Monday, August 31, 2009

A sell signal coming?




Aside from the clear divergence on this chart (courtesy Clickcharts), you can see the new little red bar on the Trend Indicator/Oscillator, that says sell, has appeared this morning. Of course the day is young so we shouldn't get too eager. If however, say, tomorrow it goes well below the blue trendline I have drawn, then maybe the autumn decline is here....

An additional and better confirmation would be seeing price action go below the August 17 bottom on fairly high volume...that means going below the horizontal magenta line I have drawn...

Patience again, wait for clear signals....

Saturday, August 29, 2009

Divergence - $SPX



Divergence is not a 'sell' signal. It does give some idea of the 'fuel' available for a move, if there is to be one. Looks like plenty of fuel here...

By the way, the $NDX looks about the same way.

Friday, August 28, 2009

$NDX moves towards one of it's .500 nodes as well...





Quietly, the $NDX has been stealthily creeping up on it's .500 node (1.317 time base), current value is .48988.

It also is getting tangled up in a couple of trendlines, as you can see, and meanwhile the $SPX is at a node value of .51810, still very much in the window of a .500 node decline, which doesn't expire until node values of .530 or greater. So both indexes are ripe now to fail. And September is almost here, the killer month for stocks.

Another nice blog...

Charles Malay, a longtime trader, has a very nice blog. His view on the markets can be summarized as follows:

# The Market PE is historically overvalued. The Current PE is @ 17 on the S&P.
# The Stock Market is overbought when measured by the number of stocks above their 50 day moving average lines.
# Bullish Sentiment is high. The Daily Sentiment Index (DSI) hit 89%. This reading is the same as the Oct 2007 high.
# Investors Intelligence, AAII registered 19% bears. This is the same reading as the time high reading.
# The trading volume is poor. There is less volume on each push up.
# Insiders are selling at 28 times the amount they are buying.
# September is traditionally a tough seasonal month. 17 out of the last 20 years have been down.
# Markets have rallied up over 50% off the bottom in 5 months. This is the farthest and fastest in history.
# The NASDAQ 100 has retraced over 50% of the decline off the all time highs.
# The SP has retraced 40% of the decline.
# The Aug 24th high was not confirmed by the 24 day RSI and MACD reading creating a divergence.
# The Shanghai index has dropped over 20% from the highs. This market bottomed before our markets and led the U.S rally up.
# 25% of NYSE volume recently has been FNMA, Freddy Mac, and Citicorp, all low price stocks that the public buys. (speculation)
# The volatility Index (VIX) hit a new low on 8/25 confirming the bullish sentiment readings. This is a signal of NO fear in the markets.
# There was no bullish reaction to the Bernanke nomination and other improved economic news. Perhaps the tone is changing

His work can be found here:

www.viewpointsofacommoditytrader.com

Wednesday, August 26, 2009

The Market...

$VIX went up some, $VXN went up quite a bit, so the $NDX therefore showed more of a potential top forming today then the other indexes, but patience will reveal what it will.

For what it's worth, the sentiment index I've been showing, fell back from extreme readings the very day that $VIX crossed into the 1.00 node (the 25th), which would seem to be a confirmation of a top, but price is the final arbiter.

Koyaanisqatsi - Hopi Indian for "World out of Balance"



Directed by: Francis Ford Coppola

This is a must see, a cult film from the early '80's about the ecological destruction of the earth by modern societies. It takes a bit over an hour to see, but it's worth it. A Classic, on Youtube.

The music is by Phillip Glass. Eerie, mystical...

The link is here:

http://www.youtube.com/watch?v=Sps6C9u7ras


This movie is beautiful, a little sad, and dramatic.

Particularly so, are the prophesies made by the Hopi's listed at the very end....

Hopefully, the speaker systems on all of your computers can handle the full dynamic range the music provides, the sound is remarkable, extraordinary....

The Cinematography is much like IMAX.

Hope you can all find time to see it. You will have to put up with a short commercial at the beginning.

Tuesday, August 25, 2009

Market closes, didn't do much....



After having just barely crossed the 1.00 node time point, the $VIX made a big hammer that stuck down into the daily Bollinger Bands. I do know this is options expiration week, so any declines in the markets may be modest at best until the big players do what they want to do Friday. But this rally is very flimsy at this point.

Monday, August 24, 2009

Financial Crisis Called Off!

http://kunstler.com/blog/2009/08/financial-crisis-called-off.html

James Kunstler has accurately distilled the current view. It matches other sentiment measures. Wild bullishness is everywhere on Wall Street, if not Main Street.

Wall Street is in for a rude awakening, PDQ.

Just another note: as of 9:20 A.M. Central time, the indexes are up about .65%, but $VIX is up almost 1.6% (not surprising given Friday's charts, take a look back), and maybe forming a double bottom with it's low of last Monday. Once $VIX starts rising in earnest, the rally is toast. I suspect we're close to that.

Saturday, August 22, 2009

Another reason the stock market is near the end of the rally...



http://www.sentimentrader.com/


The long term side (on the right) of this chart reached an extreme similar to the current values of the short term (on the left) side 2-3 weeks ago and then pulled back, but the short term side has not been this bullish since the rally began in March. I think we're in the last inning, before things turn ugly.

Combine this information with the charts on the previous two posts...

Friday, August 21, 2009

Some selected $SPX and $NDX charts





What the overhead resistance looks like with today's high's...

Two $VIX charts...




Look at MACD on the hourly $VIX chart. Looks like $VIX wants to turn up. Look at the daily $VIX chart I posted a few days back. Monday is 08/24/09... Let's see what happens...

Remember, $VIX is the opposite (sort of) of the $SPX, so, if $VIX starts to head up, the $SPX index heads down...

Why EROI is important...

EROI stands for Energy Return On Investment. For those of you who are younger, it will dominate the rest of your lives. To find out why, read this:

http://www.marketoracle.co.uk/Article12875.html

Below a EROI of about 3:1, bad things happen to modern societies. Get those solar cells and windmills up, fast!

Thursday, August 20, 2009

The 'Book' has arrived!



For those of you who have requested copies, they will go out tomorrow. Thank you all for your interest!

Anyone wanting a copy, just needs to send me their mailing address, and I will mail it to you. In return, after you receive the book, send me $20.00 plus shipping (I will let you know what that is in an email, I assume 3 to 4 dollars from the U.S. Postal Service), and on receipt I will email you the spreadsheet that goes with the book.

Rep. Bachus: "Social Security Could Face Default Within Two Years"

http://www.howestreet.com/articles/index.php?article_id=10516

Another interesting piece by Michael Shedlock.

Search for Cycles, S&P500



Playing with OPEN,HIGH,LOW,CLOSE data, and Standard Deviations, I have come up with this raw chart. This might be an image I can find regular cycles in. Or perhaps, one of you out there can print it off and find them also....Sort of a challenge...If you are perhaps interested, email me and I will send you the data that generated this chart....

P.S. It is sort of interesting that from the fall of 2007 onwards, big spikes in this graph mostly correspond to major market tops...Looks to me like maybe we just had another one of those...

How The Shadow Banks Hijacked The Fed, The Law of ONE

http://www.marketoracle.co.uk/Article12864.html

The interesting point here is that the creation of derivatives, not the money printing of the Federal Reserve, produced the 'fake boom' of the last 7 years. Pretty well argued here...

Wednesday, August 19, 2009

The Pentagon Wants Authority to Post Almost 400,000 Military Personnel in U.S.

http://www.dailypaul.com/node/103374

No sponsors yet, for this bill, but what does this tell us?

Whole Banking System insolvent and will fail?

Karl Denninger, as always, has a great post, pointing out that the entire Banking system in the U.S. has passed the ominous 5% bad loan level, and is currently at 6.49% (and still rising, of course).

You should read it, it's good:

http://market-ticker.denninger.net/archives/1344-Will-It-All-Come-Tumbling-Down.html

Tuesday, August 18, 2009

Whether you believe or disbelieve in Peak Oil...

Consider that GM is unlikely to survive by selling unproven $40,000 electric car technology (Volt) in what is likely only the early part of this economic tsunami. Ponder, that a few years ago, the U.S. automakers manufactured 19 million cars in one year, last year 11 million were produced, down over 45%.

Consider that, already, cash starved states like Michigan, are so completely broke that they are fixing roads with gravel, essentially beginning the process of de-paving them.

Further, road paving is paid for primarily by gasoline taxes, with electric cars (even if they 'make it' as a product), well, you get the picture...they don't use gasoline (much).

Consider then, that we are at, or already past, Peak Autos and Peak Roads, no matter what happens to the oil supply itself...

Consider what this, in turn, means...

Robert Crumb's Short History of America

http://www.youtube.com/watch?v=LzqfkXqUJBo

Neat artwork, gentle old-time piano background...

Can be seen in just over a minute..cool...

Saturday, August 15, 2009

Nodes on the $VIX




Note how tight the Bollinger Bands are as we approach the 1.00 node just ahead...that's expected as nodes that turn markets represent major slowing of price action relative to calendar time...current node value is just past .99, so we could turn at any time...

Friday, August 14, 2009

How to judge the next decline's magnitude...






This is something that everyone agonizes over. Looking at the $VIX monthly chart, I am seeing some of the lowest indicator readings produced over the last 5 years. Also the 'Volatility Fast' indicator is at one of the lowest readings (most complacent) in the last 5 years. This makes it hard to believe the decline to come will be 'shallow'....(For those of you unfamiliar with the $VIX it generally runs as the inverse of the $SPX. Now bottoms here are tops, and vica versa.)

This piece by Sy Harding kind of supports the too much Bullish Sentiment/Complacency argument:

http://www.decisionpoint.com/TAC/HARDING.html

Current $USD chart.



This index is almost at a .25 node (1.382 base). The actual value is .24211. This is the dollar's last chance to rally using the leverage of the .25 node, as the two other .25 nodes have already passed by. I think this will happen however, coincident with an imminent fall in equities, which tends to strengthen the dollar.

Technically, the theoretical date for the perfect .25 node here is 9/2/09, but we are close enough, that this index could in fact, rise at any time...

The most gilded age in US history

http://maxkeiser.com/2009/08/14/the-most-gilded-age-in-us-history/

This is a great post over on Max Keiser's site with a very clear chart. Says it all, rich get richer, poor get poorer. But this is quantitative, no hand-waving.

I just rechecked, and this article is really originally over at The Huffington Post, but visit Max's site anyway, He and his sidekick Stacey Herbert always have something unique going on over there. I highly recommend it.

Thursday, August 13, 2009

O.K., Now I see what's going on... about cycles...





After spending about two days intensively researching this, I can see that cycles in the 'Exponential Time' sense do exist, but they are short lived. Using the data I displayed a couple of days ago, I stripped out the cycle lengths, both as calendar days and as fractional node values. The two charts displayed here, are the results using that data.

You can see that the 'cycles', I have now more modestly renamed 'Events' in keeping with what they really are.

Basically, they vary so much in duration, that to call them cycles is just wrong. They do in fact, generally decrease in length (calendar days) as you run through an Elliot wave pattern from end to end, but the real interesting fact, is that by seeking out reasonably easy to find events (like the bottoming of the Williams%R oscillator on daily charts), the relative (node) spacing of these events relative to exponential time, changes and shrinks very dramatically as you pass through a completed Elliot wave pattern. In other words, cycles they usually aren't, but as detectors of a completed pattern, yes, they can be. That's really not too shabby.

It's still true that exponential processes are throwing out a lot of extra events, both tops and bottoms, into the stream, so a Fast Fourier Transform is going to try (struggle?) to fit these things into linear cycles. That said, this approach still might still work well at very long time scales, where I suspect Cycles dominate more than Exponential Time effects...

Conventional charts




No secret that not only are unconventional methods saying 'toppy' so are conventional, as in these charts.

One thing I will add, however, is the market may not 'tank' from around here...I am seeing negative divergence on some measures, but not a lot. It's still reasonable that it will do some horizontal thing for a while, or do a double top. The market likes to frustrate everybody...

A lot of opinions are out there on the market...

My opinion? This market is running on fumes. I wouldn't be surprised if by early next week it started to break down. Not quite a prediction, but I can see the possibility of that in the numbers. It seems this morning the Powers That Be strove mightily to lift this thing up, partly succeeded, and then the market stalled at resistance, again. I don't see what's going to change, so they are probably pushing on a string...

Wednesday, August 12, 2009

$NDX resistance...



After today's pointless Federal Reserve Crap (polite term), you can see the two run ups to the trendlines (two little strikes against the ascending blue trendline) from both 7/30/09 and today. I say trendlines because both first order and second order trendlines are in play. A lot of resistance there...
Also the $SPX is still under the influence of a .5000 node, and failed to make a higher high today, and facing trendline resistance. Don't forget too, that both indexes are at Fibonacci retracement levels, and pressing against their upper weekly Bollinger Bands. As I said, a lot of resistance...

Wow. Warren Buffet says the market has bottomed. Baloney!

Warren Buffet just announced the recession is over. Right. So Real Estate is on it's way back to lofty overpriced values? Pensions that have disappeared have come back? Talk about a shill for the establishment, Warren should know better. A year from now he's going to have major egg on his face, even if the stock market manages to hold near it's current value, which I doubt....

I notice the market is up today but...

I wouldn't get too excited by the rally today, there is a lot of overhead resistance. So could the market move on to new highs? Anythings possible, but I kind of doubt it. Time will tell....

Playing with Cycles (part 1?)








Some of you might remember back a few days ago, that I now had time to return to research since the book I was writing is 'at the printers'. Well, cycles are something I hadn't investigated much in the context of exponential time. My preliminary results are very interesting.

On studying the literature, I found that the usual procedure was to take the raw data, detrend it to make it less 'lumpy' and to take the 'tilt' out of it, whether up or down, then run a Fast Fourier Tranform on it to find the 'cycles'. I picked up the book 'Rocket Science for Traders' and saw the work done there. I came to the conclusion their methods were all flawed by the fact that if a particular cycle failed to show up in price action (as, say, a local low at that point),on a given date, it was lost to the software analysing it.

By looking at fast oscillators, like Williams %R for instance, I noticed that it was showing a lot of cycle activity that the other researchers were missing, because it didn't always translate into a big price move. With that in mind, I started picking cycle bottoms as calendar dates off of charts using Willaims%R and occasionally RSI, and then plotting them to see if I could figure out the cycle period.

I quickly realized on looking at the data, that sometime cycles of regular period were indeed showing up in the exponential time field, but sometimes the cycles were erratic, and not holding to a constant value (in terms of exponential node spans, not calendar days, of course). It was clear, however, that when plotted exponentially, the changes in Elliot Waves were made very apparent!

I am showing two charts here, of the same data. Using the Weekly chart of the $NDX, I picked off 18 values from the 10/8/02 bottom to the recent price action.

The bottom chart shows the cycle bottoms plotted against the average cycle time (all in normal calendar time), which, not surprisingly is an uninspiring and useless chart. This is what was produced first, as a control case. Then I created the top chart which shows the same dates plotted as node values against a chosen node cycle, and suddenly they group into linear segments defining the run time of individual Elliot Waves. I have labeled all of the cycle bottom dates used (the same dates plotted without labels in the boring, calendar time, lower chart) and also marked are important transitions. This has been done for two other bear market rallies (not shown) with the same results. Obviously, this has to be repeated many more times in backtesting, but I think I'm on to something here....

Tuesday, August 11, 2009

Correlations between the $USD and Equities...

Very good charts here, and I agree with most of the conclusions presented:

http://www.safehaven.com/article-14160.htm

I will have some new charts sometime tomarrow...


The market has been hanging for about a week, so the exponential charts showed nothing. Now they're starting to move, which gives us something to look at....

Here's a preview of the $SPX, you can see the .500 node (actual, .50677) and the failure at the red downsloping trendline, which is what I thought might happen...The error here is .50677/.50000 which is 1.01354, or a 1.354% error. Not as good as I thought earlier, but clearly still pretty close....

Saturday, August 8, 2009

A comment by Ty Andros...

Bernanke MUST stop any audits of the Fed as it would allow the WORLD to discover actually HOW MANY dollars are in existence. Off-balance-sheet vehicles are great until they are DISCOVERED, then all hell breaks loose. As for the people who store wealth in dollars, what would they do if they found out that there were 10, 20 or 30 TRILLION dollars more in circulation than what is now BELIEVED to be in existence? As a store of value it would be DESTROYED. This is entirely possible, or should I say PROBABLE. The US claims to have a debt-to-GDP ratio near 80%; informed investors know the liabilities are 70 to 90 trillion dollars, or almost 600%.


Don't know if he's right, but he could be....

It would be the point when Hyper-inflation and Hyper-deflation look like the same thing...

People would be arguing for years over which one it actually was, but net result is no one in the U.S., hardly, would have any real assets, unless they had precious metals, but then they better have guns to defend it...



http://www.marketoracle.co.uk/Article12596.html

Friday, August 7, 2009

The Nasdaq struggling, $SPX still advancing...




The declining red line may still be the trendline to watch, I had thought maybe the $SPX was going to stop neatly at it's Fibonacci retrace, or had already topped. Clearly that's not the case, it still has some life left in it.

Update, I just checked, the .382 retrace on the $SPX is at 1014.14, so we are just a hair past it...Time for patience...

Thursday, August 6, 2009

A thought on the art of Societal predictions, I wonder if this has been investigated?

It occurs to me that there are a few people out there now who use massive computer power to scour the Blogspace looking for word strings that portend of social changes to come. I think they're attempt is noble but I doubt the full validity of the approach. Urbansurvival.com is a website that I read regularly that champions this method.

In 2004, I was convinced that the U.S. was headed for a depression. As I talked to a lot of people about this, I noticed the vehemence of their denial of it as a possibility. Not just disagreement, but vehemence. It has just recently occurred to me that perhaps if we had a polling technique to ascertain what percentage of the population believes that a specific event can't happen, maybe where the conviction and the percentages are both very high, that this is actually a predictor of outcomes. Nietzsche used to say something about denial and the unconscious mind, I don't remember the specific quote, but it had to do with the idea the unconscious mind is much smarter then we generally recognize. It defends the conscious mind from concepts that threaten it, by making certain thoughts painful to contemplate. Aside from normal concerns about our mortality, quite a few thoughts relating to the probabilities of specific and unusual social outcomes will often be blocked. I suspect when the blocking gets very, very high, it's because the unconscious has done a computation that this outcome is likely.

When this process shows up on one issue and becomes real dominant in a population, that might be a real probable outcome...

Probably another signature of a topping process...



Note the divergence between the hourly price performance of the $SPX (Black) and the Nasdaq (Gold line)...The Nasdaq often turns down first...

Wednesday, August 5, 2009

A view from Clickcharts...



You can see the divergence off of their fairly nifty Trend Index Indicator (a price and volume weighted oscillator) that I mentioned a couple of posts ago... With today's down day, and the relatively high sentiment readings, maybe this rally is failing...

http://www.clickcharts.com/Default.aspx


Also, if the S&P did top yesterday at 1007.12, it did so at a node reading of .50448, obviously at a .5000 node (Look at Monday's $SPX charts, bottom chart of the three). Since .50448/.50000 = 1.00896, then the node hit error was obviously less then 1% (.896%). The ideal date was 7/28/09.

Sentiment getting up there...



Getting close to trendlines and with high (long term) sentiment, top is close...

http://www.sentimentrader.com/

Monday, August 3, 2009

Book Title

The title of my new book is 'quite a handle', but here it is:

ELLIOTT WAVE TIMING
Beyond Ordinary
Fibonacci Methods

Quite a handle.

Here is the Table of Contents:

Contents

Chapter 1 - Definitions and Core Concepts (Exponential Time Nodes)
Chapter 2 – Converting to Spreadsheets
Chapter 3 – Exponential Trendlines and Crossovers
Chapter 4 – Final Thoughts

Index of Charts
Index of Topics


Remember, I will need your mailing addresses to send you your copy of the book. After you receive it, my enclosed address will be where you send $20 + shipping costs, and then I'll email you the spreadsheet that goes with the book as a bonus...You can develop the spreadsheet on your own with this book, all of the equations are there, but it's easier with the original template...

Do regular cycles exist in the Exponential Time Space? Maybe...



I'm starting to investigate this, now that the book I've been writing is completed. Does anyone out there have experience with Fast Fourier Transforms? If so, I'd like to collaborate with you. I am investigating Octave software for the implementation of FFT codes.

As I think this graph shows, of a rather ordinary stock, there does appear to be a regular cycle showing up in this exponential graph. But this is by eye. I think running about 30 or 40 stocks and indexes through an FFT after they've undergone Exponential treatment would prove it once and for all, plus greatly enhance the exponential method.

$NDX charts at the end of trading today...







$SPX charts at the end of trading today...





No promises, but the $SPX might stall after it presses into the down sloping red trendline in the bottom chart...

Saturday, August 1, 2009

Why the dollar may crash, and the stock market too...

In spite of the fact that the U.S. dollar index is sporting relatively low node values, around .25 - .35 (which would normally suggest more dollar rally ahead of us), the Geopolitical realities may still trump the technicals. Here is an article by Jim Willie describing in stark terms that the U.S. economy may be nearer to major trouble then admitted on Wall Street. (Like we didn't know that, right?)

We all know what the problem is, criminally reckless behavior by the Wall Street-Washington D.C. axis. What is harder to see is the path in front of us. Jim Willie is providing a service of filling in some of the missing information on this score. Here is his commentary:


http://www.financialsense.com/fsu/editorials/willie/2009/0729.html

The book is just about here...

We're far enough along now, to announce the book will be available about mid-August. I will use sort of an honor system. Please send me your name, email and mailing address to my alternate email address, mlytle0@gmail.com, and I will send the book to you as soon as it arrives from the printers. Once you get the book, either use Paypal on my site or send me a check or money order for $20.00. Once I receive that, I will email you the spreadsheet that goes along with the book.

After some of you have the book and spreadsheet, I have a parallel blog to this one where I will take submissions of some of your analysis to show off what you've done (If you would like to do so, of course). A chance to show the originality and cleverness I know you all have :} ....

After a while, I would expect some of you will figure out things that I haven't, but that's progress.. It's possible to do different kinds of presentations with these equations, again you're knowledge and creativity matters...

The way it is....



Comic by Stuart Carlson...