Heard on the Street : Should We Take This Sell Signal Seriously?

Fellow Traders,

The clock is ticking on the U.S. debt situation and the crisis is escalating fast...

If you have been following the market since 2008, you know that all the stimulus plans, bank bailouts and the Federal Reserve's Quantitative Easing Programs (QE) haven't turned the economy around and the financial crisis is still with us.

The data released on Friday showed that the Consumer Confidence Report Fell to 63.7 in July from 71.5 in June... and the government's first estimate of second quarter GDP, advanced at a weaker-than-expected 1.3 percent rate. Growth in the fourth quarter of last year was 2.3 percent annual rate, not the 3.1 percent that our government wanted us to believe. The first quarter was also revised lower.

That doesn't sound like an economy that is humming along or recovering. Does it?

The final straw may be the ongoing soap opera bickering between Congress and President Obama. No wonder why investors are selling!

Should We Take This Recent Sell Signal Seriously...

or

... Is This A Wall Street Debt Ceiling Head Fake?

In this weeks edition of Heard on the Street, you'll learn about:

#1: The 2007-2011 Analogy: A Fractal Comparison

1. This one bearish chart could be the most important charts you look at all year.

2. Based upon my original published research on July 17 and current price action.... next week could bring a tidal wave of selling into the markets.

3. From my review of the S&P futures, this market could drop to 1166!

#2: A Review of Elliott Wave Counts:

1. I'll revisit all the counts and let you know which ones remain viable alternate counts and or why they have been eliminated. I'll even cover some counts that I'm certain readers are working that should be eliminated immediately.

2. I'll provide an outline for you to know where the battle will be won or lost, what the wave patterns will look like and the levels of demarcation where turning points may occur.

What if My Bearish Forecast is Wrong ?

Unfortunately, I can't tell which scenario will play out. As you know, trading is a game of probability. All I can do is provide you with the information to make an informed decision of how to trade this market. What I hope to convey to you in this video is that an enormous opportunity exists whether the outcome is bullish or bearish.  Proper identification and knowing where to act will be the difference.

So please watch it today.

Best of Trading

P.S. - If you appreciate my work, you can show your appreciation by sharing it either directly from my "Share It" tab on the top right hand side of my blog; by re-tweeting it or by direct linkage to my site. Other methods require permission consistant with copyright, trademark, and other intellectual property laws and treaties.  (See policy below video).

---------------------------------------------------------------------------------------------------------------------------

Except as provided in the next sentence, the Materials may not be copied, reproduced, modified, published, uploaded, downloaded, posted, transmitted, or distributed in any way, without EWL’s prior written permission. You may download one (1) copy of the Materials on a single computer only for your personal, non-commercial, internal use. You may not (i) modify the Materials or use them for any commercial purpose, or any other public display, performance, sale, or rental, (ii) decompile, reverse engineer, or disassemble software materials, (iii) remove any copyright notice or other proprietary notices from the Materials, or (iv) transfer the materials to another person.

---------------------------------------------------------------------------------------------------------------------------

ES_F FLASH UPDATE

In my 7/27/11 call, I said " two bullish interpretations hang by a tread and one or both may be eliminated within the next few days, leaving no bullish counts". If you've been following along with my 2007-2011 analogy, this comes as no surprise. However, I feel that I'm obligated to present an objective and unbiased assesment of the market and let you decide for yourself whether the evidence is compelling to make either case. Given that.....

..... during the ON session, the running flat interpretation was invalidated by printing below 1291.25. I'll be monitoring the intraday progress of the markets and update readers with any new developments.

Make sure to watch my weekend video where I will be updating the 2007-2011 analogy as well as my weekly and daily counts.

Best of Trading

Silver and Gold: A Possible Turn?

SILVER:

 

Silver appears to have completed a flat correction that met resistance at 40.85- .95. A break of the w.iv circle low of 38.19 confirms that w.(2) had ended, setting the stage for a third wave decline.

Gold:

The call on Gold is a bit more complex than silver. At the weekly chart level, the price of Gold has reached a high of 1629 where w.(4) divides w.{(1)-(5)} into the Golden section.

 

Looking at the daily chart, the wave pattern is mature. Little, if any, upside potential remains. I would allow room for limited upside here with the understanding that the risk now is to the upside. Prints below 1478.5 would mean that a meaningful decline should follow.

You can learn more about the long term direction of Silver, Gold, global indices, commodities and currencies,  in my upcoming Mid Year Forecast.

Best of Trading 

The Market Pulse

The Bull / Bear Debate Continues

Introduction:

Earlier today I posted a special video addition of Heard On The Street that updated the current status of the 2007-2011 analogy and my expectation for the progress of the pattern. If you haven't watched that video, I recommend that you do so because this update expands upon the content provided and breaks down the intraday wave count from a bearish view. One without the other will not make much sense. You can listen to the call here.

The Bearish Case:

Here, the bearish interpretation at the daily chart level, has me looking for continued selling pressure followed by a three wave advance to complete w.E. A bounce may intervene but the larger trend shall remain down.



At the intraday chart level, this chart depicts the anticipated progress of the pattern (please click on the video link to obtain for further commentary).

The Bullish Case:

In my opinion, two bullish interpretations hang by a tread and one or both may be eliminated within the next few days, leaving no bullish counts. 

At the daily chart level, the running triangle is still viable. Today, the market gaped down but gaps are not usually found in second waves, they're found in third waves. Also, according to the rules and guidelines of the Elliott Wave Principle, w.2 can't exceed the origin of w.1.  A break of 1291.25 negates the viewpoint that w. 5 was underway.  Only a break of 1252.25, the w.c low would finally extinguish this view. 

The second pattern is the running flat. Flaws already exist in this interpretation. If you recall, w.4 overlapped w.1 but not on a closing basis. A small degree of leeway was granted as the DOW and NASDAQ did not confirm the same structure. That was then. Prints below 1291.25 negate this interpretation.

Let's see what unfolds tomorrow.

Best of Trading



Special Edition of Heard On The Street: 2007-2011 Analogy

Traders,

I was planning on covering my current count for the emini S&P in my upcoming Global Gains Mid Year Forecast but felt that the implication of what we've been discussing since July 17, are to big for readers to learn after the fact. Tonight, I'm providing you with the physical count to accompany the analogy. As a reminder you can watch the video in HD (use full screen... 720 p).

I will also make my regular post later tonight, covering the intraday price action that will supplement the larger wave count in thi video. If you have any questions, please DM me on Twitter or comment on the this blog post.

Best of Trading

$ES-F: Intraday Update

Here is my current 15 min. intraday chart of the September contract. From the 1347.75 high, the market appears to be working a combination where w.(b), not labeled,  is working to the downside that will be followed by another push to approx. 1334-36 to complete w.(c) of w.b circle. Thereafter, look for a five wave decline to complete the pattern where w.Y = w.W at 1314-15. A loss of 1325.5 would not negate but would imply that w.b circle ended at 1332.75. Downside targets will be reaccessed from them. 

As an alternate, w.Y could unfold in a triangle. If price action dictates, I'll revise the chart.

Best of Trading 

The Market Pulse

Today's Market action confirms that there aren't many traders that think that the U.S government will actually default. As I mentioned in my weekly video, I expected weak hands to exchange contracts in today's trade. After the dust cleared, the market closed in the middle of the range leaving options on the table as to how to interpret the intraday price action.

If we examine a 20 minute chart, the wave structure counts as a three wave zig-zag affair that should be fully retraced. A print below w.B (1332.25) would confirm that a three wave structure unfolded that terminated at the w.c circle crest of 1340.25.

Even if today's three wave advance is fully retraced, the daily chart level remains a dangerous proposition unless the w.c low of  1252.25 is taken it. Should this occur, both the running triangle and running flat would be eliminated.

Often a tell that a top is either building or has already occurred is when the wave count and patterns do not follow the standard. Frankly, that's what I think is happening therefore, I'm sitting on my hands until the wave structure becomes clearer. We'll follow the daily price action compared to the 2007-2011 analogy for the bearish scenario with the understanding that the two bullish counts can't be extinguished just yet.

Tomorrow is another trading day. Let's see what unfolds.

Best of Trading

Heard On The Street

House Speaker Boehner Withdraws From Debt Talks

My weekend had barely started when this headline crossed the news wire. With 10 days remaining until the U.S. would default on it's debt, the chances for a 11th hour deal to raise the debt ceiling look challenging. With only six trading days left before a potential default, I'll explore what's next for the emini S&P.

Since I am preparing for the release of my Mid - Year 2011 Global Gains Forecast there will not be any additional markets covered, other than the S&P over the next few weeks. With your understanding that this is tedious work, my longer term perspective is inclusive of the current weekly and monthly chart levels for most markets. A few weeks of data will not materially change the forecast and I would prefer not to duplicate my work. Also, if I presented the material now it may not be as clear and  concise, nor would it achieve my goal by providing a quality presentation. I believe that your wait will be worthwhile.

Best of Trading

$ES-F: 2007-2011 Analogy Update

Attached is the updated chart for the Emini S&P futures. My initial chart and analysis can be found in the July 17, 2011 edition of Heard On The Street.

I've updated the chart up though this weeks close and will discuss all the scenarios and implications at further length in this weekends video. While I can't be certain to any outcome, the chart has got my full attention... as it did the first time I noticed the similarities. What's interesting is that after next Friday's close (7/29/2011), there will only be 1 trading day left before the U.S. must extend the debt ceiling or it runs out of money to pay it's debt. Would the Market's reaction be what the chart forewarns?

Just something to ponder while we see how the market closes today.

Best of Trading

Before the Bell: Possibe Bull Trap in $ES-F

Last night I made a case for a five wave advance that was followed by an initial ABC correction. While the depth of the correction was shallow, I stated that it was possible that another five wave sequence would follow.

In the ON session w.B exceed the origin of w.A and therefore the move from 1315.75 CANNOT be an impulse wave but could be viewed as an expanded flat. Levels for completion are where .C = 1.618 w.A and the RF extensions of 1.236 and 1.382.

There are certainly other ways to label is chart that would have us looking much higher. I'd like to see the open before committing to a more aggressive stance but thought that you might be interested in the possibility of a trap.

The Market Pulse

Bull Snorting and Bear Stomping

Who is really in control? Since the w.(3) crest of 1343, the market has made wild swings in both directions that just reminds me of allot of bullish snorting and bearish stomping.  Neither has yet to gain control. Today's session was no different. ABSOLUTELY NO FOLLOW THROUGH!

Sticking with "one wave at a time", I can make a case that the market completed five waves up as shown in this 3600 tick chart. While I have labeled the initial internal structure of the corrective wave, in the ON session, I'll need to see what transpires in the daily session before confirming that another impulsive move UP was underway due to the fact that the market has only corrected .382 of the previous impulse wave. Even if a deeper correction follows, another 5 wave advance to the upside is in the works if my interpretation is correct. How high remains to be seen as well as whether the move  bring clarity to the overall larger trend.

Best of Trading



The Moment of Truth for $ES-F

In light of today's move to the upside and the fact that the DOW and NASDAQ haven't confirmed the S&P wave overlap (see last nights post ), I thought I would at least show the running triangle interpretation for readers. However, it's showtime and the moment of truth has arrived as the Bulls MUST push the Market beyond 1354.5 (1352.75 the ES1 equivalent) to confirm that a triangle had completed AND make a new recovery high. Failure to print above 1354.5 (1352.75 equiv.) would forewarn, as a series of lower highswill be made possibly aligning the market as I described in my 2011 - 2007 analogy.

Let's see what happens.

Best of Trading

The Market Pulse

This chart was presented in yesterdays video edition of Heard On The Street . If you missed it I highly recommend watching it. Two levels of significance were cited (1293.75 and 1352.25) in the video. Today's low of 1291.25 was significant for two reasons.:

1. The print below 1293.75 effectively eliminated the running flat interpretation BUT the DOW and NASDAQ have not confirmed (see additional comments below). Given the length of each wave from 1252.25, a leading diagonal (that would allow for overlap) doesn't have the right structure therefore a 5th wave cannot be underway and,
2.  The area that we were watching on an intraday basis was reached, i.e. 1290.75.  In RT and as the market was declining, I said "$ES-F: also watching the 60 min chart... 1290.75 is .618 of 1352.75- 1252.25 swing. Also 3 sd ". When  price reaches a 3 sd ....  99% of all price action should be contained within the Bollinger Band.....so I was looking for a completed move at these levels. 

This after-the-fact chart  shows that price was actually contained within 2 standard deviations of the 20-sma  by the time price actually reached 1290.75. The significance here is that a 2 sd typically contains 95% of all price action. The high probability that price would be contained and the fact that the .618 retracement was in agreement  suggested that a turn was due. For tomorrow, I'll be watching the following resistance zones: the 20-sma to act as resistance. As of the close, the sma crosses 1304.75. Additional resistance (not shown) is 1305.25 - 1306.25 and the open gap.


Additional Comments:

At the daily chart level, the running triangle remains my alternate interpretation due to the reasons provided in my weekend video. While I haven't provided a count, my preferred pattern is the bearish pattern described in the video. The general shape and outcome are clear. Once the DOW and NASDAQ confirm the same overlap that is found in the S&P, the three indices will be aligned. At that time I'll discuss the larger trend. Until then we'll stay focused on a wave at a time.

Best of Trading

Heard On The Street: $ES-F #Copper #Soybeans $EUR-USD

INTRODUCTION and ANNOUNCEMENTS:

Today the world finds itself at a crossroad of immense proportions. Possible European Sovereign Default and the U.S. Debt Ceiling /consequences of a possible downgrade remain atop of one's "Wall of Worry" list. Huge changes are coming in the near future whether we're ready for them or not. Many investors cling to the false hope that the economic storm is over and that their battered portfolios will recover from a decade of lost returns. As they will find out, it may be only just beginning.

Don't worry. The sky is not falling and the world is not coming to an end. In fact, the future has never looked brighter for traders and investors who take the initiative to "batten down the hatches" and position themselves properly in the market for the coming economic hurricane.

On December 20, 2010, I published my first edition of Global Gains where I released my market calls for 2011 with respect to the U.S, Asian and European major indices, Currencies, Metals and Energy. Whether you are a new subscriber or an existing follower, you may want to compare the market position as of  7/15/2011 for each market .... then compare it to my forecasts that were made over a half year in advance. Just click on the Global Gains link above. Every post on this site is dated and time stamped so you know the posts are authentic and NOT after-the-fact. As you will see, most of those calls are outright scarey while others invariably missed the mark. That's just the nature of long term forecasting.  

I'm not reviewing this information to impress you but to impress upon you the value of the Elliott Wave Principle. Secondly, it's nearly time to update my forecasts for the remainder of the year and I think that readers will find similar value in my forecasts. I'm contemplating presenting my forecast in a webinar format near the end of August.  Stay tuned for details!

Lastly, I launched Elliott Wave Live on July 2010 as a free service, consisting of analysis and commentary on the US, Europe and Asia-Pacific markets, commodities, currency pairs, stocks and ETF's using the Elliott Wave Principle, Fibonacci Ratio Analysis and Market Timing strategies. My primary focus has focused upon the E-mini S&P. My insight has been provided primarily through my blog site, video recordings and my Twitter account.

Shortly in the near future, I will be adding another level of service... a premium service, that provides more timely intraday analysis, charts and a greater in depth look at the markets. While I have not finalized all the details and cost of the subscription service, I will offer a free trial where you can kick the tires and slam doors to determine whether this service is right for you.  All will be explained in a short video presentation at a date to be determined.

THE MARKETS:

In this weeks edition of Heard On The Street I'll be covering the Emini SP, Soybeans, Copper and EUR-USD.

Best of Trading

The Market Pulse : News Headlines Dominate Trading

After a two week vacation I'm slowing getting back into the grove. Tonight I am going to briefly discuss the larger view and provide a new count at the higher time frames by weeks end.

The wave structure that I had been working, shown above, the expanded flat was negated as the June 16 low completed a three wave structure. In my 6/28 post  , I mentioned that it was necessary for the market to print below 1252.25 in order to complete a five wave sequence.  It never happened, thus eliminating the expanded flat interpretation.

Turning to the intraday charts, today's session was dominated by Bernanke's QE3 comments. For now, I think he is just talking up the market but be certain that he will "pump and print" if needed.
Within moments of opening his mouth, Gold hit a new high and the USD was pummeled again. However, Moody's dropped a bomb on the Bulls "Risk On" parade by placing the United States' Aaa rating on review for a possible downgrade. By the close, the "Bernanke pump" had been erased.

While stating the obvious up until this point, the fact is that the market remains in a sideways trading range with wild directional swings.  There's allot of noise right now so staying focused on singular waves can save you allot of pain. 

Two counts that point down :

From the chart, the E mini SP appears to have made a five wave sequence from 1352.75 and have traced out a countertrend three wave affair that ended at 1327.75. Given the 5-3 sequence... at the minimum, another five wave structure MUST follow that could draw price to 1283.75.

Today's high could also be interpreted as w. a of a larger corrective pattern. Once complete , it will be followed by a five wave affair. It's to early to determine if this scenario will play out. Therefore, allow for the possibility of modestly higher prices before more selling pressure. A loss of 1295.25 would bolster the more immediate bearish view.

Best of Trading