Friday, May 07, 2010


Here is a one box reversal, five point box point and figure chart. It shows 24 hour e-mini trading going back to the low in early February at 1041.

The ES has had a 41 point range today - 1091 to 1132. I think we have seen the day's high and low. The market is moving up and down inside the 40 point box (blue rectangle) I have drawn on the chart. I expect more of this sideways action on Monday. But I think the ES will emerge from this box on the upside and begin a move which will take it to new highs for the bull market.

As I noted in a prior post the congestion area formed in April counted down to 1080, although at the time I thought there was no chance the market would drop that low! But it did that and more. The fact that the count from the top area has been fulfilled is one piece of evidence that the low is in place.

I think today's 1091 low will not be broken by much if at all. The 1091 level is the midpoint between the May 2008 high at 1442 and the November 2008 low at 739.

There are two lower midpoints which appear to be responsible for yesterday's 1056 low: the 1054 level which is the midpoint between the May 2008 high at 1442 and the March 2009 low at 666, and the 1064 level which is the midpoint between the September 2008 high at 1291 and the October 2008 low at 837.

I think support beneath the market at these three midpoints is very strong. The implication is that the next big swing will be upward.


Phileo said...

Hi Carl,

Could you make a post elaborating your rationale for Gold 875 ?
What would gold need to do to invalidate your thesis for 875?

TG4TA.stockman said...


What is your take on "accidents" like the one yesterday? Are they not considered anomalies (and adjusted for) in your analysis?

Looking at your posts, I would assume that you believe that they are what they are and take them into other words, the "fat finger" was a "fat lie".

EricH said...

"Black Thursday - a buying opportunity "

If that's the case, how come you didn't buy anything??? The truth is, anyone that try to buy the dip yesterday would had gotten their ass handed to them. No one expected a -1000 point down day on the Dow.

Bill said...

Great analysis Carl.

My take on it is the market will bounce back but it'll be followed by heavier selling to new lows. McLellan oscillator was below 100 yesterday I predict it'll be -130 to -140 at the end of today. Now this is very unusual for it to go below 100 and it indicates a technical bear market. So any bounce will be followed by heavy selling.

We are at the same stage we were in October 2008, High volatility, drops and bounces. After the next bounce up the market will move down further to the 980 level. The credit markets are on the verge of seizing up in Europe and just like in October 2008 the majority don't see it.

pimaCanyon said...

EricH, how do you know Carl did not buy? Maybe not yesterday at the low, but today when ES hit 1090. Carl does not post all his trades here, he certainly doesn't post what he does within his longer term retirement accounts.

In Carl's book he explains that the task of the contrarian investor is not to pick tops and bottoms, but to end up with a performance that is better than the overall market. He accomplishes this by taking advantages of buying opps, times when a bull market has had a significant pullback.

If Carl is right about new highs ahead, we have an incredible buying opportunity on our hands right now. BIG SALE happening all day today and maybe into next week. And who knows, we may even revisit the low and you can buy right at the bottom!

(My word verification is "terds".)

tempo said...

IMO a 2008 worldwide liquidity crisis has near zero probability. Look at the declining LIBOR and 10 yr treasury rates and spreads. This weekends election in Germany will likely trigger the upside move. A reversal in the 5 day ema in the VXX next week will also be a major buying signal. Thanks Carl for your informative posts.

Jack said...


If you had bot the dip yesterday you would have made a very, very nice profit before the trading was over!


dcatlowpj said...

This volatility is the bread and butter of ES traders (emphasis on scalps for a point or two).

pimaCanyon said...


I agree with your assessment of the credit markets in Europe; however, whether they actually seize up or not remains to be seen.

I just took a look at the McClellon Os. you mentioned. It dropped to -400 back in June, dropped many times below -100 since then, dropped well below -100 in late October and again in January. What settings are you using for that Oscillator, so I can be sure I'm comparing apples to apples here?

Dave Narby said...

This is not a bull market.

Anyone who looks at a parabolic 998 point drop & bounce and still thinks everything is going to work out fine is fooling themselves.

Market is broken, I'm now scaling into physical precious metals positions. Time to stop trading.

Good luck to all.

Bill said...

prima, the adjusted mclellan oscillator was -113 yesterday. I readh that the adjusted mclellan oscillator moves between 100 and -100. Between -75 and -100 the market is considered oversold, when it gets below -100 is a technical bear market.

I'm not an expert on this and you or Carl probably know more about it.

Kishore said...

Today, ES built some support at 1106. It looks like that this support will be broken today or on Monday and the low at 1091 or 1054 will be tested.

marketmakerX said...

Carl you should talk about the day you posted five point box point and figure chart couple week ago stating how this was no bear market rally. That was the sign market had topped. Use yourself as a contrary indicator too. :)

Narayana said...

/ES is making a series of lower highs. I wouldn't be surprised to see 1060 retested before this downtrend takes a breather.

EricH said...


That's complete BS.
If you were trading ES yesterday, at what point would you buy?


All major support was crashed and if you have any sort of risk management you would had gotten blown out. If not then your account would had probably gotten blown up at 1050.

Market Karma said...

Carl,, You have posted on the characteristics of a sell off that is a temporary correction to a bull market. Can you post the characteristics of a sell off that kicks off a new bear market so everyone knows what to expect. -MK

Adsense said...

Hi Carl
the bearish cycle i spoke about last week ends may 11th 13th which is next week. there is also another bullish cycle that begins
in early june and runs up into july into aug 3rd . i wanted to note something from lindseys articles , he spoke about the different 3 peaks domed house pattern, im seeing similarities with the oct 2009 to date pattern
and the pattern lindsey spoke about which ran from 1955 1956
it is not a perfect correlation yet nothing is , however i have the dow overlayed on it using closing numbers only and what is interesting is this creative thinking happens to fit with my own cycles work running into early 2011 so it is worth a bit of research even if you find yourself
doubting it .i should note while we did see a mini crash the dow never printed below the feb lows and it has not closed below it either . if the present correlation continues then we are about to go back up to 11166 again
and ill admit new highs are possible
good luck

dcatlowpj said...

Market Karma - - now that was a great question! I would really enjoy a read regarding how to understand true roll-overs to the down side. Maybe the answer is built into Carl's assessments of his always-mentioned 1270 that a tipping point and what will we see to determine it as such.

Edwin said...

I see the record volume of "TLT" and "TBT" as 1 simple evidence of a FEAR SHOCK as ppl rushed to hide behind bonds.

Well, call me a simple minded man if you wish, but I see lower bond prices and higher stock prices around the corner.

Dave Narby said...

Events like this remind me of minor earthquakes that warn of "the big one".

What happens when the states can't meet their pension obligations?

They will look for help from the federal government, who will print up and gift them the 'money'.

What happens when the fed gov't can't meet it's obligations because of collapsing tax revenues?

They will 'ask' the Federal reserve to monetize the current debt, and issue some more so they can keep spending, devaluing the dollar.

What happens when the world sees the reserve currency plunging in value?

What happens when the oil producing nations stop taking dollars, and ask for something more tangible?

Think it can't happen?

It's happened before!

This is the endgame of the old system. Anyone who thinks they can trade it? Good f*****g luck to them.

Kishore said...

Carl, here is a poll conducted by ZeroHedge.

According to the poll, consisting of 750 votes, only 3% have faith in America's Capital markets, and 97% don't.

Carl, assuming that those don't have faith in the capital markets will not be long term investors, where will the buyers come from, for continuation of an already overextended "bull market"?

Carl Futia said...

The 3% who have faith are evidently responsible for the S&P trading at 1110 instead of at 0.

So if one year from now the percentage who have faith increases from 3% to 6% we should expect the S&P rally to 2220.

dimrous said...

ZeroHedge and other blogosfear sites have an agenda.
Yes, the markets are manipulated. They have always been.
The market manipulators have the capacity to move substantially the prices at their will (see minus 10% intraday) and are most probably tacitly endorsing/sponsoring such sites of the blogosfear space. The markets will head higher after finishing up shattering the ranks of small longs and providing a glimpse of hope as well as an enticing entry point to the bears.

Chad said...

Think about it this move beat the shorts to death all of the way up.

I was doing research on all of the fibs corelating them with all of the various inflection points of Uranus and Venus aspects of 30 degrees against the closes for the DJI move from mar 6&9 2009 through april 23.

It was in deed very rare in that the markets during this move up did not pause with the exception of a few hundred points.

Shorts have a place in that they
cover when their purchase price when it comes down to them.

Did this market look like the shorts were covering at various levels down?

No because there were very few short players supporting the markets because they had already given up the ghost.

There was no fat finger just missing dead short players creating this airpocket that I hope will get filled.

Now we are going to have the reverse effect in that every time the longs come in they will get whacked at least eventually.

This is entropy folks and the pot will boil over soon.

janet said...

Futures are up quite nicely...glad I closed out my short position.

Market Karma said...

DCATLOWPJ,, Yes it is a good question! I am looking for the 10y to move to 3.8% and then lower to 3%. (currently 3.43%). Other risk assets (stocks, etc.) should follow.

With regard to this being the end of the bull market or not, keep in mind there is a very large WALL of CASH out there waiting to be put to work. But the gatekeepers to this WoC spend it very sparingly.

curt said...

if nothing else this site provides some great entertainment...Kishore of course is always classic, Dave siting an oscillator that hes not really an expert on, and Dave Narby spewing conventional dogma like its something new...pure comedy.