nummy's trading blog

Video Update 11/03/2010

2010-11-03T23:46:00.001-04:00

Video Update 10/25/2010

2010-11-03T23:40:00.003-04:00

Has been a while since posting on my blog but I am going to start using it again for journaling purposes. Will try to do a video post every week or so ... and in-between, just do profile analysis with charts and levels I will be watching for the next day. (Posted late).

SPX Count Update

2010-05-02T19:44:00.002-04:00

SPX seems ready for a retrace after the 20-day MA break and MOBO band break. However, I expect any pullback to be short-lived though, and still think we have one leg higher into the 1230-1250 range.

Overbought? Who Cares

2010-03-18T21:08:00.004-04:00

It seems the market doesn't care about overbought conditions. But when we look to the past, we can see how overbought the market can really get. Here is a look at the Elliott Wave Oscillator (EWO) and McClellan Oscillator (MOSC) of SPX currently and in 2007.

From an EW point of view, let's suppose we could be at the foot of a multi-year bull. What would the count look like? Here is my count and where I think we would be headed if that was the case.

To Infinity and Beyond!

2010-03-09T20:54:00.006-05:00

Here is a pattern I am watching closely. It is from Prechter's Elliott Wave Principles. It seems to pop up on nearly all major indices (DJI, DJT, RUT, COMP) so I am giving it some weight here.

If this pattern plays out, and we make new highs, we could be at the start of a primary wave of a new bull market. This seems highly implausible given the fundamentals, but so has the rally since the March 2009 lows. I think if the USD starts to weaken further, we could see SPX climb to the 1200-1250 region. The max for a wave (5) being around 1255 since wave (3) is shorter than (1).

OPEX Lookout

2010-02-12T19:36:00.003-05:00

Since OPEX is this upcoming week, I will start scaling into March contracts. Something to chew on over the weekend.

2004 or 2008?

2010-02-08T18:37:00.006-05:00

In this post, I talk about the 2004 comparison. Please refer to the article I posted on the slope here: http://slopeofhope.com/2010/01/cp3o.html

This next week will be very telling of how the next few months should play out. Recently the 20/50 moving averages have crossed (both exponential and simple moving averages), a commonly used signal. Consider two different scenarios in the past when there was a crossover: 2004 and 2008.

In 2008, we had a 20/50 cross which proceeded with a pretty nasty drop.

However, in 2004 we had a similar 20/50 cross (fake-out) and the outcome was a zigzag combination corrective wave before heading to new highs.

To put this into relative perspective, in 2004 the first retrace down from the top was 20.3%. We rallied back up 83.4% of that down move. Recently, we have retraced 21.9% from the top. A similar rally back up (80%ish) would put us around SPX 1120-1130. Any more downside (new lows) will throw away the 2004 scenario.

We have had four down weeks so far, and the last time we had 5 down weeks was almost 2 years ago. At this point a majority of the move has occurred and I think the risk outweighs the reward for counting on this week to be the 5th down week.

The trade should be easy to set up. If we make new lows this week, then look out below but if we begin a bounce, it could take us up to the 1120-1130 range (or even to new highs as some EW counts suggest).

Now, in no way is the economic situation today even close to that of 2004. However, for the sake of completeness, it is beneficial to consider this as a possibility. The outcome will end up determining whether the deflationists or inflationists are correct.

Dollar Breakout?

2010-01-07T18:19:00.004-05:00

Yesterday I mentioned a possible break to the upside on this cyan channel and it seems to have happened. We may see the same thing we've seen recently which is USD strength along with equity strength. However, that positive correlation, I think, is unwinding into negative territory. Took a small short position at the close today via SPY puts.

The Dow is in statistical second wave range. Statistically, most second waves retrace 50%-61.8% of the first wave in value and time. This is where statistically most second waves end (marked in the oval). From historical data we know that:

12% of second waves retrace less than 38.2%
73% of second waves retrace between 38.2%-61.8%
15% of second waves retrace more than 61.8%

Dow and S&P mini futures both resemble an ending diagonal, a common way to end a fifth wave.

Happy New Year

2010-01-06T19:19:00.004-05:00

Hope everyone had a great year and let's hope 2010 is better (or at least more rational). I rode out my oil profits until oil hit 82 now I am sitting patiently for a next move. It seems it wants to go to 84-85 range. However, it seems USD could have retraced its second wave and could head for a third up. I was kind of hoping for a deeper retrace , it may not be done yet. I am waiting for a break of the upper channel trendline to help support the notion of a third wave higher for the USD. That could be a prime shorting opportunity for commodities like oil and equities.

Alternate Again

2009-12-29T22:17:00.004-05:00

So I keep waiting for the USD to finish it's first wave up and it seems after today's action we could be on our way to the final fifth of the first wave. Above is an alternate count with possible Fib levels (depending on how you measure the fifth). I am not starting the first wave at the exact $DXY bottom (74.17). If I counted the first wave to be from the 74.17 bottom, second wave would have retraced 90%+ and that is rare, so it is likely the irregular bottom was created by a corrective wave in the opposite direction. So remember, anything goes on the fifth wave ... the third wave isn't the shortest, so the fifth could really tear here (or truncate).

Dollars for Thought

2009-12-29T09:07:00.000-05:00

Early Christmas

2009-12-23T17:57:00.007-05:00

Oil continues to bring me early Christmas presents. Looking for 80-85 over the next few weeks. My vehicle for this move is Jan 39 USO Calls.

BB Update - The lower BB is starting to turn downward (indicating this could really rip to the upside). Often on a BB squeeze, we either see an upward move with a lower BB turning downward or a downward move with an upper BB turning upward. I'd be wary as a bear right now.

Finding it hard to see the USD getting much farther ... it broke the lower channel trendline today and may have finished it's major move up. It depends on where you consider [4] of v has ended. If it was a running flat corrective wave, we have one last fifth to finish to the upside. If it was not and the fifth ends up being this truncated fifth, then USD should be ready to take a breather here. One thing worth noting is, oil has made some nice gains without needing a drastic drop in the USD.

STU

2009-12-18T21:41:00.003-05:00

An alternate count suggesting USD could push a tiny bit higher.

Bollinger Update

2009-12-17T18:29:00.002-05:00

For anyone who read my post earlier at the Slope (article here), here is an update on the BB situation ... still no decisive break either way.

STU

2009-12-17T18:22:00.003-05:00

I am waiting for a bit of a retrace on USD before getting short on equities again ... I am long a bit of oil via USO calls.

Correlation seems it will pop back down to -1 territory after being slightly positive for the past few weeks. This means USD/SPX correlation will be highly negative again. Now the USD could just keep going up but it needs to take a breather eventually and when it does it will likely float equities higher one last time.

STU

2009-12-16T19:49:00.005-05:00

Slightly modified short-term chart for the USD. The USD/SPX correlation has been slightly positive recently but we should be back to "normal" very shortly. A brief healthy pullback in the USD before heading higher would be healthy for the notion of a new trend change in USD. The USD's next low should hopefully be around 76 and hopefully we won't make a lower low if the USD is to be in a new up trend. This next breather that USD may take may very well mark the SPX top as our correlation returns to what we've been used to. I have also gone long oil via USO calls.

What I think is plausible for the end of the year.

New USD Trend?

2009-12-15T22:25:00.006-05:00

So this may be the first wave up in a new trend in the USD. Even though SPX has been fairly flat for weeks, I think a pullback in the short-term for USD will make new equity highs and a final top. Sometimes USD bottoms/SPX tops lag each other. In the short term, this is the count I came up with about a week ago.

Seems we got there ... may get a pullback into the oval region before heading higher.

OPEX Lookout

2009-12-07T23:44:00.003-05:00

Looks like the next two weeks will be critical for both bulls and bears. The run into OPEX sure has a history of being bullish, but perhaps not this time.

Update: Here are some updated charts.

Charts to Ponder

2009-12-03T20:52:00.008-05:00

Last but not least, my favorite ... the fractal. Could have one more peak to eek out.

STU

2009-12-02T22:29:00.002-05:00

Looks like [x] could have a bit more to go ... sigh. Fitting as a very painful top for bears.

STU

2009-12-01T21:03:00.006-05:00

The short-term count still has me a bit troubled. I have been having trouble counting five waves. We may be correcting here making a complex combination which would explain the fifth wave not being at the top with waves [a]-[b]-[c] of [w] being an expanded flat. Wave [x] may still have a bit higher to go. Looking through EWT, I see the figure below as a possible correction with [y] possibly initiating primary [3].

Dubai-Bubai

2009-11-30T18:30:00.002-05:00

Will Dubai World happen to be the catalyst they blame the next major move down on? Some think it is causal ... some think it is by coincidence, I say it's EW theory in motion. Traders can choose whether to react bullish or bearish to news... and up to now, we have seen bullishness in spite of any bad news. These tables eventually turn and we seem to do a 180 and react bearish to news.

Dollar Woes

2009-11-25T20:05:00.003-05:00

The USD was stabbed again today. Strangely enough though, even though EUR/USD was making new highs, /ES has failed to make a new high (as well as Dow). I revised my /DX count to something that makes more sense since we are obviously not done bottoming. Not much else to say. Hope everyone has a Happy Thanksgiving.

Update: An alternate count.

Short-term Dow

2009-11-23T20:35:00.003-05:00

I am a bit fuzzy on the short-term count as of late so I don't have much to say. The waves don't seem to be aligning in SPX but I am sticking with the Dow count. We could be in an expanded flat right now. However, I think my long-term count is still intact. Anything past 10,681 on the Dow or 1152.23 on SPX invalidates the long term count so I will continue to short any rips until those levels are breached.

Greenback

2009-11-20T18:23:00.005-05:00

I dusted off the old /DX chart and this is my current count. However, if we get some strength in the USD, I am not sure if it will be just a correction upward in a larger degree trend downward, or is it the beginning of a new multi-year upward trend.

Also, note the 2 large spikes recently. This happened overnight both times and only briefly for a minute or two where /DX soared above 80. Look here.

From Reuters:

Traders on Friday said the December futures contract DZX9 on the index had spiked to 82, raising questions given that the dollar's rise versus the euro EUR= was below 1 percent. The euro is the biggest component of the index, with a weight of 57.6 percent.

"That fact that this has occurred on two specific occasions within a two-week time frame leads market participants to believe that there is some suspicious (cancellation) of legitimate trades by the ICE Exchange," said Mike Hill, a partner at private investment house USF Corp in Atlanta, Georgia.

Lee Underwood, communications director at ICE in Atlanta, said in a statement: "All trade cancellations are made pursuant to the exchange rulebook."

According to estimates from market participants, about 4,000 contracts were canceled on Friday. The ICE declined to give the exact number.

Sources said the trades affected were those that came in between 7:04 a.m. to 7:07 a.m. ET.

The ICE had also canceled trades on the December futures dollar index on Nov. 3, between 4:59 a.m. to 5:07 a.m. ET, a market source said, adding that around 8,000 contracts were canceled.

The ICE on Nov. 3 also had declined to give specific information about the volume or reason why the trades were canceled.

Looks like the exchange doesn't want to let a USD short squeeze happen.

Truncation?

2009-11-19T18:38:00.005-05:00

Looks like [v] could have truncated Tuesday. We could be on the brink of finishing this last final wave of primary wave [2]. We need to see how the next few days play out to confirm. Thankfully I exited all of my calls yesterday at the close (Nov SPY 111s), but I missed this ride down overnight. I will be looking to load up on Dec puts tomorrow if things continue to look weak.

Update: Here is a longer-term look of where we could be.

Wacky OPEX Week

2009-11-18T18:39:00.006-05:00

Updated short-term chart. Could we be on the brink? Props to Fujisan for mentioning this "three drives" pattern many moons ago. If we peak tomorrow, it will almost be too picture perfect.

Update: An interesting pattern on an Ichimoku chart. Look at what happens to EUR/USD after getting a weak short signal followed by a strong long signal. EUR/USD seems to coil before popping higher during this signal pattern.

STU alt.

2009-11-17T18:22:00.005-05:00

I offer an alternate count here after reconsidering the action that started this wave. I didn't like where my wave [i] ended and after doing a re-count, this is my alternate count. Not much is different in waves [iii] and [iv]. What does change is how wave [v] is measured.

In this case, since [iii] is less than 1.618 * [i], [v] is expected to be either:
0.618 * (start of [i] to end of [iii]),
1 * (start of [i] to end of [iii]), or
1.618 * (start of [i] to end of [iii]).

If [iii] is more than 1.618 * [i] (like in the count posted yesterday), [v] is expected to be either:
1 * [i],
1.618 * [i], or
2.618 * [i].

I would love to see us reach 10,500 on the Dow soon ... could be the shorting opportunity of a lifetime.

STU (Short-term Update)

2009-11-16T18:10:00.005-05:00

"This is Captain nummy-nums speaking with GS Airlines where we not only get you there, but we teach you how to pray. Please put your seat backs and tray tables in the full upright and locked position. We have a 2-3 day journey to make and we will be cruising at an altitude of about 10,500. Expect a little turbulence if we get up to 10,700. We will be arriving in Honolulu at dawn. Oh ... and they don't know we're coming."

OPEX Lookout

2009-11-15T13:09:00.006-05:00

Over the weekend, President Obama visited Asia and there was some talk about the weak dollar, so I wouldn't be surprised to see a strong surge in the dollar this week. However, if that doesn't happen and history plays out as it has in the past for OPEX week, this is what I'll be looking for. I expect to see a quick pop in the first half of the week, maybe peaking us around Tuesday or Wednesday. Historically, OPEX weeks usually peak in the middle of the week.

Here is a short-term EW count of this 5 of (C) of [2]. After reconsidering my count from the last chart, wave [iv] was definitely too short. I am looking to peak somewhere in that red oval this week ... around Dow 10,550ish.

Short-term EW Count

2009-11-11T19:01:00.005-05:00

Here is a short-term count for the Dow for that, hopefully last, 5 of (C) of [2]. Patience is a virtue here. I am thinking we could peak sometime next week.

Update: A megaphone pattern is a rare chart pattern that can end up being a bottoming or topping megaphone. This chart pattern seems to be playing out on the VIX (and VXN, RVX, etc.). If the bottoming megaphone plays out we could see vix sub-20 before shooting off to break the upper megaphone trendline.

Red Pill in Sight

2009-11-10T18:26:00.005-05:00

For those of you unfamiliar with the Matrix reference, "the terms blue pill and red pill have become a popular metaphor for the choice between the blissful ignorance of illusion (blue) and embracing the sometimes painful, sometimes pleasant, truth of reality (red)" [Wikipedia]. Playing it small on the long side here. I am picking up Dec 107 & 108 SPY Puts along the way up at certain points and scalping Nov 111 SPY Calls to minimize any damage.

Here We Go

2009-11-09T19:34:00.006-05:00

More force-feeding of some blue pills. Can we please take the red pill already? I feel like a dirty sanchez being long with some Nov. SPY calls, but I am picking up Dec. SPY puts on this ride higher. Here is more or less my Dow target and S&P.

Edit: Updated charts posted in next post.

Bull Hope

2009-11-01T21:11:00.004-05:00

If we haven't truly seen a bottom in /DX (which I find hard to believe given the volume action), this EW count on SPX could be the only hope for equity bulls. The three sub-waves from mid-August until now (3 of (C) of [2]), seem they could be an expanding diagonal (allowing for [i] and [iv] to overlap slightly ... although [v] should have gone a bit higher). We could be in 4 of (C) of [2] and the minimum so that no overlap occurs in 1018. From there we could blast off into the 1150s. I am not counting on this, but I am thinking up a scenario that would be the best case for the bulls right now. If the bulls are going to spring another bear trap, now is the time to do it .... this is the week to reverse. If we don't reverse this week, I'm afraid it's Game Over for the bulls for some time.

Short-term /DX update

2009-10-29T14:15:00.004-04:00

So it looks like wave [4] of i was shorter than expected. Assuming the count is correct, I expect to trace out a wave ii correction over the next couple of days. For this count to remain correct, we need to go above 76.7 next week. If we don't, I suspect that the 75.7 range is a wave one/four boundary, and my original count on /DX short-term could have been correct. This means we may have one final push lower below 75.

Outlook for Wednesday, 10/28/2009

2009-10-27T20:31:00.002-04:00

The oval I hilighted yesterday in the short-term /DX chart is off (along with the red channel). More accurately, here is where we are with respect to the red channel. I think we may have some retracement on /DX that may only last a day or two.

Outlook for Tuesday, 10/27/2009

2009-10-26T19:39:00.008-04:00

Success! We rammed right through the upper trendline of the ending diagonal triangle (EDT). I am cautiously optimistic for a trend change here in /DX (and thus /ES). However, for the magnitude of move in /DX today, I am surprised /ES didn't drop further. I suppose this is weakness being bought into, but I'm not buying it.

Volume was strong today in /DX and ideally, we would see volume pick up into an upside break of the 8-month long red channel /DX has been in. Here is a close up of that last wave (v) of [v] of 5 ending the EDT.

Here is an updated SPX chart. It doesn't look like it will quite make it to the much talked about 1120 area, but it's close enough for me to begin getting very bearish on the market if the USD really starts to pick up here.

Outlook for the week of October 26, 2009

2009-10-25T20:16:00.008-04:00

Looks like this may be a bottom for the dollar. Friday we broke out of the ending diagonal triangle. If we see a strong, volume-supported reversal this week, equities may be toast for a while as /DX corrects up to the 80-81 range. For confirmation, I will be looking for a strong close above the 8-month red channel.

Also, AMZN puts have peaked my curiosity. Note the similar gapping twice in 2007 on earnings reports.

Outlook for Wednesday, 10/21/2009

2009-10-20T18:59:00.015-04:00

In retrospect of my short-term count last night, I realize that 2 of (4) of [4] was a 99% retracement of 1 of (4) of [4]. Then, I also noticed ii of (iv) has the same 99% retracement of iof(iv). It is very rare for a second wave to do this, so I am throwing out that short-term count. It is more likely that the 99%-retraced wave is part of the previous wave's correction. Keep in mind, my long-term count is still in play ... we are finishing up (v) of [v] of 5. The short-term count is the key to where (v) of [v] of 5 ends. It seems it might end a week or two before I was originally thinking.

After analyzing the short-term chart again, it seems an ending diagonal triangle is plausible (which is quite fitting for a fifth wave). Coincidentally, the price action that played out Monday also looks like an ending diagonal triangle (also in a fifth wave position). This could mean a slow grind down on /DX until about Friday where we bottom out at 75.

SPX October 2008 Gap Fill

2009-10-19T19:18:00.005-04:00

Looks like today we filled a gap at around SPX 1098 from early October 2008. Last gap remaining on the upside is around SPX 1350 from mid June 2008 (which I really doubt will get filled). On the other hand, there are many gaps left to fill on the downside.

Outlook for Tuesday, 10/20/2009

2009-10-19T18:15:00.007-04:00

Target for /DX is still 75. I suppose the AAPL earnings bullishness will spill over into tomorrow and maybe part of Wednesday but I expect /DX to make a short-term bottom at around 75 Tuesday or Wednesday. After 75, I expect 76 and change (76.68 max) before our final plunge to 74ish.

Outlook for Monday, 10/19/2009

2009-10-18T17:57:00.008-04:00

My main focus lately has been on the USD. I am still searching for a bottom and we seem to be close. This is my EW count since the March 2009 high. I expect /DX futures to bottom in the next three weeks sometime somewhere around 73.6-74.6. We should see a panic sell and strong volume-supported reversal to support the notion of a bottom. We should also see a decisive breakout of this red channel we have been in for several months.

Here is a closer look of the wave count for (v) of [v] of 5. I am estimating /DX at 75 in the next couple of days.

Also, here is the EW legend that I use as reference.

Update: As long as we don't make new highs in /DX overnight (76.07), we should have just seen a 2 of (5) of [5]. This should be a downward impulse over Monday and Tuesday and my target is 75 for /DX sometime on Tuesday.

Testes 1 2 3

2009-10-18T17:41:00.001-04:00

Test post.