Markets 11/229/09

Instead of assuming that the market somehow knows the future and somehow managed to get information despite the Thanksgiving holiday here and the holiday in the Islamic world which is closing markets until Tuesday, let's assume with Mr. Wyckoff that the market shows the interests of the major financial players including the government. In this case the interest was to buy in the thin market Monday so as to prevent a panic. And buy they did for 1 1/2 hours as virtually every close was near the top with heavy volume. The question is when and where are these support shares placed back on the market.
Mr. Wyckoff wrote that one of the indications of a change in trend is that the reactions are larger than the previous reactions and that is the reason I placed the blue egg underneath said reaction. The count on the 1100.5 line is 27 for a possibly substantial move down. The minimum short term move down from the top was 6 boxes across the 1106 line and we moved down 5 substantially completing the count. The market then rallied up 2 boxes to 1094.9 and retraced 1 box to the close. If it rallies 2 boxes from here the count is for a rally of 7 boxes. Declining 2 boxes will fulfill the count at the 1106 line and possibly confirm the down trend. We are on a hinge.
For your perusal.

Markets 11/24/09 There is something wrong in Asia

Notice the chart does not contain the last 3 o's which make the last up ward move climactic.
In my weekend post I showed how all of the world's major stock markets moved together. That they essentially moved with the Fed's QE. That the dominant players were heavily involved in one trade and that was to heavily short the dollar and be long everything else. There were signs of distribution throughout the world and there did not seem to be enough money to hold everything up. The leverage to do all this as well as to drive bond rallies all over the world and fund massive worldwide budget deficits is probably in the hands of a relatively small number of players. The leverage must be huge. A problem anywhere must effect everywhere...

There is a problem in Asia.
The horizontal formation of the past few weeks sure looks like distribution.
The spx also is flattening out in new high ground with shortening of the thrust. Moreover prices have worked out to an apex, to move either up or down sharply.
Oil looks like it is breaking down.
Treasury bonds surprisingly enough might be ready to move lower again.
The Russell continues much weaker than the SPX and now has a huge area of distribution going back ot early August.
Yesterday, prices were bid up overnight in order to create demand for equities, both from trapped shorts and new longs who like action. After that demand was satisfied, prices fell of there own weight. Today that decline accelerated and was sharp enough that support stepped in with stunning demand at A. On the next decline observe a perfect secondary test and notice how the supply vanishes for one bar. I have to go to sleep so let me just say what I hoped to demonstrate. You as the chart reader must answer the question of what the support buyers intentions are. Is it to hold prices up to distribute more as the point and figure formations would imply? or is it to try to induce another major rally? Knowing this can change on a dime, I believe the former. Good night.

I am sorry, on re-reading this none of the labels came through.

Markets 11/23/09

Lets look briefly at the last two days. The flat area around 109.25 -109.02 quite simply is accumulation. We break out from there and weakly rally, making higher highs and higher lows. Today the market gapped higher, which means prices were raised without buying many shares. The spike up is a buying climax, after which prices were held in a narrow range for further distribution. Demand was evidently temporarily exhausted as prices fell the remainder of the day in a stair step fashion, with little ability to rally. No one could ask for an easier way to sell alot of stock at high prices than today's action.

It is hard to believe something could gap so much higher on such little volume.
9:55-10:05 was clear stopping action. The heavy selling overwhelmed the demand and exhausted it. At 10:15 find the evidence demand was exhausted. Notice the weak rally which can attract neither a following nor range nor ease of movement at 10:30-40. Notice how weak the rallies are the remainder of the day. Demand must enter to turn this market and so far there is not much.

Please observe the buying climax previously mentioned on the 1 minute chart.
Given the world wide possible top forming in equities, today's buying climax was a low risk place to go short, with minimal risk. In fact despite today's impressive advance, there has been little buying for days.

World markets 11/22/09

Compare the advance off the lows to the other charts below. All the other advances had the power to make it past at least a few of the congestion zones on the right. It is no wonder that this is the first market to get into trouble. See below.
Beginning in August this market became disorderly. It made both higher highs ans lower lows until the peak. About this time the ease of movement started to be greater to the down side than the up side and that has continued. Given the weakness of the last rally there is a good chance this market has turned.

I posted the American market for comparison purposes. However the last 5 congealed rows should not be interpreted bullishly. This sharp up down movement in a tight range after a long advance is the hallmark of distribution.



From August on this advance struggled mightily. It had a stair step like advance but it always fell deeply back into the preceding range and then had a sharp short covering rally. Behavior changed on the last decline. The DAX made a lower low for the first time since July and the short covering failed to make a new high. As such we have a potential down trend which will be confirmed by ease of movement down. With this kind of formation and distribution going on during the advance since August, the downward count can become tremendous.

For self instruction compare the chart of Brazil, our South American representative with the Netherlands. Brazil came no where near a new low in March for example. Study the amount of overlap and retracement etc; How many of the reactions are 50%?

The largest reaction is the one off the high at 67500 for 7000 points. It followed Brazil discussing a 2% tax on hot money entering its blowing off stock market. Since then the market upthrusted its high by one x and fell back into its range. This like all the others might easily be topping action.


Australia was halted by long term resistance. It made a higher high then a lower low in its present area of congestion. It closed Friday in the middle of its trading range.
Since September, this chart looks distributive. The down move from 4850 t0 v4550 was stronger than the immediately preceding upmove. Since then Australia despite all the bullish song and dance about commodities has failed to make a new high with the S&P. You can see on the daily that the last rally was stopped at the zone of distribution.


From the Euro zone this chart is essentially the same as Australia. I would just add that since August, it has struggled higher with each rally falling back into the previous zone of congestion. The decline from 328 gave back every x and as such marks a change in behavior as this is the first time this kind on thing has happened since March.
I posted these because all markets with the exception of Japan and China have been moving together and against the dollar, often during the day on a tick by tick basis. Hopefully the charts of overseas markets make our own stock market clearer. They will move together.

Please look on your own at the Nikkei, the Swiss, which is a direct speculation against the dollar, the Russian market( they want to put a Tobin tax on to stem speculation and it is the strongest market in the world.)

Markets11/15/09b

READ THE FOLLOWING POST FIRST
One can read this chart at least 2 ways. We moved up from the beginning of November on no volume with no selling, have reacted a few points on which no selling appeared and we are now ready to rock and roll.

On the other hand no demand entered on new highs and there was even less demand on Friday's rally. Should selling kick in with ease of movement on the decline then this bull move might well be over.
Bullish chart. The last decline on the chart had reversed immediately probably emphasizing the support commented on in the first post.
The support at 10:00 failed to enlist much bullish support and the rally died out with lack of buying. The decline ended with a lack of selling. Ease of movement is on the sided of the bears but all in all the chart is neutral. So we still do not know the intentions of the 10 am support.

Markets11/15/09

I have been re-reading The Wyckoff Course and clearly Mr. Wyckoff used charts to determine the plans, thoughts and intentions of the operator. Today the idea of an operator is considered almost a paranoid conspiracy theory and instead there is some magical idea of the predictive power of markets or else they are believed to be random. Please look at the above 1 minute chart of the SPY. The market gapped up on Friday's open, retreated to fill the gap and then rallied to an upthrust. The market was then hit with intense selling, a wide range and high volume. Someone stepped in and bought and probably bought the decline as well. Now do we believe that all of a sudden thousands of people around the world sent in their orders to buy a quickly falling market? Or that a very few traders and their computers stepped in and caught the falling safe? Surely it is the latter. What is more they have balls and skill. They are better traders than us. Much better. And they have unbelievable amounts of money at their disposal.

Our job according to Mr Wyckoff is to determine their intention. Here it is clearly to stem the decline, but is it to sell again at higher prices, distribution, rather shortly or to begin a new bull move?

Observe in the next post the 5 minute bar which made the bottom and how important the close is in showing that demand came in.

MARKETS 11/11/2009

Please ignore the long tails around 10:12 to 10:15. Another tip off (see below) that the upthrust would fail was the steepness of the approach to 10:15. It looks like a small blow off top, hence we are not surprised and act on the climactic volume at 10:15 or the upthrust/key reversal at 110.92. This is not impossible, I did it in real time.

After the top is the ease of movement up or down?

On the pnf chart the market is supported at 109.68 on 5 occasions . The market has little ease of movement on the advance after the last time for the remainder of the day. The line of least resistance remains down.
Today was an obvious upthrust of the 110.31 high, clearing it by approximately 0.5 points. Today we are going to look at a few indications that the upthrust would turn the market. If one can do this successfully it is possible to take very large positons with very small risk. Today for example on the upthrust, I took on a nice size position, which perhaps I will regret still having for 0.15 cents per share risk!

In the chart below please ignore the long tails on two of the lines after 10am. I don't believe the market opened at new highs. At 9:55 the market began to move up sharply. Notice how few of the bars closed near their extreme high. Here is a break to new highs and short covering and only the last bar closed pretty much on its extremity. There was very heavy selling into the bars which kept their close off of its highs. So we are ready when the key reversal bar comes to pull the trigger.

MARKETS 11/10/2009A

I wanted to discuss yesterday again because I found the one sidedness of the market puzzling. As I said yesterday the market lacked buying but even had less selling. As Mr. Wyckoff says one of the reasons to read the tape is to define the intentions, thoughts and plans of those who move the market. So why was there no selling? It is because the proverbial"they" are all thinking acting and doing the same thing. They are playing the carry trade, both here and overseas. Part of the carry trade is a declining dollar(exchanging cheaply borrowed dollars to buy foreign assets.) What the dollar's decline meant was that the carry trade was alive and well. The game goes on. The only reason to sell is a threat to the carry trade as it is financing ever increasing prices for a host of assets, not just domestic and foreign equities. The bullish sentiment then in the only survey that really counts, the behavior of prices was close to 100%.

Because these are very highly leveraged positions, a move in the opposite direction will be explosive. This kind of unanimity characterizes the final stage of a move. As a result, I believe this is the last rally of the move that began in March. I am going to end here because I do not want to say anything else that might interfere with the simplicity of this message.

Tomorrow or Thursday I will show again how the bull move is seemingly over for large segments of the market. Look at FAS, DRN, TNA. The last is an especially beautiful chart with 3 1/2 months of topping action.

MARKETS 11/09/2009

The dollar fell sharply overnight and ended the day with a possible spring, making a new low by 0.1 points. I am not saying this is the low, but it bears watching. Clearly support came in or it would have run stops for a nice ride down.
Gold does not seem like it performed as well as the dollar did poorly.
Equities as I said yesterday rose sharply but on slim volume. Clearly nothing was for sale.
There was so little selling that I don't believe the market reacted more than 2.5 points all day. There was no significant buying either but the selling was less. In the emini there were bouts of heavy short covering. This was the most extreme one sided market we have had since this rally began in March. Either this is the beginning of a new bull market or the end is in sight of this rally.