Thursday, May 20, 2010

What's next ??

Here is a five point box, one box reversal point and figure chart showing 24 hour e-mini trading.

The drop from last week's high of 1174 has been much, much bigger than I anticipated. What's next?

So far today the low end of my range estimate at 1075 has held. But the rally off of this morning's low has been feeble. That could change and strength above the 1100 level, the lower edge of the trading range outlined by the blue rectangle, would be very bullish. It would mean that the market is headed for 1200 over the next few weeks.

Should the ES drop back to 1075 before moving visibly above 1100 I think the 1056 low will be broken. The downside should be limited to the 1025-1040 area (green oval) as indicated by the two point and figure counts I have drawn on the chart. I think a drop below 1056 would turn into a terminal shakeout and be followed by big rally. Such a shakeout would also define a George Lindsay, three peaks formation with tops in October, January, and April. I'll have more to say about the implications of the three peaks if 1056 is broken.

After the smoke clears I think all the downside action since the April 26 top will eventually be seen as a normal bull market corrective phase. I think we shall see new bull market highs within a couple of months.


EricH said...


Could it be remotely possible that this move off of March low is over and we are looking at a mini-bear market over the next 6-8 months?

If you didn't see the top at 1210 and we are now 11% lower, what makes you think you can time this bottom?

This feels just like 2007 to 2009 when every bounce you called a bottom.

MaverickUK said...

Carl you clearly are a genius in so many respects, but is this what you were doing when the markets collapsed in 08? Continuously revising your estimates lower and always remaining bullish?

You are so blinded by your bullish view that you are missing the obvious. Ask yourself on what possible basis is there to buy the market? The only reason I can come up with is for a relief rally ahead of new lows.

The fact - as you mention it yourself and what I previously already pointed out - is that the rallies are feeble and that is despite markets taking major hits. This means the markets are setting up for a major new low prior to any substantive rally.

As regards today S&P is likely to trade to 1064 or lower before another feeble rally.

sandy allred said...

The 'feeble' nature of today's rally off lows should be expected after the last few days. Expect more feeble starts and fits tomorrow and early Monday...then off to the races! My guess.

catherine said...

But it may not hold and a 20-30% decline can occur down to 950. China tightening and leading as it did earlier, dollar strong, commodities weak. It;s not exactly a buying market for shares.

Kishore said...

Carl, Thanks for your chart. It is very meaningful.

Bullish divergences are indicating that ES should rally from here. 1040 does not appear to be a possibility today.

MaverickUK said...

As I said my target for S&P is 450 and Dow is roughly around 4500. Could be hit within months.

extrader said...


If this Bull Market has any life in it, we need to clear 1094, which is not looking like that will happen! On the downside i am looking for 1056-1036 to soften the blow!

Good Luck

catherine said...

This isnt a mini bear market - its a structural bear market starting in 2000 and multi-decade decline for the west. Of course all bear market rallies are so long and so strong that everyone believes it is a bull market.

That saying, important level here. 1075 It's a volatile market so 5-8% up is possible without changing anything.

John said...

I started following Carl a few months ago and I was always wondering what was his opinion during the 08-09 bear market?

I still believe that the real crash has not started yet and the bull will resume during the next few months. The real bear market has to start from a huge negative news driven event. Could be a war or a country going broke and I think it will come late 2010 or early 2011.

Kishore said...

As ES has made a lower low, that looks like a bear trap fake out, it is now making the first rally attempt. If we assume this to be wave 1 up, wave 2 will be down, to retest the low.

Bottom guessers gets their ego satisfied, and often their a.. burnt, by trying to catch wave 1.

Wave 3 is the one to catch.

Atrader said...

Sandy nice to see your comments any specific targets and time frames??

What I do know is 1126.25 is the key on the weekly basis first then monthly.

pimaCanyon said...

John, is not sovereign debt a big enough negative news event to start the bearish ball rolling? Subprime did it last time. Now instead of home owners and banks, we have entire countries awash in debt to the tune of we'll-never-pay-it-back. This is really not news as this thing has been building for decades. BUT, it is news because everyone seems to be focused on it.

Maybe you're right, we'll have an even bigger negative news event in the near future to act as a catalyst for a crash. The way the markets are acting right now, though, is that it wouldn't take much of a news event to act as that catalyst.

sandy allred said...

Agree with the short term bullish view...but also agree with the longer term structural bear mkt view. My target for the rally that appears to be commencing off today's low is June 20. DOW 11,840 and S&P 1,300 appear on the horizon. Between June 20 and August 31 mkt likely to narrow as a rising wedge. According to any technical definition, this is a bull market. This correction will be veiwed as an ordinary reaction to an overextended market. By late August/early September when the majority will be lulled to sleep by the lack of volatility and all kinds of confident financial reporting a longer term decline will likely commence. Said decline is likely to run well into late 2012. This is my guess.

Rajeev Bharol said...

Offcourse it will rally soon. Question is how far that rally can/will go. Can it make new highs?

Adsense said...

Hi carl
i see the 3 peaks in the oil stocks
points 3 4 5 6 and today is lower
then point 4 and 6 so it can be considered point 10 . how ever i think on the dow we should consider this present low ( or the low that comes shortly if it does )
point 4 . point 3 would have ended at the april 26th high . counting 414 calander days from the march 9th low you get a date of april 27 .
this falls into the range of a subnormal bull market time span .lindsey called it an exception.counting forward 627 calendar days from the nov 21 low you come up with aug 10th. the 627
is the average subnormal advance if you take out the 414 day figure.counting from the top of oct 11 2007 to the low on march 6th2009 you get 512 calendar days coutning forward from that date you get july 31 2010 which is a saturday . lastly there is a bottom july 10 2009 ( close low)
to top jan 19 2010 ( close high )
( 193 cal days )to top count
if you add 193 days to jan 19 2010 you get saturday july 31 2010.
for me this makes the early august time preiod extremely important
specially if the market is seeing a double top ( point 5 ). the time span is abit stretched from previous time periods beteeen point 3 and 5 . hence it may be point 7 in which case we are now
at point 6 . looking at the average time period from point 3 to point 7 and taking out the shorter durations the average is 214 calander days ( approx 7-8 months) adding 214 calendar days to jan 19 2010 , you come up with
august 21 2010. so there is several reasons to be on guard in early august for a peak if indeed the market is peaking then .
one last note . im not sure if you can calls the movement from april 16 a compact top formation or not
it was the close low just befor the peak . counting 107 cal days from april 16 you come up with sunday august 1st . obviously im making several assuptions here but my own cycles work calls for a major turn for the year in early august so how this fits into all of the above we will see soon enough .
i look forward to your thoughts

Kishore said...

Rajeev says, "Question is how far that rally can/will go. Can it make new highs?"

Day traders don't care. Just a few points, and no negative points, every day, makes it a perfect day. Everything else is NOISE.

Carl, do you agree?

E said...

Step by Step.

Fat fingers again today?

Sharp bounces are playable so trade both ways and catch the swings.

Carl thanks for your great forum here.

Naveedah said...

This much bearish sentiment is SCARRY!
Will I be able to get my Optimism back?
Here I need Carl's support!

Thanks Sir!

MaverickUK said...

Carl - it never was a bull market. It was a bear market rally. The S&P never broke it's downtrend.

BullandBearWise said...

Carl has been right about one thing. Crude is going to 50.

VS said...

just hypothetically - what will convince you that this is start of a bear market and we are going down. There must be something. Or else it is sounding more and more like a compulsive trader who buys at 100 expecting 150, adds more at 80 then 70 and then rationalises that it is going to 50 before 150 therefore adding a lot more at 50 until finally the money runs out and selling all at 35. Which is when the capitulation occurs and eventually it does reach 150. The result was correctly pointed but the trade was c**p

Kishore said...

Carl is right. It is a bull market until proven otherwise. We have seen the first sell-off that makes it look like wave 5 on daily charts may not extend. We need to look at the reaction to the current sell-off and failure of retests, to confirm.

Terminologies used of Bull market, bear market, bullish, bearish etc. etc. is BS for day traders. We can decide to go long all the time or go short all the time. We can always make money if the entry and exit are right, or lose if wrong, whether it is a "bull" market, "bear" market or BS market.

Of course, we make more money by playing in the direction of the current short term trend. However, there are not many players who are equally adept at playing both sides.

We all tend to specialize, in playing the downside or the upside, depending upon our personalities, the BS stored in our memory banks, BS from the media, and the noise of blogs we chose to visit.

Incidentally, we visit the blogs not because it actually helps our trading, but we visit them for some emotional needs other than making money.

Personally, I like Carl's openness, willingness to share his knowledge, and his impeccable honesty and integrity. These are all essential for becoming a successful trader in the long run.

Carl's calls, for both upside and downside, have been pretty accurate. Some people with inadequate background, or who are probably used to spoon-feeding, probably do not understand what he explains with his charts and commentary.

Anyone who criticizes other traders for whatever reason has obviously not done much trading himself or herself.

spycharter said...

If TLT breaks and holds above 100 then that means we're in a bear market. If not, the bull lives!

dcatlowpj said...

Kishore, that was a good post! There are many truths in what you said here (last post): "we can go long or short all the time.." The meaning here is that what we all should be concerned with:

1. Primary direction. If you know this, then you are going to decide whether to trend trade (in primary direction) OR play pullbacks.

2. Beware of consolidations. Not much of that lately (a little humor here never hurts).

3. If you play counter-trend pullbacks, think about WHERE THE PLAYERS WILL EXIT. Entries can be made much better that way as there is always evidence of primary areas of control/Volume clusters/pivots - - the areas all traders watch. Think about Fibs...or whatever you think works..

4. Scale in and scale out.

5. Manage cash in other words.

Have HARD stops. Carl shows this every time his trades go against him.

As I am running in an RV going back across country towards Carl's Alma Mat., I am not trading futures, just options. So, sadly, I am not participating in what will be a great short here.

Johan Nilsson said...

pimaCanyon wrote:
"John, is not sovereign debt a big enough negative news event to start the bearish ball rolling? Subprime did it last time."

How, on Earth, do you know what caused what?

John said...

To Maverick .. did you see any long position of Carl ? You still didnt read most important posts on this forum .. did you ? It is obvious you have no clue about speculation.