Monday, December 17, 2007

E-mini and Spiders Update

Here is an hourly chart showing regular hours trading in the e-minis. My long position was stopped out today at 1457.

The fact that the market closed well below last week's low is a bearish development coming as it does after the lower top at 1537 ( 152.87 in the Spiders). At this juncture I think this means that the market is headed down below its late November low at 1418 in the e-minis and 140.60 in the Spiders. Right now I think that the 1395 level in the e-minis and 138.50 in the Spiders looks likely.

Earlier today I pointed out the bullish divergence between the 5 day moving average of the advancing issues count and the daily readings. I think this divergence will give us a small, 25 point bounce from the 1440-45 range but that a much more important divergence between the market and the 5 day moving average will be seen before the drop from the December 11 top ends.


Anonymous said...

Hi Carl,

So far the decline has been mostly orderly and measured with no real panic selling. I think this backing and filling action is intermediate term bullish.

The 20 week cycle (18-20 weeks) is trying to find a bottom here in late December. We are now about 18 weeks from the August panic lows and the large Bradley date is this week.

I think your rally to new highs call is on target. Hurst cycles are pointing up once the 20 week bottoms. 9 month cycle appears to have bottomed in November and is POINTING UP.

Bear case is fading and I think the Bulls are going to get rewarded for holding through this volatility. Thats why Bulls make the big bucks.

Terry Laundry has a November 19 blog entry which floats his "one last rally" thoughts and conclusion.

Strong case can be made that there is some nice green light here for the bulls after a December "20 week" finds bottom.

Anonymous said...

I hate this prediction of yours - not that I think you are necessarily wrong.

Point and figure chart would go bearish at 1400 and below. Probably a good time for a bounce.

Alternatively the market could go down from there.

I still would keep my eye on the discount rate spread at

If this does not get resolved positively I do not see how we go up. Unless of course the fed cuts like crazy to resolve it.

Still I am bearish as there is just to many loans that will not be repaid and that will destroy to much money institutions think they have.

At least that is how it worked in Japan after their stock market bubble followed by housing bubble.

Again I hate your short term prediction because I am afraid you are right and it will confound most people.

please do not get upset the "hate" is tongue in cheek as I am pleased you posted it even if I do not like it. I am actually quite pleased with your predictions even when I disagree with you. Some people should learn reasonable people can disagree.

Anonymous said...

Terry Laundry says that there may be 1 more rally before a decline of historic proportions. If he is correct in his assessment, I think it would be utterly foolhardy to try to sqeeze the last profitable remnants out of this market on the long side. I believe Laundry's view is that the coming decline will be very sever and of an "unrecoverable" nature. That means, unrecoverable in a lifetime. His most recent post placed the mega t top in October. So, according to Laundry, in the big picure, it's all downhill from here for several years.

I have to admit, bearish sentiment is thick so there has to be a bounce soon. But if Laundry is correct, do you want to risk it??

Best of luck all.


Anonymous said...

Hi Carl,
I really enjoy your blog. I'm trying to understand why you are bearish enough to expect a break of the Nov. low. We leaped up from that low very steeply, and a 62% retracement of the rally would be around 13127 DOW, and more retracement would not be unusual. This decline could also be the last leg of a symmetrical triangle which would end this week and lead to the rally you had been forecasting.

Brett Steenbarger, Ph.D. said...

Hi Carl,

I have a question that may be out of ignorance, so please bear with me.

From the March low, we see what appears to be a "domed house" formation with the peaks in July, October, and then the recent peak early this month. My understanding is that the 7 month duration from the March low to the October peak is standard for this formation.

The implication is that we would retrace most of that rise since March and push below the August and November lows.

Is this a misreading of Lindsay? Many thanks for your perspective--


Anonymous said...

Hurst cyclical analysis is flawed. I'm leary of any system that uses fixed static cycles as they don't account for the contraction and protraction of cycles. When a system leads one to blame "overriding fundamentals" or "the FED" or "Inversion" or "George Bush" or "the Boogie man" for a failure in their analysis then you have to question the validity of the system and one's ability to interpret it. Even a strict adherence to one system is a disaster waiting to happen which severely limits one's ability to think outside of the otherwords...closeminded.

Carl Futia said...


George Lindsay's pattern is called Three Peaks AND a Domed House.

I think you have identified a potential Three Peaks pattern. If you are right then the implication is that the drop from the December top will carry the averages below the late November low.

However, this Three Peaks part of the pattern should then be followed by the Domed House whose peak is typically the end of the bull market. The 7 month, 10 day measurement which should time this bull market top is usually taken from point 14 (see this link :

But point 14 can only develop after the market establishes its next low somewhere below the late November low. This would imply a bullish first and second quarter for 2008.

I expect to say more about the formation which started from the July top in subsequent posts.