Pundits say that the market doesn’t ring a bell at the top … well, my wave structure analysis just did.
NASDQ 100 Futures Contract (NQ_F) – 240 Minute Chart
S&P 500 Futures Contract (ES_F) – 240 Minute Chart
To set up a C-wave lower that will complete the price structure of what I think are ABC corrective waves in the major US equity indexes, price has to complete its move into resistance on the bounce out of last week’s lows. It looks like we are getting close …
S&P 500 Index Futures Contract (ES_F) – 240 Minute Chart
The ES futures contract has completed a minor abc corrective bounce right into a logical area of resistance. Price shouldn’t move much higher than the highs of this morning’s trading (around 2787.75)
NASDQ 100 Index Futures Contract (NQ_F) – 240 Minute Chart
The NQ futures have not yet broken the minor a-wave high of 7143.25 made on November 2nd. A break of that high is needed to make an official abc-structure for this bounce into resistance.
Russell 2000 Index Futures Contract (RUT_F) – 240 Minute Chart
The RUT has completed what looks like a minor 3-wave corrective bounce into logical resistance.
Bottom-Line … for the next wave lower to really have the flush-out power and thrust that the C-wave can often have, the market needs for all of the bull-tards to get back in long. The election news of a split US government may be just what gets the last trader back fully long expecting a clear sailing for the Xmas rally that is sure to come like it does every year. Maybe Trump’s speech at 11:30am eastern actually sets the absolute high for the corrective bounces.
Cheers … Leaf_West
While the NASDQ 100 Index futures contract did actually touch into my resistance zone last week, I expect to see two waves complete into resistance before I really start thinking about any counter-trend bounce being complete.
NASDQ 100 Index Futures Contract *NQ) – 240 Minute Chart
I think that we have almost completed the minor pull-back in the corrective bounce … maybe we actually push down a little more to the minor 61.8% support level which is right on the median line on the bigger broadening price pattern (say at about 6795). In any event, the next push higher (minor c-wave) should suck in lots of perma-bulls/bull-tards, which then will set-up the final push down into support at the end of the bigger, 3-wave structure C-Wave.
Cheers … Leaf_West
“Downtown” Josh Brown named JPM his final trade today for the half-time fast money show. Is he correct in his expectation that JPM is a screaming buy here? Only time will tell, but there is a lot of overhead supply facing the market and JPM here after the damage done by the market in October.
JPM – 65-Minute Chart #1
If my read of the overall market corrective pattern is correct (i.e., ABC correction), then JPM is likely to find resistance in the SLOT and pull-back one more time. That pull-back may make a higher low which will be bullish or it could follow the market down and make a lower leg (i.e., a final C-wave move).
There are lots of buyers of JPM during the market weakness that may be willing to sell their shares if they can get back to break-even.
JPM – 65-Minute Chart #2
The whole run-up in JPM from this past summer has also produced a lot of stranded traders down here at the current levels … the Point of Control that needs to be taken out before I would consider JPM bullish would be that $113.50 – $115.50 zone vs the $108.00 current price.
Cheers … Leaf_West
It is no secret that I like how Dan Nathan thinks … he appears to be one of the most rational traders that CNBC dares show on their daily programming. Dan has been saying for the past several weeks that the recent corrections in the momo, high-beta, over-crowded, super-cap tech stocks are going to be hard to recover from. Dan argues that this would seem to imply that the overall markets are also going to have a hard time making it back to recent all-time highs.
Is Dan right? The basis for Dan’s argument lies in the fact that many traders are trapped in these mega-stocks at much higher prices and will, to a large degree only be too happy to let some stock go if/when these stocks ever get back up to their recent highs. That is what is going to create problems for the market in any bounce from this week’s lows.
Let’s take a look at the volume profiles for the FANG stocks along with AAPL which is going to report its earnings and the all-important Xmas season outlook today after the close. Let’s start with AAPL … Continue reading
Tonight’s AAPL earnings report is pretty key for the market … if the outlook is disappointing, then all bets are off about what could happen in the market the next several days. I still think that the market is set-up to bounce higher into the SLOT resistance zones and therefore I want to do my work and be prepared for that next move into the final resistance levels. Here are some looks at the volume profiles for the two key futures contracts that I trade. Continue reading
At the close of the 195-min candle at 10:15am eastern today, the futures chart that I am using to trade the direction of the NQ during the corrective move I last posted on this past Saturday broke on a closing basis, the ATR resistance level.
To me, that ATR break allows me to mark an A-Wave low in the NQ’s ABC corrective pattern I am anticipating. I have adjusted my timing and retracement charts to that new low. Here are the NQ charts from this past Saturday’s post (click here to read that entire post) …
NASDQ 100 Futures – 195 Minute Chart (from Saturday Oct 27th)
NASDQ 100 Futures – 195 Minute Chart #1
Note that I am now looking for some chop in the price action to show me that price has accepted the ATR break higher. The timing windows are approximate, but the B-Wave high is scheduled for the day of the US mid-term election (Nov 6th), The C-Wave low, bigger support for this corrective pattern is for Nov 15th around mid-day.
Cheers … Leaf_West
Ok … that was a fun week. My mother-in-law passed away this past Sunday, I got a severe case of vertigo on Tuesday evening (which I still have, but to a lesser degree), and the market had some huge volatile moves. Today I can stand looking at my computer screens for more than a few minutes at a time so I thought it would make sense to assess where we are and what we should expect going forward.
Bottom Line … what do we know? I think it is safe to say that an important top was put into the US markets recently and I think I can safely say that because of the style/type of move lower we have seen in all the major US stock indexes. The US markets are finally correcting like the rest of the global markets have been doing since the beginning of the calendar year.
So if we assume that an important top was made in the US markets (not saying an all-time high, but an important high none-the-less), then traders should be looking for a larger and possibly a more complex corrective move than the traditional ABC corrective move seen during trending markets. So saying that, let’s look at the markets and try and determine if the first leg of the move lower is done for any or all of the major indexes. Continue reading
Today the SPY ETF pushed below the 200 daily simple moving average of $276.28 and made a low of $273.91 … a close back above or around the 200 SMA will be a bit of a victory for the bulls but it would be best if we did not make another lower low today.
As I discussed in yesterday’s blog post, the weekly candle needs to close somewhere off of the lows when we close for the week tomorrow. The 50% level of the current weekly range is $281.385 and the 38.2% level would be $279.62. For me, a close at or above those levels gives me more confidence that there is not a lot more selling right now. Things can change with a new Presidential tweet next week, but that kind of close for the week would be good.
Cheers … Leaf_West
The market today inflicted a lot of pain to the long bulltards … many of them probably were taken out with margin calls late in the day. Is the short-term selling over? Let’s take a look at the market indicators.
McClellan Oscillator – Daily Chart
Ok … I like to keep track of the McClellan Oscillator to tell me when markets get at extremes. Below -100 on the Oscillator generally marks an oversold market, and below -150 usually is seen only during wicked capitulation selling that is seen only occasionally. The indicator ended today at -148.36 and is the second lowest reading group seen this year. Only the early Jan/Feb carnage generated readings this low.
I mark on the above daily chart the four extreme readings, and then marked those same periods on the weekly SPY chart on the right. You can see that generally, those were great times to step into the market to buy the dips. Can we say that same thing here again? Only time will tell, but let’s look closer at those four candles to see what additional information when can garner.
Remember, those price candles are weekly candles and therefore, the look of the current weekly candle will not be determined until the close on Friday.
Candle #1 … see how the candle bounced off of the low and closed closer to the middle of the weekly range? That showed strength to close the week and as it turned out, price continued to bounce for about 5 more weeks.
Candle #2 … that weekly price candle ended right on the lows. That shows selling right into the end of the week. The next week saw a rather large range price action, but it was an inside candle that stuck to the bottom 50% of the bigger losing candle. You can see that we actually made another lower low on the 2nd week that followed the bigger sell-off candle. Then we had a bigger sustainable rally that benefited traders willing to wade back into stock positions.
Candle #3 … That weekly candle bounced off of the lows and finished the week around the mid-point of the candle’s range. Again, that shows strength into Friday’s close. The market bounced hard out of that low.
Lessons for Candle #4 … so what can we garner from the other extreme readings seen this year? I would suggest that the next two trading days are important – if the market continues to see more selling the next two days, then I think we are still likely going to see some volatility for the next little bit. Maybe we push to new lows right away, or maybe we get a half-assed bounce and then a new lower low with positive divergences in many momentum indicators.
Bottom-line will be to be patient and keep your trading time frame intra-day until we get more information about a low being made over the next 5-7 days.
Let’s look at the VIX to see if it will tell us anything …
S&P 500 VIX Index – Daily Chart #1
The 30-Day VIX / 90-Day VIX ratio is a great indicator to help traders find extremes in the short-term fear of the market. We are well into the 1:1 ratio extreme zone here at 1.11x so we are getting near the end of the extreme fear in option premiums.
S&P 500 VIX Index – Weeky Chart
When you back out to a weekly time frame, you can see that we are at levels on the VIX that typically mark a level where support will typically be found. Remember, these are weekly candles, so lots of daily anguish can be felt in the interim.
S&P 500 VIX Index – Daily Chart #2
I pushed the second daily chart above by pushing the illustrated days to early 2018 so that traders could see the wild daily swings that we can typically seen when the market makes these large outsized moves.
Bottom Line … Be safe, don’t be a hero, but don’t be paralyzed either. Know what could happen and how oversold we are becoming. Trade accordingly.
Cheers … Leaf_West