).

Let's see what price action brings early next week before we make that decision. The problem I have is that the intra-day squiggles are very unclear on the leg that would complete 5.

If this is still minor 4, then price needs to find support soon. The 50% retracement of 3 is around 1005, while the 61.8% is at 981.50. I really don't want price to break the 50%, however, the line in the sand is 940.50, which is the high of 1.

If I had been long this market, I would have closed that position out Friday. I think the risks are inherently one sided here. As always, I could be dead wrong in my perception of price action.

WHEAT As expected, the wheat market continued selling off this past week.

Per our discussion last week, wheat should see 5 intermediate waves down to complete an important bottom. It appears that (1) of (5) has completed.

If you drill down intra-day, it looks like (2) may be tracing out an expanded flat. If this is correct, then we should see upward pressure early next week to finish this little corrective.

The 38.2% retracement comes in at 507.25, while the 50% retracement is at 517.

At the conclusion of this counter-trend rally, I fully expect price to continue the downtrend. My first minimum downside target remains at 437.50, which is the .618 projection of [1] - [3].

CORN The corn market continued its downtrend this week after taking a couple days to trace out an intermediate (2) wave.

If correct in my assessment, then the corn market should see some acceleration to the downside soon as it enters its (3)rd.

Price needs to take out 317.25, which should lock in (2)'s high for now. The next level of importance would be the 304 L, which is the bottom of primary [3].

[5] = [1] - [3] at 211.25. [5] = .618 of [1] - [3] at about 270, which is the minimum we should expect.

Like wheat, corn is getting closer, day by day, to a very important bottom.

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The New Bull Market Fallacy

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ES

As expected, ES finished higher today. Range was 17.25 points and volume was about average, but less than yesterday.

It looks like we finished b down, in what would be an expanded flat. It appears that we have completed [1] and [2] of c up. I'm thinking that I will need to ratchet up my degree's by one.

c = a at 1023.75. The 161.8% projection of a comes in at 1039.50. The 1.382 extension of (a) sits at 1027.50. This is a common level that an expanded flat, which is what I believe is tracing, gets to. It can certainly exceed that level or fall short.

Should also be noted that a potential Bearish Butterfly could come into play at the 1020 level.

I might add, that the current 2 bar 15 minute deadly is at 1016.25, while the whole swing from the 998 L gives 1030.

These are just levels and numbers to keep in mind as we watch structure unfold.

If I'm incorrect in my assessment, there are several other options:

1.) minor A has not completed
2.) minor B has already completed
3.) we never take out the 1016 H and trace either a regular flat or triangle
4.) 13 others that I wont list

I wasn't overly impressed with the commitment of the bigs today.

Edit: As of this writing, it appears that we may have completed another 5 little waves up. Interesting that price was stopped (AGAIN!) at the median line.

Crude

Crude had a beautiful day going for awhile - before giving most of it up. Range was $2.16 and volume finished slightly less than yesterday.

This is a 4 hour chart. I needed to show a bigger chart to be able to get this whole mess of a (iv) on it.

If we use the 68.71 L as the end of minuette (iv), then we can actually get 5 waves up. This is not without issues folks. As talked about in last nights update, we do have minor overlap.

I have today's high of 72.21 labeled as sub-minuette i. This high could however, finish off minute [c]. I don't think so - but it is possible.

I will assume that ii has completed, this makes iii = i at 73.54. The 61.8% projection of i - iii is at 74.59.

Notice that RSI is sporting a nice positive divergence from the 72.84 H. This is another reason that I feel there is additional upside left in the structure.

Insiders unloading

Insiders have sold almost 2.2 Billion worth of shares over the past 2 weeks. You can read about it here. Wonder why?

Crude

Crude finished the day higher on contracting volume. Range was $2.29.

It appears that we have impulsive price action. The only wrinkle is that there is slight overlap on the initial move off of the 68.84 L, however, not on a close basis.

I will assume that minuette (iv) has finally finished until proven otherwise.

There are a couple of ways to count this initial impulse. I show sub-minuette i ending at the 71.13 H. It is quite possible that it actually completed at the 70.88 H with a truncated 5th, as shown as my alternate.

iii = i at 72.06. iii = 1.618 of i at 73.48. If correct in my assessment of structure, we should see price start to accelerate to the upside as it hits its wave iii.

Crude is setting up to finish its minor C leg. This should time fairly well with the dollar completing its 2nd wave.

ES

ES was basically up the entire session, until the eod sell-off. Range was a nice 25.50 handles and volume was strong.

We gained even more clarity of structure with today's price action (sorta). It appears that we had a double zigzag down to complete minuette (a). This finished at the 985.75 L (give that man a "BINGO!"), which was talked about in last nights update.

We clearly had a 5 wave move off that low that finished at the 1011.25 H. I have labeled this as sub-minuette a. If my interpretation is correct, we should have a little correction and then another 5 waves up.

This would complete c and thus, minuette (b). Remember, a corrective always completes in 3 waves, either a 5-3-5 or a 3-3-5.

Based on the structure off the 1016 H, we can deduce that this minor B will take the form of a flat or triangle. I have previously mentioned in the last few weeks that an expanded flat made a lot sense to me. It would trap the dippers and nail stops of a lot of shorts.

Unfortunately, there is the possibility that A is STILL tracing. I'll be glad when I no longer have to say that.

There were a couple of nice setups today. The first being the initial move to the 1007.75 H. Notice the magenta dotted line running across those tops. This was also the completion of the [3] wave (not shown). I had additional numbers there as well.

Secondly, look where the [5]th had help deciding where it would finish. Right at the median line. In addition to a couple of numbers, this was also the 15m deadly and the 60m projection. Stone wall folks. Naturally there was divergence, like all 5ths.

Very interesting look at the bigs and smalls breakdown. The smallies made their net highs at 1004.50. From there, they basically sold the remainder of the day.

In contrast, the bigs didn't start to puke 'em up until the 1011.25 H.

Bottom line folks, I expect some correction of this a leg, which could already be complete, then a resumption of the upside until we have another 5 waves. At that point, we should begin to have downward pressure. This assumes that we are in minor B.

Crude

Crude finished the day down over $1 with expanding volume. Range was $2.54.

When I said I thought there would be range expansion today, I sure didn't expect it to the downside. Yet, action was not impulsive.

Crude basically supported at its 20 day ema. It has its 50 day sma at 68.45, should price fall further. Also, the 50% retracement of (iii) sits at 68.58.

I would start to get concerned if price action took out the 50% retrace level by much. The top of wave (i) is at 67.79 - the line in the sand.

Is it possible that we somehow completed a (v)th up there? I suppose it is, but I sure can't find it.

The current 15m deadly is 70.36. That remains valid until 68.71 is printed again. The 60m is at 71.98.

ES

ES finished down with a bearish candle combination for the last two days. Range was 20.75, which is misleading, as half took place during globex. Volume expanded from yesterday.

We gained a little bit of clarity with today's price action, although, far from anything definitive. It appears that minor B is in full swing. I think that a close under the 989.75 L would be a deal closer. Notice that level acted as support today.

I have the count labeled as a zigzag. I believe that it counts best this way. We clearly had two sets of small 5's down to the 1000.50 L, then notice that we had price overlap (on a close basis) with the retrace.

I may need to ratchet up the degree's one notch. The key will be if price prints 998.50 on this retrace. If it does, it confirms the zigzag. If not, then its possible that we have a 1-2, 1-2 situation and we are entering wave 3 of 3.


b retraced 70.7% of a, which leads me to assume that we will see the 141.4% projection of a at 985.75. The 60m projection comes in at 984, while the 15m terminal projection sits at 980.

Watch for the potential of a Bullish Butterfly that could setup in the 983 area.

I do have to admit that I like my previous count of an expanded flat. It's hard to tell at this point what the precise structure is. The bottom line is that we should see continued weakness.

Look how the 100 lotter's unloaded on the retrace. Somebody was going to get crushed here...it wasn't going to be the gold line :)

This is the perfect example of why I pay attention to this indicator.

This coincided well with the 15m deadly at 996.50.

Crude

Crude had a very narrow range day - just a $1.48 range. It put in a doji on the daily.

5 1/2 days and counting in this consolidation. The never ending (iv) wave. It has to make a move sooner or later.

We did get a little 5 wave advance off the 70.09 L. Maybe that's the start of something bigger.

Based on structure, I have no reason not to believe the break will be higher. Stay patient - the magic 8-ball says we should have range expansion tomorrow.

ES

ES finished the day positive, thanks to an eod push. Range was awful at 9.5 handles. Even worse was volume, completing the second lowest volume day of the year (1/2/09).

I have no clue where the count is. This [v] wave has been absolutely maddening to figure out. EWI says they "think" [v] ended at Friday's top, so we will go with that (they are as clueless as the rest of us).

It does appear that we completed a nice zigzag off of the 1016 H. Perhaps we get a double zigzag down to start off minor B.

It wasn't a surprise that price rejected, however temporary, at 1007.75. It appears that the leg off the 998.25 L can count as a 5. This suggests that the retrace will be a zigzag, more than likely of sub-minuette degree.

There is also the chance that this stoopid [v] wave has yet to complete.

I continue to believe that we are in a topping process. Everything from structure, momentum, breath and everything in between says we are due a retrace from the big advance off the 865.25 L. It's coming whether you want it to or not.

The big's were really non-committal until the last 4 minutes of trade.

One thing is for sure, we are short-term overbought.










A lot has been mentioned lately about how the Federal Reserve is funneling money through the big banks to prop up the equity markets. They accomplish this through their Open Market Operations, both Permanent (POMO) and Temporary (TOMO).

When they purchase Treasury securities from these selected dealers, which range from $1.5B - $7.5B, the capital infusion allows them to leverage the money and basically ramp the markets.

It makes all the sense in the world to me. Whether you believe that or not, there is a high correlation to positive closing days and the Fed's OMO's. Here is a schedule of upcoming auctions.

Weekend Update ES

ES The ES continues its topping process. Did we have an ending diagonal? Maybe...maybe not.

I'm just not sure. This whole structure off the 7/29 lows has been BS. Nothing but choppy overlapping waves that is extremely tough to discern (but easy to trade). In a word - corrective.

For the time being, I will assume that the orthodox high is 1006.50, which was an ending diagonal and minor A has completed. I have a count on the chart, but it is speculation at this point.

I will keep scalping like a demon and continue to take their money. The count will resolve itself soon enough.

Speaking of taking their money, please tell me that Kool and I were not the only ones selling this pig at 1015. I had 17,638.832 numbers in that area AND the boundary line AND a completed structure AND divergence (denoted by red circle). Free money folks.

SPX Here is my big picture view. As I stated last week, EWI has changed their count to reflect a double zigzag.

This is probably a better interpretation, but not without unanswered questions. As I also stated, there is really no difference because you end up in the same place at the same time.

The next good timing (KoolsTools), on a daily basis, is a cycle peak that comes in 15 trading days on Friday the 28th. This comes from the 5/15 and 7/8 lows.

Folks, you don't need to know where the next 50 points are going. Find out where the next 4-6 are headed and you can live like a king.

Weekend Update #2

CRUDE The crude market spent the majority of the week consolidating.

Nothing has changed in structure to alter my current interpretation. My view remains that crude is tracing out a minute [c] leg to finish off minor B.

I'm still assuming that price reaches the daily projection (KoolsTools) around 75. This should be a significant resistance area, as the 127.2% projection of [a] and the June highs are right there as well.

Here is how the subwaves are looking. It appeared that we were going to finally move on out of this minuette (iv) wave on Friday. Unfortunately, Jim Kane threw his 88.6% in the way.

There is the possibility that (v) could be an ending diagonal, as shown by my alternate count. Remember, ED's are a 3-3-3-3-3 structure. It appears that we completed what could be the first 4 legs.

Notice also that wave iii is shorter than i and the converging trend lines. We would need another 3 wave leg up that is less than $2.66 to satisfy this pattern.

I will be paying close attention to this when trade opens Sunday night.

DOLLAR INDEX The dollar put in new swing lows Wednesday and then abruptly exploded higher to finish the week.

We may have put in an important bottom this past week. The downside structure looks complete. It also appears that the move off the 77.52 L is impulsing. Notice the channel break as well (I think that first fake break was warning sign).

Our first area of resistance should be the 4th of lesser high at 79.81. If we take out the 81.97 H, then I think that will more than likely lock in the bottom.

If price trades below the 77.52 L we know (C) is not complete.

GOLD The gold market turned down in the latter part of the week, perhaps due to the dollar strength.

It appears that minute [ii] has completed. Notice the 78.6% projection of (a) is where price turned. This is the top of what Michael Jardine refers to as "the death zone."

If I'm correct in my overall assessment of gold, then we should start to see some acceleration to the downside. This appears to fit with the dollar structure.

Our first objective would be to take out the 930 level. Again, our line in the sand is the 996.90 H. If price were to trade through that level then the alternate count comes into play.

30 YR BOND The bond complex spent the week losing ground.

I have made some minor changes to the count. It appears that intermediate (4) has completed, though not a certainty. If completed, then we should be starting down in a minor set of waves that would finish (5).

There is also the possibility that (4) will turn a triangle.

Notice how minor 2 was stopped in its tracks at the channel line.