S&P Futures: Market Wrap for Spetmeber 29, 2010

Back to back days of lackluster trade on low volume. Today was an inside day. These price bars are often the precursor for range expansions. With GDP, Jobless claims, Chicago PMI and Helicopter Ben speaking early in the morning, we should expect a volatile trading session.  There is no material change to my forecast that was published in the week in review. For those readers that are first time visitors or those who may have missed the post click here.


Best of Trading

S&P Futures: Flash Alert

The market is at a critical juncture. Current trade is down on impulsive action. A Weekly H&S pattern may be setting up for failure. There are several flaws in the pattern that are evident according to the the textbook pattern. Volume at the head should be on heavy volume (capitulation) and the break of the Neckline should show significant volume expansion if the breakout is real. Friday, the CNBC "talking heads" declared the breakout. All the BO traders had to jump this move. Now we are retesting support that must hold.

Let's see what unfolds.

Best of  Trading

S&P Futures: Market Wrap for September 27, 2010

A very boring day from my view point whereas the market spent much of the day within the resistance zone near the top end of my projected targets of 1134 + 1%. As I mentioned in an earlier post, the only upside target that may still be in the works is where wave c = wave a at 1158 and closes the gap. In the meantime, prices have been testing the .618 retracement of the entire move down from 1216.50. Caution is still necessary as this area is not getting any stronger. There have been 3 tests of the area from a week ago.

What interests me to day is that I can count 5 waves down on a 20 minute chart. While this by itself confirms nothing, it could be the beginning of the resumption of the larger degree trend. Therefore, I will be watching intently for confirmation of  the trend change. As soon as I am able to confirm it I will discuss it.

Until then,

Best of Trading

S&P Futures: Week In Review for September 24, 2010

The current rise in equities and commodities exhibit the concept of "all in one" whereas it seems that everything is pegged to the US Dollar trade. With the FED's announcement this week, it is clear that  Keynesian economics is still very much alive. Hopes for a full recovery and the re-inflation of assets are dependent on quantitative easing (QE) that further devalues the Dollar. The Market seems to favor this continued approach. We will not debate this issue but in my humble and subjective opinion, only a bottom in the US Dollar can derail this rally. I want to be clear that I am not changing my long term bearish bias. I'm merely stating my perspective regarding the current  rally.

The following weekly chart shows a target box for termination points for wave 2 (blue). Price has also reached the previous 4th wave, a typical termination point for corrective price structures and the .618 retracement. Should prices fall below this area then my expectation is for a termination to be at the lower end of the target box.

The two SMA's, 30 and 10 represent cyclic activity. While no attempt has been made to determine the dominant cycle, both moving averages seem to match price bottoms and tops quite well. Notice that both cycles topped at wave 1(blue) and are now hard down. Regression analysis indicates that a low may be struck at 77.37 which is well within the target box. So we have two methods pointing to near term lower prices, then bottoming.

So how does this analysis fit into our e-mini trading? Simply put, I expect higher prices. Looking at the daily chart level, several target areas are evident such as:

1. 1150.75
2. The open gap at 1156.75
3. The previous 4th wave and reverse fib extension at 1172.5
4. Wave (c) =wave (a) at 1158.

As I mentioned earlier this week. The stage has been set for a turn. The information that has been provided  herein provides key areas that you may want to consider for trades. As always, consider your risk and speak to a licensed broker or investment advisor before taking any investment action.

Best of Trading

S&P Futures: Market Wrap for September 22, 2010

The upper targets have been achieved from my previous forecast of 1134+/- 1%. In doing so, several points of interest are: internals are weak; the NYSE ADV/DEC is diverging as price rallies; ROC and other short momentum indicators are beginning to rolled over. Sentiment indicators and the Put/Call Ratio appear to be signaling a reversal is near. Yet as of the close, we have no confirmation that a top has taken place.

The wave structure is mature but I can't rule out the possibility that price will not try to close the gap surrounding the previous 4th wave at 1158. Also, price has yet to reach the upper boundary of the channel. Tomorrow this line goes through 1151.25. It's important to note that extremes of channel lines mark cycle tops and bottoms. How you might ask? Because when a longer duration cycle than the one contained in the channel lines rolls over, curvilinear channels (not shown) also turn and prices quickly break through the chartists trend lines. The grey lower trendline is of significance. It was tested today and held leading me to believe that the upside is still viable. Should the market break the trendline in a convincing manner my assumption is that a major price reversal is founded on the fact that:

1. A long duration cycle has caused the effect and it will be quite some time before the previous trend is resumed.

2. A long duration cycle has a large magnitude associated with it and therefore the amount of price range associated with it should be significant.

For tomorrow, my trade plan is to scalp while waiting for confirmation that a tradeable top is in place. Don't forget to follow me on Twitter for intraday comments at www.twitter.com/elliottwavelive


Best of Trading

S&P Futures: Market Wrap for September 20, 2010

So much for a quiet day before the FOMC announcement. Let's get right into it. The following chart shows where we are in terms of the current wave count. If you have been following along you know that I was calling for a breakout and a price target of 1134 +/- 1%. We have also reached the point where wave (v) = .618 wave (i) - (iii) at 1135.75. The high of the day was 1140.25 so there is certainly more room to the upside should the internal structure of wave (v) subdivide. 

You will also note that the previous high on June 21 labeled wave 2 (blue) , (1126.75), has given way to an alternative wave count whereas we never began wave 3. Often countertrend moves are difficult to nail down  until such a point where both technicals and wave structure finally come together. To be frank, I certainly had difficulty with the labeling but I alluded of this potential outcome as early as August 31 and then again on the following day. To quote. "Food for thought - Turning to the larger picture, the elusive, wave iii of 3 down, has not materialized leaving me cautious as if I smell a fox in the chicken coop! At the daily chart level, the market has meandered sideways for 3 + months. This is not the kind of price action one expects if we are truly in a third of a third. However, the larger count ( not shown) is still the highest in probability and should be maintained until such time as price renders us wrong. In the meantime, there is nothing wrong with looking ahead and playing "what if". Several possible explanations are available, although premature. Could we be building a triangle B wave that counts the decline from 4/26/2010 as an A-B-C structure or are we building a combination wave 2 pattern? " Well today we have our answer. It's a combination!  W-X-Y.

A few other key notes. Earlier in the commentary I mentioned that wave (v) could subdivide further. If so, the wave (c) = wave (a) at 1158. It's a possibility. What is of interest here is that an unclosed gap is at 1157 which by coincidence is in the vicinity of the previous 4th wave. This should make you pay attention to the message of the market because countertrend moves can end at or near the previous 4th wave. I'm not stating that the market can get there, I'm only drawing your attention to the fact and the principles of EW.

Looking forward, I am still be looking for a top as this rally is extremely long in the tooth. Until next time...

Best of Trading.


P.S. Don't forget you can follow me on Twitter for intrady updates at www.twitter.com/elliottwavelive

S&P Futures: Week in Review for September 17, 2010

I apologize but this Week in Review will be brief as I am having some unresolved software issues and I can't pull up my charts. Before Friday's session, I suggested that traders let the market commit to us before we commit capital to it. Heeding that advise keep you out of the market waiting for confirmation that a top was in place. Reviewing price action, Friday could best be described as choppy action that certainly didn't get me excited about placing any bets to the short side. From a technical standpoint, various momentum indicators suggest an imminent top but the fact is that nothing is resolved and it remains to be seen if a lasting top  (wave 2) is in place or if the bulls will make another run at the 1134 area.

Focus in the early part of this week will be on the FOMC meeting. Typically we see an upward bias before the announcement but I will not be surprised to see a narrow trading range on Monday. So being patient is key. I should have my computer issues resolved tomorrow morning and hope to have more detailed comments in tomorrows daily wrap.

Once again, please accept my apology on the lackluster post.


Best of Trading

S&P Futures: Watch update

Scalping  here and there in the am session but I am still waiting for the confirmation that the top is in. It looks like we are beginning the next leg down. If so, that would count a third wave. Need 5 waves down , then 3 up to put a position trade on.

Best of Trading

S&P Futures: Watch Alert for September 17, 2010

The ES_F hit 1132.75 in the ON. Previously discussed targets of 1134 +/- 1 % have been reached. Let the market commit to you before you commit to it. I need to count 5 waves down in an impulsive manner followed by a 3 wave countertrend move up to act. Should set up a great selling opportunity against recent highs.

Best of Trading

S&P Futures: Flash Notice

The wave structure looks to be a wave iv triangle that when complete would result in a last gasp impulse wave to 1134 +/- 1% thus completing wave 2 (revised count from previous daily levels).

Best of Trading

S&P Futures: Market Wrap For September 15, 2010

Not much has transpired in the way of price appreciation since Monday. Both Monday and Tuesday were either doji or spinning tops depending on your interpretation. Regardless, they show indecision and declining momentum. What we don't know is whether they are just part of a continuation signature or if they signal that a top is forthcoming. Today showed a slightly more bullish candle that closed near its high. I'll be looking for initial upside momentum to pick up tomorrow or in the ON session.

As I have mentioned, I have to believe that we are going to take out the 6/21/2010 high of 1127.50. My upside target remain at 1134 +/- 1%. There has got to be a tremendous amount of buy stops just above the 6/21/2010 high. One would think that this adds fuel to the fire, pushing prices higher. What's odd is why larger players have not forced the issue in the first 3 days of this week so they can liquidate their longs. The answer might be that there is also allot of overhead supply between 1127.5 and 1150 waiting to break even on longs that were held throughout the decline. It will be interesting to see how much buying will be absorbed from new bearish positions, long liquidations from profit takers and frustrated bulls who finally get a chance to break even.  I have to call this a draw between the Bulls and Bears but when the dust clears, the Market should roll over as the Bulls have exhausted their energy.

Finally,  for my analysis to turn immediately more bearish, I still need to see a decisive close below 1110 in an impulsive manner with five completed waves.

Next update is on Friday, 9/17/2010.

Best of Trading

S&P Futures: Market Wrap for September 13, 2010

Good Evening. As a reminder I am only posting to the blog on a M-W-F basis but you can get my intraday thought by following me on twitter. The URL is : https://twitter.com/elliottwavelive

From my week in review that I previously posted, I was anticipating an ending diagonal to form today. With today's gap open and persistent strength, the diagonal interpretation has given way to the other interpretation of the wave structure that I brought to your attention... a iv wave triangle. Given this alternative I indicated that greater upward potential could hunt stops above 1126.75.


Earlier today I posted preliminary projections for wave v to my Twitter account. I can now revise those with somewhat greater clarity. My projections using the diagonal interpretation were 1119.25- 1121.76. Looking at the current wave structure as depicted in the chart wave v should terminate according to the following Fibonacci extensions:

wave v = .618 waves (i) - (iii) at 1141
wave v = 1.618 wave (i) at 1123.52

Looking at daily cycle analysis, upper projections point towards 1134.75 +/- 1% which is agreeing with my Fib projections. As always, these targets are not magnets but areas that one should focus upon if the market approaches them. It's what price does after encountering the key areas that matters... meaning we should see an impulsive 5 wave structure if this countertrend rally has completed.

Best of  Trading

S&P Futures: Week In Review

The Market ended the week with a negligible gain. NYSE volume was putrid;765.6 million shares traded... the lowest of the year. I found two interesting chart patterns that I would like to share with you. They are  "fractal" in nature. Fractals are the structures Elliott described as self-similar patterns appearing at every degree of trend.

Looking at the first chart, we can compare the current wave structure to that of the decline from the 2007 top. In the far left hand box, notice how prices were able to push up in one final surge before resuming the downtrend. Looking at the box on the right, the same fractal is present suggesting that once this countrend rally has completed, the market will trade significantly lower consistent with the longer term trend analysis and wave interpretation.

The second fractal is the ending diagonal pattern. From the 120 minute chart, notice the larger diagonal that terminated at wave 2. Now compare it to it's brethren depicted in the right hand box. Should the market push up as expected to complete wave v of the diagonal, the stage would be set to resume the larger downtrend which is consistent with the weekly chart shown. What is unclear is whether the market has enough umph to close the gap at 1119.75. I have to think that larger market participants are not going to let the market decline before this gap is closed. So near term, that's my target even though a new high is the only requirement to fulfill the completion of the pattern!

Finally, there is one other interpretation of the wave structure that I need to bring to your attention. It is possible that a iv wave triangle ( not shown) is forming that would have greater near term upward potential... one that might hunt stops above 1126.75. Should this play out, this would not negate the weekly fractal pattern but it would alter the overall daily wave count from wave 1 (1038.50). In this case, a combination wave 2 (blue) would most likely be in order, follwed by the wave 3 decline.

The early part of next week should tell us the information that we need to position ourselves for the next market turn.

Best of Trading

S&P Futures: Posting Update Notice

Hi everyone,

Starting today, I will only be publishing commentary three times a week ( M-W-F). Intraday post are posted to my twitter page. You can follow me at: https://twitter.com/elliottwavelive

Bet of Trading

S&P Futures: Market Wrap for September 7, 2010

The market concluded today's session with an attempt to close the gap from Friday. On a closing basis, the gap is still open. As I mentioned earlier today, I need to see trade below 1090.5 to conclude that several other wave interpretations can be taken off the table and to place any bearish positions. Trade below 1081. 5 would bolster the bearish case.

The chart presented tonight is a "best" interpretation of the wave structure that calls for selling pressure. It is also quite possible that other alternative counts are best suited and another high may be in order. We'll have to see over the next few days what the market has in store. In the mean time, caution is advised and position sizes should remain small.

Food for thought - Turning to the larger picture, the elusive, wave iii of 3 down, has not materialized leaving me cautious as if I smell a fox in the chicken coop! At the daily chart level, the market has meandered sideways for 3 + months. This is not the kind of price action one expects if we are truly in a third of a third. However, the larger count ( not shown) is still the highest in probability and should be maintained until such time as price renders us wrong. In the meantime, there is nothing wrong with looking ahead and playing "what if". Several possible explanations are available, although premature. Could we be building a triangle B wave that counts the decline from 4/26/2010 as an A-B-C structure or are we building a combination wave 2 pattern?

Bottom line is that the market will get as many participants on the wrong side before it tips it's hand. Let's see what unfolds.

Best of Trading

S&P Futures: Pre Market for September 7, 2010

Looking for confirmation that a tradeable top is in place. Trade closing Friday's gap (1090.5) in an impulsive manner would be what I need to see to act.

Best of Trading 

S&P Futures: Pre Market Analaysis for September 3, 2010

Jobs report just came out and the futures are flying higher. Does anyone think that the market manipulators get the reports before us? Of course they do.

At the time of this post, the market seems to be challenging the gap established on 8/11/2010. I don't know if the market has the muscle to close it but the thrust off of 1039.25 appears to be too strong for the current count.

Open interest and volume over the rally continues to fall ... so technicals still indicate that shorts are liquidating positions. This is only a corrective wave structure. Once this rally exhausts itself, trend should resume down.

Best of Trading

S&P Futures: Market Wrap for September 1, 2010

The market certainly didn't cooperate in holding below 1054.25. The previous interpretation was incorrect. Structurally, the price action is still to be viewed corrective but it appears that my comments on August 31, 2010, i.e. " keeping the possibility of a larger upside correction on the table" are unfolding. Today the market traded impulsively. The attached chart includes the new internal structure. While we have satisfied the minimal requirement to count 5 waves up by the fact that wave iii (blue) was exceeded, the market may further subdivide into a larger fifth wave. Should we fail to see any significant follow through, odds favor a wave (ii) purple completion.

Best of Trading

S&P Futures: Pre Market Analysis for September 1, 2010

If the overnight session is any indication, I'd have to concede that wave (ii) purple up has still not resolved itself as a break of 1054.25 is immanent. Several technicals still point to a counter trend wave structure that began on August 25, 2010. Yesterday, both volume and open interest declined... a signature of short covering. Once the buying pressure subsides, we should see the resumption of the trend which is down.

Best of Trading