S&P Week in Review for 10/25/2010 - 10/29/2010

Happy Halloween.

While everyone is trick or treating tonight, Wall Street might be celebrating the holiday twice this coming week. One for the elections and the other for the FED's policy meeting. Both announcements should bring some added volatility to the market. In anticipation of these events, the market has meandered in a sideways affair for the better part of two weeks. Currently I am anticipating another recovery high as the wave structure from 10/25/2010 has been in three waves. One could speculate that the new recovery high would be struck right after all the "news" is out. When this coinsides with the wave pattern, a powerful "sell the news" event might be in order as bullish optimism reins. This would be in line with what typically transpires at market peaks. Throw in lagging momentum, UPVDV and NYSE ADVDEC oscillators and its clear that the market lacks the strength to maintain a sustained rally at this point. Therefore any further strength should be short lived.

Here's the market's position as of 10/29/2010:

Momentum: OB on Weekly, Daily and 60 min charts.


Pattern: final wave.v of wave.c of wave.2

Time: No change from previous comment.

Trade Strategy: Remain flat past news events but looking to establish a bearish position as 60 min momentum indicator makes a bearish reversal while price and the wave count confirm a top is in place.


Best of Trading

Crude Oil: Flash Alert for October 29, 2010

Mini Crude Oil continues in a W-X-Y corrective w. iv structure.  Attached is the 60-min chart level with the appropriate wave labeling. Earlier in the week I anticipated prices to trade to 79. 15. I'm now expecting a final push down to 81.325 (.618 retracement of the c and d waves) or a possible test the center line of the price chart. Both projections are slightly above the original target. Expect higher prices after completion of w.e.

Aggressive traders may want to consider an entry as w.e completes. Currently the 60 min. momentum is OS and a bullish reversal (not made as of the post) should confirm that w.iv is complete. Stop below 80.525. Since the pattern isn't complete I can only provide estimated price targets. At a minimum, expect a new high above 84.425 with upside potential to 89.275. Once the pattern is completed, I will narrow the price target.

Best of Trading

S&P Futures: Daily Market Wrap for October 27, 2010

An interesting day in that the "turn down" in precious metals, crude oil and indexes all coincided with a continuation of a possible turn up in the dollar that began on Monday. As you know I've been pounding the table on the "all-in-one" concept whereas as the dollar goes, your investment is inversely related. Those market participants that were hoping that today's price action was the start of w.3 down in the ES_F were disappointed as the wave structure of the decline once again unfolded in three waves, followed by a late afternoon advance. This suggests that another recovery high will be made. The only factor that would negate this potential is for an initial close below 1167.75 and then a move below 1155.5.

Here's the market's position at the close:

Momentum: Remains OB on weekly. Daily time frame has turned down from an OB condition and a divergence between price is present. The 60 min is bullish.
Pattern: final wave.v of wave.c of wave.2

Time: No change from previous comment.
Trade Strategy: Remain flat but looking to establish a bearish position as 60 min momentum indicator makes a bearish reversal while price and the wave count confirm a top is in place.

Best of Trading

S&P Futures: Daily Wrap for October 25, 2010

In my week in review I stated that my position was "slightly bullish due to the triangle breakout following the period of low volatility (see 20-min. chart).  Absence of any 5 waves down from 1186.25, I must favor the upside". After an inspiring positive open the market fizzled into the close. I have repeatedly mentioned that the greater risk in the market at this point was taking the bullish side of the trade. Since 10/13/2010, the ES-F have netted +8.50 points against deteriorating internals. Whether you're trading for points or ticks, you can see how dangerous trading this market has become. The market continues to make higher highs in 3 wave patterns. One would conclude that this is a final diagonal pattern but the chart doesn't count well. It's possible that w.2 ended today, yet every rise has been followed by 3 wave declines. Until I have confirmation of 5 waves down from a peak.... I'll sit on my hands. As soon as I can identify that a top is in place, I'll show a detailed chart.

Here's the current market position for the E-mini's:


Momentum: Remains OB on weekly. Daily time frame has made a bullish momentum reversal. 60 min chart has made a bearish reversal.


Pattern: final wave.v of wave.c of wave.(2)


Time: The previous time relationships were negated.

Trade Strategy: Flat.

Best of Trading

Crude Oil: Flash

Mini crude broke above KR (key resistance) earlier today but has since made a reversal back to the same area of 82.7. What was once resistance should now be support. However should price trade below 82.7, wave overlap would have occurred indicating that the move from 79.8 was a counter trend move. My expectation is that the entire wave would be retraced with a potential target  of 79.15 to complete a W-X-Y corrective pattern. Let's see what develops.

Best of Trading

S&P Futures: Week in Review for Week Ending 10/22/2010

The ES_F made very little upward progress for the week. The major theme continues to be the relationship between the USD, cocommodities and indices. Therefore I will not be reiterating previous commentary. Rather, I will provide the weekly charts of the Dollar, Gold and the S&P. Readers can review the archive section for the month of October to obtain a greater understanding of the "all in one" relationships between the currency market, commodities and index futures.

Here's the market position for the ES_F as of 10/22/10.

Momentum: Remains OB on weekly. Daily time frame has made a bullish momentum reversal. 60 min chart level has also made a bullish reversal.

Pattern: final wave.v of wave.c of wave.(2)

Time: The previous time relationships were negated.

Trade Strategy: Slightly bullish due to the triangle breakout following the period of low volatility (see 20-min. chart).  Absence of any 5 waves down from 1186.25, I must favor the upside. However, the higher percentage trade remains a flat position but looking to establish a bearish position as momentum indicators and price confirm a top is in place.

Other weekly charts:

Best of Trading

S&P Futures: Market Wrap for 10/20/2010

Last time we spoke, I mentioned that we could see a further rally in the USD. Indeed we did. However, looking at the 60- min. chart through today a bearish and bullish case can be made. I've attached a chart of the bullish interpretation. Should the bearish case prevail, a new low will occur. The same can be said for the ES_F. One can argue that the decline from 1182. 25 is a three wave structure and that today's wave pattern is tracing up in an impulsive manner or that the structure was corrective. Odds are that it is impulsive as the current decline from 1179.25 looks corrective, possibly a 4th wave at lower time frames. Expect a new high if the bullish scenario plays out.  

What I want to make clear to the readership is that there is no clear wave pattern. When I run into this, I simply wait for the market to commit to me before I commit to it and place my money at risk.

Here's the market's position as of the close:

Momentum: Remains OB on weekly. Daily time frame has turned down from OB area. 60 min chart level has turned down.

Pattern: final wave.v of wave.c of wave.2

Time: The previous time relationships were negated.

Trade Strategy: Neutral. Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.

Best of Trading

S&P Futures: Market Wrap for October 18, 2010

HAS THE DOLLAR TURNED?

Today I was looking for some weakness off the open with respect to the USD. What transpired was a further subdivision upward to complete w.i, followed by what I expected... a w.ii decline. At the close, price appeared to bounce again suggesting that tomorrow we could see further strength manifesting itself as a w.iii.

Conversely, as expected, we did see higher prices in the ES_F but the momentum signature that I discussed in the weekly wrap reached a new high instead of producing a divergence. With respect to the SPX, the ROC moved higher confirming the potential for divergence as a new high was reached.  

The market closed very weak. At the time of this post, futures are down 4.75 suggesting further weakness early on into Tuesday's session. While the new recovery high meets the requirements of a completed five waves, the structure is less than desirable. Trade below the lower trendline would give me more confidence that a top may be in place.

Here's the Market's position at the close of trade:

Momentum: Remains OB on weekly and daily time frames. No turn down. 60 min chart level has turned down. Expect selling pressure in the ON session or at the open of Tuesday's trade.

Pattern: final wave.v of wave.c of wave.2

Time: The previous time relationships were negated today as time has exceeded the projections for a top to be made.

Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.

Best of Trading

S&P Futures: Week In Review for October 15, 2010

The USD continues to be the focus whereas a bottom of W.2 may have been struck on Friday at 9:00 am est. Looking at the following charts we can see support buying coming into the market on volume at the previous w.ii circle. Furthermore, this aligns well with the commentary that I made in late September. If you would like to review it click here: http://elliottwavelive.blogspot.com/2010/09/s-futures-week-in-review-for-september_25.html

I am expecting some weakness in the Dollar for Monday as momentum indicators have turned down at the 60 minute chart level. Expect a three wave decline followed by a break of 77.355 that would confirm that w.2 had ended on 10/15/2010. Should this occur,  equities would be impacted.

Turning my attention to the ES_F market, there is an absence of 5 waves down. Therefore I must consider that price will reach a new high consistent with my down, up analysis made on Oct. 11, 2010. I have included two charts that show what I am looking for and what would signal that wave.2 top is in place. First, I've drawn a red line showing how a divergence between w. (iii) and w. (v) might be forming. Tops and bottom formations often exhibit these diverging signatures. Secondly, a chart of the SPX shows what I'll be looking for in terms of the ROC. Note the black bar that I have drawn in. This slightly higher bar would coincide with one last push up... again a momentum divergence from price. Aggressive tradeRs should be leaning against a completed wave count and these signatures with a tight stop. More conservative traders can wait for a break of the lower channel boundary. I'll try to identify both when they occur.

Here's the current market position for the E-mini's:

Momentum: Remains OB on weekly and daily time frames. Sideways. No turn down.


Pattern: final wave.v of wave.c of wave.2

Time: L-H time relationships of 4-5 weeks indicate that a significant top should occur by the week ending on 10/15/10 +/- 1week"

Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.


Best of Trading

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

I continue to watch the USD Index in anticipation for a turn that will undermine the current rally in equities and commodities. So far the index has held above the low established on 10/11/2010 but  most recently the Index can't seem to put together any sustainable follow through.

Today's ES_F move forces some minor labeling changes of the 60-minute chart. Nothing changes the outlook. I am anticipating a small move down, followed by one more push to new highs based upon today's trade. Here's the market's position as of the close:

Momentum: Remains OB on weekly and daily time frames. No turn down. 60 minute TF has turned down supporting a decline.

Pattern: final wave.v of wave.c of wave.2

Time: No change from previous comment, "The weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week"

Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.


Best of Trading

S&P Futures: Alert for October 13, 2010

I'm ccancelling the potential trade set-up sited last night due to ON session strength. Traders should monitor price around cited resistance of 1172 at market open. At the time of this post, the ON high was 1174.75. Let's see whether the regular session trades at this level or if the ON session has stolen the day's thunder and a reversal occurs. Expect a gap open. If it gets closed then the gap may have been exhaustion gap.

Best of Trading.

S&P Futures: Trade Alert for 10/13/2010

Last night I covered my expectations for trade today. Please read that post if you missed it or to refresh your memory. Today price traced out a down - up pattern in three waves each. This continues to confirm that the pattern is an ending diagonal. Technicals have diverged on lower TF's as price confirms the possible top. While there are no guarantees, as a trader I am compelled to trade this from the short side tomorrow as long as the market's position doesn't significantly change in the ON session. It's a good location. Stops above 1172.


If the ON session shows some strength, I may wait until a break of the lower trendline before looking for an entry set-up. This is a more conservative entry but a safer play.


Let's see what develops.

Best of Trading

S&P Futures: Market Wrap for October 11, 2010

Holiday markets are always slow and it's hard to gain much insight from them. I continue to monitor the USD trade like a hawk. Sunday night, the dollar gapped down and price has since filled the gap in today's trade. There's support just below the market at 76.7 that should limit any further downside. Looking at the wave pattern, it is clearly an ending diagonal. Now may be a great opportunity to go long with a limited capital exposure against the crowded dollar down trade.

If the Dollar has made it's w.2 low, equities and commodities should come under increasing pressure to trade lower. Turning my attention to the ES_F market, the following market position as of the close is:

Momentum: Remains OB on weekly and daily time frames. No turn down.


Pattern: Ending diagonal of wave.c of W-X-Y pattern

Time: No change from previous comment, "The weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week or the week ending 10/15/2010. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week"

Trade Strategy: Remain flat but looking to establish a bearish position against the termination of the ending diagonal that coincides with the turn in the US Dollar. Looking at the daily chart of the ES_F , I've labeled a possible expectation for the next few days as well as the previous wave.4 red resistance level. There are certainly other ways to label the diagional that would allow for the termination of the pattern to end tomorrow. Either way what's important to understand is that confirmation that the pattern had ended is a swift move below the trendline. When it does, the minimal expectation is a move back to the origin of the pattern (1117.25) and often much further. This should be a great set-up for shorts against the high of the pattern.

Best of Trading

S&P Futures: Week In Review for the week ending October 8, 2010

The e-mini S&P continues to march forward even as several indicators suggest that a top is immanent. While indicators can assist in building the bearish case, price ultimately will tell me when the market has truly made it's turn. Currently the market is within a few points from wave. 4 (red) of wave.1 blue. Elliott refers to the fact that corrective structures often reach the span of the previous fourth wave of  one larger degree. That objective is 1172. I certainly didn't think that wave.2 would reach such a lofty objective due to the fact the other high probability target zones existed well below this area. The bottom line is they were all exceeded.

As I mentioned in my weekly review for September 24, 2010, the US Dollar will need to terminate wave.2 before a significant top in equities can be put in place. I believe this to still be the case as the very mention of FED's QE.2 has added pressure to the upside for equities and commodities while hammering the dollar. Current market sentiment for the Dollar is just at 3% Bullish. So the "dollar down trade" is highly crowded. With the overhang of more easing, some other event is going to trigger the Dollar's turn.

Here's the Market's position at the close of the week.


Momentum: Remains OB on weekly and daily time frames. No turn down. 
 
Pattern: final wave.v of wave.c of wave.2
 
Time: No change from previous comment, "The weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week or the week ending 10/15/2010. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week"
 
Trade Strategy: Remain flat but looking to establish a bearish position as momentum indicators and price confirm a top is in place.
 
 
Best of Trading

Flash: USD Making Turn?

Yesterday I posted a chart of the dollar as it reached it's .786 retracement of wave (1). As you know I have stated that the equity rally would not end until the Dollar had made it's turn. Here's the intra-day chart with the corresponding wave labels. While the current wave structure is encouraging, momentum is OB. Expect sideways to down early on. What transpires thereafter will tell us whether a W.(2) bottom has been put in place.

Best of Trading

US Dollar Possible Turn: Effect on Equities

The US dollar has reached a .786 retracement of w. (1) and has turned. With sentiment below the levels seen at the 2009 lows, it's reasonable to expect that the dollar has made it's w.2 bottom. As previously noted in my posts, I believe that the market's are moving in a "all in one" fashion. Meaning, as the dollar goes, so does the market.  Sell programs across the board right now. 
Best of Trading

S&P Futures: Market Wrap for October 6, 2010

In my daily commentary from Monday, I stated that if a larger degree w.3 was unfolding, then price MUST break through the bottom channel trendline in an impulsive manner. Conversely, a break of the upper channel line and a close above 1144 would indicate that the decline from 1153.5 was just part of a larger w.iv correction and we can expect new highs with limited upside potential. That analysis should have benefited buyside traders. However, two days later and there has been no further follow through to the upside after Tuesday's advance.


Here's the Market's position at the close.

Momentum: Remains OB on weekly and daily time frames.
 
Pattern: W.iv of w.v of w. (v) of w. C of w.2 or 1-2, 1-2 count of w.3. The higher probability being a corrective structure.
 
Time: Looking at the weekly chart level, H-H time relationships indicate that momentum highs range between 6-8 weeks +/- 1 week. That indicates that the top of wave 2 should occur at the end of this week or the week ending 10/15/2010. In addition, L-H time relationships of 4-5 weeks indicate that a significant top should occur at the end of this week +/- 1week.


Trade Strategy: With weekly and daily momentum OB, there is limited upside potential as the wave structure is mature. There is greater risk trading long at this point. One trade that I'll be looking at is a break of 1151. My reasoning is that a break below this swing low opens the door for an w.iv A-B-C correction and possibly something larger if the wave pattern proves itself as minor w.3 down.
 
Look for my Twitter updates and follow this trade as well as others in real time at http://www.elliottwavelive.blogspot.com/
 
Best of Trading

S&P Futures: Market Wrap for October 4, 2010

In my weekly wrap up I presented a case for a bearish turn... the completion of W. 2. Moving forward I will be using a similar format so that everyone can see how I combine 4 factors to locate a possible trading opportunity and make a trading decision. I hope everyone finds this helpful and I'd like to get some constructive feedback.

Here's the bottom line as of the close of trade.

Momentum: Overbought. Weekly momentum is starting to roll over. Daily momentum continues to decline but remains in overbought territory. 60 minute momentum is oversold and has turned up indicating sideways to up prices early on tomorrow.

Pattern: Possible beginning of W.3 or building a larger W.4 decline that can't be ruled out at this juncture. That's why I stated in my weekly wrap that at a minimum a 3 wave decline would transpire. Keep in mind that my suggestion to go short was based upon the fact that two viable wave count interpretations indicated that the market position had a high probability of a decline for today's trade.

Price: The decline from 1153.5 has remained in channel lines. If indeed a larger degree W.3 is unfolding, then price MUST break through the bottom channel trendline in an impulsive manner (See red bar). Tomorrow that line crosses 1119. A break of 1119.25 would also bolster the bearish case. Conversely, a break of the upper channel line and a close above 1144 would indicate that the decline from 1153.5 was just part of a larger W.4 correction and we can expect new highs with limited upside potential.

 Time: High to high cyclical patterns indicate that a momentum high should be reached within the first hour of tomorrow's trade.

Trade Strategy: As long as weekly and daily momentum remains in overbought territory, short positions should be established on lower time frames. Look for 60 minute momentum to reach an oversold condition. Enter a short position on a lower TF as the lower TF momentum makes a bearish reversal. 

Best of Trading

S & P Futures: Week in Review for October 1, 2010

With so little net process last week, I thought that I would share with everyone what my opinion of the current market position for the week ending 10/1/2010.

Momentum: Overbought. A weekly momentum high is likely within the next bar or two followed by a decline lasting several weeks. Daily momentum is also overbought. The immediate upside at this point is limited.

Pattern: Corrective. The trading has been contained within parallel channel lines and is typical for a corrective pattern. Expect a minimum a 3 wave decline or the resumption of the larger trend down resulting in new lows.

Price: The .618 retracement from the low of wave 1 ( 1038.5) has been tested multiple times. Price is currently just below this important level. A 1.272 reverse extension  (1151) of the decline from 1126.75 - 1037.25 has also been tested. In previous posts, I mentioned other clusters of fibonacci targets for the termination of this correction ( 1158, 1150.75). While there is another key area above the market (1171.5- 1182), the fact that several fib targets are clustered in close proximity to each other and near the .618 retracement leads me to believe that the rally has ended or is near confirming such.

Time: From the low of 1006, 10/5/2010 +/- 1 trading day is the 100% time retracement whereas wave c = wave a of 27 bars. Also, 10/1/2010 +/- 1 trading day whereas wave b = .382 and wave c = .618. Therefore there is an expectation that the rally ended on 9/30/2010 or will do so between 10/4 - 10/6.

Trade Strategy: Go Short. With weekly momentum, pattern, price and time all in position for a high, the trade strategy is to consider going short on the shorter time frame daily chart. How you accomplish that depends on your own trade plan.

Best of Trading.