Friday, October 23, 2009

Update


Here is a 30 minute bar chart showing day session e-mini trading. The market has dropped decisively below yesterday's midpoint at 1081.50. From this I conclude that a lower top was established this morning and that the reaction which started from the 1099 level has further to go.

The purple rectangle delimits a reaction which matches the average length of the three previous corrections in the e-minis since the early July low at 866. Thus my downside target of 1050. I think this entire drop will continue well into next week. There should be one or two up days along the way.

The next temporary low (green oval) will probably occur against one of the two declining red dash trend lines. I note that the 1064 level is also the midpoint between the October 2008 low of 837 and the high of September 2008 at 1291 (higher purple dotted line).

By the time this correction ends I expect the market to kiss the rising green trend line which should then have reached the 1050 area. The 1054 level is the midpoint between the May 2008 high of 1442 and the March 2009 low at 666 (lower purple dotted line).

Once this drop ends I expect the e-minis to resume their advance and move up to 1120 or above.

19 comments:

John M said...

Well-reasoned analysis. Thanks, Carl.

andi said...

AMZN up 25%..smoking...atta market..
I still recommend folks to buy the dips..as no one knows exactly when this market perks up again...
So accumulate @1075, @1065..etc//

Ken said...
This comment has been removed by the author.
tapped out said...

Carl, has this new view of mkt direction caused you to move away from an above normal allocation back to a normal allocation? Not saying you ever were above. Curious though!

Jim said...

Carl

Buy it, its going back up to 1090 before the close.
You've done exceedingly well over the last 2 months!!

dewers said...

Be careful about trying to make sense out of a choppy market.

Makes one wonder who is behind these run ups and down . . . Goldman comes to mine?

Chop-chop!
Professor

Wags94596 said...

This is the FIRST time that the energy stocks and commodity names have declined and been hit hard while the Euro has been UP!

Very interesting divergence.

jeff said...

All,

I concur with Carl that we will chop around here. Rather than try to play the hourly ebbs and flows(I'm not smart enough for that), I will simply look to see if we get back to the 50 DMA on the S&P. And if we then subsequently bounce from there, I think it poses a pretty good low risk trade up to whatever level the S&P heads up. As everyone can see, there is a bottom trend line from March and until it is broken, the trend is up. In between, using the critical moving averages (50 DMA, 25 DMA), and watching daily stochastics starting to rise from oversold levels, is the best way I know to keep from losing your dough.

mfm9800 said...

Today is a treat. Two charts from Carl. They ask if charting is a science or an art? Well I must say everytime I view Carl's charts I feel as though I am viewing a Van Gogh. Love your work Carl, eer, I mean Vincent!

boris said...

We expected last push in the market by the mid OCtober, to be lead by energy and gold.
We stated that on this board. We told our internal subscribers that high could stretch into October 17+-2 trading days.

We Stated here that FAHAP( First Annual High Attraction Point, projected by us February 2009) at 1084 will present the big hurdle. WE agreed with Carl's initial esitmante that high will come centered around October. We did allow 1120 as equivalent FAHAPS for INDU,FTSE and DAX would indicate 5% above FAHAP SPX 1084.
We have our multiyear YBR projection topping in Nove 13, we have the subwave WBR( White Brick Road) topping mid October and then 13th of November. We have PUTCALL ratios at extreme levels. We have Daily Sentiment index at 97% worse( bearish ) than the October 2007( 89% bulls)

We can go on and on, but we would say that major statment is this. At 1100 the

next 100 pts is much more likely to come on the downside!

Good Trading all

Wags94596 said...

The 21-day MA on the SPX is coming thru at 1071 today. That will offer strong support.

But I don't think that we will see that "test" today.

Pelican said...

Carl
Thanks for the update.. hope it won't jinx the down trend..
I actually think AMZN's great earning is bearish for the economic. Many people in CA are buying more and more from Amazon to avoid sales tax, especially big ticket item. When the economic is good, people may not care much about sales tax. But when the economic is bad, every penny saving counts.

extrader said...

1073 held, maybe a good time to go long at 1076

extrader said...

I think the market his heading to 1120 next week... forget about 1050 everyone is waiting for that number and the market usually does the opposite of what everyone is expecting!

I think we close 1080-1082 today!

Good Luck

J said...

Carl, why do you think oil will head down to $50?

tapped out said...

extrader! used your numbers to score some playdough for the weekend. thanks 4 the heads up long on 1073.25

Wags94596 said...

Looks like we finished a "C" wave move down in Wave 4. That means that we should get another rally next week to close out the fiscal year for all of the Funds.

Meanwhile, excellent question for Carl . . .

How do you see a nearly 40% drop in crude oil? Are you looking for a massive US Dollar rally to begin soon?

In a little less than one month, oil has rallied from $65.50 to $82.00 in the December contract. That's a far cry from $50 for sure.

Kishore said...

We had the first wave down of a correction on Wednesday.

We are now in the third wave down which should continue at least through Monday.

The bottom of the correction is not in yet!

Carl's number for the bottom of the correction are pretty close to 50% Fibannaci's retracement of the last wave up that started on Oct. 2, 2009.

MaverickUK said...

Carl. This may not just be a reaction. This could be the end of the rally full stop. The S&P (as is the FTSE and other markets) was up against a very strong downward sloping trendline which runs from the very highs in Oct 07. We could be heading for a 10% correction at least - if not a full retrace to new lows.